Conn’s, Inc. operates as a specialty retailer that offers a broad selection of quality, branded durable consumer goods and related services in addition to proprietary credit solutions for its core consumers.
The company operates an integrated and scalable business through its retail stores and website. Its complementary product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points...
Conn’s, Inc. operates as a specialty retailer that offers a broad selection of quality, branded durable consumer goods and related services in addition to proprietary credit solutions for its core consumers.
The company operates an integrated and scalable business through its retail stores and website. Its complementary product offerings include furniture and mattresses, home appliances, consumer electronics and home office products from leading global brands across a wide range of price points. The company’s credit offering provides financing solutions to a large, under-served population of consumers who typically have limited credit alternatives.
Segments
The company operates through two segments, Retail and Credit.
Retail
As of January 31, 2022, this segment operated 158 retail stores located in 15 states. The company’s stores typically range in size from 25,000 to 50,000 square feet and are predominantly located in areas densely populated by its core customers.
The company utilizes a merchandising strategy that offers a wide range of quality, name brand and private brand products across a broad spectrum of price points. This wide selection allows the company to offer products and price points that appeal to the majority of its core consumers. The company’s primary retail product categories include:
Furniture and mattress, including furniture and related accessories for the living room, dining room and bedroom, as well as both lay flat mattresses and mattress in a box offerings. The company offers brands, such as Corinthian, Catnapper, Tempur-Pedic, Simmons Beautyrest and Nectar.
Home appliance, including refrigerators, freezers, washers, dryers, dishwashers and ranges. The company offers brands, such as Samsung, LG, General Electric, and Frigidaire.
Consumer electronics, including LED, OLED, QLED, 4K Ultra HD, 8K televisions, gaming products, next generation video game consoles and home theater and portable audio equipment. The company offers brands, such as Samsung, LG, Sony, Bose and Microsoft Xbox.
Home office, including computers, tablets, monitors and accessories. The company offers brands, such as HP, Apple, and Microsoft.
The company offers a high level of customer service through its commissioned and trained sales force, next day delivery and installation in the majority of its markets and product repair or replacement services for most items sold in the company’s stores. The company also sells and offers its services through its website. Flexible payment alternatives offered through the company’s proprietary in-house credit programs and third-party financing alternatives provide its customers the ability to make aspirational purchases.
Credit
This segment’s in-house consumer credit programs are an integral part of the company’s business and is a major driver of customer loyalty. The company has developed proprietary underwriting models that provide standardized credit decisions, including down payment, limit amounts and credit terms, based on customer risk and income level. The company uses its proprietary auto-decision algorithms, as well as in-depth evaluations of creditworthiness performed by qualified in-house credit underwriters to complete all credit decisions.
In order to improve the speed and consistency of underwriting decisions, the company continually reviews its auto-decision algorithms. Additionally, it provides access to alternative financing options to a wider range of consumers through the company’s relationship with third-party payment solution providers. These third parties manage their own respective underwriting decisions and are responsible for their own collections. The company’s in-house credit programs and access to third-party payment solutions allows it to provide credit to a large and under-served customer base.
The company makes the following payment options available to its customers based on a review of their credit worthiness:
For customers with credit scores that are typically above 650, the company offers special no-interest or lower interest option financing programs on select products through a Conn’s branded revolving credit card from Synchrony or the company may offer an in-house financing program.
For customers with credit scores that are typically between 550 and 650, the company offers its proprietary in-house financing program, which is a fixed term, fixed payment installment and consumer loan contract; and may also include special no-interest or lower interest options.
For customers that do not qualify for the company’s credit programs, it offers a lease-to-own payment option through an arrangement with its third-party lease-to-own providers.
The company continuously evaluates alternative financing programs that may give it the ability to provide more customers with the ability to purchase the products and services the company offers.
Industry and Market
The products the company sells are typically considered home necessities, used by its customers in their everyday lives. As of January 31, 2022, the company operated 73 of its 158 stores in Texas.
Customers
The company has a well-defined core consumer base that is consisted of working individuals who typically earn between $25,000 to $60,000 in annual income, live in densely populated and mature neighborhoods, and typically shop at its stores to replace older household goods with newer items. The company’s product line is consisted of durable home necessities, which enable it to appeal to a diverse range of cultural and socioeconomic backgrounds and to operate stores in diverse markets.
Seasonality
The company’s business is seasonal, which typically means that a higher portion of sales and operating profit are realized during the fourth quarter (year ended January 2022) due primarily to the holiday selling season. In addition, during the first quarter, its portfolio performance benefits from the timing of personal income tax refunds received by its customers, which typically results in higher cash collection rates.
Merchandising
Vendors: During the year ended January 31, 2022, 73.3% of the company’s total inventory purchases were from six vendors, including 31.5%, 21.1% and 11.0% of the company’s total inventory purchases from Samsung, LG, and GE, respectively.
Regulation
Numerous federal and state laws impose disclosure and other requirements and limitations on the origination, servicing and enforcement of retail installment sale accounts and consumer loans, as well as the company’s acts and practices in connection with these activities. Applicable federal laws include, but are not limited to, the Truth in Lending Act (TILA), the Equal Credit Opportunity Act (ECOA), the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), the Telephone Consumer Protection Act (TCPA), the Gramm-Leach-Bliley Act (GLBA), the Electronic Fund Transfer Act (EFTA), the Military Lending Act (MLA), the Servicemembers Civil Relief Act (SCRA), and the implementing regulations of the foregoing statutes.
The Consumer Financial Protection Bureau has broad power to impose civil monetary penalties, restitution, and other corrective action under the various laws described above, and for this reason, poses a significant regulatory risk to the origination, servicing, and collection of the company’s retail installment contracts and consumer loans.
In Texas, Oklahoma, Louisiana and Tennessee, Conn Credit Corporation, Inc., an affiliate of Conn Appliances, Inc., offers a consumer loan product to the company’s customers. In conjunction with its direct loan program, Conn Credit Corporation, Inc.; Conn Appliances, Inc.; and Conn Credit I, LP, each hold consumer lender licenses as required by their respective state laws. For customers of most stores located outside of Texas, Oklahoma, Louisiana, and Tennessee, Conn Appliances, Inc. offers a retail installment sale contract.
Tradenames and Trademarks
The company has registered the trademarks ‘Conn’s’, ‘Conn’s HomePlus’, ‘YE$ YOU’RE APPROVED’, ‘YES Money’, ‘YE$ Money’, ‘YES Lease’, ‘YE$ Lease’, and the company’s logos, which are protected under applicable intellectual property laws and are the property of the company. Its trademark registrations generally last for ten-year periods and are renewed prior to expiration for additional ten-year periods.
Competition
The company competes against a diverse group of retailers, including national mass merchants, such as Wal-Mart, Target, Sam’s Club, Sears and Costco; specialized national retailers, such as Best Buy, Ashley Furniture and Mattress Firm; and home improvement stores, such as Lowe’s and Home Depot.
The company also competes with internet retailers, such as Amazon, Wayfair, and manufacturer-direct websites. The company also competes against companies offering credit-constrained consumers products for the home similar to those offered by the company under weekly or monthly lease-to-own payment options. Competitors include Aaron’s and Rent-A-Center, as well as many smaller, independent companies.
History
Conn's, Inc. was founded in 1890. The company was incorporated in 2003.
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