Conn’s is selling off much of its consumer debt and appointing a new CEO as the specialty retailer looks reposition its business.
In a series of strategic moves designed to shore up its ailing consumer finance business and restore investor confidence, Conn’s has named Norman Miller as its new CEO, entered into an agreement to securitize $1.4 billion of retail installment contract receivables, and received board authorization to repurchase up to $75 million of securities, and termination of the stockholders’ rights plan.
The company says Miller is a seasoned executive with considerable experience in retail and consumer finance, having previously served as president of both Sears Automotive and DFC Global. He succeeds Theodore Wright, who will remain on the Conn’s board of directors as executive chairman.
The company also entered into an agreement to securitize $1.4 billion of retail installment contract receivables. Conn’s intends to execute periodic securitizations of future originated loans including the sale of any remaining residual equity.
“This transaction is an important step toward creating a simplified capital structure that is also intended to provide a model that is more easily understood by investors,” the company said in a statement.
The board also authorized the company to repurchase up to a total of $75 million of outstanding shares of its common stock or its 7.250% Senior Notes Due 2022. This authorization is the maximum amount permitted under the company’s credit facility and senior note indenture.
The company says the repurchase program underscores its confidence in its long-term growth prospects, consistent with Conn’s overall commitment to generate continued profitable growth and enhanced long-term shareholder value.
Conn’s also reported second quarter fiscal 2016 results on Wednesday.
Same store sales for the quarter increased 6.7%, excluding the impact of the company's decision to exit video game products, digital cameras, and certain tablets.
Theodore M. Wright, Conn’s executive chairman, said: "In the second quarter of fiscal 2016, the retail segment expanded with new store growth and positive same store sales. Greater than 60-day delinquency was 9.2% as of the end of the current quarter, compared to 8.7% as of the comparable quarter last year and 8.4% as of the end of the previous quarter."
Credit segment operating loss was $9 million, driven primarily by increased provision for bad debts. The percentage of the customer portfolio balance 60+ days delinquent was 9.2% as of July 31 compared to 8.7% as of July 31, 2014; and diluted earnings for the three months ended July 31 were $0.45 per share compared to diluted earnings of $0.48 per share for the three months ended July 31, 2014.
Wright added: "The retail segment successfully opened four new stores during the second quarter in key existing markets, consistent with our proven growth strategy of planned store openings. Furniture and mattress sales were 33.7% of total product sales for the quarter. Retail gross margin was 41.8% compared to our long term goal of 42%."