Continuing challenges within its in-house credit unit led Conn’s into the red last quarter.
This morning the company reported a net loss of $9.7 million for its fiscal first quarter, ended April 30, compared to year-ago profits of $15.7 million.
The red ink flowed from the chain’s customer credit operation, where rising delinquency rates and higher bad-debt provisions led to a $21 million operating loss, compared to an $8.5 million operating loss last year.
The credit crisis also led to last year’s ouster of former chairman, president and CEO Theo Wright.
To help staunch the bleeding, his successor, Norm Miller, has brought in a new finance team, led by equity investor Lee Wright as chief financial officer. Wright was previously CEO of drilling company ProDirectional, a holding of his former private equity firm Diamond Castle.
He succeeds Tom Moran, who leaves after less than a year in the job.
Other new blood includes Mark Prior, who succeeds Robert Bell as general counsel and corporate secretary, and John Davis, a former consumer credit consultant who was named chief credit officer.
Davis’ credit risk management role is arguably the most critical to Conn’s stability, as he is charged with limiting risk to the business while keeping the consumer credit flowing — historically a key driver of its retail sales.
In addition, executive VP/COO Michael Poppe was promoted to president/COO of credit and collections, reflecting “the company’s desire to focus his efforts on its critical credit and collections business,” Miller said.
Meanwhile, tighter underwriting standards and last year’s exit from gaming, digital imaging and select tablet models took a toll on retail sales. Total retail revenue rose 6.8 percent, to $319 million, thanks to new store locations — Conn’s opened five during the quarter, for a total of 108 — but comp sales declined 3.4 percent, largely on weakness in CE.
Broken out by category, CE comps fell 14.2 percent; majap comps declined 3.9 percent; and home office comps slipped 3.8 percent.
Specifically, CE unit volume decreased 10.4 percent, partially offset by a 4 percent increase in average selling prices (ASPs). TV sales decreased 1.5 percent as unit volume decreased 8.1 percent, partially offset by a 7.2 percent increase in ASPs.
In appliances, unit volume increased 5.4 percent while ASPs were flat. Total sales for refrigeration increased 6.8 percent, laundry increased 2.6 percent, and cooking increased 8.5 percent, the company said.
The quarter’s only comp-sale gains were in furniture and mattresses (up 3.8 percent), and revenue from service contract commissions (up 0.9 percent).
Looking ahead, Conn’s plans to open 10 to 12 stores during the current fiscal year and is projecting comp declines in the mid- to low-single digits, due to stricter credit standards.
“Our long-term outlook and market opportunity remain intact,” Miller noted, “and we believe the actions we are taking to improve our credit results will significantly increase profitability in fiscal 2018 and beyond.”