Conn's Inc.

Conn's, Inc. (CONN - Snapshot Report), the consumer electronics and home products retailer, is one of the few retail success stories after sales soared in the fourth quarter by 22.3% as the Texas economy stayed hot. The company recently raised fourth quarter guidance. It reports earnings on Mar 26. CONN is trading at 8.8x forward earnings.

Company Description

Conn's is a specialty retailer that operates 76 locations in Texas, Louisiana and Oklahoma. The bulk of the company's stores are in Texas, with only 6 operating in Louisiana and 3 in Oklahoma.

The company sells home appliances, including refrigerators, dishwashers, washers, and dryers, consumer electronics, including LCD and plasma televisions, digital cameras and computers, lawn and garden products, furniture and mattresses, and other home products.

A hallmark of the company is its flexible in-house credit options which, over the prior 3 years, has allowed Conn's to finance, on average, about 61% of its retail sales.

Fourth Quarter Sales Jumped 22.3%

As many retailers struggle, Conn's bucked the trend with strong sales growth for the quarter ending Jan 31, 2009.

Net sales increased 22.3%, or $44.8 million, to $245.4 million compared to sales for the quarter ending Jan 31, 2008.

Same store sales climbed 12.5% for the quarter, with a gain of 21.7% in just the month of January compared to the year ago period. The company said same store sales were strong during every month of the quarter, driven by the company's focus on increasing its market share.

Consumer electronics was the hot category, growing 43.8% year over year. Consumers continued to buy flat-panel televisions, especially LCD televisions, and home theater systems.

Fourth Quarter Guidance Raised

On Feb 19, Conn's raised its previously issued guidance for the quarter ended Jan 31, 2009 due to strong sales and improved margins in the quarter. The new forecast calls for earnings per share in the range of 66 cents to 68 cents, well above previous guidance of 53 cents to 58 cents per share. Earnings per share in the fourth quarter of 2008 were 57 cents per share.

Conn's is scheduled to report fourth-quarter earnings on Mar 26.

Consensus Estimates Rise

Given the company's increased guidance, it's not surprising that consensus estimates for the fourth-quarter 2009 and full-year 2009 have been rising. Fourth quarter estimates jumped 50% to 60 cents in the last 90 days, still well below the company's forecasted range.

Full-year guidance is up 3 cents to $1.20 per share in the last 3 months, with 3 out of 4 covering analysts raising in the last 30 days.

Value Fundamentals

Conn's is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 3 out of the last 4 quarters.

The company is trading with a forward P/E of 8.8. It has a price-to-book of 0.83. It also has a PEG ratio of only 0.61. The company's has a solid 5-year average return on equity (ROE) of 15.41%.