Conn’s Plunges After Delinquent Customer Debts Crimps Profit

Conn’s Inc., a seller of furniture and appliances that entices customers with no-interest loans, tumbled 31 percent after delinquent debts weighed on its annual profit forecast.

The company now expects earnings of $2.80 to $3 a share, according to a statement today, compared with a previous forecast of as much as $3.70. Conn’s, based in the Woodlands, Texas, also posted second-quarter profit of 50 cents a share, missing the 75 cents projected by analysts.

Conn’s is seeing more customers struggle to pay their bills -- a trend that cuts across all levels of credit quality and geographic regions. Though it’s been tightening underwriting standards and improving collections, the moves didn’t make up for the rise in delinquent loans, the company said. The rate of customers failing to pay their debts after two months will probably reach historical highs in the second half of the year, Conn’s said.

“In response to higher delinquency, we are reducing the level of no-interest programs and raising the interest rates in some markets to increase portfolio yield,” Chief Executive Officer Theodore Wright said in the statement. “We remain confident in the business model.”

The shares fell to $31 in New York, marking the biggest one-day drop in more than six months. The stock has declined 61 percent this year.

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