Shares of Conns Inc. (CONN) climbed 3.5% following the company’s positive holiday sales results, which include sales data for both Nov and Dec 2014.
While retail net sales for November advanced 19.4% to $122.7 million year over year, sales jumped 11.5% to $132.4 million for December.
Moving to the comparable store sales (comps), overall comps slipped 0.5% for December, compared to a 38.5% surge in the same period last year. This could be attributed to stricter underwriting, compared to last year. Apart from this, new store openings largely impacted store performances at Arizona and New Mexico. Excluding these two locations, Conns’ December comps climbed 1.4%.
Segment-wise, December comps for the Furniture and mattress segment rose 3.8%, while both the Consumer electronic and Home appliance segments posted comps growth of 7.5%. On the other hand, comps at the Home office and other segment slumped 26.4% and 24.2%, respectively.
Consumer electronics comps were backed by greater average selling price which compensated for unit declines in the segment. Within the Consumer electronics, tablet comps fell 58.7%, Television comps improved marginally and Gaming sales witnessed a remarkable increase owing to consumer demand.
However, at the Home office segment, the higher average selling price could only partially remove the impact of lower units sold. Excluding the home office division, comps rose 5.2%.
Finally, the comparable sales from repair service agreement commissions dipped 3.9%, on account of alterations in product sales mix.
The company’s sales results were adversely impacted by supply chain issues stemming from port labor disruption. However, the effect was minimized to a great extent by greater planned inventories. Going forward, management expects January sales to remain cushioned to a great extent from these disruptions, given that there is no further fall in product flow.
Alongside, the company reported that its 60-plus day delinquency rate as of Dec 31, 2014 stood at 9.7%, up 30 basis points from November. Nevertheless, its less than 60 day delinquency as of the same date was way below its year-ago level.
Despite positive holiday sales results, Conns’ Zacks Rank #5 (Strong Sell) is justified by the recent dismal third-quarter fiscal 2015 results. The company posted a loss of 8 cents per share in contrast to 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 delivered by the retail division.
A better-ranked stock in the consumer electronics industry is Best Buy Co. Inc. (BBY), holding a Zacks Rank #2 (Buy). Other stocks performing well in the retail space include Burlington Stores Inc. (BURL) with a Zacks Rank #1 (Strong Buy) and Dollar Tree Inc. (DLTR) carrying a Zacks Rank #2.
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