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Conn’s Q3 Losses Widen

Stricter underwriting standards, which were implemented to steady Conn’s in-house credit business, took a toll on sales and earnings during the retail chain’s third fiscal quarter.

Net loss widened to $3.8 million from the year-ago net loss of $2.4 million, and net sales declined 4.5 percent to $308.4 million, for the three months ended Oct. 31.

Profits were impacted by $2 million in net charges primarily associated with impairments from disposals, legal and professional fees related to  securities-related litigation, charges for severance, and transition costs due to changes in the executive management team.

But same-store sales tell the real story: Comps fell 10.1 percent for the quarter, with underwriting changes accounting for all but 0.1 percent of the decline.

Related:Credit-Related Accounting Changes Pound Conn’s Q2 Profits

Indeed, chairman/CEO Norm Miller cited “favorable trends across many categories including furniture and mattress, appliances, and consumer electronics.”

Nonetheless, comps declined 13.5 percent for furniture and mattresses, the chain’s largest and most profitable category, and were down 9.9 percent for CE and 6.5 percent for major appliances.


*Furniture unit volume decreased 13.7 percent, partially offset by a 6.8 percent increase in average selling price (ASP);

*Mattress unit volume decreased 7.3 percent, partially offset by a 4.8 percent increase in ASP;

*Home appliance ASP decreased 6 percent, partially offset by a 5.6 percent increase in unit volume. Total sales for laundry increased 3.2 percent, cooking decreased 7 percent, and refrigeration decreased 2.0 percent;

*CE unit volume decreased 11.8 percent, partially offset by a 6.9 percent increase in ASP, and TV sales decreased 5.7 percent as unit volume decreased 11.6 percent, partially offset by a 6.7percent increase in ASP; and;

*Home office unit volume decreased 12.2 percent and ASP decreased 1 percent.

The tighter underwriting provisions, and the outsourcing of its extended-finance promotions to Synchrony, are intended to stem the rising tide of customer delinquencies and defaults within Conn’s credit division, which has also impacted earnings.

Related:Delinquency Creep Continues At Conn’s

“While the near-term reduction to retail sales was anticipated,” Miller said, “we believe the long-term benefits of improving credit quality and performance will meaningfully increase Conn’s future overall profitability.

“It will take time for these turn-around initiatives to impact the company’s financial results, but I remain confident we are headed in the right direction,” he said.

During the quarter the company opened one new store, in North Carolina, for a total of 11 new locations this year and a total store count of 113. Only three new stores are planned for next year.

Looking ahead to fiscal Q4, Conn’s is anticipating another 10 percent decline in comp store sales.