THE WOODLANDS, TEXAS — Computers, video game consoles and more affordable 4K helped Conn’s readily outpace the CE industry last quarter, although its outlook for the back-half of the year is more muted.
Category comps increased 23.6 percent for the three months ended July 31, as TV sales rose 16.2 percent on 0.8 percent comp growth, home-theater sales rose 36.6 percent, and sales of gaming hardware grew more than 500 percent.
On an earnings call, chairman/CEO Theo Wright credited the gains to a decline in Ultra HD pricing, which made the technology accessible to a broader swath of customers. The displays, which included the company’s first crop of sub-$2,000 models, comprised 13 percent of LED TV sales in the second quarter, and rose to 21 percent of the TV mix in August, which helped raise CE gross margins to 29 percent.
Within home office, comps increased 14.2 percent, representing a 56.2 percent spike in computer sales and a 27.7 percent decline in tablet revenue. Wright said tablet comps declined 36 percent, which was faster than expected, and that the category is not expected to recover quickly.
Conn’s hopes to offset some of the tablet decline with the introduction this fall of a prepaid mobile program that it has been testing for the past year.
Meanwhile, comps for appliances, the company’s largest product category, increased 19.4 percent, with laundry sales up 41 percent, refrigeration up 31 percent, and cooking ahead 27.4 percent, more than offsetting room air’s 1.6 percent decline.
On the call, Wright said the company strengthened its competitive offering in majaps by adding 100-percent free delivery every day beginning in May, ending its past practice of reimbursing customers via rebate. Conn’s has also increased its volume of appliance advertising – which is largely run outside of holiday promotional windows – with the goal of doubling appliance sales in three years, the CEO said.
More recently, total August comps increased 3 percent, reflecting the weak room air season, Conn’s exit from the lawn equipment category, and the switch to free appliance delivery. Excluding those factors, comps would have risen 8 percent, against a tough year-ago comparison of 29 percent, Wright said.
Broken out by category, August majap comps were up 17 percent excluding AC; furniture and mattress comps rose 10 percent; CE comps slipped 4 percent on a 10 percent decline in TV; and home office edged up 1 percent on a 49 percent decline in tablets, he said.
Wright also described Labor Day weekend performance as “outstanding,” with TV sales trend reversing and category comps returning to positive territory.
Looking ahead, Conn’s is projecting full-year compsales growth of 5 percent to 10 percent against last year’s strong double-digit gains, and negative TV comps for the balance of the current fiscal year.