Beaumont, Texas – Nearly $15 million
in one-time pretax charges pushed Conn’s into the red during its second fiscal
quarter, ended July 31.
The multiregional CE, majap and
furniture chain reported a $3.4 million loss for the period, compared with year-ago
earnings of $1.6 million. Total revenue declined 13.5 percent to $184.4
million, and comp-store sales fell 12.8 percent for the quarter.
Conn’s said it recorded a pretax
charge of $11.1 million for the early repayment of its $100 million term loan,
and a pretax charge of $3.7 million for closing three stores with unexpired
leases. Excluding the charges, the company’s adjusted net income was $5.5
Retail revenue declines reflect a
16.1 percent drop in sales of CE, majap and home-office products; a 5.2 percent
decrease in extended-service commissions; and an 8.9 percent falloff in
extended service revenue. Retail gross margin increased 320 basis points to
28.9 percent from 25.7 percent thanks to an increased sales mix of
higher-margin furniture and mattresses, improved gross margins in the CE, majap
and home office categories, and increased sales of extended-service contracts.
The store closings bring to five the
number of locations exited during Conn’s current fiscal year, leaving the chain
with 71 showrooms, although the retailer said it plans to open five to seven
stores in new markets next year.
Operating income within the
company’s credit segment increased 78 percent to $13 million, as the 60-plus
day delinquency percentage declined to 6.1 percent. Nevertheless, continued
declines in the total portfolio balance and delinquency levels resulted in
lower interest earnings and reduced servicing costs, the company said.
“We are pleased with our progress on improving
margins and reducing our cost of capital,” stated chairman Theodore Wright. “While
softer industry conditions resulted in sales slightly below our expectations,
the changes made to date position us to drive improved profitability.”
Looking ahead, Conn’s is projecting
flat comp-store sales for the last two quarters of its fiscal year, with the third
quarter expected to be positive and fourth quarter expected to be slightly