Conn's (CONN) Tops Q2 EPS by 11c, Revenues Beat; Provides Q3 Sales Growth Outlook

September 3, 2019 6:03 AM EDT

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Conn's (NASDAQ: CONN) reported Q2 EPS of $0.62, $0.11 better than the analyst estimate of $0.51. Revenue for the quarter came in at $401.06 million versus the consensus estimate of $379.02 million.

Second quarter of fiscal year 2020 highlights include:

  • Total retail sales of $306.1 million, an increase of 3.3% over the prior fiscal year period
  • Same store sales increase of 0.4% in non-Hurricane Harvey markets
  • Earnings of $0.62 per diluted share, an increase of 17.0% over the prior fiscal year period
  • Second quarter retail gross margin of 40.5%
  • Consolidated operating margin of 10.4%
  • Credit spread of 890 basis points, the best second quarter credit spread in six years
  • Credit segment revenues of $94.8 million, an increase of 7.5% over the prior fiscal year period
  • Net income of $20.0 million, compared to $17.0 million during the prior fiscal year period
  • Adjusted EBITDA of $54.0 million, or 13.5% of total revenues
  • Repurchase of 1.9 million shares at an average share price of $18.30

“Retail sales growth as a result of new store openings, strong retail profitability, and favorable credit performance drove record second quarter earnings of $0.62 per diluted share. Our e-commerce sales are quickly ramping, and we are well positioned to serve our customers online as we expand our geographic footprint. During the second half of this fiscal year, we expect to lap the benefits Hurricane Harvey rebuilding efforts had on same store sales, which has impacted the year-over-year sales comparison over the past four quarters,” stated Norm Miller, Conn’s Chairman and Chief Executive Officer.

“With strong operating performance and financial results, I am excited to announce our plans to enter the Florida market next fiscal year. We believe that the state of Florida can support over 40 Conn’s HomePlus locations once fully penetrated. Positive momentum is accelerating across our business and we believe fiscal year 2020 is shaping up to be a year of strong earnings and operational growth,” concluded Mr. Miller.

Outlook and Guidance

The following are the Company’s expectations for the business for the third quarter of fiscal year 2020:

  • Total retail sales growth between 4% and 8%;
  • Change in same store sales between negative 3% and positive 1%;
  • Markets not impacted by Hurricane Harvey between negative 2% and positive 2%; and
  • Markets impacted by Hurricane Harvey between negative 8% and negative 4%;
  • Retail gross margin between 40.0% and 40.5% of total net retail sales;
  • Selling, general and administrative expenses between 32.25% and 33.25% of total revenues;
  • Provision for bad debts between $46.5 million and $50.5 million;
  • Finance charges and other revenues between $94.0 million and $98.0 million;
  • Interest expense between $14.5 million and $15.5 million; and
  • Effective tax rate between 27% and 29% of pre-tax income.

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

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