Conn's reviews internal financing program as surprise loss sends shares tumbling; CFO out

Published January 08, 2015

A surprising third-quarter loss sent shares of Conn's plunging Tuesday as the furniture retailer withdrew its outlook for next year and said that its chief financial officer was stepping down immediately.

Conn's offers financing to customers, some with low incomes and sub-par credit scores, and that segment of the business has taken a turn for the worse.

"Delinquency rates have increased and losses are being realized at a faster pace than originally anticipated," said Chairman and CEO Theodore Wright. "We recorded additional provisions for credit losses this quarter, based on the assumption that we will not realize any improvement in these trends over the next 12 months, despite the underwriting changes and improved collections execution."

In addition to the departure of CFO Brian Taylor, the company announced the creation of a new credit risk and compliance committee. That committee includes board members tasked with reviewing credit risks, underwriting strategy and credit compliance activities.

The company also initiated a search for a chief risk officer who will supply reports to the credit risk and compliance committee.

Conn's named Mark Haley, the company's chief accounting officer, as interim CFO.

While the percentage of customer balances 31 to 60 days past due declined slightly to 3.3 percent, the company's provision for bad debts was $72 million. That's an increase of $49.4 million from the same period last year.

Conn's Inc. lost $3.1 million, or 8 cents per share in the third quarter, a period for which Wall Street was expecting a per-share profit of 68 cents, according to a survey of analysts surveyed by Zacks Investment Research.

During the same period last year, Conn's had a profit of $24.4 million, or 66 cents per share.

Shares of Conn's slumped 39 percent, or $13.77, to $21.32, a level for the stock that has not been seen in more than two years.

Revenue for The Woodlands, Texas, company rose to $370.1 million from $310.9 million, but also fell well short of the $382.5 million projected on Wall Street.

Conn's anticipates fourth-quarter sales at stores open at least a year to be flat to up 3 percent.

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Elements of this story were generated by Automated Insights using data from Zacks Investment Research. CONN stock research report from Zacks.

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Keywords:Conn's,Earnings Report

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