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Conns Down 4.7% on Dismal March Comps, Delinquency Data

Shares of Conns Inc. CONN have dropped 4.7% since the company released negative comparable store sales (comps) data for the month of March.

While total retail sales inched up 0.6% year over year to $104.4 million, comps for the month ended Mar 31, 2016 slumped 10.4%.

Conns’ comps for the month continued to be adversely impacted by the company’s decision to discontinue its video game products, digital cameras and certain tablets. Excluding the effect of the discontinuation of these products, Conns’ March comps fell 8.5%.

Further, Conns’ 60-plus day delinquency rate contracted 40 basis points (bps) sequentially, while it expanded 20 bps year over year to 8.9% as of Mar 31, 2016.  The unfavorable year over year comparison is attributable to persistent softness in portfolio growth pace.

Coming back to sales results, segment-wise, this Zacks Rank #5 (Strong Sell) company’s Furniture and Mattress, Home appliance, Consumer electronics, Home office and Other segments posted comps declines of 2.1%, 11.6%, 22.5%, 9.4% and 6.4%, respectively.

The year over year fall in comps was a result of a couple of factors. Firstly, Easter Sunday falling in March this year caused a nearly 360 basis points (bps) drop in the monthly sales, owing to store closures. Additionally, refinements in underwriting, which were executed in the fourth quarter of fiscal 2016, weighed on sales to an extent of about 150 bps.

Though March started on a sluggish note, Conns witnessed considerable improvement in the last fortnight, thanks to favorable alterations in the company’s long-term promotional offers. Also, sales performance relatively enhanced in the markets with greater oil industry concentration.

Finally, comparable sales from repair service agreement commissions declined 5.9% for March.

Apart from Conns, many other retailers bore the brunt of unfavorable Easter timing, giving us a disappointing comps picture. Evidently, The Gap Inc. GPS and Zumiez, Inc. ZUMZ reported comps declines of 6% and 7.8%, respectively.

A better-ranked stock in the retail sector is Target Corp. TGT with a Zacks Rank #2 (Buy).

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ZUMIEZ INC (ZUMZ): Free Stock Analysis Report
 
GAP INC (GPS): Free Stock Analysis Report
 
CONNS INC (CONN): Free Stock Analysis Report
 
TARGET CORP (TGT): Free Stock Analysis Report
 
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