BEAUMONT, TEXAS —
Conn’s, the multiregional CE and appliance chain, trimmed its losses in its fiscal third quarter but reported improved Black Friday sales.
The fiscal third-quarter loss of $7.8 million compared with a year-ago loss of $19.3 million. Conn’s said it trimmed its losses by cutting expenses and increasing gross margins, although the improvement also reflects one-time charges taken during the same period last year.
Net sales declined 15.2 percent to $136.8 million, and finance charges and other income decreased 8.6 percent to $33 million for the three months, ended Oct. 31. Same-store sales fell 16.3 percent, on top of a 9.3 percent decrease during the year-ago quarter.
Broken out by category, major CE, comprised largely of TVs, fell 24.7 percent in dollar volume during the quarter, and was down 14 percent in units amid a 13 percent decline in average selling prices (ASPs).
Major appliance revenue dropped 13 percent year over year during the quarter, despite a surge in room air, and track sales, comprised of smaller electronics, decreased 2.8 percent as gains in MP3 players, compact audio systems and accessories were offset by weakness in gaming, computers, GPS devices and imaging.
Conn’s said sales were impacted by weak local economies, tighter customer credit requirements, competitive pricing and capital limitations.
The latter was corrected with the completion of a refinancing plan that provides $500 million in capital and extends the company’s loans out to 2013 and 2014. The infusion will afford Conn’s “greater flexibility” in its consumer credit offers, chief financial officer Mike Pope said during a conference call. Conn’s is launching a direct-mail marketing campaign to promote them and is also rolling out a rent-to-own financing option chain-wide.
Sales improved in November, beginning with the second week of the month, president/CEO Tim Frank said on the call. Total November sales declined 1 percent and same-store sales slipped 1.4 percent, as ASPs fell 13 percent in CE, 6.5 percent in majaps and 1 percent to 2 percent in laptops.
Sales soared 13.1 percent on Black Friday and edged up 3.8 percent on the following Saturday and Sunday, Frank said. Conn’s enjoyed higher ASPs on Black Friday weekend over last year thanks to improved merchandising performance and a better mix of fully featured large-screen TVs — including a 55-inch 3D LED TV that was sold in a bundle and “blew out the door,” making it a top weekend SKU, Frank said.
Despite plentiful vendor inventory, the promotional environment has moderated following two years of rampant discounting, particularly in appliances, although the macroeconomic outlook remains challenging. Challenges to local economies within Conn’s trading areas also continue, but are stabilizing, he said.
Broken out by business segment, retail losses before income taxes were $2.2 million for the quarter, compared with a year-ago loss of $19.2 million that included a goodwill impairment charge of $9.6 million and a $4.1 million litigation reserve adjustment.
The credit segment’s loss before income taxes was $5.6 million for the quarter, compared with a year-ago loss of $0.1 million, attributed to reduced interest earnings, higher collection expenses and borrowing costs, and a $2.9 million write-off of costs of un-completed financing transactions.
Conn’s operates 76 retail locations in Texas, Louisiana and Oklahoma, including 23 stores in the Houston area, 20 in the Dallas/Fort Worth market, nine in San Antonio, five in Austin, five in southeast Texas, one in Corpus Christi, four in south Texas, six in Louisiana, and three in Oklahoma.