2 Retailers Reporting Massive Comp Sales Growth

For most brick-and-mortar retailers, the fourth quarter was a challenging one. On one hand, many chains still suffered from a weak consumer-spending environment in which many shoppers were loath to open up their wallets. On the other hand, extreme winter weather weighed heavily on store traffic. Some retailers were seen bucking the trend, however, delivering excellent comp-store sales growth for the period.

Let's take a look at the performance of Conn's (NASDAQ: CONN  ) and Restoration Hardware (NYSE: RH  ) in their fourth-quarter reports compared to that of their respective main competitors.

Source: Conn's. 

Conn's
Conn's, based in Texas, is a fairly small durable consumer-goods retailer, selling home furnishings, appliances, consumer electronics, and credit products. The store has only around 75 locations and a market cap of $1.4 billion. However, its fourth-quarter report showed some fairly staggering results in terms of comp-store sales growth.

For the three-month period ending Jan. 31, total revenue was up 44% with adjusted earnings per share rising 37%. Same-store sales rose an incredible 33% year over year for the period, which is impressive by any standard. Furniture and home-office products led the increase, with comp-store sales for the categories up 60% and 53%, respectively. Meanwhile, the retail gross margin expanded by 370 basis points to 40.6%. However, the outlook isn't quite as impressive, with comp-store sales expected to grow by only 5%-10% in fiscal 2015, down from 27% for full-year 2014.

Meanwhile, the results of competitor hhgregg (NYSE: HGG  ) have been falling apart recently. The company's third-quarter results, which included the holiday period, were a disaster. For the three-month period ending Dec. 31, revenue declined 11.6%, with comp-store sales down 11.2%. The company cited the usual suspects, such as weather and a tough discounting environment. Adjusted earnings crumbled 67.3% to $0.17 per share, missing the consensus by more than 40%.

Source: Restoration Hardware. 

Restoration Hardware
Restoration Hardware operates in a similar industry to Conn's but doesn't do much in the way of electronics, focusing largely on home furnishings. With 71 retail locations and a market cap of $2.8 billion, it is roughly of similar size to Conn's as well; also like Conn's, its fourth-quarter report was a blowout.

For the fourth quarter, the company reported an increase in net revenue of 18%, which would have been 26% excluding the effect of an extra week in the same period last year. Meanwhile, adjusted EPS soared 38% to $0.83. Comp-store sales were up a very healthy 17%, although this growth slowed from 26% last year. In the report, no outlook was given for fiscal 2014 comp-store sales.

In any case, Restoration Hardware is easily outpacing rival Pier 1 Imports (NYSE: PIR  ) . Pier 1 recently updated its fourth-quarter and full-year guidance, and it's not pretty. Again citing the effects of the extreme winter weather, CEO Alex Smith stated that the fourth-quarter results were "frustrating and disappointing," but added that things should be back to normal when the weather turns around.

The updated outlook has come in well below analyst expectations. Revenue is now projected in the range of $512 million to $514 million versus a $542 million consensus. Meanwhile, comp-store sales are expected to be flat year over year. Earnings per share are now expected to come in at $0.40-$0.41 versus previous guidance in the range of $0.47-$0.52 and a $0.51 consensus. Clearly, the updated outlook was a severe disappointment to investors, and sent shares down some 7% on the day.

The bottom line
Despite a tough environment for retailers in the fourth quarter, some managed to pull through the winter months with quite impressive results. Conn's and Restoration Hardware managed to deliver double-digit comp-store sales growth in the fourth quarter, which is impressive under any circumstances but especially so considering the tough retail environment throughout the period. As such, these companies may be outperforming the sector going forward.

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