Off, But Beat
By Alan Wolf On Apr 5 2010 - 3:01am
BEAUMONT, TEXAS — Conn’s, the
multiregional appliance, electronics
and furniture chain, said net income
declined 48 percent during its fiscal
fourth quarter and fell 70 percent for
the full year.
But results surpassed analysts’ estimates,
and Conn’s was rewarded
with a 30 percent hike in share price in
the hours following the earnings announcement.
The 76-store retailer attributed its
performance to weak demand, falling
flat-panel prices, and higher charge-off
and delinquency rates for its in-house
credit operation, which finances about
61 percent of Conn’s sales.
Net sales for the three months, ended
Jan. 31, fell 30.3 percent to $171 million and comp-store sales declined 31.7 percent.
Total fourth-quarter revenue decreased
25 percent to $202.3 million.
Net sales for the full fiscal year slipped
10.2 percent to $722.8 million and compstore
sales decreased 13.8 percent. Total
fiscal year revenue dipped 6.1 percent to
Net income for fiscal fourth quarter was
$6.5 million, and adjusted net income, excluding
the positive impact of a non-cash
fair value adjustment and a tax benefit
stemming from a litigation settlement,
was $1.9 million.
Net income for the full fiscal year was
$7.7 million, and adjusted net income, including
a $4.9 million litigation settlement
and a $9.6 million goodwill impairment
charge, was $12.4 million.
Conn’s said the nearly 32 percent drop
in fourth-quarter comp sales was caused
by a mix of challenging economic conditions
in its trading areas, difficult yearover-
year comparisons stemming from
brisk replacement sales following the
September 2008 hurricanes, declines in
unit sales and average selling prices of
flat-panel TVs, a highly competitive retail
environment, and tighter credit underwriting
standards that the company
implemented last year.
In a conference call, president/CEO
Tim Frank said CE revenue fell 38.5 percent
during the fourth quarter on a 19 percent
decline in TV unit volume, while majap
revenue decreased 21.7 percent, also
on a falloff in unit sales.
Nevertheless, Conn’s managed to increase
gross product margin to 20.2 percent,
from 18.5 percent for the prior quarter,
and Frank cited “strong improvement
in product gross margins since December”
that was largely achieved through a
more profitable product mix.
Comps are also rising, he said, having
improved 13 percent in February year
On the product front, Frank reported
“some challenges” from tight TV supplies,
as well as industrywide shortages
in appliances after majap makers pulled
back the production reins amid weak demand.
Conn’s merchants are working
very closely with video vendors to secure
inventory, he said, while appliance makers
have “stepped up” to ensure that the retailer
is well positioned to take advantage
of the Energy Star rebate program when it
enters Conn’s markets this month.
The $300 million rebate program has
been “very favorable for other dealers,”
Frank noted, “and we expect to see significant
numbers. We have planned for that
and have purchased for that.”
Frank said early indications also point
to a positive short-term impact from 3D
TV. “It’s really taking off,” he observed
less than one week after the TVs hit
Conn’s stores, with attachment rates of
3D Blu-ray Disc players outpacing A/V
As previously reported in TWICE, the
company recently amended its credit facilities
with lenders. The modifications
eased the covenants but increased the
cost of borrowings, reduced the credit
line, and shortened the maturity date by
a year, to Aug. 2011. As of Jan. 31, the total
amount immediately available for borrowing
under all of Conn’s credit agreements
was $47.7 million, reduced from $52.1 million
as of Oct. 31, 2009.
The chain opened two new stores last
fall and closed two clearance centers,
bringing the total store count to 76. No
new store locations are planned for the