Why Shares of Conn's, Inc. Jumped More Than 20% Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Continue Reading Below

What: Shares of Conn's were up nearly 24% at one point Thursday and were up more than 18% around 2:15 p.m. after the retailer of furniture, consumer electronics, and appliances reported a 4.9% rise in same-store sales for the month of January.

So what: Conn's same-store sales growth was far lower than the massive 28.2% growth posted in January of 2014, but judging from the market reaction, expectations were low. Conn's total sales rose by 16.8% year-over-year in January thanks to both rising same-store sales and additional stores being opened over the past year.

Conn's runs its own in-house financing program, and its 60-plus day delinquency rate was flat in January compared to December at 9.7%. This was no doubt a relief to shareholders after Conn's took a big charge related to its credit business during its third quarter, wiping out most of the company's operating profit. The company's slower growth during January compared to a year ago is partly due to tighter underwriting in its credit business.

Now what: The ultimate quality of Conn's credit portfolio is still a big unknown, casting a shadow over the company's solid January results. Various class action lawsuits relating to its credit business have been launched against Conn's, and Conn's rapid growth in recent years correlates with its loosening of lending standards. Investors should be well-aware of the risks in Conn's credit business before considering investing in the stock.

The article Why Shares of Conn's, Inc. Jumped More Than 20% Today originally appeared on Fool.com.

Continue Reading Below

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.