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Conn’s Q4 Profits Fall 48%

Beaumont, Texas – Conn’s, the multiregional appliance, electronics and furniture chain, said net income declined 48-percent during its fiscal fourth quarter and fell 70 percent for the full year.
The 76-store retailer attributed the results to weak demand, falling flat-panel prices and higher charge-off and delinquency rates for its in-house credit operation, which finances about 61 percent of Conn’s sales.
Net sales for the three months ended Jan. 31 fell 30.3 percent to $171 million and comparable-store sales declined 31.7 percent. Total fourth-quarter revenue decreased 25 percent to $202.3 million.
Net sales for the full fiscal year slipped 10.2 percent to $722.8 million and comp store sales decreased 13.8 percent. Total fiscal year revenue dipped 6.1 percent to $836.7 million.
Net income for fiscal fourth quarter was $6.5 million, and adjusted net income, excluding the positive impact of a non-cash fair value adjustment and a tax benefit stemming from a litigation settlement, was $1.9 million.
Net income for the full fiscal year was $7.7 million, and adjusted net income, including a $4.9 million litigation settlement and a $9.6 million goodwill impairment charge, was $12.4 million.
Conn’s said the nearly 32-percent drop in fourth-quarter comp sales was caused by a mix of challenging economic conditions in its trading areas; difficult year-over-year comparisons stemming from brisk replacement sales following the September 2008 hurricanes; declines in unit sales and average selling prices of flat panel TVs; a highly competitive retail environment; and tighter credit underwriting standards that the company implemented last year.
Nevertheless, Conn’s managed to increase gross product margin to 20.2 percent from 18.5 percent for the prior quarter.
As previously reported in TWICE, the company recently amended its credit facilities with lenders. The modifications eased the covenants but increased the cost of borrowings, reduced the credit line, and shortened the maturity date by a year, to Aug. 2011. As of Jan. 31, the total amount immediately available for borrowing under all of Conn’s credit agreements was $47.7 million, reduced from $52.1 million as of Oct. 31, 2009.