December 14, 2012 / 8:16 PM / in 5 years

Conn's shifts focus to mattresses, furniture

(Reuters) - Electronics and furniture retailer Conn’s Inc (CONN.O) said it would reduce its dependence on consumer electronics and shift its focus to the higher-margin furniture and mattresses business to drive sales over the next few years.

“We expect (the furniture and mattresses business) to become over time the top revenue segment,” Chief Operating Officer Mike Poppe said.

The recovery in the home goods industry after years of declining sales during the housing downturn and recession has helped furniture retailers such as Williams Sonoma Inc (WSM.N) and Restoration Hardware (RH.N) post strong results. Economists expect home construction to add to economic growth this year for the first time since 2005.

The share of furniture and mattresses business to Conn’s revenue rose to about 13 percent for the year ended January 2012 from about 8 percent two years ago, while that from consumer electronics fell to 29 percent from 34 percent.

The company, which also sells refrigerators, freezers, notebooks, printers and computer accessories, had revenue of $792.3 million for fiscal 2012. It had a market value of about $972 million.

The aggressive upgrades to flat-panel high-definition televisions over the last five-six years have slowed due to a lack of compelling new products, Poppe said.

This has pressured prices, leading to lower margins and revenue in the business. The gross margin in the business was 24.5 percent in August-October, contrasting with 45.3 percent in the furniture and mattresses division.

“Television will always be an important category for us, one of our top/key categories. But we do see its contribution to the mix shrinking somewhat marginally as we grow our furniture and mattress market share,” Poppe said.

Poppe, who joined the company in September 2004, expects the furniture and mattresses business to contribute 30 percent or greater over the next few years.

The retailer, which has 66 stores in Texas, Louisiana, Oklahoma and New Mexico, has been expanding the floor space dedicated to the furniture and mattresses business. It has also been working towards improving product selection and merchandising.

Conn‘s, which has been selling mattresses for about a decade and furniture for a few years, is also driving up promotions within the segment.

“There is still all the learning and getting comfortable with selling furniture and mattresses, and that is going to take time,” Poppe said.

“So, we see it as a multi-year opportunity.”

Reporting by Arpita Mukherjee in Bangalore; Editing by Don Sebastian

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