We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Conns' (CONN) Q2 Loss Narrower than Expected; Stock Up
Read MoreHide Full Article
Shares of Conns Inc. (CONN - Free Report) jumped nearly 11.8% after the company posted lower-than-expected loss for the second quarter of fiscal 2017. It recorded adjusted loss of 4 cents per share in the quarter that was narrower than the Zacks Consensus Estimate of a loss of 7 cents. However, in the year-ago quarter, the company had reported adjusted earnings of 47 cents per share.
Including one-time items, the company posted a loss of 39 cents per share, against earnings of 45 cents in the year-ago quarter.
Total revenue climbed 0.5% year over year to $398.2 million, but came in below the Zacks Consensus Estimate of $412 million. The year-over-year improvement in the top line was mainly backed by improved retail revenues.
Segment Discussion
Conns offers consumer durable products in the U.S. under the Retail segment, which includes home appliances, furniture and mattresses, home office as well as consumer electronics. During the second quarter of fiscal 2017, the company recorded higher revenues across the Furniture and mattress, Home appliance and Other Segments, while the Home office and Consumer Electronics Segments witnessed a year-over-year sales decline.
The segment’s total revenue increased 2.1% to $332.4 million, mainly backed by store growth, partly offset by negative comparable store sales (comps). Comps for the quarter decreased 5.1%, while excluding the impact of Conns’ decision to discontinue the sale of video game products, digital cameras and certain tablets, the same dropped 4.6%.
Further, gross margin at the Retail segment contracted 60 basis points (bps) year over year to 37.1%, but expanded 130 bps sequentially. The year-over-year decline was attributable to higher warehouse and delivery charges due to slower sales, coupled with the opening of the company’s 10th distribution unit. These were somewhat offset by a convenient shift in product mix of the Furniture and mattress and appliance segments.
Moreover, adjusted operating profit at the Retail segment came in at $38.6 million, on excluding the net charges of $2.9 million, mainly related to impairments from disposals, legal and professional fees.
Revenues from the company's Credit segment fell 6.7% to $65.7 million in the quarter, due to a 210 bps decline in the yield rate to 14.0%, including $8.2 million adverse effect of changes in estimates for allowances for no-interest option credit programs with deferred interest. This was partly compensated by average balance growth of 8.7% in the customer receivable portfolio. Excluding the effect of changes in estimates, yield rose 10 bps year over year. The customer portfolio balance improved 6.4% year over year to $1.5 billion at quarter end.
During the quarter, the company’s provision for bad debts increased by $8.7 million to $60.1 million. This was led by an 8.7% increase in average receivable portfolio balance, a $5.0 million increase in the provision for bad debts due to a change in the estimates of future sales tax recoveries, and a rise in the balance of customer receivables treated as troubled debt restructurings.
Liquidity Position
As of Jul 31, 2016, the company had cash and cash equivalents of nearly $15.5 million, long-term debt and capital lease obligations of $1,181.9 million, and total shareholders’ equity of approximately $519.6 million.
Borrowings outstanding under Conns’ revolving credit facility as of Jul 31, 2016, were $97.7 million. Also, the company had $15.5 million free cash available for use.
Store Update
During the quarter, Conns opened four new Conn's HomePlus stores, comprising one store each in North Carolina, Mississippi, Tennessee and Alabama. This took the company’s total store count to 112.
Moreover, it plans to open 1 more store during fiscal 2017, for a total of 10 new stores this year. Going forward, the company expects to open three more stores in fiscal 2018.
Other Developments
During second-quarter fiscal 2017, Conns updated its methods for the calculation of estimates in relation to the allowance for doubtful accounts, allowances for no-interest option credit programs, and deferred interest.
Guidance
For third-quarter fiscal 2017, the company expects comps to decrease in high single digits. Further, retail gross margin as a percentage of total net sales, is anticipated between 36.50%–37.25%, and selling, general and administrative expenses as a percentage of total revenues in the range of 29.25%–29.90%.
Moreover, Conns expects the provision for bad debts to be in the band of 14.25–15.25% of the average total customer portfolio balance. Also, other revenues and credit segment finance charges are estimated between 18.25%–18.75% of the average total customer portfolio balance. Interest expenses are anticipated in the range of $24.5–$26.5 million.
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand.Click to see them now>>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Conns' (CONN) Q2 Loss Narrower than Expected; Stock Up
Shares of Conns Inc. (CONN - Free Report) jumped nearly 11.8% after the company posted lower-than-expected loss for the second quarter of fiscal 2017. It recorded adjusted loss of 4 cents per share in the quarter that was narrower than the Zacks Consensus Estimate of a loss of 7 cents. However, in the year-ago quarter, the company had reported adjusted earnings of 47 cents per share.
Including one-time items, the company posted a loss of 39 cents per share, against earnings of 45 cents in the year-ago quarter.
Total revenue climbed 0.5% year over year to $398.2 million, but came in below the Zacks Consensus Estimate of $412 million. The year-over-year improvement in the top line was mainly backed by improved retail revenues.
Segment Discussion
Conns offers consumer durable products in the U.S. under the Retail segment, which includes home appliances, furniture and mattresses, home office as well as consumer electronics. During the second quarter of fiscal 2017, the company recorded higher revenues across the Furniture and mattress, Home appliance and Other Segments, while the Home office and Consumer Electronics Segments witnessed a year-over-year sales decline.
The segment’s total revenue increased 2.1% to $332.4 million, mainly backed by store growth, partly offset by negative comparable store sales (comps). Comps for the quarter decreased 5.1%, while excluding the impact of Conns’ decision to discontinue the sale of video game products, digital cameras and certain tablets, the same dropped 4.6%.
Further, gross margin at the Retail segment contracted 60 basis points (bps) year over year to 37.1%, but expanded 130 bps sequentially. The year-over-year decline was attributable to higher warehouse and delivery charges due to slower sales, coupled with the opening of the company’s 10th distribution unit. These were somewhat offset by a convenient shift in product mix of the Furniture and mattress and appliance segments.
Moreover, adjusted operating profit at the Retail segment came in at $38.6 million, on excluding the net charges of $2.9 million, mainly related to impairments from disposals, legal and professional fees.
Revenues from the company's Credit segment fell 6.7% to $65.7 million in the quarter, due to a 210 bps decline in the yield rate to 14.0%, including $8.2 million adverse effect of changes in estimates for allowances for no-interest option credit programs with deferred interest. This was partly compensated by average balance growth of 8.7% in the customer receivable portfolio. Excluding the effect of changes in estimates, yield rose 10 bps year over year. The customer portfolio balance improved 6.4% year over year to $1.5 billion at quarter end.
During the quarter, the company’s provision for bad debts increased by $8.7 million to $60.1 million. This was led by an 8.7% increase in average receivable portfolio balance, a $5.0 million increase in the provision for bad debts due to a change in the estimates of future sales tax recoveries, and a rise in the balance of customer receivables treated as troubled debt restructurings.
Liquidity Position
As of Jul 31, 2016, the company had cash and cash equivalents of nearly $15.5 million, long-term debt and capital lease obligations of $1,181.9 million, and total shareholders’ equity of approximately $519.6 million.
Borrowings outstanding under Conns’ revolving credit facility as of Jul 31, 2016, were $97.7 million. Also, the company had $15.5 million free cash available for use.
Store Update
During the quarter, Conns opened four new Conn's HomePlus stores, comprising one store each in North Carolina, Mississippi, Tennessee and Alabama. This took the company’s total store count to 112.
Moreover, it plans to open 1 more store during fiscal 2017, for a total of 10 new stores this year. Going forward, the company expects to open three more stores in fiscal 2018.
Other Developments
During second-quarter fiscal 2017, Conns updated its methods for the calculation of estimates in relation to the allowance for doubtful accounts, allowances for no-interest option credit programs, and deferred interest.
Guidance
For third-quarter fiscal 2017, the company expects comps to decrease in high single digits. Further, retail gross margin as a percentage of total net sales, is anticipated between 36.50%–37.25%, and selling, general and administrative expenses as a percentage of total revenues in the range of 29.25%–29.90%.
Moreover, Conns expects the provision for bad debts to be in the band of 14.25–15.25% of the average total customer portfolio balance. Also, other revenues and credit segment finance charges are estimated between 18.25%–18.75% of the average total customer portfolio balance. Interest expenses are anticipated in the range of $24.5–$26.5 million.
CONNS INC Price, Consensus and EPS Surprise
CONNS INC Price, Consensus and EPS Surprise | CONNS INC Quote
Zacks Rank
Currently, Conns carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the retail sector include hhgregg, Inc. , Five Below, Inc. (FIVE - Free Report) and ULTA Salon, Cosmetics & Fragrance, Inc. (ULTA - Free Report) , all carrying a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>