What happened

Shares of Conn's (CONN 1.34%), the rent-to-own retailer, were surging today after the company delivered strong results in its fourth-quarter earnings report, with profits up sharply even as revenue fell.

Shares of the retailer were up 27% as of 2:30 p.m. EDT on Wednesday.

The entrance to a Conn's store

Image source: Conn's.

So what

Tighter underwriting standards led to a 10.1% decline in comparable-store sales, as sales financed by Conn's fell by 29%. Overall revenue declined by 11% to $367.8 as both revenue from net sales and finance charges fell, but that easily beat expectations at $328.7 million.

But the most impressive figure was the company's slashing its provision for bad debt from $69.5 million to $25.1 million due to a reduction in its customer accounts-receivable portfolio as 60+ day receivables fell by 24%. That, along with a lower interest expense from a reduction in debt and a tax benefit from the CARES Act, drove a surge in earnings per share from $0.17 in the quarter a year ago to $0.85, well ahead of estimates at $0.23.

CEO Norm Miller said, "Overall, we believe Conn's is at an inflection point in our growth strategy as we continue to leverage our best-in-class in-house and third-party credit offerings, increase digital and e-commerce investments, expand our brick-and-mortar footprint, and enhance our merchandising and marketing strategies."

Now what

Looking ahead, management did not provide guidance in the press release, but the company did say that comps had turned positive in the quarter to date, rising 3% even as it dealt with the impact of severe winter storms over much of February.

That momentum combined with its improving debt portfolio, the economic reopening, and the recent stimulus package all bode well for Conn's this year. Today's gains could lead to an extended upswing for the retail stock.