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Video Undermines hhgregg Q3 But Furniture Segments Perform Better

Monday January 14th, 2013 - 10:13AM


Today, hhgregg, Inc. announced that, for the third fiscal quarter of 2013, net sales decreased 3.6% to $799.6 million. Comparable store sales decreased 9.7% in the period, the retailer stated.

According to the company, the decrease occurred due to, in part, a third quarter slide in video category sales of 24.6% in addition to an other category decrease of 23.7%. The other category includes audio, furniture and accessories, mattresses and personal electronics. In recent quarters, cameras, camcorders and small electronics have tended to suffer comp decreases while furniture and, particularly, mattresses have tended to perform better, even to the extent of partially offsetting declines in other segments, according to hhgregg statements. The plus side of the ledger includes the appliance category, which gained 6.1% in the third quarter, and the computing and mobile phones category, which increased 16.2%.

Given the sales results, hhgregg stated that it expects to post third quarter net income of $17.4 million, or 51 cents per diluted share, versus $22.5 million, or 60 cents per diluted share, for the same period a year ago. Third quarter 2013 results included a $500,000, or $300,000 after tax, charge related to impairment for one store that should produce adjusted net income of 52 cents per share, the company noted.

A published Thomson Reuters analyst poll called for revenues of $845 million and earnings per share earnings of 59 cents.

“Fundamental shifts across the video category continued to pressure our business during our third fiscal quarter, and we were disappointed in our video performance,” said Dennis May, hhgregg president and CEO said in commenting on results. “Declining industry demand for flat screen televisions along with broadened distribution of large screen televisions negatively impacted overall store traffic and video category sales. During the quarter, we placed less emphasis on lower-end promotional televisions to bolster gross margin rates, which led to an increase in video category and total company gross margin rates. Throughout the quarter, we continued to test new product categories and consumer financing options that further diversify our business and reduce our dependence on new product innovations in the video sector."

He added that the appliance business, “which is now our largest product category, along with our computing and mobile phones category continue to perform well. We are pleased with the results of our initiatives to drive continued market share gains in the appliance category, resulting in our sixth consecutive quarter of appliance comparable store sales increases. In addition, we are pleased with the consumer acceptance of our new products, particularly the roll-out of the furniture category and the introduction of Apple products. We believe that our service-oriented sales force along with our ability to both offer attractive financing options and deliver big box product to our consumers' home, gives us the flexibility to adapt our business around today's dynamic retail environment.”