Why Conn's Stock Is Falling Today

What happened

Shares of home furnishings specialist Conn's Inc. (NASDAQ: CONN) are falling today, down 13.7% as of 3:19 p.m. EDT, after investors digested second-quarter results that had initially sent the stock 7% higher during pre-market trading.

So what

Total revenue checked in at $384.6 million during the second quarter, slightly topping analyst estimates calling for $384 million. Conn's adjusted earnings per share reached $0.57, easily beating analysts' estimates calling for $0.41 per share. Conn's also reported record retail gross margin at 41.4% and record quarterly credit segment revenue from its finance division.

"The initiatives to drive retail growth are starting to take hold and second quarter same store sales increased for the first time since the second quarter of fiscal year 2016, while total retail sales were up 3.5% over the prior year period. The momentum in our business is encouraging and we continue to believe fiscal year 2019 will be a strong year," said Norm Miller, Conn's chairman and CEO, in a press release.

Now what

Despite the solid second-quarter results and the company's first quarter of positive same-store sales in three years, the same-store sales growth was at the lower end of expectations. Conn's same-store sales growth checked in at 0.3% during the second quarter, and management's guidance called for a range of flat to 3%, while analysts had expected 1.9% growth. Despite the sell-off today -- and Conn's has historically had large price swings after quarterly reports -- the company can build on its record retail gross margin and improvement in its finance division, and focus on improving same-store sales growth for the remainder of 2018.

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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.