How Conn's Crushed Q2 Earnings

Conn’s Inc. (NASDAQ: CONN) released its fiscal second-quarter financial results before the markets opened on Tuesday. The retailer said that it had $0.62 in earnings per share (EPS) and $401.06 million in revenue, compared with consensus estimates that called for $0.51 in EPS and $379.02 million in revenue. In the same period of last year, Conn’s said it had EPS of $0.57 on $384.62 million in revenue.

During the most recent quarter, total net sales increased 3.3% year over year to $306.06 million, while finance charges and other revenues increased 7.6% to $95.0 million.

The increase in retail revenue was primarily driven by new store growth, partially offset by a decrease in same-store sales of 2.3%. The decrease in same-store sales was driven by a decrease of 9.3% in markets affected by Hurricane Harvey, partially offset by an increase of 0.4% in markets not affected by the hurricane. Note that same-store sales include e-commerce sales.

The increase in credit revenue primarily resulted from the origination of Conn’s higher-yielding direct loan product, which resulted in an increase in the portfolio yield rate to 21.9% from 21.3% for the comparative period in fiscal year 2019, and from a 3.0% increase in the average outstanding balance of the customer accounts receivable portfolio.

Looking ahead to the fiscal third quarter, the company expects to see total retail sales growth in the range of 4% to 8% with a retail gross margin between 40.0% and 40.5%. Consensus estimates call for $0.62 in EPS and $395.8 million in revenue for the quarter.

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

Retail sales growth as a result of new store openings, strong retail profitability, and favorable credit performance drove record second quarter earnings of $0.62 per diluted share.  Our e-commerce sales are quickly ramping, and we are well positioned to serve our customers online as we expand our geographic footprint.  During the second half of this fiscal year, we expect to lap the benefits Hurricane Harvey rebuilding efforts had on same store sales, which has impacted the year-over-year sales comparison over the past four quarters.

Shares of Conn’s closed Friday at $20.16, in a 52-week range of $15.40 to $42.65. The consensus price target is $33.33. Following the announcement, the stock was up about 14% at $23.00 in early trading indications Monday.

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