Why Conn’s Q4 Earnings Beat Was Not Enough

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When Conn’s Inc. (NASDAQ: CONN) reported its fiscal fourth-quarter financial results before the markets opened on Tuesday, the retailer said that it had $0.96 in earnings per share (EPS) and $433 million in revenue. Consensus estimates had called for $0.76 in EPS and $438.12 million in revenue, and it the same period of last year it said it had EPS of $0.56 on revenue of $420.39 million.

During the most recent quarter, same-store sales were −1.4%, an improvement of 660 basis points from the fourth quarter of fiscal 2018, despite lapping the benefit Hurricane Harvey rebuilding efforts had in the fourth quarter of fiscal 2018. Non-Harvey same-store sales were up 3.7%.

The company opened two new Conn’s HomePlus stores during the fourth quarter of fiscal 2019 and has opened two new Conn’s HomePlus stores during the first quarter of fiscal 2020, bringing the total store count to 125 in 14 states.

Looking ahead to the fiscal first quarter, the company expects to see a change in same-store sales between −5% and −1%, as well as a retail gross margin in the range of 39.5% to 40.0% of total net retail sales. Consensus estimates call for $0.46 in EPS and $381.96 million in revenue.

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

Fiscal year 2019 was a historic year for Conn’s and reflects the growing momentum in our business. For fiscal year 2019, same-store sales, retail gross margin, bad debt charge-offs and overall profitability improved significantly compared to the prior year. Retail growth strategies underway produced a 3.7% increase in non-Harvey same store sales during the fourth quarter. Fourth quarter GAAP earnings increased significantly to $0.91 per diluted share, which are the best quarterly earnings we have achieved in our 128-year history. In addition, we generated $73.8 million in GAAP net income and a record adjusted EBITDA of $212.8 million for fiscal year 2019.

Shares of Conn’s were last seen down fractionally at $23.78, in a 52-week range of $17.00 to $42.65. The consensus price target is $36.00.

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