) posted adjusted earnings per share of 35 cents in the first
quarter of fiscal 2013, beating the Zacks Consensus Estimate of 33
cents and the year-ago earnings of 14 cents per share.
The improvement in earnings was buoyed by higher sales,
efficient cost containment effort and lower interest expense.
Inside the Headline Numbers
In the first quarter, the seller of home appliances and consumer
electronics grew 4.6% year over year in revenues to $200.9 million
which slightly lagged the Zacks Consensus Estimate of $202.0
million. The quarter's revenue comprised net sales increase of 6.2%
to $166.9 million, and a decrease of 2.9% in finance and other
charges to $33.9 million.
Same store sales increased 17.8% during the first quarter. The
upside was driven by higher average selling prices, increased
furniture and mattress offering, and retention of a portion of the
unit volume from closed stores. However, closure of 11 stores in
fiscal 2012 provided a partial offset to the growth.
Retail gross margin was 33.7% in the quarter, up 320 basis
points year over year. Favorable shift in product mix, especially
in the furniture and mattress categories, helped drive retail gross
margin in the quarter. In the aforesaid category, the company
witnessed significant sales and margin growth which was higher than
the growth in the other categories.
Conn's ended the year with cash and cash equivalents of $6.7
million, long-term debt of $194.4 million and stockholder equity of
The company raised its diluted earnings per share guidance for
fiscal 2013 to $1.30-$1.40 from the earlier projected range of
$1.20-$1.30. Growth in same stores sales are expected at mid- to
high-single digits. The company also plans to open as many as five
to seven new stores.
We remain optimistic on Conn's due to a set of bullish features
including strong same-store sales momentum, share gain in the
challenging appliance market, strategic association with suppliers,
margin improvement, closure of underperforming units and an
increase in its credit portfolio balance.
The raise in earnings per share guidance for 2013 also bears
evidence to the company's strong fundamentals. Going ahead, Conn's
expects to report further improvement in margins from the furniture
and mattresses category following the completion of a restructuring
in furniture sourcing.
However, Conn's faces intense competition bigger industry
Best Buy Co. Inc.
). Further, same-store sales which are in a good shape currently
will likely see a difficult comparison over the next few
Conn's currently retains a Zacks #1 Rank, which translates into
a short-term Strong Buy rating. We also maintain our long-term
Outperform recommendation on the stock.
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