Conn's Tumbles 10% Despite a Surge in Q3 Adjusted Earnings

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What happened

Shares of Conn's (NASDAQ: CONN), a specialty retailer of a range of merchandise including furniture and mattresses, home appliances, electronics, and home office supplies, were down 10% as of 12:25 p.m. EST on Tuesday, after the company released mixed fiscal 2019 third-quarter results.

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So what

Third-quarter revenue checked in at $373.8 million, slightly higher than the prior year's level, but missing analysts' estimates of $384.7 million. Adjusted earnings per share reached $0.59, which barely topped analysts' estimates of $0.58 but was a staggering 228% increase versus the prior year.

There were a number of other highlights during the third quarter, including record retail gross margins of 41.2%. And the company had a credit spread (Conn's also offers consumers financing) of 940 basis points, which was its best third-quarter spread in five years. On the downside, Hurricane Harvey, which caused roughly 100 missed selling days in 2017 and a later surge in sales, skewed comparable sales, leading to a total net same-store sales decline of 4.4% during the quarter.

Despite the mixed results, CEO Norm Miller had a positive spin for investors:

Now what

The good news for investors, despite Tuesday's sell-off, is that comps picked up in November, when same-store sales were up 3.6% overall. And they were up an even higher 8.5% in non-Harvey markets, suggesting stronger sales momentum heading into the fiscal fourth quarter. Investors should also take Conn's volatile stock price with a grain of salt as it has a history of popping and dropping after quarterly results. Investors would be better served by paying attention to the company's comps momentum as well as its opening 12 to 15 new stores; both developments could help drive stronger top-line results next year.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.