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Conn's, Inc. Reports Furniture & Mattress Sales Increase 15.8%

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Conn’s, Inc., a specialty retailer of consumer electronics, home appliances, furniture, mattresses, computers and lawn and garden products, announced its net sales results for the quarter ended July 31, 2010.

Net sales for the quarter ended July 31, 2010, of $178.7 million, decreased $11.6 million, or 6.1%, as compared to the quarter ended July 31, 2009. Net sales represent total product sales, repair service agreement commissions and service revenues. Same store sales (sales recorded in stores operated for the entirety of both periods) decreased 6.5% for the quarter ended July 31, 2010. The same store sales trend, which improved each month of the quarter, with positive same store sales in July, was impacted by:

  • more challenging economic conditions in the Company’s markets during the quarter, as compared to the same quarter in the prior year, and
  • management’s emphasis on improving retail gross margin while maintaining price competitiveness.

The Company improved its retail gross margin, which includes gross profit from both product and repair service agreement sales, to approximately 25% for the quarter ended July 31, 2010, as compared to the 23.6% experienced in the quarter ended July 31, 2009. Total revenues for the quarter, including revenues from finance charges and other, will be reported in the Company's earnings release and conference call scheduled for August 26, 2010.

The following is a summary of the key items impacting net sales during the quarter, as compared to the same quarter in the prior fiscal year:

  • Consumer electronics category sales declined as a result of a 20.4% drop in the average selling price of flat-panel televisions, partially offset by a 10.1% increase in unit sales driven by increased sales of plasma televisions,
  • Home appliance category sales declined during the quarter on lower unit sales, primarily in the refrigeration and room air conditioning categories, though average selling prices increased,
  • Track sales declined slightly as increased sales of accessories, MP3 players and desktop computers were offset primarily by declines in the sales of camcorders, digital cameras, GPS devices, netbooks, computer monitors and video game hardware. A 17.2% increase in unit sales of laptop computers offset a 14.8% decline in the average selling price of this product.
  • The growth in furniture and mattresses sales was driven by the addition of in-store specialists focused on this category, improved in-store displays and expanded product selection,
  • An increase in lawn and garden sales included in other product sales was largely responsible for the growth in this category,
  • The decline in repair service agreement commissions was driven largely by increased cancellations of these agreements as a result of higher credit charge-offs, partially offset by a revenue increase as a result of higher product unit sales volume,
  • Service revenues decreased as the Company increased its use of third-party servicers to provide cost-effective, timely product repairs for its customers, and
  • Sales from two stores opened since May 1, 2009, reduced by the closure of the Baytown, Texas clearance center, partially offset the decrease in Total net sales.

“I continue to be encouraged by the improving sales trends we have seen each month this year,” said the Company’s President and CEO, Tim Frank. “I believe we can continue to deliver improved sales and retail gross margin performance as we begin to compare against periods that were very challenging in our markets last year.”

Net sales for the six months ended July 31, 2010, were $341.7 million, a decrease of $48.8 million, or 12.5%, as compared with the six months ended July 31, 2009. Same store sales decreased 13.3% for the six months ended July 31, 2010.

About Conn’s, Inc. The Company is a specialty retailer currently operating 76 retail locations in Texas, Louisiana and Oklahoma: with 23 stores in the Houston area, 20 in the Dallas/Fort Worth Metroplex, nine in San Antonio, five in Austin, five in Southeast Texas, one in Corpus Christi, four in South Texas, six in Louisiana and three in Oklahoma. It sells home appliances, including refrigerators, freezers, washers, dryers, dishwashers and ranges, and a variety of consumer electronics, including LCD, LED, 3-D, plasma and DLP televisions, camcorders, digital cameras, computers and computer accessories, Blu-ray and DVD players, video game equipment, portable audio, MP3 players, GPS devices and home theater products. The Company also sells lawn and garden products, furniture and mattresses, and continues to introduce additional product categories for the home to help respond to its customers' product needs and to increase same store sales. Unlike many of its competitors, the Company provides flexible in-house credit options for its customers. In the last three years, the Company financed, on average, approximately 61% of its retail sales.

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