Appliance and electronics retailer Conn's cruised past earnings and sales estimates as furniture and mattress sales nearly doubled, sending shares spiking to a record high on Thursday Conn's (CONN) enjoyed strong gains across all its product categories — which also include consumer electronics, appliances and home office products — but its mattresses and furniture got most of the attention from Wall Street.
Furniture and mattresses have become "a greater point of emphasis for Conn's" as it worked to provide more balanced revenue, said analyst Bradley Thomas of KeyBanc Capital Markets.
Conn's Ottoman Empire
Third-quarter furniture and mattress sales rose 96% vs. a year earlier. The category also put up a 55% same-store sales gain.
Total sales rose 51% to $310.9 million, the third straight quarter of faster growth and the best gain in at least four years. Analysts had expected $289 million.
Same-store sales shot up 35%.
Conn's Q3 earnings rose 87% vs. a year earlier to 71 cents a share, beating the consensus by 7 cents.
Retail gross margin climbed to 40.1% from 35.5% the prior year — helped by the mattress and furniture mix.
Conn's top line has gotten a boost on several fronts, says David Magee, analyst at SunTrust Robinson Humphrey.
"It is a combination of better advertising, stronger sales efforts in the stores, a streamlined credit application process, more no-interest financing, and a very successful foray into furniture/mattresses over the past two years," Magee said.
Conn's stock rose 19% to 69.82, hitting a record 71.69 intraday. The stock price has more than doubled this year.
Conn's has run off six straight quarters of double-digit or better sales and EPS growth. It continued its strong run in November, reporting a 49% retail sales increase and 32% comps gain.
Conn's, based in the Woodlands, Texas, operates more than 70 stores in the South and Southwest. It extends credit directly to its largely moderate-income clientele and works with them to offer flexible financing.
Finance charges and other revenue grew 37.8%.
"Credit was a smaller contributor to the quarter than we expected due to a somewhat lower net portfolio yield — 18% vs. 19% last year — as no-interest financing use rose," Magee said.
Q3 sales of furniture and mattresses hit $63.2 million from $32.3 million a year earlier. That was "largely driven by increased unit volume," Thomas noted.
Home appliance sales rose 47% to $66 million. Comparable store sales climbed 22%. Consumer electronics revenue grew 45% to $68 million, with comps up 26%.
The home-office category delivered a 76% overall sales gain and 56.6% same-store sales increase.
Meanwhile, Conn's raised its full-year EPS target to $2.75-$2.80 from $2.50-$2.65. That implies holiday Q4 EPS of 91-96 cents vs. analyst estimates for 83 cents.
Conn's also issued upside guidance for fiscal 2015, projecting EPS at $3.80 to $4 vs. consensus views of $3.57. Conn's sees same-store sales growing 7% to 12%.
Also reporting early Thursday, specialty discounter Dollar General (DG) logged Q3 profit of 72 cents a share, up 14% from the prior year and 2 cents above consensus views. Sales climbed 11% to $4.38 billion, slightly below estimates. Comps climbed 4.4% as the company benefited from higher customer traffic and average ticket prices.
Dollar General rose 3% to 59.81 after hitting a record 60.25.
Look Out Five Below
But Five Below (FIVE) and beauty products chain Ulta Salon, Cosmetics & Fragrance (ULTA) did not fare well in late trading.
Five Below, which caters to teens with products $5 or less, rang up Q3 earnings of 5 cents a share, up 60% vs. a year earlier and in line with estimates. Sales rose 28% to $110.7 million, but fell shy of views for $112.1 million.
Five Below also guided lower for the holiday Q4, saying EPS should come in at 49-51 cents vs. consensus estimates for 52 cents.
Five Below crashed 13% late after falling 4% during the regular session.
Ulta Beauty earned 72 cents a share, below views for 74 cents. Sales grew 22% to $618.8 million vs. views for $622 million. It also warned of soft sales and heavy promotions in the holiday season.
Ulta shares dived 19% in after-hours trading. During the regular session Ulta slid more than 4%.