Conn's Stock Soars on Same-Store Sales Jump From Stimulus, Tighter Credit

Conn’s same-store sales rebounded in fiscal Q1 ended April 30, topping expectations with a 19.4% bump from a year earlier on stimulus-driven consumer demand and a tighter credit strategy, said CEO Norm Miller on a quarterly earnings call Thursday. The same-store sales bounce was 1.8% higher than Q1 two years ago. Retail revenue grew 26.5% to $291.5 million.

Consumer electronics, 15.5% of quarterly revenue, rose 13% to $38 million on improving TV sales and higher gaming hardware volume, “as inventory, while still constrained, has become more available,” said Miller. Higher sales offset “continued challenges” from COVID-19 and industry supply chain inventory and pricing dynamics, he said. Conn’s supply chain team is working to secure “our share of available product” and working with vendors on “opportunistic buys to help bridge the gap until inventories begin to recover.”

Home office, the only category not to post growth in the quarter, had a 16.4% sales decline to $14.5 million as it lapped last year’s spike in sales due to work-from-home and distance learning demand due to the pandemic, Miller said.

Q1 e-commerce sales of $10.6 million were a 96% improvement over the year-ago quarter. The company hopes to double e-commerce sales in FY ’22 to over $50 million as part of an omnichannel strategy, Miller said. The company opened six Conn’s HomePlus showrooms during the quarter and one last month in Florida, for a total of 153 in 15 states. It plans to open 11-13 more in existing states in the fiscal year.

Conn’s cash, third-party financed and credit card sales grew 70% year on year, said Miller, and it believes it can capture customers it lost because of “significantly tighter underwriting” over the past 12 months. It has started taking additional risk, he said, saying the addition of new lease-to-own partners at the mid-low end of the credit spectrum “positions us extremely well” for the future.

Earnings were $45.4 million vs. a $56.2 million net loss in the year-ago quarter, said the company. Earnings swung positive to $1.52 per share vs. a loss of $1.95 per share in Q1 last year, for the highest quarterly net earnings in company history, Miller said. Credit segment operating income was $54.2 million vs. a loss of $67.5 million in the year-ago quarter, due to a drop in the provision for bad debts offset by a decrease in credit revenue. It ended the quarter with $434.7 million in net debt vs. $813 million, a year ago, said Chief Financial Officer George Bchara.

Demand and economic uncertainty for the back of the year remain high, but Conn’s expects same-store sales to be up high single-digits for the fiscal year, said Bchara. It’s monitoring inflationary trends across many categories. The stock closed 27% higher Thursday at $30.57.