Conn's Inc. has a market cap of $378.5 million; its shares were traded at around $12.69 with a P/E ratio of 54 and P/S ratio of 0.5.
Highlight of Business Operations:For the three months ending October 31, 2011, total revenues increased 12.3% on a same store sales increase of 18.9%, excluding the four stores that have been closed, one store in the process of being closed and two stores with leases that expired in the current fiscal year. The increase in same store sales was driven by increases in furniture and mattresses, home appliances and consumer electronics sales. Repair service agreement commissions increased on the higher product sales volume and a higher sales penetration on repair service agreements during the current year period. Total revenues for the nine months ended October 31, 2011 decreased 3.5% on a same store sales decrease of 0.7% primarily due to a 3.8% overall drop in Product sales;
The segment s retail margin (includes gross profit from both product and repair service agreement sales) for the three month period decreased to 25.2% as compared to the year ago period. The impact of an adjustment to the inventory reserve, which increased cost of goods sold by $4.7 million, decreased retail gross margin by 300 basis points. The Company achieved expanded gross margins in the furniture and mattresses and home office categories and saw a shift in the product sales mix to higher-margin furniture and mattress sales. Retail margin for the nine months period increased from 26.5% in the year ago period to 27.5%; and
Selling, general and administrative (SG&A) expense increased by $5.6 million, and increased 40 basis points as a percent of segment revenues to 29.5% for the three months ended October 31, 2011 as compared to October 31, 2010. The total expense increase was driven by increased compensation and related expenses and increased advertising expense which were partially offset by decreased depreciation and occupancy expenses. We increased our investments in advertising and sales staffing, in support of our growth initiatives, to drive sales growth during the third and fourth quarter of the current fiscal year and on an ongoing basis. SG&A for the nine months ended October 31, 2011 increased by $2.0 million and increased as a percent of segment revenues to 27.7% from 26.3%, primarily due to the same reasons mentioned for the three month period.
Total revenues for the three months ending October 31, 2011 declined by $8.0 million, as compared to the prior year, as the declining customer accounts receivable balance resulted in lower interest income and fee revenues and the adoption of Troubled Debt Restructuring (TDR) accounting guidance and increase in non-TDR account bad debt reserves also reduced revenues due to increased reserves for uncollectible interest and repair service agreement and credit insurance commissions. As a result of the improved payment rate by our credit customers on their accounts and lower percent of sales financed under our credit programs, the average customer accounts receivable balance has fallen 13.1%, from $695.3 million during quarter ended October 31, 2010, to $604.0 million during the quarter ended October 31, 2011. Total revenues for the nine months ended October 31, 2011 declined by $10.2 million or 10.2% as the year to date average outstanding customer accounts receivable balance decreased from $704.8 million to $623.5 million or 11.5%;
SG&A expense for the credit segment fell $1.3 million, primarily due to reduced compensation and related expense. Continued improvement in the delinquency performance of the portfolio has allowed us to reduce the cost of servicing the portfolio, as the balance 60-209 days delinquent has fallen from $53.7 million at October 31, 2010, to $47.7 million at October 31, 2011. Credit segment SG&A expense as a percent of revenues was 56.7% for the three months ended October 31, 2011 and 46.6% in the prior year. The increase in SG&A expense as a percent of revenues is due largely to the revenue reduction resulting from the adoption of accounting guidance for TDRs during the quarter ended October 31, 2011 which increased reserves for uncollectible interest and repair service agreement and credit insurance commissions. For the nine month period SG&A expense for the credit segment declined $4.5 million and remained relatively flat as a percent of segment revenues from 47.9% in the prior year period to 48.4% in the current year;
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