CONN’S, Inc. (CONN), Best Buy Co., Inc. (BBY): Can This Retailer Rise Further?

Page 1 of 2

Did you know that CONN’S, Inc. (NASDAQ:CONN) rose 238% in a year, adding 80% since January? The electronics retailer has shifted its focus from consumer electronics to furniture and mattresses, and this bet has clearly paid off. As one can see, this was a smart move.

CONN'S, Inc. (NASDAQ:CONN)

However, the sole magnitude of the rise puts doubts on the prospects of the stock. The stock has performed spectacularly in an almost straight line without any significant pullback. Now, if you’ve missed this train, is there still time to get in?

Shifting away from electronics

Furniture and mattresses were a huge game-changer for CONN’S, Inc. (NASDAQ:CONN). In the first quarter of this fiscal year, same store sales for this segment rose 50.9%. Home office segment showed a 34.2% rise in same-store sales, while consumer electronics was down 0.8%.

Things are not easy in the world of electronics retail, as the field is competitive and margins are tight. Well, if we look at RadioShack Corporation (NYSE:RSH), the margins could even be negative. This retailer operates at a negative 1.33% margin. The company has a history of losses, and is projected to lose money in the next two fiscal years. More to this, the estimates have been spiraling downward in the last three months. The company is now estimated to lose $0.71 per share, 70% more than previously estimated.

The furniture move has helped CONN’S, Inc. (NASDAQ:CONN) maintain a very healthy 11.29% operating margin. Let’s compare it to an electronics retailer that actually does make money — Best Buy Co., Inc. (NYSE:BBY). The company operates at a tiny 2.15% margin. Despite this, the shares have enjoyed a fascinating 154% rise this year.

New initiatives called Renew Blue have helped put life back in the stock. The most important move was dealing with the online part of the business which was previously in bad shape. Accepting the fact that most consumers first search online for their purchases has helped Best Buy Co., Inc. (NYSE:BBY) adapt to the new reality and put funds and effort into its online business.

Going from electronics to mattresses had a big influence on margins. In its most recent report, CONN’S, Inc. (NASDAQ:CONN) stated that gross margin from the consumer electronics segment was 29.2%, while the furniture and mattress segment had a 48.3% gross margin. This is a huge difference.

Is this enough to keep the stock going?

As CONN’S, Inc. (NASDAQ:CONN) business operates in a healthy manner, the key question is whether the shares have gotten ahead of themselves.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!