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Dive Brief:
- Conn’s swung to a profit in the fourth quarter, reporting $43.3 million in net income on Thursday, up from a prior year net loss of $42.8 million. The home goods specialty retailer reported total revenue of $366 million for Q4, up 9% from nearly $335 million year over year.
- However, the company was still in the red for the year, posting a net loss of nearly $77 million for 2023, up nearly 30% from the prior year. Revenue for the year also declined to $1.24 billion, down nearly 8% from $1.34 billion a year earlier, due in part to a reduction in finance charges and other revenue.
- Conn’s acquired W.S. Badcock, another home goods retailer, in December. Conn’s CEO Norm Miller said the company cut $50 million of combined expenses in Q4 and has identified $50 million of additional cost savings, as well as $50 million in “revenue synergies,” through actions like transitioning Badcock’s customer credit program to Conn’s in-house loan offering.
Dive Insight:
Conn’s acquisition of Badcock as a wholly-owned subsidiary added about 380 stores in eight southeastern states. Overall, the retailer now has a footprint of more than 550 stores across 15 states. Both retailers offer home goods, furniture, mattresses, appliances and consumer electronics. Furniture and mattresses made up the largest portion of Conn’s Q4 net sales at nearly 41%, followed by home appliances at 29%.
In December, Conn’s said annual revenue for the combined company is expected to reach approximately $1.85 billion. E-commerce sales are expected to reach around $125 million. Conn’s said it expects to provide last-mile delivery to over 92% of the population in states where it operates.
“While we expect the macro-environment to remain challenging throughout our fiscal year 2025, I am confident that the Badcock transaction, combined with existing strategic initiatives underway, will position us to emerge stronger and more resilient than ever before,” Miller said in an earnings announcement. “As a result, we expect to experience year-over-year improvements in both retail sales and profitability throughout fiscal year 2025.”
And financing is a key element of Conn’s revenue model. In October, the company launched a new marketing campaign that is meant to destigmatize financing. The company earned about $71 million in finance charges in Q4 and over $257 million for the year.
Miller first joined the company in 2015 as a board member and has served as Conn's president and CEO multiple times, including in the interim since 2022. He took over as full-time CEO in December. Miller said transitioning Badcock’s credit program to Conn’s program is one of the company’s five near-term strategic priorities.
As an example, Miller said Badcock’s average ticket last year was about $1,400. Under Badcock’s financing program, the monthly payment would be about $110, while the same charge on Conn’s program would be a $56 monthly payment. The company’s core customer, Miller said during this week’s earnings call, makes purchasing decisions based primarily on their monthly payment.
Since both retailers have similar product categories and customer profiles, Miller said the financing program change could significantly increase Badcock's average ticket. Conn's went through a similar transition and had an average ticket of under $1,600 when Miller first joined the company versus an average ticket of over $1,800 today. The company introduced Conn's credit in select Badcock stores this month and expects to begin offering Conn's credit in all Badcock locations by the end of May.
“This successful transition supports a high degree of confidence that we can provide more purchasing opportunities for Badcock’s customers,” Miller said, according to a call transcript. “As a result, we believe credit-driven growth strategies will be an important near-term catalyst to unlock revenue and cost synergies in the coming quarters.”
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Nate Delesline III, Khareem Sudlow
