Conn’s beats Q1 earnings estimates but revenue falls short

Conn’s Inc. (NASDAQ: CONN) topped market expectations on earnings for the first quarter of 2020 but revenue came in shy of estimates.

Total revenue was $353.5 million compared to $358.3 million for the same period last year. Analysts had forecasted revenues of $367 million.

GAAP net income improved over 53% year-over-year to $19.5 million, or $0.60 per share. Adjusted net income was $19 million, or $0.58 per share. Adjusted EPS grew 45% year-over-year and came ahead of estimates of $0.53.

In the Retail segment, revenues fell 4.9% to $262.2 million, mainly due to a 8.2% drop in same-store sales. Same-store sales decreased 14.8% in markets impacted by Hurricane Harvey and 5.6% in markets not impacted by Hurricane Harvey. The company believes same-store sales were impacted by rebuilding efforts as well as a larger shift towards online applications.

Conn’s saw sales declines in all its product categories in the retail segment with the highest of 14.2% in Home office. Same-store sales and volumes also decreased across all categories.

In the Credit segment, revenues grew 10.5% to $91.3 million, helped by the origination of the higher-yielding direct loan product, which resulted in a portfolio yield rate increase, along with an increase in the average outstanding balance of the customer accounts receivable portfolio.

The company opened four new Conn’s HomePlus stores during Q1 2020 and one new Conn’s HomePlus store during Q2 2020, bringing the total store count to 128 in 14 states. During fiscal year 2020, Conn’s plans to open 14 to 15 new stores in existing states to leverage current infrastructure.

The Board of Directors approved a stock repurchase program, effective May 31, 2019, under which the company may repurchase up to $75 million of its outstanding common stock. The program will remain effective for one year, unless extended by the board.

For the second quarter of 2020, the company expects a change in same store sales between negative 4% and 0%. In the markets not impacted by Hurricane Harvey, the change is expected between negative 2% and positive 2% while in the markets impacted by Hurricane Harvey, it is expected between negative 11% and negative 7%.   

Conn’s stock has climbed 10% so far this year.

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