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Conn's, the specialty electronics/appliance retailer, reported lower net income but higher net revenue for its fiscal third quarter that ended Oct. 31.
Net income for the third fiscal quarter was $4 million, compared with $7.2 million for the third quarter of last year, a decline of 43.8 percent, due in part to a non-cash decrease in the fair value of the chain's interests in securitized assets.
Total revenues for the quarter increased 9 percent to $189.4 million compared with $173.7 million for the quarter, ended Oct. 31. This increase in revenues included increases in net sales of $17.7 million, or 11.6 percent, and a decrease in "finance charges and other" of $2 million, or 9.3 percent. Same-store sales (revenues earned in stores operated for the entirety of both periods) increased 6.8 percent for the fiscal third quarter.
The credit portfolio experienced rising delinquencies during the third quarter, though at a slightly slower pace than in the prior year quarter.
"While we enjoyed solid growth at the top line, we were not satisfied with our bottom-line performance this quarter, even after excluding the impact of the fair value adjustment," said Thomas J. Frank, Sr., the company's chairman/CEO. "Since we anticipate the retail environment continuing to be very competitive, we must improve our execution to achieve the gross profit and operating margins we expect."
During an investors' call, Frank said the company is removing significant operating costs by flattening its management ranks, improving or replacing the bottom-performing 20 percent of personnel, and running its vast truck fleet more efficiently.
During the period all product categories performed well except major appliances, which continued a two-year trend of negative growth, independent of macroeconomic conditions. The company has since addressed the majap weakness by making "significant changes in merchandising and personnel," Frank said, including price reductions to grow market share. The measures impacted margins but resulted in positive growth, and were necessary to shore up a core company category.
Frank said the chain enjoyed double-digit comp-sales gains in November, buoyed by a record 58 percent increase on Black Friday, with sales remaining strong throughout the Thanksgiving weekend. Conn's saw "nice increases" in all product categories, particularly in flat-panel TV, which vindicated the company's decision to make a "substantial increase in inventory levels before Thanksgiving," he said.
"I'm very, very excited about the business. We saw consumers in the stores, they were spending, they weren't worried about sub-prime mortgages, and they loved the new technology out there," he said.
Frank also thanked retiring chief financial officer David Rogers for his contribution to the company's growth. Rogers will be succeeded by CFO-elect Mike Pope.
Conn's has 65 stores in operation in Texas and Louisiana. Additionally, the company expects to open 11 stores by July 31, 2008, including two replacement stores and one new store in Oklahoma City. The chain plans to continue its expansion by opening an additional two to five stores in the last half of 2008, which will give it a total of 78 locations by this time next year. — Additional reporting by Alan Wolf
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.