Conn’s Inc. (NASDAQ: CONN) reported an 18% jump in earnings for the second quarter of 2020 as new store openings, strong retail profitability, and favorable credit performance drove retail sales growth. The results exceeded analysts’ expectations.
Net income improved by 18% to $20 million or $0.62 per share. Adjusted earnings increased by 9% to $0.62 per share, which came in ahead of the analysts’ estimates of $0.51 per share.
Total revenues rose by 4% year-over-year to $401.06 million, which came in ahead of the market expectations of $379.02 million. Total retail sales were $306.1 million, up 3.3% from last year, and same-store sales increased by 0.4% in non-Hurricane Harvey markets. Total same-store sales decreased by 2.3%.
Looking ahead into the third quarter, the company expects total retail sales growth of 4% to 8% and retail gross margin of 40% to 40.5% of total net retail sales. The change in same-store sales is anticipated to be between negative 3% and positive 1%. The markets not impacted by Hurricane Harvey is predicted to be negative 2% and positive 2%, and the markets impacted by Hurricane Harvey is projected to be negative 8% and negative 4%.
During fiscal 2020, the company plans to open a total of 14 new stores in existing states to leverage current infrastructure. In addition, Conn’s announced its planned expansion into the Florida market with the first store expected to open in the second half of fiscal 2021. To support this expansion, the company plans to open a distribution center in central Florida within the next twelve months.
The company generally finance its operations primarily through a combination of cash flow generated from operations, borrowings under its Revolving Credit Facility, and securitizations of customer receivables through the capital markets. As of July 31, 2019, the company had $403 million of immediately available borrowing capacity under its $650 million revolving credit facility. Conn’s also had $7.6 million of unrestricted cash available for use.
As of July 31, 2019, the company had long-term debt and finance lease obligations of $945.98 million. This debt levels could adversely impact its financial health, ability to obtain financing in the future and to react to changes in its business.