Beaumont, Texas — Conn’s, the electronics/appliance chain based here, reported lower net income and same store sales for the third quarter ended Oct. 31.
The chain’s quarterly performance is still feeling the impact of last year’s major hurricanes that swept the chains market area.
Net income for the third fiscal quarter decreased 19.2 percent to $7.2 million compared with $8.9 million for the restated third quarter of last year.
Total revenues for the quarter increased 0.6 percent to $173.7 million compared with $172.6 million for the same quarter last year. This increase in revenue included increases in “finance charges and other” of $1.8 million, or 9.1 percent, and a decrease in net sales of $700,000, or 0.4 percent.
Same store sales (revenues earned in stores operated for the entirety of both periods) decreased 3.7 percent for the fiscal third quarter. As previously disclosed, the same store sales increase for the quarter ended Oct. 31, 2005 of 23.3 percent was positively impacted 700 to 900 basis points by hurricanes Katrina and Rita.
Also as previously reported, during the third quarter of last year a significant hurricane impacted a portion of the Conn’s retail market area and its credit collection operations. This resulted in higher delinquencies for receivables in the credit portfolio serviced by the chain.
Those delinquencies continue at higher than expected levels and have produced loan losses greater than had been expected before the year began. The losses affect securitization income received from the credit subsidiary of the company and is reflected in the line “Finance charges and other” on the Statement of Operations report. Loan losses, which were lower than in the second quarter, are in line with estimates made at the end of the second quarter when Conn’s recorded an impairment charge for estimated future loan losses and therefore the chain did not find it necessary to record an additional impairment this quarter.
During the fiscal year to date, Conn’s has opened four new stores, two in its Houston market, one in San Antonio and one in the Dallas/Fort Worth market, bringing the total store count to 60. By the end of January 2007, the chain expects to operate approximately 61 to 62 stores. Conn’s retail locations are in Texas and Louisiana: twenty stores in the Houston area, thirteen in the Dallas/Fort Worth Metroplex, nine in San Antonio, five in Austin, four in Southeast Texas, one in Corpus Christi, two in South Texas and six stores in Louisiana.
In a conference call, executive vice chairman/COO Bill Nylin said white goods sales were down 10.1 percent in October compared to the year-ago period, when refrigerator sales alone were $6.2 million greater due to hurricane-related replacement business.
By contrast, CE sales were up 12.3 percent last month, driven by growth in flat panel TV. Indeed, plasma sales were up 101 percent and LCD sales rose 195 percent for the quarter, representing an additional $25 million in revenue, Nylan said, and described the growth as “a key business shift from projection to flat panel TV.”
Nylin said the company enjoyed a “good start” to the holiday selling season, with sales up 14.7 percent on Black Friday and 5.7 percent for the three-day weekend. Although the promotional environment is “more aggressive than last year,” he said there were no marketplace surprises over the holiday weekend, and that the chain would continue to be “competitive to the extent that we need to be.” Lower prices, he added, are beneficial to Conn’s by “moving product to a level that generates a lot more customer interest.”
Nylin described current flat panel availability as “excellent,” and said inventory is in “great shape.” Nevertheless, he doubted that growth would be positive for the current quarter due to the post-hurricane comparisons.
Looking out beyond the holiday period, Conn’s plans to open another five to six stores next year, and “continues to be a healthy, strong company,” Nylin said. “I’m optimistic about our future.”
Nylin was filling in during the conference call for chairman/CEO Tom Frank, who is recuperating from knee replacement surgery that was performed two months ago. Nylin said Frank is doing well andis still actively engaged in running the business