Conn's, Inc. (NASDAQ:CONN) Q3 2020 Earnings Conference Call - Final Transcript

Dec 10, 2019 • 11:00 am ET

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Conn's, Inc. (NASDAQ:CONN) Q3 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Norman L. Miller

segments of the portfolio. We made the necessary adjustments to maintain our long-term credit spread of approximately 1,000 basis points, which negatively impacted same-store sales by approximately 4% to 5%. Compounding the impact to third quarter retail sales was a combination of significant price deflation for premium large screen televisions and an increase in production of large screen TVs by second- and third-tier manufacturers. These market dynamics disproportionately reduced large screen TV prices and also enabled customers to use cash or existing financing options to purchase large screen TVs elsewhere, which further impacted same-store sales by approximately 3% to 4% during the quarter.

Producing positive same-store sales, while remaining disciplined in our credit strategy, is a top priority of the leadership team. As Lee will review in his remarks, we have implemented several strategies to offset current market conditions and we are pursuing multiple retail growth initiatives.

Unit expansion is an important component of our growth plan and the performance of our new showrooms remained in line with our expectation as they contributed over 7% to retail growth during the third quarter. This year, we have successfully opened 14 new showrooms, and plan to open 16 to 18 new showrooms next fiscal year, including our first locations in the state of Florida. We are excited about our expansion plans as our showrooms are extremely profitable, have a quick payback and have historically produced compelling return.

The leadership team and our Board of Directors are significant shareholders of the Company, and we share investors' disappointment with our sales performance during the third quarter and the pace of our retail transformation. Our focus on better-best products for the home and affordable financing options are the cornerstone of our unique value proposition for a large population of consumers across the country.

In addition, our disciplined credit strategy, combined with our strong capital position and highly profitable business model, provides us with significant flexibility to successfully navigate current market conditions, while supporting our long-term growth plan. While the remainder of this fiscal year will be challenging, we believe we will emerge well-positioned to achieve an 8% to 10% retail growth rate during next fiscal year and we are confident we can sustain this level of growth for many years to come.

So, with this overview, let me turn the call over to Lee, who will provide more details on our third quarter operating results.

Executive
Lee A. Wright

Thanks, Norm. I'll begin my prepared remarks, outlining our credit segment performance and the drivers affecting retail sales, before reviewing the near- and long-term initiatives, we have developed to turnaround our retail performance.

Third quarter credit segment results were very strong. Our credit spread was over 1,000 basis points during the third quarter, as a result of a record net yield of 22.1% and favorable charge-offs of 11.4%. As a result, we achieved our first credit segment income in 5.5 years. The continued improvements in our credit performance validates our credit strategy, supports our unique and hybrid business model, and