Conn’s November CE Sales Rise Called ‘Significant Reversal’ From October

Conn’s CEO Tim Frank thinks TV makers are being more promotionally active than normal for a holiday selling season to generate sales and market share gains, he said Thursday on an earnings call. “Certainly I believe that to be the case,” Frank replied when an analyst asked him whether he’s seeing an unusually high level of activity among TV vendors “offering more funding incentives to drive interest in the category."

Conn’s thinks TV makers will soon “transition” to new model lines more rapidly than they have in the past, Frank said. “That, coupled with the slower sales pace in general, is going to create even more promotional activity, which creates an opportunity for us as a power regional.” As a result, Conn’s will be able to “mix up into larger screen sizes, which of course is a big selling benefit,” Frank said. It also leaves Conn’s well positioned to sell step-up TV features like 3D, LED backlighting and Internet connectivity, he said.

Preliminary “operational reports” at Conn’s show that sales of “major electronics” at the chain jumped 6 percent in November compared with the same month a year earlier, Frank said. Conn’s won’t officially report November sales data until it releases results for the year ending Dec. 31. The November increase marks “a significant reversal” from October, when the chain incurred sales decline in major electronics that was “just over” 21 percent, he said. For the third quarter through Oct. 31, CE sales at Conn’s fell 24.7 percent from Q3 a year earlier, when CE sales were down only 3.6 percent from the year before that, Frank said. In units, CE sales for the quarter were down 14 percent, and average selling prices plummeted 13 percent, he said: “So we had a good month in November for major electronics,” especially TVs.

Conn’s November TV sales increase drew from “a little bit of a mix” between old models and new, Frank said. The chain’s top-selling Black Friday SKU was a “3D package” featuring a 55-inch LED-backlit LCD TV, Frank said. He didn’t name the vendor, but it’s believed to be Samsung. “From a unit standpoint, they flew out the door,” Frank said of the 3D TV bundle. “It was very exciting to see that. Again, that’s from vendor support and our merchandising team really focusing on improved mix."

Overall Black Friday sales at Conn’s jumped 13.1 percent from a year earlier, Frank said. For Saturday and Sunday of Thanksgiving weekend, sales were up a combined 3.8 percent, he said. For the month of November, overall sales fell 1 percent and declined 1.4 percent on a same-store-sales basis, he said. “What we saw was sort of an improving trend throughout the month” of November, with the upturn starting in the second week, Frank said. “So it was not driven just by the holiday weekend, although that certainly was above average."

For the quarter overall, total net sales fell 15.2 percent to $161.38 million and its net loss widened 64.6 percent to $14.37 million. Still, the chain’s gross margins jumped to 40.4 percent from 37.4 percent a year earlier, Frank said. Since Conn’s this week closed on a new $500 million refinancing agreement, “we're now in a position to be more aggressive in offering flexible credit programs to our customers,” he said. “This does not mean we will open up our underwriting standards to the levels we were using two years ago. But we do have some opportunities to expand our offerings. Our previous capital constraints forced us to shrink our credit portfolios and reduce our marketing efforts to attract credit customers. Now we are in a position to restart direct marketing to attract customers into our stores to buy on credit. These opportunities should help us improve our sales results and slow the reduction of the credit portfolio balance, if not grow the portfolio.” Conn’s is committed to improving “existing operations and aggressively marketing our credit offerings to consumers” in its current markets “before opening new stores,” Frank said.