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Conn’s Q1 Profits Fall, Gives Market Overview


Conn’s reported a
31-percent decline in
fiscal first-quarter profits
and outlined market conditions
for key categories
now and later in the year.

Net earnings were $4
million on a 4.3 percent
decline in net revenues,
to $189.3 million, for
the three months ended
April 30. Comparablestore
sales slipped 3.9

Product sales fell by
3.2 percent on weakness in the CE, major appliances
and home office categories, which was partially offset by
a 25-percent spike in sales of furniture and mattresses.

In a conference call the day of the financial report,
retail president David Trahan said comp sales fell 5 percent
in CE, 8 percent in majaps and 19 percent in home
office during the quarter due to lower average selling
prices and consumer preference for entry-level products.

Specifically, Conn’s customers are choosing lowerpriced
plasma and LCD TVs, and top-load washers and
top-mount refrigerators, over costlier LED, 3D and connected
TVs and front-load washers, Trahan said.

Majap demand has also been impacted by recentlyimplemented
vendor price hikes, he noted. The increases
are averaging about 2.5 percent, and may be followed
by another round of increases in August, he said.

However, demand for fully-featured TVs could improve
this quarter when manufacturers begin providing
promotional support for their new 2011 lines, he added.

Chairman and interim CEO Theodore Wright noted
that the annual income of Conn’s core customers is
$36,000, and that “price is a critical factor in their purchasing
decisions.” In response, the company will continue
to price-match competitors and mount aggressive,
albeit selective, promotions.

Looking ahead, Wright projected same-store sales
declines in the mid- to high-single digits during the current
quarter due to lower average selling prices for TVs
and laundry products, as rising gas and food costs and
high unemployment continue to pressure customers.

Nevertheless, retail gross margins will likely remain
between 27 percent and 28 percent, he said, and he
was encouraged by the improved performance of the
retail and credit segments.

On the product front,
the company has begun
adding tablet computers
to its PC mix, and plans
to have a full assortment
by the third quarter, Trahan

Tablets, along with TVs,
will also be used as bundled
loss leaders in furniture
package promotions.

Trahan added that the
crisis in Japan will likely
lead to shortages of digital
cameras through the
fourth quarter, but should
have no significant impact on TV and appliance availability.
However, TV sales would be impacted by a late
or non-start of the football season.

During the quarter Conn’s closed one store, in Austin,
Texas; will shut five additional stores during the current
quarter; and will allow leases to expire on two locations,
which will leave the chain with 68 stores in Louisiana,
Oklahoma and Texas.

Wright said Conn’s could resume expansion next
year with five to 10 new stores, and is currently evaluating
new metropolitan markets and real estate.