n's(US:CONN)2023-08-31 01:40Financial Data and Key Metrics Changes - Total revenues for the second quarter were $306.9 million, representing an 11.5% year-over-year decline [51] - The company reported a GAAP net loss of $1.39 per diluted share compared to net income of $0.09 per diluted share for the same period in fiscal year 2023 [51] - Retail revenues were $246.3 million, a 12% year-over-year decline, primarily driven by a 15.4% decline in same-store sales [15] - Retail gross margin increased by 230 basis points to 36.9% compared to 34.6% for the same period in fiscal year 2023 [16] - SG&A expenses in the retail segment were $101.4 million, up from $98 million for the same period last fiscal year [17] Business Line Data and Key Metrics Changes - Sales financed through the company's in-house credit option increased by 4.3% year-over-year, while sales through the lease-to-own offering increased by 2.5% [3] - The credit segment reported a loss before taxes of $4.5 million compared to income of $7.9 million for the same period last fiscal year [22] - Finance charges and other revenues in the credit segment declined by 5.6% year-over-year to $63.1 million [52] Market Data and Key Metrics Changes - The 60-day delinquency balance was 11.1% at July 31, 2023, compared to 11% at July 31, 2022 [52] - The balance of re-aged accounts as a percent of the portfolio was 15.9% compared to 16.1% for the same period in fiscal year 2023 [19] Company Strategy and Development Direction - The company is focusing on improving profitability, controlling credit risk, and leveraging its value proposition to serve customers and drive sales [13] - A new application process was launched to make it easier for customers to apply for payment options with little-to-no impact on their credit score [14] - The company plans to pause new store openings after reaching a total of 10 new stores this fiscal year, focusing instead on driving growth within existing locations and online [46][47] Management's Comments on Operating Environment and Future Outlook - Management expects the economic environment to remain fluid but is confident in the progress being made and believes the company will emerge stronger [13] - The company anticipates continued improvements in total retail sales and same-store sales as growth strategies take hold [27] - Management noted that tighter credit conditions could create sales opportunities, particularly for the company's offerings [68] Other Important Information - The company entered into a $50 million 3-year delayed draw term loan to improve its capital position [23] - A $273.7 million ABS transaction was completed, which was 10x oversubscribed, indicating strong demand for the company's bonds [24] - The company expects annual SG&A expenses to increase by $15 million to $25 million due to new stores and investments in e-commerce [25] Q&A Session Summary Question: What drove the sequential decline in delinquencies? - Management indicated that delinquencies remained stable and down year-over-year due to a shift in the customer mix towards higher credit quality customers [9] Question: How does the company view the trajectory of sales and profitability? - Management believes that ongoing improvements in sales and the eCommerce business will drive incremental sales over the next 24 months [61] Question: What are the expectations for margins moving forward? - Management confirmed that there were no one-time items affecting margins and that improvements were driven by pricing and assortment changes [69]