) posted adjusted earnings per share of 36 cents in the second
quarter of fiscal 2013, beating the Zacks Consensus Estimate by a
penny. The earnings improved substantially from the year-ago level
of 18 cents per share.
On a reported basis, earnings stood at 35 cents versus a loss of 10
cents recorded in the year-earlier quarter. Higher sales combined
with efficient cost containment efforts aided the earnings in the
Inside the Headline Numbers
In the second quarter, the seller of home appliances and consumer
electronics grew 10.9% year over year in revenues to $207.4
million, which also outperformed the Zacks Consensus Estimate of
$203.0 million. The quarter's revenue comprised net sales increase
of 13.0% to $171.7 million in retail, and a 2.3% growth in finance
and other charges to $35.8 million.
Same store sales increased 21.5% during the second quarter. The
upside in retail sales was driven by higher average selling prices,
increased furniture and mattress offering, and withholding of a
portion of the unit volume from closed stores. In addition, the
opening of a Conn's HomePlus store in Waco, Texas in mid-June and
the revamp of four stores also contributed to the growth.
Retail gross margin was 34.1% in the quarter, up 590 basis points
year over year. Favorable shift in product mix, especially in the
furniture and mattress categories representing 21% of total product
sales, 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. Margins also benefited from the removal of low
price-point and low margin products.
Conn's ended the year with cash and cash equivalents of $5.2
million, long-term debt of $238.9 million and stockholder equity of
The company raised its diluted earnings per share guidance for
fiscal 2013 to $1.40-$1.50 from the earlier projected range of
$1.30-$1.40. Prior to this, management's guidance for fiscal 2013's
earnings per share was in the range of $1.20-$1.30.
Growth in same stores sales are expected at 10-15% (prior guidance
was mid- to high-single digits). The company also plans to open as
many as five new stores for the full-year.
We remain optimistic on Conn's owing to a set of bullish features
which include strong same-store sales momentum, share gain in the
challenging appliance market, ability to charge higher price points
compared to its peers, strong margin improvement, unit remodeling
and an increase in its credit portfolio balance.
The consecutive raise in earnings per share guidance for 2013
also reflects the company's strong fundamentals. With about 12%
comps growth in August, Conn's also kicked off its third quarter on
a positive note. Conn's long-term prospect to garner 30% of product
sales from its high-margin furniture and mattresses category will
also bode well for its overall margins.
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Conn's which faces intense competition from bigger industry players
Best Buy Co. Inc.
)., currently carries a Zacks #2 Rank that translates into a
short-term Buy rating.