A Strong First Quarter Sends Conn’s Shares 21% Higher Thursday

What happened

Shares of Conn’s, Inc. (NASDAQ: CONN), a specialty retailer selling merchandise such as furniture, electronics, and home office supplies, are jumping 18% as of 11:26 a.m. EDT, after the company easily topped analysts’ earnings estimates during the fiscal 2019 first quarter.

So what

Total sales, which includes both its retail and credit segments, increased to $358.4 million during the first quarter, slightly ahead of analysts’ estimates calling for $355 million. The bottom line is where the company shined during the first quarter as it swung to a profit of $12.7 million, compared to the prior year’s loss of $2.6 million. Adjusted earnings per share checked in at $0.40, which easily exceeded analysts’ estimates of $0.27 per share.

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“Credit performance strengthened during the quarter, and our credit segment had its first quarter of operating income in four years,” said Norm Miller, Conn’s Chairman and Chief Executive Officer, in a press release. “With our credit platform on a clear path toward improved financial results, we continue to focus on driving sustainable growth in our highly profitable retail segment.”

Now what

It was a strong first quarter — especially compared to how the fourth quarter went — and a positive start to fiscal year 2019 for Conn’s. It posted record first-quarter retail gross margins of 39.6% and a credit spread of 870 basis points, which was the best result since the quarter ending April 30, 2014. One metric for investors to watch in the second quarter is the company’s same-store sales, which posted the first positive month in two years during April. Management believes it has momentum and that same-store sales should check in between flat and a 3% gain during the second quarter, and that will be important if the company wants to turn a strong first quarter into a strong full-year.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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