Conn’s CEO eyes 500-store opportunity

BY Mike Troy

Born the six of seven kids to parents of modest means, Conn’s CEO Norm Miller knows firsthand the challenges facing working families. That’s why he’s proud of Conn’s approach to serving customers and believes the retailer’s unique business model offers staggering growth potential.

Conn’s recently opened its 100th store in Las Vegas, but CEO Norm Miller is convinced the retailer could eventually operate as many as 400 to 500 stores nationwide by providing quality, value priced merchandise and convenient financing options to the millions of Americans with less than perfect credit. Miller joined the company in September 2015 and to capitalize on the growth potential he’s intent on establishing what he calls the right foundation for growth. That means fine-tuning the product assortment of furniture and mattresses, home appliances, consumer electronics and home office products while making sure the company continues to drive sales by extending credit to underserved customers who are most likely to make installment payments in a timely manner.

It can be a find line at times – one Conn’s has run afoul of in the past – but as Miller noted, “at the end of the day, it doesn’t do us any good to drive sales that we can’t collect.”

Conn’s has been fine-tuning its lending procedures and refining its product assortment to become more of a furniture retailer while exiting some volatile consumer electronics categories like video games, digital cameras and tablet. Over time, Miller sees the rapidly growing furniture and mattress category, which produced same store sales of 18% in the third quarter, accounting for between 42% and 45% of the company’s product sales, up from about 33% currently. The appliance category is the other major contributor to sales, accounting for about 27% of total sales with the de-emphasized consumer electronic categories accounting for another 22%.

Because transaction sizes can be large, Conn’s offers in-house financing which is quite popular with customers but exposes the retailer to losses. It’s also a risky proposition to investors which is why Conn’s provides frequent and detailed disclosures into a credit portfolio where 10.2% of balances were 60 days past due during the company’s most recent quarter. This despite the fact the company is selective about those to whom it extends credit. For example, of the more than 300,000 credit applications processed during the quarter, only 42% were approved and the average household income of the applicants was about $41,000. The company has nearly 752,000 active accounts with an average credit score of 594 and average balance of $2,370 giving it a total receivables portfolio of $1.5 billion.

Miller, whose background appears tailor-made to lead Conn’s, joined the company after the struggling retailer concluded a strategic business review and determined its best path forward was to remain an independent, publicly held company. Miller had previously served as president of Sear Automotive and president and COO of DFC Global Corp., a leading financial service company focused on serving unbanked and underbanked consumers. In addition, he held management roles at Aramark, Nestle, Kraft and Pepsi. And he graduated from West Point and served as an officer in the U.S. Army.

Conn’s should be well served by an executive with such a diverse background considering the company’s unique operating model and reliance on extending credit to subprime customers to drive sales.

“I can not only relate, but I see and understand that we make a difference in peoples’ lives,” Miller said, referencing his own modest upbringing. “I am proud of what we do and what we provide to our customers.”

The value proposition the company provides is yielding respectable improvement, but not yet remarkable results. In the third quarter, total revenues increased 6.8% to $395.2 million due to retail revenues that increased 5.9% to $323.1 million and credit revenues that increased 11.2% to $72.2 million. Despite top line growth, Conn’s posted a net loss of $2.4 million, or seven cents a share, which was better than a prior year loss of $3.1 million, or eight cents a share. The company’s performance would have been stronger but it incurred charges equal to six cents a share related to the review of strategic alternatives which preceded Miller’s arrival and it also made a prudent decision to increase reserves for bad debt expense.


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