Conn’s (NASDAQ:CONN)

Tuesday saw a dramatic decline in the price of Conn’s (NASDAQ:CONN) stock after the business reported missing on both fronts, with same-store sales declining 22% year over year in its Q2 2023 earnings report.

The specialty retailer in Texas reported revenue of $346.63 million (-17.1% Y/Y), $23.6 million below expectations. Sales in the retail segment fell by 19.4% YoY to $279.51M. Furniture and mattress sales were down 21 percent, home appliances accounted for 43.2% of retail sales, were down 10.9% year over year, consumer electronics were down 34.2%, home offices were down 50.8%, and service income was down 13.8% year over year.

Operating income for the retail sector substantially decreased to $0.1 million from $28.7 million in the same quarter last year. It had an adjusted value of $1.4 million.

The company’s lease-to-own partners’ stricter underwriting rules are to blame for the decline in same-store sales.

Revenue from the credit segment was $66.8 million (-6.4% Y/Y). In comparison to the three months ended July 31, 2021, the provision for bad debts grew to $26.8 million for the quarter from $10.1 million.

CEO Chandra Holt noted that during the second quarter, “challenging macroeconomic conditions continued to pressure consumer spending, which disproportionately reduced year-over-year sales for our financial access client segment and sales of our discretionary product categories.”

Q2 2023 Non-GAAP EPS of $0.04 missed consensus by $0.05, although the company saw an increase in digital sales as eCommerce revenue increased 11.5% to a second-quarter record of $19.3M. The retailer increased the number of stores by two, bringing the total to 163 as of July 31, 2022, and added four Belk store-within-store locations.

Conn’s concluded an ABS transaction on July 21, 2022, resulting in the issuance and sale of Class A and Class B Notes totaling over $407.7 million in aggregate principal amount, and ended the second quarter with over $211 million in cash and liquidity.

Outlook

According to the corporation, existing actions will result in cost reductions of between $12.0 and $16 million in the second half of 2023.

Conn’s also anticipates a $20 million reduction in capital investments for the fiscal year 2023. The price of CONN stock has decreased 6% to $10.64 as of Tuesday, with a 52-week range of $7.80 to $28.

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