Furniture and electronics seller Conn’s (CONN) was having one of the largest single-day drops in its trading history Tuesday after lowering its forecast and issuing unsettling commentary about the financing operation that makes up almost one-fifth of its overall revenue.
So far, Conn’s was recording its third-worst day ever, sinking 30.1% to $31.33 on volume that was more than 10 times that of a normal day. Including this plunge, the retailer has had two of its three biggest declines this year. The ugliest occurred in February, at 42.9%, also after Conn’s disappointed investors with a credit update that derailed its profit views. While the shares often move significantly after quarterly reports, the latest disaster leaves the stock 60% below where it closed last year.
Conn’s produced three brilliant years before 2014, with the stock surging an average of 156.7% annually. However, the three years before that looked more like this one, with an average decline of 30.9% each year from 2008 through 2010.
This session, credit concerns had investors fleeing. Conn’s said 8.7% of its customer financing balance as of July 31 was more than 60 days late, up from 8% April 30. By the end of August, it had worsened to 9.2%. Now, the company expects its full-year provision for bad debts to be between 11% and 12% of its average portfolio balance, whereas previously it put the estimated provision at 8% to 10%. The balance was $1.18 billion on the last day of July.
Higher bad-debt costs, which in the second quarter accounted for 12.4% of total expenses, deduct from earnings. Because of the debt woes, Conn’s, based in The Woodlands, Texas, expects earnings of $2.80 to $3 a share this year, before charges. That’s the second time guidance has been reduced, having been initially issued last December at $3.80 to $4 before being taken down to $3.40 to $3.70, partly because of increased delinquencies. Analysts recently were at $3.54, according to FactSet.
For the second quarter, the credit and lending side weighed on Conn’s results, and adjusted earnings of 50 cents a share fell from 52 cents a year earlier, and badly missed the Wall Street consensus of 75 cents. Total sales of $353 million were slightly short of expectations, though same-store sales, up 11.7%, were a bright spot, surpassing the forecast. Still, that wasn’t nearly enough to compete with the bad news.
Conn’s said “delinquency unexpectedly deteriorated across all credit quality levels, customer groups, product categories, geographic regions and years of origination,” adding that it’s made some changes “to tighten underwriting.”
The company’s credit revenue was over $64 million in the second quarter, about 18% of total revenue.
Recommended for You
An AirAsia jet with 162 people on board disappeared Sunday while flying from western Indonesia to Singapore on a scheduled two-hour flight. Here's a look at the key developments:Associated Press
Don't get too caught up in the amount of money you're saving for retirement. Focus instead on the income you'll have.Money
The Baby Boomer generation — the 76 million Americans born between 1946 and 1964 — was the first to really live a full lifecycle in the economy as currently structured. Members of the Greatest Generation were paying their mortgages when the value of the U.S. dollar was still tied to gold. Before…The Fiscal Times
Plunging oil prices have dragged down this entire sector, but these companies could rebound strongly next year.TheStreet.com
Understand the definitions of revenue and operating income, how they are calculated and interpreted, and how operating income is derived from revenue.Investopedia
Many investors are looking for where to put their money now that the Dow Jones Industrial Average has hit 18,000.24/7 Wall St.
In investing, where there's a winner, a loser is not far from sight. Here are the biggest losing bets in 2014.Fortune
Tom Elliott, international investment strategist at DeVere Group, says Saudi Arabia is a low--cost producer that could be driving down the oil price to disrupt Shia regimes in Syria an Iraq.CNBC Videos
Take note: Don't get yourself fired, period, whether it's before or after a mortgage is finalized.USA TODAY
Whether it’s responsible money management, weight loss or a healthier lifestyle, New Year’s resolutions usually become a thing of the past by February, when the holiday festivities are over, the dust has ...Money Talks News
Russian lenders are stepping up efforts to tap Islamic finance as international sanctions and a slump in oil prices push the world's biggest energy exporter to the brink of a recession. Vnesheconombank, ...Bloomberg
By Simon Falush LONDON (Reuters) - Brent crude oil rose to $60 per barrel on Monday, supported by concerns about disruption to exports from Libya, but a global supply glut kept prices nearly 50 percent off their peak for the year. A fire at one of Libya's main export terminals has destroyed 800,000…Reuters51 mins ago
Car insurance industry, meet potential disrupters Google and Apple. The prospect of smartphones becoming the central nervous system of usage-based insurance could disrupt the property and casualty industry, ...San Jose Mercury News
A balanced investment portfolio is important to...Business Insider
T-Mobile’s stock-market underperformance belied its earnings and subscriber growth in 2014.The Wall Street Journal
Dear Liz: My mother just turned 75 and wants to downsize from her four-bedroom house. My father passed away six years ago. She owns her home outright, and at the time of my father's death the value of ...Los Angeles Times
From sleeping fishing village to city of 10m people in 25 yearsFinancial Times Video
Hong Kong listed Chinese banks are rallying this morning after the two-day Christmas holiday break upon news that the People's Bank of China will loosen its definition of loan-to-deposit ratios starting ...Barrons.com
ALGIERS, Algeria (AP) — Algeria's oil minister on Sunday called on OPEC to cut production and raise the price of oil, which has plunged dramatically in the last six months.Associated Press