Conn’s (CONN) at Record Highs on Swelling Profits in Q3 and Rosy Outlook

Andrew Klips  |

Specialty retailer Conn’s, Inc. (CONN) is hitting all-time highs in Thursday trading after reporting mushrooming sales and profits in the third quarter and an outlook for the full year that handily topped analysts.

For the quarter ended October 31, the Woodlands, Texas-based company reported consolidated revenue of $310.9 million, up 50.6 percent from $206.4 million in the third quarter last year.  Net earnings were $24.3 million, or 66 cents per share, compared to $11.7 million, or 35 cents per share, in last year’s quarter. On an adjusted basis, which excludes the impact of one-time items, earnings were $26.2 million, or 71 cents per share, versus $12.7 million, or 38 cents per share, in the year prior quarter.

Wall Street was expecting adjusted earnings of 64 cents per share on $289.0 million in revenue.

At the end of the quarter, Conn’s was operating 72 retail locations in Texas, Louisiana, Arizona, Oklahoma and New Mexico, selling a wide array of products, including appliances, electronics, furniture, accessories and more. The third quarter benefited from two new stores opened during July and two new stores during the quarter, with gains pared by two stores also being closed.

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The gains ran across all major categories for Conn’s.  Compared to Q3 2012, sales of home appliances were up 37.1% to $66.5 million.  Furniture and mattress sales climbed 95.7% to $63.2 million.  Consumer electronics sales improved 45.2% to $68.4 million.  Home office sales were up 76.5% to $28.6 million.  Repair service agreement commissions jumped 60.7% to $19.6 million.

Retail gross margin rose by 460 basis points as compared to last year’s quarter to 40.1 percent, as margins widened in all major product categories. 

"We achieved the highest quarterly revenue and net income in Conn's history," stated Theodore M. Wright, chairman and chief executive at Conn’s, in a statement. "This sales trend continued into November with retail sales expanding 49%. November same store sales rose 32%."

Wright added that the company expects to open five new stores in January and 15 to 20 new locations during the next fiscal year.

Also looking forward, Conn’s raised its profit guidance for the fiscal year ending January 31, 2014 to adjusted earnings per share of $2.75 to $2.80. The company had previously guided adjusted profits in a range of $2.50 to $2.65 per share. Analysts were expecting adjusted earnings of $2.60 per share.

Shares of CONN have been rising at a blistering pace since January 2011, when the price of a share fell to $3.12.  Shares have risen in 8 out of the first 11 months this year, rising about 90 percent through Wednesday’s close at $58.46. Beating the street with the third quarter results and forecast for the full year has pushed shares up about 19 percent in Thursday action, including making a new record high at $69.90.

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