Despite Financial Skid, hhgregg Beats Q4 Expectations

For the three-month period ended March 31, hhgregg, Inc. reported net income of $9.9 million, or 31 cents per diluted share, versus $53.6 million, or $1.45 per diluted share, for the prior-year period. Fourth quarter 2012 results included $39.6 million of net income related to life insurance proceeds net of severance paid to the estate of the company’s former executive board chairman as well as a $500,000 after-tax charge related to impairment of two store locations.

Net income for the 2012 quarter adjusted for one-time items was $14.5 million, or 39 cents per diluted share.

Diluted earnings per share just beat published analyst estimates while revenues came in a bit short of expectations.

The decrease in first quarter net income year over year arose from a comparable store sales decline of 9.8%, a slide in gross profit as a percentage of net sales and an increase in advertising expense as a percentage of net sales offset by the addition of 20 stores over the preceding 12 months, the retailer noted.

In the quarter, as a percentage of sales, appliances gained while the video operation declined. The Other category, primarily accessories, audio, fitness equipment, furniture, mattresses and personal electronics, gained slightly while computing and mobile phones was flat.

Net income for the fiscal year ended March 31 was $25.4 million, or 74 cents per diluted share, $81.4 million, or $2.14 per diluted share, for the 12-month period ended March 31, 2012, according to hhgregg. Fiscal 2013 results include a third quarter charge of $300,000 after tax related to the impairment of one store location, the company related. Excluding the fiscal 2013 impairment charge and the 2012 one-time items, first quarter net income was $25.7 million, or 74 cents per diluted share, versus $42.2 million, or $1.11 per diluted for the previous fiscal year. The decrease in adjusted net income in 2013 resulted from a comparable store sales decrease of 8.7%, an increase in SG&A as a percentage of net sales and an increase in net advertising as a percentage of net sales, offset by revenues from the additional stores and a modest increase in gross margin as a percentage of net sales, hhgregg maintained.

Net sales for the three- and 12-month periods ended March 31, decreased 2.6% and 0.7% respectively, the company pointed out, to $597.6 million and $2.47 billion. The decreases in net sales for the three- and 12-month periods ended March 31 resulted from the comp store declines partially offset by the impact of new stores.

Dennis May, hhgregg president and CEO said in comments on financial performance, “During our fourth quarter, we experienced sequentially improving comparable store sales each month of the quarter, with March materially better than January. These positive trends are continuing during our first fiscal quarter with comparable store sales running positive low single digits. While I am pleased with the current trends in the business, we are cautiously optimistic given the inherent volatility that exists in our business and the importance of the Memorial Day sales period.”


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