Shares of Conns Inc. (CONN) surged 24.4% following the company’s robust sales results for the month and quarter ended Jan 31, 2015.
Total retail sales for January advanced 16.8% year over year to $93.6 million. Comparable store sales (comps) for the same period climbed 4.9%, compared with a 28.2% rise last year. Management stated that the company generated solid collections during January, backed by a year-over-year rise in its payment rate.
Segment-wise, the Furniture and mattress, Consumer electronic, and Home appliance segments posted comps growth of 8.9%, 7.7% and 6.9%, respectively, in January. On the other hand, comps at the Home office and other segment declined 8% and 11.5%, respectively.
Consumer electronic comps were backed by greater average selling price which compensated flat unit sales. Within the Consumer electronic segment, tablet comps slumped 46.5%, Television comps improved 3.1% and Gaming sales sustained remarkable growth owing to consumer demand.
However, at the Home office segment, the higher average selling price could only partially eliminate the impact of lower units sold. Excluding the home office division, comps rose 6.5%.
As predicted earlier, the supply chain issues stemming from port labor disruption had limited impact on Conn’s January sales, as its effects were primarily restricted to imported furniture.
Moving to the fourth-quarter fiscal 2015 results, total retail sales escalated 16.2% to $350.5 million, with comps inching up 1.3%. Further, the company’s comps for fiscal 2015 jumped 8%.
Segment-wise, fourth-quarter comps for the Furniture and mattress, Consumer electronic, and Home appliance segments improved 4.7%, 8.2% and 6.6%, respectively. However, comps at the Home office and other segment plunged 21.9% and 19.4%, respectively.
Finally, the comparable sales from repair service agreement commissions grew 5% for January, while dipping 1.2% for the quarter.
Conn’s comps were impacted by stricter underwriting, compared with last year. Apart from this, new store openings largely impacted store performances at Arizona and New Mexico. Excluding these two locations, Conns’ January comps ascended 6.9%.
Alongside, the company reported that its 60-plus day delinquency rate as of Jan 31, 2015 remained flat with its Dec 31, 2014 data, owing to the absence of significant portfolio growth. Nevertheless, its less than 60-day delinquency as of the same date was below both its month-ago and year-ago level.
Despite strong sales results, Conns’ Zacks Rank #5 (Strong Sell) is justified by its recent dismal third-quarter fiscal 2015 results. The company posted a loss of 8 cents per share, in sharp contrast with earnings of 66 cents recorded in the prior-year quarter and the Zacks Consensus Estimate of 68 cents. The decline resulted from higher delinquent debt rates that weighed on the company’s profits despite an outstanding performance from the retail division.
Better-ranked stocks in the retail space include Target Corp. (TGT) and Burlington Stores Inc. (BURL), each with a Zacks Rank #1 (Strong Buy) and Ross Stores Inc. (ROST), carrying a Zacks Rank #2 (Buy).
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