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Conn’s Turning A Corner Amid Dour First Quarter

Multiregional furniture, appliance and electronics chain Conn’s posted a net loss and a double-digit sales decline for its fiscal first quarter.

The latter reflected double-digit comp sale decreases in the company’s core furniture, mattress, appliance and CE categories.

But despite the dour results, the chain narrowed its losses, improved retail profitability, and drove higher credit segment revenue.

Net loss for the quarter, ended April 30, was $2.6 million, compared with a prior-year net loss of $9.7 million, and reflects the cost of downsizing a distribution center and refinancing debt.

Total retail revenues declined 12.3 percent, to $279.4 million, and same-store sales fell 15.2 percent due in part to the impact of stiffer underwriting requirements on the credit side. Conn’s also faulted delayed consumer tax refunds, one less business day after a leap year in 2016, and “general consumer softness” for the downturn.

Broken out by product category:

*Furniture unit volume decreased 24.1 percent, partially offset by an11.8 percent increase in average selling price (ASP).

*Mattress unit volume decreased 21.6 percent, partially offset by a 15 percent increase in ASP.

*Majap unit volume decreased 9.7 percent and ASPs decreased 1.8 percent.

*CE unit volume decreased 16 percent and ASPs decreased 2 percent; home-office unit volume decreased 28.7 percent, partially offset by a 2.5 percent increase in ASPs.

Conn’s Q1 Sales Details

Source: Conn’s

But despite the sharp declines, retail profitability improved, thanks to a favorable product mix and lower warehouse, delivery and transportation costs, which raised retail gross margin by 260 basis points and brought operating margins up to 11.5 percent, compared with 10.6 percent last year.

Meanwhile, credit revenues rose 9.1 percent, to $76.5 million, as a result of originating a higher-yield direct-loan product, and provision for bad debts was down $2.1 million to $55.7 million.

Elsewhere, Conn’s opened three HomePlus stores during the quarter — in North Carolina and Virginia — which will be the only new additions for the year, while extending its new lease-to-own option through Aaron’s subsidiary Progressive Leasing to all 116 stores across 14 states.

“Our first-quarter performance demonstrates the progress we are making improving our financial results, while creating a sustainable platform for long-term profitable growth,” said chairman/president/CEO Norm Miller. “The foundation of our success is Conn’s differentiated business strategy, which offers our customers the ability to affordably finance top-of-the-line, brand-name products for their homes. This compelling retail experience provides Conn’s with a significant opportunity to grow retail sales and become a national retailer.”

He added: “During fiscal 2018, we will continue to focus on improving our financial results and operating performance, and we expect to return to full-year profitability.”