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Conn's Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: December 3, 2012 07:05AM
Conn's Inc. (CONN) filed Quarterly Report for the period ended 2012-10-31. Conn's, Inc. has a market cap of $921.62 million; its shares were traded at around $28.28 with a P/E ratio of 30.41 and P/S ratio of 1.16.
Highlight of Business Operations:Revenues were $167.7 million for the quarter ended October 31, 2012, an increase of $12.6 million, or 8.2%, from the prior-year period. The increase in revenues during the quarter was primarily driven by higher demand for furniture and mattresses, tablets and lawn equipment. On a same store basis, revenues for the current quarter rose 12.6% over the prior-year period. Reported revenues for the three months ended October 31, 2012 also reflects the benefit of the completion of 15 store remodels over the past 12 months and the opening of a Conn s HomePlus store in Waco, Texas in June of 2012. This growth in sales was partially offset by store closures and the decline in unit sales due to the focus on higher price-point product offerings. Revenues for the nine months ended October 31, 2012 were $506.8 million, an increase of 9.1% over the prior-year level and driven by same store sales growth of 17.2%.
Retail gross margin was 35.5% for the quarter ended October 31, 2012, an increase of 10.2 percentage points over the 25.3% reported in the comparable quarter last year. The prior-year quarter included an inventory reserve adjustment, which increased cost of goods sold by $4.7 million and decreased reported retail gross margin by 300 basis points. Excluding this adjustment, retail gross margin rose 720 basis points year-over-year driven by margin expansion within each of the major product categories. Additionally, results were favorably influenced by sales mix, with the 31.7% increase in higher-margin furniture and mattress sales outpacing the overall growth realized in the other product categories. The broad margin improvement across all categories was driven by the continued focus on higher price-point, higher margin products and sourcing opportunities. Retail gross margin was 34.4% for the nine months ended October 31, 2012, an improvement of 620 basis points over the prior-year period. After excluding the $4.7 million fiscal 2012 inventory reserve adjustment, retail gross margin rose 520 basis points over the prior-year period. This margin expansion reflects a favorable shift in product mix and margin expansion in each of the product categories.
Selling, general and administrative (“SG&A”) expense was $47.3 million for the quarter ended October 31, 2012, an increase of $1.4 million, or 3.0%, over the quarter ended October 31, 2011. The SG&A expense increase was primarily due to higher sales-driven compensation costs and advertising expenses, partially offset by a reduction in depreciation and facility-related expenses. As a percent of segment revenues, SG&A expense declined 140 basis points to 28.2% in the current period from 29.6% in the prior-year quarter. For the nine months ended October 31, 2012, SG&A expense was $139.8 million, an increase of $7.8 million from the prior-year period. SG&A expense as a percent of segment revenues declined 80 basis points to 27.6% attributable to the leveraging effect of higher total revenues.
SG&A expense for the credit segment was $13.9 million for the quarter ended October 31, 2012, relatively unchanged from the same quarter last year. SG&A expense as a percent of revenues was 36.0% in the current year period, which compares to 44.0% in the prior-year period. For the nine months ended October 31, 2012, SG&A expense was $40.4 million, or 37.5% of revenues, versus $43.4 million, or 43.0% of revenues, in the comparable prior-year period. On a dollar basis, SG&A decreased by $3.0 million in the current period due to reduced compensation and related expenses.
Interest income and fees of the credit segment increased over the prior-year level primarily driven by an 11.7% increase in the average balance of the portfolio and the effect of a $1.0 million increase in reserves for uncollectible interest for the three months ended October 31, 2011 resulting from the prior-year adoption of TDR accounting guidance. Portfolio interest and fee yield increased to 19.3% from 18.0% in the third quarter of fiscal 2012. The increase in insurance commissions was primarily related to the increase in retail sales.
Stocks Discussed: CONN,