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Category: Stock Market and Conn's (CONN)
Date: 8 June 2021 Stock Price of Conn's (CONN): $29.05 Market Capital of Conn's: $852 million We take a look at the 1st quarter earnings report of their 2022 fiscal year of Conn's home plus, the speciality furniture and related accessories group. For the quarter the group reported revenues of $293 million and net income of $45.4 million.
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Same store sales exceeded our expectations and increased 19.4% and total sales increased 26.5% as our team capitalized on robust consumer demand and the successful execution of our strategic growth initiatives. - Norm Miller, Conn’s Chairman and Chief Executive Officer."
More About Conn's
We are a specialty retailer currently operating 128 retail locations in Alabama, Arizona, Colorado, Georgia, Louisiana, Mississippi, Nevada, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia. We sell furniture and related accessories for the living room, dining room and bedroom, as well as traditional and specialty mattresses; home appliances, including refrigerators, freezers, washers, dryers, dishwashers and ranges; a variety of consumer electronics, including LED, OLED, Ultra HD and internet-ready televisions, Blu-ray players, home theater and portable audio equipment; and home office products, including computers, printers and accessories. We also offer a variety of products on a seasonal basis. Unlike many of our competitors, we provide flexible in-house credit options for our customers in addition to third-party financing programs and third-party lease-to-own payment plans.
Overview of Conn's 1st quarter 2022 earnings report
First Quarter Financial Highlights:
First Quarter Results
Net income for the three months ended April 30, 2021 was $45.4 million, or $1.52 per diluted share, compared to net loss for the three months ended April 30, 2020 of $56.2 million, or $1.95 per diluted share. The increase in net income was primarily due to an increase in retail revenue and a decrease in the provision for bad debts. On a non-GAAP basis, adjusted net income for the three months ended April 30, 2021 was $46.3 million, or $1.55 per diluted share, which excludes a loss on extinguishment of debt. This compares to adjusted net loss for the three months ended April 30, 2020 of $54.6 million, or $(1.89) per diluted share, which excludes professional fees associated with non-recurring expenses related to fiscal year 2020.
- Net earnings for the first quarter increased to a quarterly record of $1.52 per diluted share, compared to a loss of $1.95 per diluted share for the same period last fiscal year;
- Same store sales increased 19.4% for the first quarter of fiscal year 2022 as compared to the first quarter of fiscal year 2021 and increased 1.8% on a two-year basis as compared to the first quarter of fiscal year 2020, primarily due to higher cash and third-party credit sales and an increase in demand across most of the Company’s home-related product categories;
- E-commerce sales during the first quarter of fiscal year 2022 increased 95.7% as compared to the prior fiscal year period;
- Lease-to-own sales during the first quarter of fiscal year 2022 increased 82.0%, as compared to the prior fiscal year period;
- During the first quarter of fiscal year 2022, the Company added six new showrooms, including five within the state of Florida, bringing the total number of showrooms at April 30, 2021 to 152, compared to 139 at April 30, 2020; and
- At April 30, 2021, the carrying value of customer accounts receivable 60+ days past due declined 49.4% year-over-year to the lowest level in seven fiscal years, and the carrying value of re-aged accounts declined 45.1% year-over-year to the lowest level in four fiscal years.
First Quarter Results
Net income for the three months ended April 30, 2021 was $45.4 million, or $1.52 per diluted share, compared to net loss for the three months ended April 30, 2020 of $56.2 million, or $1.95 per diluted share. The increase in net income was primarily due to an increase in retail revenue and a decrease in the provision for bad debts. On a non-GAAP basis, adjusted net income for the three months ended April 30, 2021 was $46.3 million, or $1.55 per diluted share, which excludes a loss on extinguishment of debt. This compares to adjusted net loss for the three months ended April 30, 2020 of $54.6 million, or $(1.89) per diluted share, which excludes professional fees associated with non-recurring expenses related to fiscal year 2020.
Conn's management commentary on their 1st quarter 2022 earnings
THE WOODLANDS, Texas, June 03, 2021 (GLOBE NEWSWIRE) -- Conn’s, Inc. (NASDAQ: CONN) (“Conn’s” or the “Company”), a specialty retailer of furniture and mattresses, home appliances, consumer electronics and home office products, and provider of consumer credit, today announced its financial results for the quarter ended April 30, 2021.
“Same store sales exceeded our expectations and increased 19.4% and total sales increased 26.5% as our team capitalized on robust consumer demand and the successful execution of our strategic growth initiatives. Strong first quarter sales were driven by a 70.0% increase in retail sales financed through cash, credit card, and third-party offerings, as our in-house credit underwriting strategy remained conservative during the quarter,” stated Norm Miller, Conn’s Chairman and Chief Executive Officer.
“We generated the highest quarterly net earnings in our 131 year history as a result of strong operating performance from both our retail and credit segments. We significantly grew retail sales, while simultaneously managing credit risk demonstrating the power of our unique and hybrid business model, which we believe supports a meaningful and long-term opportunity to expand our platform and attract more consumers.”
“Throughout fiscal year 2022, we are focused on building on the positive momentum underway and pursuing our strategic initiatives, which include increasing retail sales across our best-in-class financing options, executing on our digital transformation, and expanding our brick-and-mortar footprint. I am extremely encouraged by the direction we are headed, and proud of our team’s resiliency and dedication over the past year,” concluded Mr. Miller.
“Same store sales exceeded our expectations and increased 19.4% and total sales increased 26.5% as our team capitalized on robust consumer demand and the successful execution of our strategic growth initiatives. Strong first quarter sales were driven by a 70.0% increase in retail sales financed through cash, credit card, and third-party offerings, as our in-house credit underwriting strategy remained conservative during the quarter,” stated Norm Miller, Conn’s Chairman and Chief Executive Officer.
“We generated the highest quarterly net earnings in our 131 year history as a result of strong operating performance from both our retail and credit segments. We significantly grew retail sales, while simultaneously managing credit risk demonstrating the power of our unique and hybrid business model, which we believe supports a meaningful and long-term opportunity to expand our platform and attract more consumers.”
“Throughout fiscal year 2022, we are focused on building on the positive momentum underway and pursuing our strategic initiatives, which include increasing retail sales across our best-in-class financing options, executing on our digital transformation, and expanding our brick-and-mortar footprint. I am extremely encouraged by the direction we are headed, and proud of our team’s resiliency and dedication over the past year,” concluded Mr. Miller.
Showroom and Facilities Update
The Company opened six new Conn’s HomePlus® showrooms during the first quarter of fiscal year 2022 and has opened one new Conn’s HomePlus® showroom during the second quarter of fiscal year 2022, bringing the total showroom count to 153 in 15 states. During fiscal year 2022, the Company plans to open a total of eleven to thirteen new showrooms in existing states, including the seven already opened, to leverage current infrastructure.
Liquidity and Capital Resources
As of April 30, 2021, the Company had $290.4 million of immediately available borrowing capacity under its $650.0 million revolving credit facility. The Company also had $6.6 million of unrestricted cash available for use.
During the three months ended April 30, 2021, cash provided by operating activities of $130.8 million contributed to strengthening the Company's balance sheet and decreasing net debt as a percentage of the portfolio balance at April 30, 2021 to 39%, the lowest level in eight fiscal years.
On May 12, 2021, the Company completed the redemption of the 2019-A Asset Backed Notes at an aggregate redemption price of $41.1 million (which was equal to the entire outstanding principal balance plus accrued interest). We funded the redemption with cash on hand and borrowings under our revolving credit agreement.
The Company opened six new Conn’s HomePlus® showrooms during the first quarter of fiscal year 2022 and has opened one new Conn’s HomePlus® showroom during the second quarter of fiscal year 2022, bringing the total showroom count to 153 in 15 states. During fiscal year 2022, the Company plans to open a total of eleven to thirteen new showrooms in existing states, including the seven already opened, to leverage current infrastructure.
Liquidity and Capital Resources
As of April 30, 2021, the Company had $290.4 million of immediately available borrowing capacity under its $650.0 million revolving credit facility. The Company also had $6.6 million of unrestricted cash available for use.
During the three months ended April 30, 2021, cash provided by operating activities of $130.8 million contributed to strengthening the Company's balance sheet and decreasing net debt as a percentage of the portfolio balance at April 30, 2021 to 39%, the lowest level in eight fiscal years.
On May 12, 2021, the Company completed the redemption of the 2019-A Asset Backed Notes at an aggregate redemption price of $41.1 million (which was equal to the entire outstanding principal balance plus accrued interest). We funded the redemption with cash on hand and borrowings under our revolving credit agreement.
Conn's (CONN) stock price chart over the last 5 years
The image below shows the stock price history of Conn's over the last 5 years. And its been a very good time for Conn's stockholders with the stock price increasing by a whopping 306.6% over a 5 year period.
The stock of Conn's is trading a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Conn's stock is very positive at this point in time.
The stock of Conn's is trading a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Conn's stock is very positive at this point in time.
Conn's (CONN) vs Target (TGT) stock chart over the last 5 years
The image below shows the stock price performance of Conn's (CONN) and Target (TGT) over the last 5 years. Both are retailers of a wide variety of goods and hence the comparison. The summary below shows the stock price returns of Conn's and Target (sorted from best to worst performer)
The stock of Conn's has easily outperformed that of Target (TGT) over the last 5 years.
- Conns: 306.6%
- Target (TGT): 231.%
The stock of Conn's has easily outperformed that of Target (TGT) over the last 5 years.
Conn's (CONN) latest stock valuation
So based on Conn's 1st quarter 2022 earnings report what do we value their stock at? Based on their latest earnings report our valuation model provides a target price of $25.30 for the stock of Conn's
We therefore believe the stock of Conn's is overvalued at its current price of $29. We recommend that investors look to enter a stock at least 10% below our target price which in this case is $25.30. A good entry point into the stock of Conn's would therefore be at $22.80 or below.
We expect the stock of Conn's t pull back slightly after the strong run its had recently to levels closer to our target price in coming weeks and months.
We therefore believe the stock of Conn's is overvalued at its current price of $29. We recommend that investors look to enter a stock at least 10% below our target price which in this case is $25.30. A good entry point into the stock of Conn's would therefore be at $22.80 or below.
We expect the stock of Conn's t pull back slightly after the strong run its had recently to levels closer to our target price in coming weeks and months.
Next earnings release of Conn's (CONN)
It is expected that Conn's will release their 2nd quarter 2022 earnings report in early September 2021
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