Conns Posts Dismal May Comps, Delinquency Data; Stock Up

Conns Inc. (NASDAQ:CONN) released sales data for the month of May, wherein it recorded a 0.8% rise in net sales to $111.0 million. Shares of the company jumped 4.5% following the announcement.

However, Conns’ dismal comparable store sales (comps) trend lingered, as comps for the month ended May 31, 2016, slumped 7.6%. Comps 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’ May comps declined 6.7%.

Further, Conns’ 60-plus day delinquency rate expanded 30 basis points (bps) sequentially and 40 bps year over year to 8.9% as of May 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 3.2%, 8.0%, 15.6%, 5.5% and 3.4%, respectively.

The year-over-year fall in comps was a result of a couple of factors. Firstly, the unfavorable shift of Memorial Day caused a nearly 290 bps drop in monthly sales. Additionally, refinements in underwriting, which were executed in the fourth quarter of fiscal 2016 and the first quarter of fiscal 2017, weighed on sales to an extent of 650–700 bps. Nonetheless, these refinements are anticipated to mitigate credit risk and in turn, enhance portfolio performance in the future.

Finally, comps from repair service agreement commissions for May declined 5.0%.

Notably, management stated that first-quarter fiscal 2017 onward, it has started providing a more elaborate outlook to assist investors and analysts with financial modeling. Consequently, Conns will no longer release monthly sales and delinquency data after the May sales update.

Stocks to Consider

Better-ranked stocks in the retail sector include Burlington Stores, Inc. (NYSE:BURL) , Fred's, Inc. (NASDAQ:FRED) and Wal-Mart Stores Inc. (NYSE:WMT) , each with a Zacks Rank #2 (Buy).

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