Conn's (CONN) Misses Q4 EPS by 15c, Revenues Miss

Conn's (NASDAQ: CONN) reported Q4 EPS of $0.20, $0.15 worse than the analyst estimate of $0.35. Revenue for the quarter came in at $315.07 million versus the consensus estimate of $412.09 million.

Fourth Quarter Results

Net income for the fourth quarter of fiscal year 2020 was $5.1 million, or $0.17 per diluted share, compared to net income for the fourth quarter of fiscal year 2019 of $29.5 million, or $0.91 per diluted share. On a non-GAAP basis, adjusted net income for the fourth quarter of fiscal year 2020 was $5.9 million, or $0.20 per diluted share, which excludes a loss on extinguishment of debt. This compares to adjusted net income for the fourth quarter of fiscal year 2019 of $31.0 million, or $0.96 per diluted share, which excludes a charge related to an increase in our indirect tax audit reserve.

“We are disappointed with our fourth quarter credit and retail results,” stated Norm Miller, Conn’s Chairman and Chief Executive Officer. “As expected, difficult market conditions within the premium TV and gaming sectors persisted during the fourth quarter and we continued to see the impact of underwriting adjustments we made in the third quarter. We also experienced declining credit performance associated with higher risk vintages, an increase in new customers and difficulties in collections efforts related to implementation of the Company’s new loan management system.”

“The COVID-19 pandemic has had a significant impact on our daily lives and our hearts go out to anyone who has been impacted by the illness. We are taking decisive actions to navigate the impacts the rapidly evolving COVID-19 situation is having within our markets. We are working to ensure our stores remain open and provide essential products and services that help customers adjust to in-home activities and lifestyles. We are revising our fiscal year 2021 store expansion plans to open between 6 and 8 stores, delaying our Florida expansion to next fiscal year and delaying other non-essential capital expenditures. In addition, we recently borrowed an additional $275.0 million of cash on our revolving credit facility as a precautionary measure to preserve financial flexibility in light of the current uncertainty.”

“For over 130 years, Conn’s has provided products and services that improve the lifestyles of our local communities, while supporting customers in good and bad times through our affordable financing options. Our experienced leadership team, profitable operating model and strong balance sheet provide us with the necessary resources to navigate this challenging period. We remain committed to helping our customers, employees and communities in this time of need. I want to thank our dedicated team for their efforts serving our customers through these uncertain times,” concluded Mr. Miller.

In response to the COVID-19 pandemic, Conn’s has enacted the following key actions:

• Continue to operate almost all of our showrooms as of April 14, 2020, with reduced in-store hours of 10:00 AM to 7:00 PM to provide additional flexibility to our employees, allow for additional cleaning and manage expenses;
• Implemented a series of underwriting changes beginning in March to control delinquencies and charge-offs;
• Borrowed $275 million of cash from our revolving credit facility as a precautionary measure to preserve financial flexibility, increasing our cash on balance sheet to over $270 million and cash and immediately available liquidity to approximately $400 million;
• Delayed or eliminated non-essential capital expenditures, including reducing the number of planned showroom openings in fiscal year 2021 from 16 to 18 to 6 to 8 and delaying our showrooms associated with our future Florida distribution center;
• Temporarily increased hourly wages by $2 per hour to support our front-line employees; and
• Temporarily reduced the salaries for certain executives, including named executive officers, by 20% and our CEO by 25%.

For earnings history and earnings-related data on Conn's (CONN) click here.

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