Southern Households Love What Conn's Has to Offer
Popular holding company Conn's, Inc. (NASDAQ: CONN) reported first quarter results this morning that solidified the company's need to not only please its customers, but analysts as well. The specialty retailer of electronics, furniture, mattresses and more boasted a same store sales increase of 17.8% in comparison to the year prior.
Overall, CONN saw great improvements in a number of categories throughout its earnings call. With total store revenues of $200.9 million, (up from $192 million year-over-year), and a retail gross margin increase of 3.2%, it's no wonder management increased guidance for the remainder of fiscal 2013.
According to CEO Theodore M. Wright, the results of CONN's first quarter are based on a better shopping experience offered to valued customers, with remodeled stores aiding in the effort to satisfy consumers. With 64 retail locations based in the South, it appears the company is positioned to continue dominating its segment in coming months.
Guidance was bumped up for the year with diluted EPS of $1.30 moving up to $1.40. When making the decision to elevate investor and analyst expectations for CONN, management had quite a few things to consider, including store openings, an increased credit portfolio balance, and same store sales clearly on the rise.
Thus far, Piper Jaffray has found CONN's earnings and guidance to be so attractive it initiated coverage on the company with an Overweight rating and $22 PT.
"CONN represents an attractive 12-month investment opportunity as it is in the process of improving its business model and is poised for significant growth in the coming years. Additionally, we believe CONN is incorrectly characterized by the Street as a retailer of Consumer Electronics to lower income households," the research firm noted in a recent report.
With a unique business model backing CONN, the competition may have something to fear. According to Morgan Stanley, Best Buy (NYSE: BBY) has recently experienced pricing problems that can be attributed to broad distribution and loose price controls. These issues have seemingly hurt profitability for retailers and manufacturers as a whole, however, for BBY the impact was much greater than it was for CONN.
Along with battling cost blunders, BBY has had a rough start to the year with the discovery of CEO Brian Dunn's inappropriate relationship with a female employee. Following the news, founder and chairman Richard Schulze resigned from the company he helped to build.
Clearly, consumers are losing faith that BBY is in fact the best place to purchase its electronic entertainment products. With issues continuing to pile on top of one another, BBY's downfalls have only further helped position CONN for the successful year it is about to endure.
Conn's closed on Friday at $17.71, up 204.82% year-over-year. Conversely, Best Buy closed Friday at $18.30, down 40.25% year-over-year.
Latest Ratings for CONN
|Dec 2014||Canaccord Genuity||Downgrades||Buy||Hold|
|Sep 2014||Canaccord Genuity||Maintains||Buy|
|Sep 2014||Stifel Nicolaus||Downgrades||Buy||Hold|
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