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Conn’s, Inc. Reports Record Retail Gross Margin In Quarter Ended October 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 October 31, 2012.

Net sales for the three months ended October 31, 2012, were $167.3 million, an increase of $12.4 million, or 8.0%, over the prior-year period. Net sales include 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 October 31, 2012 grew 12.6% over the prior period, on top of same store growth of 18.9% a year ago. The Company had 65 and 70 stores open at October 31, 2012 and 2011, respectively.

“We delivered our fifth straight quarter of double-digit, year-over-year same store sales growth,” commented Theodore M. Wright, the Company’s Chairman and CEO. “The expansion of our furniture and mattress business and improved sales mix across all categories increased our retail gross margin. Consumer electronic same store sales were down only 3% despite continued industry headwinds in this category.”

The retail gross margin, which includes gross profit from both product and repair service agreement sales, was approximately 35% for the three months ended October 31, 2012, an approximate 970 basis point increase over the same period last year. During the three months ended October 31, 2011, the Company adjusted its inventory valuation reserve – reducing retail gross margin for the prior-year period and benefiting the reported margin expansion in the current-year period by 300 basis points.

The following table presents net sales by category and changes in net sales for the quarter:

    Quarter ended October 31,       Same store
2012   % of Total   2011   % of Total Change % Change % change
(dollars in thousands)
Home appliance $ 48,499 29.0 % $ 46,993 30.3 % $ 1,506 3.2 % 6.4 %
Furniture and mattress 32,346 19.3 % 24,567 15.9 % 7,779 31.7 % 34.0 %
Consumer electronic 47,082 28.1 % 50,073 32.3 % (2,991 ) (6.0 )% (3.2 )%
Home office 16,169 9.7 % 13,242 8.6 % 2,927 22.1 % 27.5 %
Other   7,567 4.5 %   5,529 3.6 %   2,038   36.9 % 59.8 %
Total product sales 151,663 90.6 % 140,404 90.7 % 11,259 8.0 % 11.5 %
 
Repair service
agreement commissions 12,183 7.3 % 10,601 6.8 % 1,582 14.9 % 23.1 %
Service revenues   3,477 2.1 %   3,950 2.5 %   (473 ) (12.0 )%
Total net sales $ 167,323 100.0 % $ 154,955 100.0 % $ 12,368   8.0 % 12.6 %
 




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