Cash America 4Q13 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Fundamental themes have not changed much

“the fundamental trends of the business have not really changed from the trends we’ve been discussing for most of 2013.”

Tight consumer, more general merchandise, less gold

“Number one would be the cautious consumer behavior, resulting in historically tepid loan and retail demand; two is the transitional shift towards higher proportion of general merchandise in our pawn loan and inventory portfolios; three, as Tom mentioned, was a substantive year-over-year decline in the amount of gross profit from the commercial sales of scrap gold and diamonds that we reported on a quarterly basis”

Worst holiday season in 10 years except for ’08

” I’ve seen one research firm describe as the worst seasonally-adjusted holiday performance period in the last 10 years, obviously, excluding 2008.”

Surge in consumer pawn loan demand, perhaps a sign of a turn?

” was also encouraged by an unexpected surge in pawn loan demand late in the quarter. We certainly don’t have enough supporting data to lead us to believe our consumer is breaking out of an extended borrowing and spending funk. But for me, it’s beginning to feel like we may be poised for a change in consumer sentiment that could possibly begin driving greater strength in our U.S. pawn business than we’ve seen in the past 2 years.”

I think a turn is coming some time in 2014

“I’m beginning to get somewhat of a sixth sense that a shift could be coming at some point in 2014”

Comps finally get better in 2H14

“the second half of 2014 will see us finally fully wrap the very difficult year-over-year comparisons for gross profit on commercial dispositions”

Organic customer acquisition vs. lead gen

“migration of our customer acquisition activities toward greater reliance upon our organic channels of SEO, PPC, TV and mail and less reliance upon the lead generation channels.”

Not modelling any improvement for now

“we’ve taken a more conservative approach with our financial plan for 2014, which underpins the earnings guidance first established in October and confirmed by Tom in his comments. We will not be modeling any changes in consumer behavior for our pawnshop business, either now or in future guidance updates, until we see solid evidence of such change nor are we modeling an improvement from the Retail Services initiatives I mentioned earlier, although I would be surely disappointed if such improvements failed to materialize.”

Making progress on organic acquisition

“we have a number of key initiatives in Chicago rolling at [ph] around driving more effective SEO and PPC activity. And we’re beginning, I think, to learn a lot about how to effectively reach customers through the more traditional means of TV and mail campaigns, et cetera, here in the U.S.”

Turn is coming

“what I was hearing anecdotally from our operators was that customers were seeing — seemed to be a little more aggressive in December than we had been experiencing. Too short a period to really extrapolate that into a change. Again, John, as you know, I’ve been doing this an extraordinarily long period of time and intuitively, I still believe that this customer will be back and will be back with the traditional behaviors that we had seen through most of the 30-year history at Cash America. And I just have an intuitive sense today that we’re getting close to that return. I can’t tell you it’ll be in February or March or April or May or whenever, but I just feel like things are going to look better for us here in 2014 than what we’ve experienced the last couple of years with consumer behavior. The fact is that this segment of population continues to grow. The facts are there aren’t alternative products out there for them to use. The issue in my mind has been confidence and our future confidence in their employment, confidence in their take-home pay. And when that strengthens in our particular consumer base, I am pretty optimistic that we’ll see some growth we haven’t experienced on a same-store basis here over the last 2 years.”