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Conn's Inc. (CONN)
F2Q10 (Qtr. End 7/31/09) Earnings Call
August 27, 2009 11:00 am ET
Michael Poppe – Chief Financial Officer
Timothy Frank – President, Chief Executive Officer
David McGee – Sun Trust Robinson Humphrey
Rick Nelson – Stephens Inc.
Previous Statements by CONN
» Conn's Inc. Q3 2009 Earnings Call Transcript
» Conn’s, Inc. Q3 2008 (Qtr End 10/31/08) Earnings Call Transcript
» Conn’s, Inc. F2Q08 (Qtr End 07/31/08) Earnings Call Transcript
Good morning everyone and thank you for joining us. I'm speaking to you today from Conn's corporate offices in Belmont, Texas. You should have received a copy of our earnings release dated August 27, 2009 distributed before the market opened this morning, which describes our earnings and other financial information for the quarter ended July 31, 2009. If for some reason you did not receive a copy of the release, you can download it from our website at conns.com.
I must remind you that some of the statements made in this call are forward-looking statements with the meaning of the Securities and Exchange Act of 1934. These forward-looking statements represent the company's present expectations or beliefs concerning future events. The company cautions that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties which could cause actual results to differ materially from those indicated today.
I would now like to turn the call over to today's host, Tim Frank, Conn's President and CEO.
Good morning and thank you for joining us today. Mike and I are going to speak to our sales, financial performance and the current status of our credit and financing operations.
In the face of the challenging market, we believe we gained market share, maintained control of the credit portfolio performance and continued to focus on removing costs from the business model. I continue to be very excited about the long term growth opportunities for our business and believe we are well positioned for renewed sustainable growth.
We faced increasingly challenging economic conditions but have a long track record of success through a variety of economic cycles and have consistently delivered increasing sales and profitability since our founding.
We believe our unique value proposition and excellent customer service differentiate us from our competitors and we expect to continue to capture share in our markets. We increased market share in our key categories of electronics, appliances and furniture and mattresses despite the current challenging economic environment as evidenced by our sales performance relative to published industry information.
According to the U.S. Census advanced retail sales report, revenues for consumer electronic and appliance retailers during the three months ended July 31, 2009 were down 13.8% while our revenues declined only eight tenths of one percent in those categories. In fact, our LCD unit sales during the second quarter increased 32% over the prior year and plasma units increased 120% as we offer our customers a great selection of top brands and expanded our line up this year.
Our furniture and mattress business has continued to exceed industry performance. Again, according to the U.S. Census, sales for furniture retailers during the three months ended July 31, 2009 were down 13.3% while our business was up 10.7%. We told you on the last earnings conference call that we were focused on capturing market share and we delivered on that promise.
Net sales for the quarter were essentially flat, down two tenths of a percent as same store sales declined 5.2%. Revenue growth from appliances, furniture and mattresses was offset by revenue declines in consumer electronics and lawn and garden.
The track category was flat during the quarter which is an improvement over the prior quarter trend as we expanded our selection in computers, added net books and improved our in-store displays and increased our promotional activities.
Our appliance revenues grew on a 5.7% increase in refrigeration sales and a 26.8% increase in air conditioning sales as laundry sales were down 6% and cooking sales were down 8.7%. We expect to continue to counter the national trend of significantly lower appliance sales through aggressive promotional activities. Additionally, we expect to benefit from the $300 million Federal Energy Star incentive program.
We grew our furniture and mattress revenue after remodeling many of our stores, improving our in-store display of these products and creating a more inviting environment in which to shop in addition to expanding our brand selection.
Consumer electronics revenue declined by 4.2% despite a 28% increase in total television units sold due to a 25.7% decline in average selling prices.
The lawn and garden category continues to be a challenge due to the drought conditions we've been experiencing in many of our markets. Our service maintenance agreement sales were down during the quarter as we completed a review of the program and our training in response to the ongoing Texas Attorney General investigation.
We expect that as a result of the enhancements made after our review and the overall improved execution by our service organization, sales and service maintenance agreements will trend towards our historical performance levels over time. We believe sales growth will be driven by aggressive promotional activity, our consumer credit advantage and a more effective merchandizing layout in our remodeled stores.