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Shares of Conn's Bounce 16% After 2nd Consecutive Profitable Quarter

By Daniel Miller - Dec 7, 2017 at 1:29PM

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Shares of Conn's are up Thursday despite some comparable store sales weakness thanks to the company beating analysts' estimates on the top and bottom line.

What happened?

Shares of Conn's Inc (CONN -0.12%), a specialty retailer selling household furniture, appliances, and accessories, are bouncing 16% higher Thursday as of 11 a.m. EST after the company announced strong third-quarter results for fiscal year 2018.

So what

Conn's posted total revenue of $373.2 million during the third quarter, which managed to top the estimates of analysts surveyed by Zacks that called for $362.2 million. The strong top-line result filtered to the bottom line, with adjusted earnings per share (EPS) checking in at $0.18, compared to estimates of a more modest $0.04 adjusted EPS. More importantly, the third quarter represented the second consecutive quarter of profitability, and the company's credit segment recorded its highest spread in 11 quarters.

Woman looking at dresser furniture

Image source: Getty Imagesc

"Retail performance remains solid and Conn's achieved record third quarter retail gross margins, which helped produce another quarter of strong retail operating income. With improving credit trends, we are increasingly confident that the investments we have made in the credit platform can support profitable growth..." said Norm Miller, Conn's chairman and CEO, in a press release.

Now what

Management plans to open five to nine new stores during fiscal year 2019, which should help offset some of the comparable store weakness felt during the third quarter. However, if the company continues to benefit from a widening credit spread and improving retail gross margins, more quarters of profitability should be achievable. That's great news for investors who hope the stock can hold its 191% gain in price over the past 12 months. 

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