Conn’s misses on Q2 profits; customer debt takes toll

The Woodlands, Texas - Conn’s Inc. missed Wall Street expectations for profits in the second quarter of fiscal 2015, as net income dropped 8% to $17.65 million from $19.16 million. In addition to charges related to facility closures, a significant increase in delinquent customer debt in the company’s credit segment negatively impacted net income results.

Meanwhile, total revenues soared 30% to $352.96 million from $270.69 million. Same-store sales rose 11.7%.

“Overall results were not satisfactory,” said Theodore M. Wright, chairman and CEO of Conn’s. “Our credit operations ran into unexpected headwinds, resulting in portfolio performance deterioration. Despite tighter underwriting, lower early-stage delinquency and improved collections staffing and execution, delinquency unexpectedly deteriorated across all credit quality levels, customer groups, product categories, geographic regions and years of origination. Tighter underwriting and better collections execution did not offset deterioration in our customer’s ability to resolve delinquency.”

In response to higher delinquency, Conn’s is further tightening its underwiriting and also reducing the level of no-interest programs and raising the interest rates in some markets to increase portfolio yield. As a result of increased bad customer debt, Conn’s reduced its fiscal 2015 earnings guidance while forecasting same-store sales growth of 5%-10%.
 

 

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