Conn’s Resumes Retail Expansion

Planning upward of nine new stores next year
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Texas-based Conn’s is getting back to business in the wake of Hurricane Harvey, which ravaged the state’s coastal communities last month.

With its in-house finance business back on track and its ledger returning to black, Conn’s is revving up its expansion plans again.

The multiregional furniture, appliance and tech chain, which had been vexed by a string of quarterly losses, said it’s planning to open upward of nine new stores next year after limiting its ribbon-cutting to three locations in 2017.

The return to buildout mode is a testament to chairman/CEO Norm Miller, who engineered a turnaround during his brief two-year tenure by shoring up the company’s lending unit and bringing in a new management team.

In a series of strategic moves designed to shore up its ailing consumer finance business and restore investor confidence, Conn’s has changed chief executives, sold off $1.4 billion in customer credit receivables, and will use $75 million of the proceeds to repurchase stock and repay loans.

Conn's chairman/CEO Norm Miller

As Oppenheimer analysts Brian Nagel and David Bellinger observed earlier this fall: “The past several years proved tumultuous for Conn’s, as the company struggled to balance its credit and retail operations amid a fluid macro backdrop. … Now under the direction of new CEO Norm Miller, and his freshly assembled team of senior leaders, the Conn’s credit business is on a much more solid footing, and supportive of a return to expansion in retail.”

Conn’s comeback was confirmed in yesterday’s fiscal third-quarter earnings report, covering the three months ending Oct. 31. Net income was $1.6 million, vs. a year-ago net loss of $3.8 million, and the company’s 60-plus-day delinquency rate on customer credit fell year-over-year for the first time since 2013 as Miller instituted a new direct-loan program and outsourced its 0 percent finance promotions.

One pain point, however, was retail sales. Despite a post-hurricane rebuilding bump, revenue fell 5.3 percent to $291.9 million and comps declined 7 percent on weakness across the board but particularly in CE and commissions from extended-service contracts.

The company attributed the downturn to “general softness in consumer spending,” but higher average selling prices (ASPs) — led by home office (up 15.5 percent) and furniture (up 9.3 percent) — produced record third-quarter retail gross margins of 39.8 percent and “another quarter of strong retail operating income,” Miller said, totaling $29.6 million.

Next year’s stores will open in current markets to leverage existing infrastructure, he noted. The Texas-based business operates 116 Conn’s HomePlus showrooms in 15 states from Colorado to the Carolinas, following an aggressive expansion strategy under Miller’s predecessor Theo Wright.

“I am encouraged by the successful transformation underway at Conn’s, and the long-term opportunities to create sustainable growth and profitability,” Miller added. 

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