The Woodlands, Texas – Conn’s financial engines were firing on all cylinders during its first fiscal quarter, driving strong double-digit gains in sales, comps and profits.
Thanks to what chairman/CEO Theo Wright described as “solid performance in both the retail and credit operations,” net income rose 28.4 percent to a record $28.5 million for the three months ended April 30, while total revenues rose 33.6 percent to $335 million.
On the retail side, a 64.7 percent increase in furniture and mattress sales sent net sales soaring 32.6 percent to $277.6 million and helped raise retail gross margin 110 basis points to 41.4 percent. Adjusted retail segment operating income increased 44.8 percent to $39.5 million.
Same-store sales rose 15.6 percent over a tough prior-year comp of 16.5 percent, and hit 19 percent excluding low-margin lawn equipment, a category that was discontinued in January.
Broken out by product segment, furniture and mattress comps increased 33.2 percent, and unit sales rose 52 percent and 19 percent, respectively, while their respective average selling prices (ASPs) rose 15 percent and 14 percent. The combined category accounted for about one-third of total product revenue, 29.2 percent of total sales, and 42.4 percent of total product gross profit during the period.
Majap comps increased 20.5 percent and unit volume rose 21 percent, representing sales gains of 35 percent in laundry, 32 percent in refrigeration and 23 percent in cooking. Appliances represented about 28 percent of total sales during the quarter and 27.3 percent of total product gross profit.
CE comps edged up 3 percent on a 42 percent increase in home theater and portable audio sales, which was offset by a 2 percent decline in TV comps. CE represented about 24 percent of total sales during the quarter and 21.6 percent of total product gross profit.
In home office, comps increased 36.7 percent on a 60 percent gain in computer sales that was blunted by a 15 percent sales decline in tablets. Home office represented about 8.6 percent of the product mix and 5.6 percent of total product gross profit.
Service revenues rose 21.4 percent to 1.1 percent of total sales, and repair service agreement commissions increased 26.7 percent, to 7.3 percent of total sales.
The chain opened two new stores in Denver during the quarter, its first in Colorado, and closed two other locations.
Within the company’s in-house credit operation, revenue rose 38.9 percent to $57.4 million and operating income slipped 3.5 percent to $11.3 million. “Execution in our collections operation improved during the quarter and delinquency declined as anticipated,” Wright noted. “We expect to see further execution improvement in the coming quarters.”
Wright said the retail sales momentum is carrying into the current quarter, with same-store sales up 13 percent in May. The company also opened its first two Tennessee stores last month; will open seven more chain-wide by the end of July; and plans to open upward of 20 new showrooms in total, and close 10, during its current fiscal year, which ends Jan. 31, 2015. Some of the new stores, plus supporting distribution centers, are expected to appear in the new markets of Mississippi, Nevada, and North and South Carolina.
Wright noted that Conn’s incurred “substantial costs” related to its expansion plans during the first quarter, which he expects will become better levered over the balance of the year, and that full-year comp sales are expected to increase between 5 percent and 10 percent.