The Woodlands, Texas – Higher prices, a new store format, and an expanded assortment of furniture and mattresses sent Conn’s comp-store sales soaring 21.5 percent during the chain’s second fiscal quarter ended July 31.
The gains were modestly impacted by Hurricane Issac, which forced several Louisiana stores to temporarily close last month.
Conn’s also confirmed plans to open upwards of 17 stores this year and next, some of which will be located in the new markets of Arizona and New Mexico.
Total revenues, including finance charges from its in-house credit operation, grew 10.9 percent to $207.4 million, net sales rose 13 percent to $171.7 million, and net income hit a record $11.6 million compared with a year-ago loss of $3.1 million.
Conn’s credited its sales growth to an improved and expanded assortment of furniture and mattresses; higher average selling prices (ASPs) in core categories; four store remodels; the opening of a new-format Conn’s HomePlus store in Waco, Texas, in June; and retention of a portion of unit volume from closed stores.
Profits were fueled by a 530 basis-point increase in retail gross margin, to 34.1 percent, as the company dropped low-price and low-margin products and continued to focus on new sourcing opportunities. Earnings were also buoyed by an improved sales mix, as higher-margin furniture and mattress sales increased 50 percent year over year, outpacing growth in all other product categories.
Chairman/CEO Theo Wright said improvements in the company’s retail operating performance continued into August, when comp-store sales rose 12 percent on top of a 6 percent gain last year, and furniture and mattress comps increased 33 percent on top of a year-ago rise of 59 percent.
Adjusted retail operating income more than quadrupled to $12.9 million, although operating income for the company’s credit segment declined 21 percent to $10.6 million, due to an increase in the provision for bad debts and a decline in portfolio interest and fee yield to 18.4 percent, reflecting a higher relative amount of short-term promotional receivables and increased charge-offs.
The majap, furniture and CE chain currently operates 65 stores in Louisiana, Texas and Oklahoma. It plans four more store remodels this year, which allocate increased sales floor space to furniture and mattresses, and 10 store relocations.
Late last month the company moved its main corporate headquarters here in this Houston suburb from Beaumont, Texas, to attract more talent, Wright said.