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Conn’s, Inc. Reports Net Sales For The Quarter Ended July 31, 2012

Stocks in this article: CONN

Conn’s, Inc. (NASDAQ: CONN), a specialty retailer of home appliances, furniture, mattresses and consumer electronics and provider of consumer credit, today announced its net sales for the three months ended July 31, 2012.

Net sales were $171.7 million for the three months ended July 31, 2012, an increase of $19.7 million, or 12.9%, from the same period last year. Net sales represent total product sales, repair service agreement commissions and service revenues. Same store sales (sales recorded in stores operated for the entirety of both periods) for the quarter ended July 31, 2012 rose 21.5% over the comparable prior-year period.

Theodore M. Wright, the Company’s Chairman and CEO, commented, “We opened our new store in Waco, Texas in mid-June. The new Conn’s Home Plus store delivered solid revenues in July – positioning it within the top 10% of our 65 stores ranked on sales.”

The retail gross margin, which includes gross profit from both product and repair service agreement sales, was approximately 33.5% for the quarter ended July 31, 2012, an approximate 470 basis point and 760 basis point increase over the same periods in fiscal 2012 and 2011, respectively. Retail gross margins increased sequentially each month within the current quarter. The following table presents net sales by category and changes in net sales for the quarter:

                               
Quarter ended July 31, Same store % change
2012         % of Total         2011         % of Total

Change

% Change
(dollars in thousands)
Home appliance $ 51,922 30.3 % $ 51,479 33.9 % $ 443 0.9 % 7.2 %
Furniture and mattress 31,942 18.6 % 21,361 14.1 % 10,581 49.5 % 57.5 %
Consumer electronic 46,590 27.1 % 47,407 31.2 % (817 ) (1.7 )% 4.6 %
Home office 14,436 8.4 % 10,727 7.0 % 3,709 34.6 % 41.5 %
Other   11,134 6.5 %   7,257 4.8 %   3,877   53.4 % 61.4 %
Total product sales 156,024 90.9 % 138,231 91.0 % 17,793 12.9 % 20.0 %
 
Repair service
agreement commissions 12,355 7.2 % 9,945 6.5 % 2,410 24.2 % 35.7 %
Service revenues   3,273 1.9 %   3,811 2.5 %   (538 ) (14.1 )%
Total net sales $ 171,652 100.0 % $ 151,987 100.0 % $ 19,665   12.9 % 21.5 %
 

The following provides a summary of items influencing the Company’s major product categories during the quarter, compared to the same quarter in the prior fiscal year:

  • Home appliance sales increased during the quarter reflecting a 25.0% increase in the average selling price, partially offset by a 19.1% decrease in unit volume. Approximately one-third of the unit sales decline was attributable to the previous store closures. On a same store basis, laundry sales increased 15.4%, refrigeration sales increased 7.5% and cooking sales increased 17.4%. Milder temperatures drove a 18.9% decrease in room air conditioner sales;
  • The continued growth in furniture and mattress sales was driven by enhanced presentation, product selection and increased promotional activity. The reported increase was tempered by the impact of previous store closures.
    • Furniture same store sales growth was driven by a 36.5% increase in unit sales together with a 19.3% increase in the average sales price.
    • Mattress same store sales also increased reflecting a favorable shift in product mix from the Company’s decision to discontinue offering low price-point products. As a result, on a same store basis, the average mattress selling price rose 78.5% and was partially offset by an 18.8% decline in unit volume;
  • Consumer electronic sales decreased modestly due to the previous store closures. On a same store basis, sales rose 4.6% with growth in televisions, home theater and audio sales partially offset by a reduction in gaming hardware and accessory item sales. With the Company’s decision beginning late last year not to compete for low-priced, low-margin television sales, the same store average selling price for televisions increased 32.1%, while unit sales declined 20.5%; and
  • Home office sales growth was driven by the expansion of tablet sales, as well as a 26.8% increase in the average selling price of computers. The reported increase was partially offset by the impact of store closures, a reduction in computer unit volume and lower sales of accessory items.

All of the above amounts are preliminary estimates and are subject to change upon completion of the Company’s quarterly financial statement closing process. Actual results may differ significantly from the preliminary estimates.

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