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Why Conn's Is Running Higher Today

By Rich Duprey - Jun 3, 2021 at 11:08AM

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The furniture retailer's earnings beat analyst expectations.

What happened

Shares of Conn's (CONN 3.74%) are 19% higher in morning trading Thursday after the rent-to-own furniture retailer blew past Wall Street's first-quarter earnings expectations.

So what

Conn's posted net income of $45.4 million, or $1.55 per share on an adjusted basis, compared to losses of $54.6 million, or $1.89 per share, a year ago. Revenue was $363.7 million, up from $317.2 million, almost 15% higher year over year.

Analysts had forecast Conn's would post earnings of just $0.30 per share on $327 million in sales. Consensus estimates typically exclude one-time items that companies adjust for.

Woman looking at home furnishings

Image source: Getty Images.

Comparable sales also rocketed 19.4% higher in the quarter, and were up just under 2% on a two-year stack, to eliminate the impact of last year's pandemic which forced most stores to close for weeks or months at a time.

Now what

While the record profit for Conn's is welcome, investors need to understand the furniture retailer and other retailers also reporting blowout earnings are benefiting from a unique scenario not likely to be repeated.

Beyond going up against much easier comparables, retail stocks are realizing a windfall because of a third stimulus package that put more money into consumers' hands. That will likely result in a hangover in quarters to come, especially next year when Conn's and others have to go up against these excellent numbers.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Conn's, Inc. Stock Quote
Conn's, Inc.
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