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 +0.00%) rose as much as 14% early Tuesday, then settled to trade up around 10% as of 11:20 a.m. after the retailer announced better-than-expected first-quarter earnings.
So what: Quarterly revenue climbed 8.8% year over year to $365.1 million, driven by a combination of new store openings and an increase in credit revenue from growth in the average balance of its customer receivable portfolio. Those results were offset, however, by a 4.3% decline in same-store sales and a 100-basis-point decrease in portfolio yield. Meanwhile, retail gross margin was 41.3% for the quarter, or a decline of 10 basis points from the year-ago period. The percentage of customer portfolio balance more than 60 days delinquent fell 130 basis points from the previous quarter to 8.4%. For the quarter, Conn's reported a 45% year-over-year decline in net income to $15.7 million, or $0.43 per share.
Analysts, on average, were anticipating lower earnings of $0.41 per share, but on slightly higher revenue of $368.5 million.
Now what: Conn's also reaffirmed its outlook for the full fiscal year, calling for a flat to low-single-digit increase in same-store sales, retail gross margin between 40% and 41%, opening 15 to 18 new stores, and the closure of two underperforming locations. Conn's currently has about 90 retail locations.
In the end, it appears the market is most pleased with the solid earnings and sequential decline in delinquent balances. But personally, I'm just not compelled enough by Conn's mixed results to jump in today. Until Conn's shows it can achieve sustained growth in both its top and bottom lines, I'm perfectly content watching its progress from the sidelines.
