Image source: Conn's.
Arguably one of the market's most volatile retailer stocks is at it again. Shares of Conn's (CONN +0.00%) surrendered nearly a quarter of their value last week, plunging 24% after posting another problematic report.
Conn's managed to post top-line growth in its latest quarter, but its 7% uptick was entirely the handiwork of new stores that opened over the past year. Things aren't as sunny at the individual store level, where comps slipped 3.4% for fiscal 2017's first quarter, or 1.3% if you back out the impact of discontinued product lines.
Things only get worse on the bottom line, where adjusted earnings a year earlier were reversed into a significant deficit this time around. Analysts were holding out for a small profit.
Many retailers have been pulling up lame these days, but Conn's also has the dark cloud of its credit business. Conn's has been dealing for a couple of years now with unreliable borrowers, and things aren't getting any better. The chain is in the process of restructuring its troubled credit business, but that isn't going to make things any easier in the near term.
Its provision for bad debts is growing a lot faster than its revenue. Conn's is trying to rein in its financing, particularly its interest-free offers in pursuit of closing sales with risky borrowers. This is an issue, but Conn's continues to expand aggressively. The 108-store chain expects to open as many as a dozen new stores this fiscal year.
The ups and mostly downs of Conn's
Gamblers have to love Conn's. There doesn't seem to be a dull moment in the ownership experience. Whether it's up or mostly down, the stock loves to move. Let's check out its weekly price action through the past 10 weeks.
| Week | Close | Change |
|---|---|---|
| 3/28/16 | $12.12 | (23%) |
| 4/4/16 | $10.93 | (10%) |
| 4/11/16 | $12.45 | 14% |
| 4/18/16 | $15.40 | 20% |
| 4/25/16 | $13.74 | (11%) |
| 5/2/16 | $11.66 | (15%) |
| 5/9/16 | $10.00 | (14%) |
| 5/16/16 | $11.58 | 16% |
| 5/23/16 | $11.15 | (4%) |
| 5/31/16 | $8.51 | (24%) |
Source: Yahoo! Finance.
If you didn't pick up on the wild price swings, Conn's stock has posted double-digit percentage moves in nine of the past 10 weeks. The recent volatility finds the stock's one-year beta ballooning up to 2.17.
Conn's sells appliances, furniture, and these days a lot less consumer electronics than it used to. It's in a rough spot, and Wall Street pros have their concerns. Oppenheimer issued a cautious note following its unsettling financials, and Piper Jaffray downgraded the stock on Friday.
This is Conn's first weekly close in the single digits since late 2011, but the one thing it needs to woo more than investors right now is creditworthy customers.
The stock is trading 64% lower so far in 2016, the latest in a series of wild swings it's taken in each of the past four years. That's just more proof that Conn's is one of the most volatile retailer stocks in the investing universe.
