Is Conn’s in Trouble After Q4 Earnings?

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Conn’s Inc. (NASDAQ: CONN) released its fiscal fourth-quarter financial results before the markets opened on Thursday. The company said that it had $0.56 in earnings per share (EPS) on $420.4 million in revenue, versus consensus estimates from Thomson Reuters of $0.54 in EPS on revenue of $428.69 million. The same period of last year reportedly had EPS of $0.05 and $432.81 million in revenue.

Total retail revenues were $334.5 million. The 6.1% decrease in retail revenue was primarily driven by a decrease in same-store sales of 8.0%, partially offset by new store growth. Sales for the three months ended January 31, 2018, were impacted negatively by the transition of its lease-to-own partner and general consumer softness along the Mexico border.

In terms of its segments, the firm reported the following:

  • Furniture and mattress sales dropped 3.9% year over year to $106.97 million.
  • Home appliance sales increased 0.9% to $84.49 million.
  • Consumer electronics sales fell 15.0% to $81.97 million.
  • Home office sales decreased 0.4% to $25.39 million.

Looking ahead to the fiscal first quarter, the company expects to see same-store sales down 3% to 5%, with a retail gross margin between 38.5% and 39.0% of total net sales. The consensus estimates call for $0.35 in EPS on $367.13 million in revenue for the coming quarter.

On the books, Conn’s cash and cash equivalents totaled $9.3 million at the end of the quarter, down from $23.6 million at the end of the previous fiscal year.

Norm Miller, Conn’s board chair and chief executive, commented:

Conn’s fiscal year 2018 financial results demonstrate the successful execution of the Company’s turnaround strategies and, as expected, a return to full-year profitability.  Credit segment performance improved throughout the fiscal year as a result of higher finance charges, stronger portfolio fundamentals, controlled expenses, and lower borrowing costs.  Conn’s retail segment ended the year with record retail gross margins.  I am encouraged by the platform we have created and the positive momentum underway at Conn’s.

Shares of Conn’s were more than 14% lower early Thursday to trade at $30.75. The consensus analyst price target is $39.00 and the 52-week range is $11.30 to $37.80.