Earnings Review and Free Research Report: Conn's Reported Better than Expected Earnings
LONDON, UK / ACCESSWIRE / September 28, 2017 / Pro-Trader Daily has just published a free post-earnings coverage on Conn's, Inc. (NASDAQ: CONN), which can be viewed by registering at http://protraderdaily.com/optin/?symbol=CONN, following the Company's release of its second quarter fiscal 2018 financial results on September 07, 2017. The specialty retailer of furniture and mattresses, home appliances, consumer electronics, and home office products reported net profit for Q2 FY18 compared to net loss in the year-ago same period. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member's account at:
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Earnings Reviewed
For the second quarter ended July 31, 2017, Conn's recorded net sales of $286.41 million, down 13.7% compared to net sales of $332.00 million for Q2 FY17. The Company's revenue fell short of analysts' estimate of $371.9 million.
Conn's net income was $4.3 million, or $0.14 per diluted share, for Q2 FY18 compared to a net loss of $11.9 million, or $0.39 per diluted share, for Q2 FY17. On a non-GAAP basis, the Company's adjusted net income for the reported quarter was $8.2 million, or $0.26 per diluted share, which excluded charges and credits and the loss from extinguishment of debt related to the early redemption of its 2015-A Notes. The Company's adjusted net loss for the year-ago corresponding period was $1.2 million, or $0.04 per diluted share, which excluded charges and credits and the impact of changes in estimates. Conn's earnings exceeded Wall Street's expectations for a loss of $0.02 per share.
Conn's Segment Results
Retail segment - During Q2 FY18, the Company's total retail revenues were $286.5 million, down 13.8% compared to $332.4 million for Q2 FY17. The decrease in retail revenue was primarily driven by a decrease in same-store sales of 15.1%, partially offset by new store growth. The segment's sales were negatively impacted by underwriting changes made during FY17, the transition of the Company's lease-to-own partner and general softness in consumer spending. For the second quarter of the fiscal year 2018, the retail segment's operating income was $31.3 million.
During Q2 FY18, the retail segment's Furniture unit volume decreased 24.3%, partially offset by a 12.6% increase in average selling price. The division's Mattress unit volume decreased dropped 15.9% on a y-o-y basis, partially offset by an 11.3% increase in average selling price.
The retail division's Home appliance unit volume decreased 12.0% and average selling price decreased 2.0% during Q2 FY18, while its consumer electronics unit volume decreased 21.2%, partially offset by a 2.1% increase in average sales price.
Credit segment - For Q2 FY18, the Credit segment revenues were $80.1 million, up 21.9% compared to $65.7 million for Q2 FY17, primarily the result of originating higher-yield direct loan product, which contributed to the increase in the portfolio yield rate to 18.7% from 14.0%, partially offset by a 4.2% decline in the average balance of the customer receivables portfolio.
The segment's interest income and fees for the reported quarter included the negative impact of adjustments of $8.2 million because of changes in estimates for allowances for no-interest option credit programs and deferred interest. Excluding the impact of changes in estimates, the yield rate increased 260 basis points from Q2 FY17. The total customer portfolio balance was $1.48 billion on July 31, 2017, down 4.2% compared to $1.54 billion at July 31, 2016.
The Company achieved a credit spread of 390 basis points during Q2 FY18, which was the largest spread in seven quarters. Conn's provision for bad debts for the Credit segment was $49.3 million for Q2 FY18 compared to $60.1 million for Q2 FY17.
Store Update
During FY18, Conn's has opened three new Conn's HomePlus® stores, two of which were opened during Q1 FY18 in North Carolina, and one of which was opened during the current quarter, bringing the total store count to 116. The Company does not intend to open any additional stores in the fiscal year 2018.
Liquidity and Capital Resources
As of July 31, 2017, Conn's had $130.5 million of immediately available borrowing capacity under its $750.0 million revolving credit facility, with an additional $416.8 million that may become available under the Company's revolving credit facility if the Company grows the balance of eligible customer receivables and total eligible inventory balances under the borrowing base. The Company also had $35.0 million of unrestricted cash available for use.
Stock Performance
On Wednesday, September 27, 2017, the stock closed the trading session at $24.85, climbing 4.19% from its previous closing price of $23.85. A total volume of 784.94 thousand shares have exchanged hands, which was higher than the 3-month average volume of 565.22 thousand shares. Conn's stock price skyrocketed 38.83% in the last three months, 174.59% in the past six months, and 129.46% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have soared 96.44%. At Wednesday's closing price, the stock's net capitalization stands at $751.71 million.
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