Conn’s Inc, a retailer of furniture and electronics, has announced a series of financial promotions, including a new CFO. The company has its head office in The Woodlands and has a market capitalization of $559 million.
CFO Lee Wright has been promoted to COO. Mr Wright joined the company in June 2016. Prior to that he was CEO of Professional Directional Enterprises, an energy services company. His annual salary will increase from $600,000 to $650,000.
George Bchara has been promoted from Chief Accounting Officer to CFO. He joined Conn’s in December 2016 from BankUnited, based in Florida. Prior to that he worked at PwC. Mr Bchara’s salary will increase from $325,000 to $400,000.
Ryan Nelson has been promoted from Controller to Chief Accounting Officer. He joined the company in May 2018. Prior to that he spent seven years with EnLink Midstream Partners. His salary will increase from $200,000 to $225,000.
For the year ended January 31, 2019, 70% of Conn’s retail sales were made using in-house credit programs. A further 23% use third-party financing. Only 7% of sales are made with cash or credit card. Many of the customers are sub-prime borrowers. As a result, the profitability of the company is very dependent on its credit management program and the delinquency rate of its customers.
Increase in delinquency rate 2013-2015
At the end of 2013, the company had a market capitalization of $2.8 billion. It was hit hard by the subsequent downtown, especially in the Energy sector as many of its stores are in Texas and the surrounding states. The company compounded that problem by taking more of the credit risk in-house. The provision for bad debts as a percentage of the total credit portfolio rose from 7% in 2013 to 16.1% in 2015. When Mr Wright joined the company, the market capitalization had dropped to $250 million.
That decline took a toll on the senior executive team. A new CEO, Norm Miller, was appointed in September 2015. There were also 3 CFO’s in 4 years (including a former CAO who was interim CFO for 6 months) prior to Mr Wright arriving.
Credit management improvements
The company has improved its delinquency rates since Mr Wright arrived. The provision for bad debts has dropped to 12.9% for the year ended January 2019. This is due to a combination of improved credit management processes, increased use of third-party financing and an improving economy. However, the company remains vulnerable if there is a sharp downturn in the economy.