Beaumont, Texas - Conn's is cutting staff, raising new capital and may close at least one store to counter what it described as "challenging conditions."
The 76-store CE and appliance chain attributed its circumstances to price competition, the weak economy, capital constraints, and tighter underwriting requirements for its in-house credit operation.
The company plans to report a loss for the current third fiscal quarter, which ends Oct. 31, and said same-store sales declined about 16 percent during the first two months of the period.
Conn's may also report a loss for its fourth fiscal quarter ending Jan. 31, 2011.
Retail gross margin rose to about 25 percent during the first two months of the quarter, compared with 22.4 percent for the entire year-ago period, but net charge-offs stood at about $6.1 million, or 5.3 percent of the average balance outstanding, amid rising delinquency rates and a declining portfolio balance.
In response, the company said it is expanding its use of third-party rent-to-own financing and is closely monitoring its underwriting standards to improve the credit quality of the customer receivables portfolio.
Conn's is also cutting staff to meet current business volumes, adjusting its marketing and promotion programs to improve sales, and is considering the closure of one store in the Dallas market.
To help raise capital, the board has approved a plan to issue $25 million in new common stock and expects to expand its borrowing capacity to $475 million after refinancing two separate loan facilities.
The chain will report its full third-quarter sales results on Nov. 5.