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Why Conn's Shares Popped

By Jeremy Bowman - Updated Nov 17, 2016 at 4:25PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Conn's (CONN -5.20%) were flying today, gaining as much as 15% after the retailer promised a better-than-expected results in 2013.

So what: In its quarterly earnings report, the durable-goods retailer delivered an EPS of $0.54 on expectations of $0.55. Revenues increased 10.4% to $250.3 million but were also slightly below estimates, while same-store sales grew swiftly at 7%. Guidance for the coming year, however, was well ahead of the consensus, as management now sees EPS of $2.40-$2.50, ahead of estimates at just $2.08. CEO Theodore Wright noted "improvement in retail and credit operations" and announced the opening of 10 to 12 new Conn's Home Plus stores. Same-store sales at those locations were up 15% in February and March, after the quarter ended.

Now what: The new store additions will increase store count by 15-18%, and Conn's has said that they bring in 1.6 times the revenue as regular stores. Margins have also greatly improved over the past year, with a net margin of 8.5% in the usually strong fourth quarter. If Conn's continues expanding at the same pace across the Sun Belt, the stock should have no problem moving higher.

Get more on Conn's. Add the company to your Watchlist by clicking right here.

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