Conn's, Inc. (NASDAQ:CONN) Q2 2020 Earnings Conference Call Transcript

Sep 03, 2019 • 11:00 am ET

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Conn's, Inc. (NASDAQ:CONN) Q2 2020 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of John Baugh with Stifel. Please proceed with your question.

Analyst
John A. Baugh

Thank you. Good morning and congratulations on a good quarter.

Executive
Norman Miller

Thank you, John.

Executive
Lee A. Wright

Good Morning.

Executive
George L. Bchara

Good Morning.

Analyst
John A. Baugh

What if we could start with Florida and maybe talk a little bit about how you expect the expenses to ramp there and importantly, the interest rate cap or regulatory environment within that state?

Executive
Norman Miller

Sure, John. I'll start off with the reason we went to Florida and then I'll hand it to Lee and George to talk about the SG&A side. Florida obviously is contiguous to our existing market. So, makes a lot of sense for us. Very attractive from a rate standpoint. We were able to charge -- it is -- it will be a state licensed product and we'll be able to charge the 29.99% APR and so -- and from a demographic standpoint, as you heard in our comments, there's 21 million people in Florida, a lot of similarities to the state of Texas from a demographic standpoint. And we're very bullish about what it bodes from a future sales standpoint.

Executive
Lee A. Wright

Yeah, and from an operational standpoint, John, expenses -- as we mentioned, we've signed a lease with the distribution center in Central Florida. It gives us that core location for our logistics build out. We'll start incurring expenses in the fourth quarter as we go. We'll start opening showrooms in the second half of next year and ramp that up. Again, obviously, as you know, when we go into new market, we will have some marketing expenses as we enter there and make sure we get our brand name out, but as we talked about and Norm said in the call, very excited about Florida's long term potential. So from that standpoint, it's certainly worth the investment, a long-term play for us, the 40-plus stores we are going to open at the state.

Analyst
John A. Baugh

Great. And then, maybe we could talk again about same-store sales, and I'm particularly interested in non-Harvey and you've got, I assume, some building benefit from new stores you opened over a year ago, offset by some cannibalization because all the stores have been in existing markets. Could you talk about the plus and the minus there and maybe how that's influencing numbers now and how that might change going forward with the Florida plan?

Executive
Norman Miller

Yeah, John. So currently, because we didn't open that many stores, last year seven, there's not many in the comp base. It'll be the fourth quarter and into the first quarter of next year when we will start to see that benefit. As you well know, historically when the Company opened new stores, we would open them at $8 million to $10 million in revenue in the first year. We're now averaging between $6 million and $7 million in revenue because of the tightened underwriting. And those stores, by the way, are