Conn's, Inc. Announces Preliminary Fourth-Quarter Fiscal 2014 Results and Updates Fiscal 2015 Earnings Guidance
Significant items for the fourth quarter of fiscal 2014 include:
- Same store sales rose an estimated 33.4% from the same period last year;
-
Preliminary retail segment net sales increased 44.8% over the
prior-year quarter to an estimated
$301 .6 million; - Estimated retail gross margin expanded from the same period last year to approximately 40%;
- Credit segment provision for bad debts as a percentage of the average outstanding portfolio balance is expected to exceed previously issued full-year fiscal 2014 guidance;
-
The percentage of the customer portfolio balance 60-plus days
delinquent was 8.8% at
January 31, 2014 , an increase of 30 basis points fromOctober 31, 2013 ; - Consolidated selling, general and administrative expenses were approximately 27% of total revenues;
- Planned new store openings of 15 to 20 for fiscal 2015 re-affirmed; and
-
Fiscal 2015 earnings guidance revised to
$3.40 to$3.70 per diluted share.
Based on preliminary results, the Company expects to generate diluted
earnings per share of between
The Company updated its full-year fiscal 2015 earnings guidance to
reflect the impact of higher-than-anticipated recent delinquency rates
and lower expected sales increases, principally in the electronics
category. For the fiscal year ending
"Credit segment performance did not keep pace and delinquency and charge-offs rose in December and January. Sales driven portfolio growth combined with seasonal portfolio increases placed pressure on our collections operation and execution deteriorated. Sustained below-normal temperatures and the related higher energy costs in some of our markets also temporarily impacted our consumer's income available for debt service.
"We made minor adjustments to our underwriting standards in the third quarter and early fourth quarter and are seeing the benefits of these changes in early stage delinquency. The pace of portfolio growth will slow with normal seasonal trends. Our marketing effectiveness with higher credit score customers has also improved. The benefits of these changes to portfolio performance will be realized over the next several quarters.
"Unusually severe weather in the fourth quarter of fiscal 2014 did not prevent us from reaching our sales objectives. Since the first of the year, however, vendor supported promotion of televisions has declined compared to the holiday season and the same period a year ago. Net purchase prices for consumers increased significantly for many of our key television models and same store sales trends in electronics are below fourth-quarter fiscal 2014 levels. While our sales outlook for other product categories remains positive, we have revised our fiscal 2015 guidance to include lower expected sales rates in electronics
"We are excited about Conn's business model and our growth
opportunities. Fiscal 2015 results will be influenced by the full-year
impact of the 14 stores opened in fiscal 2014, the planned opening of 15
to 20 new Conn's
Preliminary Fourth-Quarter Fiscal 2014 Retail Segment Update
Net sales for the three months ended
The following table presents preliminary net sales by category and changes in net sales from the prior-year quarter:
|
Three Months Ended |
Same store | |||||||||||||||||||||
| 2014 | % of Total | 2013 | % of Total | Change | % Change | % change | ||||||||||||||||
| (dollars in millions) | ||||||||||||||||||||||
| Home appliance | $ | 70.7 | 23.3 | % | $ | 50.4 | 24.1 | % | $ | 20.3 | 40.4 | % | 29.5 | % | ||||||||
| Furniture and mattress | 72.3 | 24.0 | 39.8 | 19.1 | 32.5 | 81.4 | 59.7 | |||||||||||||||
| Consumer electronic | 88.9 | 29.5 | 72.4 | 34.7 | 16.5 | 22.8 | 13.2 | |||||||||||||||
| Home office | 37.3 | 12.4 | 22.6 | 10.9 | 14.6 | 64.7 | 53.0 | |||||||||||||||
| Other | 6.2 | 2.1 | 4.5 | 2.2 | 1.8 | 39.2 | 25.2 | |||||||||||||||
| Product sales | 275.4 | 91.3 | 189.7 | 91.0 | 85.7 | 45.2 | 31.8 | |||||||||||||||
|
Repair service agreement commissions |
22.9 | 7.6 | 15.7 | 7.5 | 7.2 | 45.9 | 37.0 | |||||||||||||||
| Service revenues | 3.3 | 1.1 | 2.9 | 1.5 | 0.4 | 12.6 | ||||||||||||||||
| Total net sales | $ | 301.6 | 100.0 | % | $ | 208.4 | 100.0 | % | $ | 93.3 | 44.8 | % | 33.4 | % | ||||||||
| Number of stores- | ||||||||||||||||||||||
| Beginning of period | 72 | 65 | ||||||||||||||||||||
| Opened | 8 | 4 | ||||||||||||||||||||
| Closed | (1) | (1) | ||||||||||||||||||||
| End of period | 79 | 68 | ||||||||||||||||||||
The following provides a summary of items influencing the Company's major product category performance during the quarter, compared to the prior-year period:
- Home appliance unit volume increased 31%. Laundry sales were up 46%, refrigeration sales rose 34% and cooking sales increased 35%;
- Furniture unit sales increased 29% and the average selling price was up 19%;
- Mattress unit volume rose 70% and average selling price increased 12%;
- Television sales rose 17% in total and 9% on a same store basis. Home theater sales increased 58% and portable audio sales were up 89%; and
- Computer sales increased 77% and tablet sales rose 46%.
Retail gross margin, which includes gross profit from both product and
repair service agreement sales, was approximately 40% for the quarter
ended
Preliminary Fourth-Quarter Fiscal 2014 Credit Segment Update
The customer portfolio balance was
The following table presents preliminary credit portfolio data as of and
for the three-month periods ended
|
|
|
|
|||||||||
| 2014 | 2013 | 2013 | |||||||||
| Total outstanding balance | $ | 1,068.3 | $ | 944.8 | $ | 741.5 | |||||
| Weighted average credit score of outstanding balances | 594 | 591 | 600 | ||||||||
| Weighted average months since origination of outstanding balances | 8.4 | 8.6 | 9.3 | ||||||||
| Account balances 60+ days past due | $ | 94.4 | $ | 80.5 | $ | 52.9 | |||||
| Percent of balances 60+ days past due to total outstanding balance | 8.8% | 8.5% | 7.1% | ||||||||
|
Percent of portfolio re-aged |
11.3% | 10.9% | 11.7% | ||||||||
| Three Months Ended | |||||||||||
|
|
|
|
|||||||||
| 2014 | 2013 | 2013 | |||||||||
| Data for the periods ended: | |||||||||||
| Average total outstanding balance | $ | 1,011.5 | $ | 895.1 | $ | 713.1 | |||||
| Weighted average origination credit score of sales financed | 605 | 599 | 611 | ||||||||
| Weighted average monthly payment rate | 4.8% | 5.1% | 5.1% | ||||||||
| Interest and fee income yield, annualized | 18.2% | 17.8% | 18.7% | ||||||||
| Percent of bad debt charge-offs (net of recoveries) | |||||||||||
| to average outstanding balance, annualized | 10.6% | 7.6% | 7.4% | ||||||||
| Percent of sales paid for by payment option: | |||||||||||
| In-house financing, including down payment received | 78.1% | 79.5% | 74.6% | ||||||||
| Third-party financing | 12.7% | 11.5% | 16.1% | ||||||||
| Third-party rent-to-own options | 3.6% | 2.5% | 3.3% | ||||||||
| Total | 94.4% | 93.5% | 94.0% | ||||||||
Based on preliminary results, the Company expects to generate diluted
earnings per share of between
For fiscal 2013, diluted earnings per share of
The preliminary financial results presented above are subject to the
completion of the Conn's financial closing procedures. Accordingly, our
actual results may materially differ from the preliminary results
presented. The Company will update and discuss its fourth-quarter and
full-year results when it reports its financial results on
Fourth-Quarter Fiscal 2014 Conference Call
Conn's will host a conference call on
Participants can join the call by dialing 877-754-5302 or 678-894-3020. The conference call will also be broadcast simultaneously via webcast on a listen-only basis. A link to the earnings release, webcast and fiscal 2014 fourth-quarter conference call presentation will be available at ir.Conns.com.
About Conn's, Inc.
Conn's is a specialty retailer currently operates 79 retail locations in
- Home appliance, including refrigerators, freezers, washers, dryers, dishwashers and ranges;
- Furniture and mattress, including furniture and related accessories for the living room, dining room and bedroom, as well as both traditional and specialty mattresses;
- Consumer electronic, including LCD, LED, 3-D and plasma televisions, Blu-ray players, home theater and video game products, digital cameras, and portable audio equipment; and
- Home office, including computers, tablets, printers and accessories.
Additionally, Conn's offers a variety of products on a seasonal basis. Unlike many of its competitors, the company provides flexible in-house credit options for its customers in addition to third-party financing programs and third-party rent-to-own payment plans.
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 that
involve risks and uncertainties. Such forward-looking statements
include information concerning our future financial performance,
business strategy, plans, goals and objectives. Statements
containing the words "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "plan," "project," "should," or the negative
of such terms or other similar expressions are generally forward-looking
in nature and not historical facts. Although we believe that the
expectations, opinions, projections, and comments reflected in these
forward-looking statements are reasonable, we can give no assurance that
such statements will prove to be correct. A wide variety of potential
risks, uncertainties, and other factors could materially affect our
ability to achieve the results either expressed or implied by our
forward-looking statements including, but not limited to: general
economic conditions impacting our customers or potential customers; our
ability to continue existing or offer new customer financing programs;
changes in the delinquency status of our credit portfolio; increased
regulatory oversight; higher than anticipated net charge-offs in the
credit portfolio; the success of our planned opening of new stores and
the updating of existing stores; technological and market developments
and sales trends for our major product offerings; our ability to protect
against cyber-attacks or data security breaches and protect the
integrity and security of individually identifiable data of our
customers and our employees, our ability to fund our operations, capital
expenditures, debt repayment and expansion from cash flows from
operations, borrowings from our revolving credit facility, and proceeds
from accessing debt or equity markets; and the other risks detailed in
our
Basis for Presentation of non-GAAP Disclosures
To supplement the Company's preliminary fourth-quarter and full-year fiscal 2014 earnings estimates prepared and presented in accordance with generally accepted accounting principles ("GAAP"), the Company also provides adjusted earnings per diluted share for such periods and full-year fiscal 2013. This non-GAAP financial measure is not meant to be considered as a substitute for the comparable GAAP measure but should be considered in addition to results presented in accordance with GAAP, and is intended to provide additional insight into the Company's operations and the factors and trends affecting the Company's business. The Company's management believes this non-GAAP financial measure is useful to readers because (1) it allows for greater transparency with respect to key metrics the Company uses in its financial and operational decision making and (2) they are used by some of its institutional investors and the analyst community to help them analyze the Company's operating results.
| Reconciliation of Fourth-Quarter Fiscal 2014 Projected Guidance for Earnings Per Diluted Share to Adjusted Earnings Per Diluted Share | |||||||
| Low | High | ||||||
| Estimated diluted earnings per share (GAAP) | $ | 0.76 | $ | 0.81 | |||
| Less - Estimated facility closure benefit | (0.01) | (0.01) | |||||
| Estimated diluted earnings per share, as adjusted (non-GAAP) | $ | 0.75 | $ | 0.80 | |||
| Reconciliation of Full-Year Fiscal 2014 Projected Guidance for Earnings Per Diluted Share to Adjusted Earnings Per Diluted Share | |||||||
| Low | High | ||||||
| Estimated diluted earnings per share (GAAP) | $ | 2.55 | $ | 2.60 | |||
| Adjustments - | |||||||
| Estimated fourth-quarter facility closure benefit | (0.01) | (0.01) | |||||
| Facility closure costs incurred during nine-months ended | |||||||
|
|
0.05 | 0.05 | |||||
| Estimated diluted earnings per share, as adjusted (non-GAAP) | $ | 2.59 | $ | 2.64 | |||
| Reconciliation of Full-Year Fiscal 2013 Earnings Per Diluted Share to Adjusted Earnings Per Diluted Share | |||||||
| Actual | |||||||
| Diluted earnings per share (GAAP) | $ | 1.56 | |||||
| Adjustments - | |||||||
| Facility closure costs | 0.02 | ||||||
| Corporate office relocation | 0.02 | ||||||
| Severance costs | 0.01 | ||||||
| Loss from early extinguishment of debt | 0.02 | ||||||
| Diluted earnings per share, as adjusted (non-GAAP) | $ | 1.63 | |||||
CONN-G
Conn's, Inc.
Kim Paper Canning, 936-206-3156
or
Source: Conn's, Inc.
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