Beaumont, Texas - Conn's said soft demand for TVs and major appliances contributed to a 15.2 percent decline in fiscal second quarter sales, to $152.2 million.
Comp-store sales slipped 12.8 percent during the period, ended July 31. TV sales experienced their steepest declines during holiday periods despite a relatively strong July 4 holiday weekend, the company said, while total comp-sale declines eased to the mid-single digit range for the balance of July.
Conn's also reported a mix shift to higher-margin furniture and mattresses, which helped push retail gross margins up to 29 percent, compared with 25.7 percent during the year-ago period.
During the quarter the regional CE, appliance and furniture chain closed four Texas stores for a total of five during the current fiscal year, leaving 71 locations in Texas, Louisiana and Oklahoma.
Also during the quarter the company completed a $55 million expansion of its revolving credit facility, to $430 million, extended the term by 20 months to July 2015, and completed an $8 million real estate loan to finance three owned store locations.
"While the sales results for the quarter did not meet our expectations, we did deliver gross margins above the range we targeted, and I am encouraged by recent sales trends," observed Conn's chairman Theodore Wright. "Early indications are that we can retain a meaningful portion of the customers that shopped at our now closed locations. Also, the two stores with significantly expanded floor space allocated to furniture and mattresses have delivered good results so far."
Broken out by category:
Â· CE sales declined primarily as a result of a 27.1 percent decrease in the unit sales of TVs, as the average selling price increased 7.2 percent. The decline in unit sales and increase in average selling prices was largely impacted by the company's strategy during the current-year quarter, especially during the two holiday weekends, to drive higher average selling prices (ASPs) and gross profit contribution. Also, lower DVD player and digital camera sales contributed to the decline.
- Major appliance sales declined during the quarter on lower unit sales as average selling prices increased by 5.1 percent. Laundry sales were down 11.8 percent, refrigeration sales were down 10.8 percent and cooking sales were down 16 percent;
- Home office sales declined primarily as a result of a 28 drop in the unit sales of laptop, netbook and desktop computers, as the average selling prices of those products increased by 6.6 percent. This decline was partially offset by sales from the introduction of tablets. While home-office sales declined, the company drove an increase in the amount of gross profit generated by this category.
- Repair service agreement commissions decreased less than product sales on higher sales penetration as a percent of product sales, as compared with the prior year period.
- Service revenues decreased as Conn's experienced lower customer repair volumes, in the current year quarter, and increased its use of third-party servicers during the quarter, compared with the previous year, to provide timely product repairs for its customers.
Conn's will report its second-quarter earnings and operating performance on Sept. 7.