Conn's Turns Corner In Consumer Credit Crisis

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THE WOODLANDS, TEXAS — Multiregional furniture, majap and CE chain Conn’s is returning to most-favored-retailer status within the investment community by seemingly stemming its losses from its in-house consumer credit operation.

Earlier this month chairman/CEO Theo Wright announced that customer delinquencies in January that are less than 60 days overdue declined from December, and continue to be well below the year-ago period, reflecting “strong” collections, an improved payment rate and stricter underwriting standards.

Greater than 60-day delinquency was flat for the month, he said.

Easy in-house credit has long been the cornerstone of Conn’s business model, but rising delinquencies amid the tough economy pushed the company into the red last quarter.

The crisis prompted the departure of chief financial officer Brian Taylor, the creation of new president and chief risk officer roles, and the hiring of a financial advisor to explore strategic options, including a possible spin off of the credit Staples will purchase Office Depot for $6.3 billion. segment or even the sale of the company.

But the latest credit trend has reignited Wall Street’s love affair with the stock, which rose double-digits in the days following the delinquency announcement and has received five separate buy ratings from analysts, according to Zacks Investment Research.

Adding to the momentum were strong retail segment results under retail president David Trahan. Net sales rose nearly 17 percent in January to $93.6 million, and were up 16.2 percent, to $350.5 million, for the fiscal fourth quarter, ended Jan. 31.

Comp sales increased 5 percent in January and 1.3 percent for the quarter, impacted by tighter underwriting, particularly in Arizona and New Mexico, the company said.

Broken out by category, higher average selling prices in CE offset flat unit volume to push comps up 7.7 percent in January. TV comps increased 3.1 percent, “and we continue to experience strong sales in gaming,” Wright said, although a 47 percent decline in tablet comps sent the home office category down 8 percent.

Elsewhere, majap comps rose 7 percent; furniture and mattress comps increased 9 percent; and comps for commissions from extended-service contracts were up 5 percent in January.

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