Why Conn's Shares Popped
Apr 3rd 2013 4:56PM
Updated Apr 3rd 2013 5:02PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Conn's were flying today, gaining as much as 15% after the retailer promised a better-than-expected results in 2013.
So what: In its quarterly earnings report, the durable-goods retailer delivered an EPS of $0.54 on expectations of $0.55. Revenues increased 10.4% to $250.3 million but were also slightly below estimates, while same-store sales grew swiftly at 7%. Guidance for the coming year, however, was well ahead of the consensus, as management now sees EPS of $2.40-$2.50, ahead of estimates at just $2.08. CEO Theodore Wright noted "improvement in retail and credit operations" and announced the opening of 10 to 12 new Conn's Home Plus stores. Same-store sales at those locations were up 15% in February and March, after the quarter ended.
Now what: The new store additions will increase store count by 15-18%, and Conn's has said that they bring in 1.6 times the revenue as regular stores. Margins have also greatly improved over the past year, with a net margin of 8.5% in the usually strong fourth quarter. If Conn's continues expanding at the same pace across the Sun Belt, the stock should have no problem moving higher.
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