by Furniture remains a key category for both retailers. Will it be a drag on these businesses moving forward?
HIGH POINT — A look at both Conn’s and Big Lots most recent quarterly performance offers a window into the importance of furniture sales at each retailer and how well this segment did in what are still considered challenging times.
First here’s the latest financial picture for both retailers.
Conn’s reported total net sales for the second fiscal quarter ended July 31 were $245.8 million, down 12% from the $279.5 million reported the same period last year. Same-store sales declined 15.4%, which the company said was the third quarter of sequential improvement. For the full six months, its sales totaled $470.4 million, down 14.8% from the $552.3 million reported the first half of the prior fiscal year.
The company reported a net loss of $33.5 million, or $1.39 per share during the second quarter, compared to net income of $2.1 million, or 9 cents per share the same period last year. For the full first half, the company reported a loss of $68.9 million, or $2.85 per share, compared to net income of $8.4 million the year prior.
Big Lots reported net sales of $1.13 billion during the second quarter, down 15.4% from the $1.34 billion reported the same period last year. Same-store sales declined 14.6%, which it said was within its guidance.
Its net loss during the quarter was $249.8 million, or $8.56 per share, compared to a net loss of $84.2 million, or $2.91 per share, during the same period last year.
For the full first half, net sales were $2.3 billion, down 16.8% from the $2.7 billion reported the same period last year. Its net loss for the first half was $455.9 million, or $15.67 per share, compared to $95.2 million, or $3.31 per share last year.
The performance of both stores is worth comparing as they each carry different product segments, with furniture being among the most important.
For Conn’s, furniture sales represented about $81.3 million in sales during the quarter. While down from the $86.3 million during the second quarter of last year, furniture actually grew to 33.1% of sales, compared to 30.9% last year. Meanwhile, home appliance sales, which represent the largest single category in the store, fell to 36.8% of sales, compared to 43.2% during the same second quarter last year.
In terms of same-store sales, furniture net sales fell 10.2%, which was far lower than the 27.2% drop in home appliances and the 17.7% drop in consumer electronics, which represented about 11% of overall sales.
Big Lots reported an 18% decrease in comp furniture sales for the quarter, which the company said represented a sequential gain compared to the first quarter. Despite the decrease, furniture remained its largest category in the second quarter, at 23% of overall sales. The next largest segment of the business was seasonal at 22% of sales. Seasonal reported the largest decrease in comp sales at 26%.
Soft home, which includes anything from towels and washcloths to tablecloths, fell 11%, while consumables, such as household and personal care products fell 7%. They represent 13% and 12% of the business, respectively, while food and apparel and electronics represent 14% and 10% respectively. The food and apparel/electronics segments had small decreases at 5% and 1% respectively.
Thus, we see a glimpse of how furniture is performing at each of these major retailers compared to some other categories. The good news is that they still represent among the largest areas of the business. It will be worth watching to see how they compare for the balance of the calendar year.
One of the things still said to be impacting retailers around the country is high inventory levels.
In its report, Big Lots said that it has significantly reduced inventory in line with sales — or by 15.2% compared to the same period last year. It also expects comps to modestly improve in the third and fourth quarters, at least compared to the 14.6% comp sales decline in Q2, which the company said was ahead of guidance.
By comparison, Conn’s highlighted some different metrics, including a focus on growth in its e-commerce segment and growth in credit applications that drive sales activity for cash-strapped customers. During the latest quarter, it said, e-commerce sales rose 41.5% to a second quarter record of $27.2 million. Meanwhile, its credit applications rose 30.6% compared to last year, which the company said resulted in the first quarter of positive sales financed through Conn’s in-house credit offering in six quarters.
In his comments on the latest quarter, Big Lots President and CEO Bruce Thorn addressed challenges and opportunities that lie ahead.
“Our results for Q2 illustrate that we remain in a very challenging environment,” he noted. “However, we did see some sequential improvement in the quarter and were pleased to come in ahead of or in line with our guidance on all key metrics. We believe this improvement was driven by the key actions we are taking that cut across all areas of our business. While the consumer environment will likely remain challenging and result in negative comp sales in the back half of the year, we are now in a position to get back to playing offense. This will be supported by the incredible efforts of our associates, and our outstanding vendor partners, who remain aligned with our efforts to offer great quality products and amazing value. Turning to liquidity, we are very comfortable with our position coming into the second half of the year. We significantly strengthened our balance sheet through our recently closed sale/leaseback transaction, and we are prepared and positioned to navigate through the current economic challenges.”
Conn’s interim President and CEO Norman Miller also addressed some of the dynamics the retailer experienced during the quarter.
“Strategic initiatives focused on turning around our retail performance and better serving our core credit-constrained consumers are taking hold and continue to perform in line with our expectations,” he said. “During the second quarter, we experienced improving sales trends in our Conn’s in-house and lease-to-own offerings and record quarterly e-commerce revenue. In addition, the recent enhancements to our marketing strategies and credit application process drove a 30.6% increase in applications during the second quarter, which resulted in an increase in sales financed through Conn’s in-house credit offering.”
“Retail gross margin grew 230 basis points over the prior year period to the highest level in seven quarters, as we benefit from pricing and assortment changes we have made since the end of last year,” Miller added. “In addition, credit quality remains stable and in line with our expectations. As we navigate a fluid economic environment, we continue to leverage our powerful value proposition to serve our core credit-constrained consumers and drive sales, while remaining focused on improving profitability and controlling credit risk.”
