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.
