According to a 13D form recently filed with the Securities and Exchange Commission, Christian Leone‘s Luxor Capital trimmed its stake in CONN’S, Inc. (NASDAQ:CONN) to 6.63 million shares from 7.59 million shares, which are held through its affiliated funds. Sales were made between June 2 and 3 and ranged between $36.10 to $39.03. That represents a more than 100% increase on the bottom end from where shares of CONN’S were trading just five months ago. Leone’s position still comprises 18.2% of the company’s outstanding common shares.
Luxor Capital was launched in 2002 with an objective of investing primarily in distressed companies, in addition to employing a value-based approach. The fund has equity and fixed-income investments throughout the world, while assets under the fund’s management currently amount to $11.5 billion. The market value of Luxor’s public equity portfolio stood at $6.19 billion at the end of the first quarter, up from $4.96 billion at the end of 2014, while the finance and consumer discretionary sectors represented most of the fund’s holdings.
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The fund initiated a position in the $1.41 billion retailer of durable consumer goods and provider of credit solutions during the first quarter of 2014 with some 2.0 million shares. So far this year, CONN’S, Inc. (NASDAQ:CONN)’s stock has delivered a stellar performance, up by more than 105%. In comparison, the specialty retail industry has only appreciated by 4.18% during the same time period. The company also has a lower trailing twelve month earnings multiple of 24.62 compared to the industry’s average of 46.14. However, CONN’S, Inc. (NASDAQ:CONN)’s beta of 1.64 is higher than the industry’s 0.93.
The interesting thing about the furniture and home-appliance retailer is that it is not particularly performing as well as the action in its stock price might suggest. The first quarter EPS of $0.44 signified a fall in profits of 44% on a year-over-year basis. The $365.08 million in revenues also missed estimates by $3.45 million. Same-store sales saw a dip of 4.3% during the first three months of the year primarily owing to the prolonged port labor dispute which tightened underwriting and disrupted its supply chain, with the furniture category was impacted the most. Moreover, the credit financing business also weighed heavily on the company’s underperformance.
So why are investors so enthusiastic about CONN’S, Inc. (NASDAQ:CONN)’s prospects? Firstly, although disappointing, the first quarter EPS still beat the estimates by $0.03. Secondly, the same-store sales figures are beginning to look much better as well. For the month of May, the furniture and mattress segment saw an increase of 6.3% compared to the same month last year, while home appliances registered a bump of 10.9%. Moreover, just this month the company announced that it is actively pursuing the sale of all or part of its loan portfolio and has enlisted professional advisers to facilitate the process. Although CONN’S, Inc. (NASDAQ:CONN) didn’t provide any specific timetable for the deal, it expects the sale to happen during this quarter or early next quarter according to CEO Theodore Wright. The operating loss from the segment amounted to $8.5 million in the first quarter.
The interest of hedge funds in CONN’S, Inc. (NASDAQ:CONN) declined over the first quarter as a total of 20 firms had an aggregate investment of $689.57 million at the end of it as compared to 26 funds with $313.51 million at the start of it. Ken Griffin‘s famous managed futures fund Citadel Investment Group and renowned activist David Einhorn‘s Greenlight Capital are two prominent stockholders of CONN’S, Inc. (NASDAQ:CONN) with respective stakes of 2.43 million shares valued at $73.69 million and 3.56 million shares valued at $107.88 million.
Disclosure: None
