Conn's Conference Call Highlights

reported its Q3 earnings this week. Shares of the company were down 40 percent. Below are some key highlights from its conference call.

• Over the last 10 months, we've successfully opened an additional 20 stores in eight markets and three new warehouses. • We're reaching more customers than ever before, giving low-income consumers the opportunity to purchase quality, durable, branded products for their homes at affordable monthly payments. • Revenues and gross margins expanded yet again in the quarter, and operating income in the retail segment grew. • These changes were reflected in the FICO score underwritten in Q3 of fiscal 2015 of 608 compared to 599 in Q3 of fiscal 2014. • The aggregate impact of these changes is estimated to be a reduction in sales rate of 12% compared to the third quarter a year ago. • As we have indicated previously, the fiscal 2014 origination static losses will be elevated and we expect these to be around 9.5% based on current collections trends. • Fiscal 2015 origination static loss had been expected to trend down from fiscal 2014 because of tighter underwriting standards. • Turning to our retail segment, November same-store sales were up 0.5%. November a year ago delivered a 31% same-store increase. • A year ago comparisons become easier for each of the next three quarters. • November same-store sales of televisions increased 6%. • Same-store sales of furniture and mattresses increased 7% in the third quarter, on top of a 55% increase a year ago. For our new store, sales of furniture and mattresses are about 39% of the total in the quarter. • In total, under-levered operating cost related to facility openings totaled $4.5 million this quarter, impacting earnings by about $0.08 a share. • In the fourth quarter of last year, we opened eight stores, including severallate in the quarter. • As of October 31, 55% of our $169 million in inventory was financed with outstanding accounts payable. • Inventory was up 23% on a sequential basis while our store count grew 7%. • Our inventory turn rate was approximately 4.5% for the quarter. • We'll open stores in markets with existing marketing spend, existing distribution of both. • The recent delinquency and charge-off trends are shown on slide eight. 60-plus day delinquency increased 130 basis points during the quarter to 10%. • As of November 30, the 60-plus day delinquency rate was consistent with October at 10% compared to 8.5% last year. • The net charge-off rate decreased 110 basis points sequentially to 8.9%. • The decrease was partially due to increased sales of charged off accounts during the quarter compared to the prior quarter. • $7.6 million reduction in recoveries expected over the next 12 months due to our decision to pursue collection internally and a $4 million increase related to an 18% increase in balances treated as troubled debt restructuring for accounting purposes.