Shares of electronics retailer
) crashed nearly 43% in a single day after the company trimmed
its fourth-quarter fiscal 2014 and fiscal 2015 earnings guidance.
The company also provided an insight into its fourth-quarter
fiscal 2014 performance.
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For the quarter, retail segment net sales grew 44.8% year over
year to $301.6 million, while same store sales rose 33.4% year
over year. In spite of the year-over-year growth, management now
anticipates quarterly earnings in the range of 75-80 cents, way
below the Zacks Consensus Estimate of 93 cents.
Sluggish electronics sales and higher provision for bad debt
(triggered by higher charge-offs, accounts receivable and
delinquency rates) compelled management to lower its outlook. For
fiscal 2014, the company now expects earnings in the band of
$2.59 to $2.64, as against $2.75 to $2.80 projected earlier. The
current Zacks Consensus Estimate is pegged at $2.77 per share.
Further, anticipating the impact of lower sales and higher
provision to spill over in fiscal 2015, management trimmed its
full-year earnings guidance to $3.40-$3.70 from $3.80-$4.00 per
share. However, the company reaffirmed its guidance of opening
15-20 stores in 2015. The current Zacks Consensus Estimate is
pegged at $3.93 per share.
Conns' Credit segment failed to deliver as loan delinquency rates
and higher charge-offs rose significantly in December and
January, pushing up provisions for bad debt. The percentage of
customer portfolio balance over 60 days delinquent was 8.8% as of
Jan 31, 2014, as against 7.1% in the past year. The customer
portfolio balance was $1,068.3 million as of Jan 31, 2014,
increasing 44.1% from Jan 31, 2013.
While a severe winter and subsequent rise in energy expenses at
the customers' end impacted debt payments, the company's focus on
sales growth marred its debt collection operations.
Apart from this, factors such as rise of e-shopping have added to
the company's troubles. Heightened competition from online giants
) has significantly affected prices and reduced footfall at
several brick and mortar stores.
Earlier this year, several electronic chains including
Best Buy Co., Inc.
) have reported dismal holiday sales data and subsequently
trimmed their guidance. In fact, Best Buy lost 30% of its market
capitalization in a single day after having risen twofold in
Currently, Conns carries a Zacks Rank #3 (Hold).