Conn's Inc.

by Zacks Equity Research

November 26, 2012 |

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Conn’s Inc. (CONN - Snapshot Report) has hit a 52-week high twice this month, having gained momentum after releasing preliminary sales and gross margin numbers for its fiscal third quarter. Furthermore, shares of this Zacks #1 Rank (Strong Buy) specialty retailer of durable consumer products have more than doubled in price since the beginning of this year.

Preliminary Q3 Sales and Gross Margin

On November 8, Conn’s reported preliminary sales, same store sales and gross margin results for its fiscal third quarter. Net sales were up 8% year over year to $167.3 million, compared to the Zacks Consensus Estimate of $199 million.

Same store sales increased 12.6% during the quarter, marking the fifth consecutive double-digit same store sales growth for the company. The upside in retail sales was driven by higher average selling prices, increased furniture and mattress offerings and growth in home office sales. This was offset by declines in unit volume due to previously closed stores.

Retail gross margin was 35% in the quarter, up 970 basis points year over year. A favorable sales mix across all product categories, combined with the expanded furniture and mattress business, largely drove retail gross margin in the quarter.

Conn's is scheduled to release its complete fiscal 2013 third quarter results on December 3, 2012.

Preliminary Results Drive Estimates

Following the preliminary results, earnings estimates have been trending higher in the past 30 days. The Zacks Consensus Estimate for fiscal 2013 rose 2.7% to $1.52 per share, as 4 of 7 estimates were revised higher. This represents year-over-year growth of 120.3%.

The Zacks Consensus Estimate for fiscal 2014 advanced 3.3% to $1.90 per share over the same time frame, as 4 of 7 estimates again advanced, reflecting a year-over-year increase of 24.8%.

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Shares of Conn’s have recorded a year-to-date return of 141.5%, indicating that the company continues to gain from its earnings and sales momentum, as well as its expanding credit portfolio.

Moreover, shares have continually traded above the 200-day moving average since the beginning of calendar year 2012. The stock is also trading above its 50-day moving average since July 26, 2012. Additionally, the company has outperformed the S&P 500 Index since February 6, 2012.

Founded in 1890 and headquartered in Beaumont, Texas, Conn’s is a retailer of durable consumer products in the United States. The company deals in home appliances, furniture and mattress, consumer electronics and home office products. Additionally, the company offers a variety of products on a seasonal basis, including lawn and garden equipment. The company also provides flexible in-house credit options for its customers, in addition to third-party financing programs and third-party rent-to-own payment plans. Conn's has a market cap of 917 million.


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