Beaumont, Texas –
Conn’s said growing unemployment in its home state of Texas has slowed sales and
increased delinquencies for its in-house credit business, which may lead to an
earnings loss for the current quarter, ended Oct. 31.
The multiregional appliance and electronics
chain said earnings are also being squeezed by continued margin pressure.
Product gross margins were down about 110 basis points during the first two
months of the quarter, it reported, compelling the company to boost margins and
cut expenses.
Conn’s is currently testing a new compensation
plan for sales associates that’s designed to accomplish both by lowering base
pay and increasing incentives, TWICE earlier reported.
Meanwhile, net sales have fallen 20 percent
during the first half of October, the chain said, compared with a 1.3 percent
dip for August and September.
Conn’s attributed
the marketplace deterioration to rising unemployment in Texas, and cited Bureau
of Labor Statistics figures that showed the percentage of those out of work
rising from 5.5 percent in December to 8 percent in August.
This contributed to an average net loss rate
of about 4 percent within the company’s credit operation during August and
September, Conn’s said, and the figure is expected to rise going forward. In
response, the company is increasing the use of promotional credit programs for
high-credit-quality customers, is raising the floor on the credit scores
accepted in the portfolio, and is increasing down payment levels.
Conn’s also said
it is continuing to “closely monitor” its capital availability and will adjust
its plans if necessary to maintain adequate liquidity and compliance with its
various capital facility covenants.
As a result of the current economic conditions
and its effects on the company’s operating results, Conn’s withdrew its
previously issued earnings guidance and has decided to temporarily discontinue
its practice of providing earnings projections.
