Weather, Repositioning Hit hhgregg Results

For the fiscal year ended March 31, hhgregg, Inc. posted net income of $200,000, or one cent per diluted share, versus $25.4 million, or 74 cents per diluted share, for the prior-year period. Net sales were $2.34 billion versus $2.47 billion in the year before, according to the company.

The results included charges of $4.3 million, or $2.6 million after tax, related to the write down of inventory for the planned exit from the contract-based mobile phone business, the write-off of store fixtures associated with the company’s changing product mix and the previously announced impairment of one store, hhgregg noted. The results for the 12-month period ended March 31, 2013 include $500,000, or $300,000 after tax, in charges related to the impairment for one store. Net income for the fiscal year, as adjusted for one-time items, was $2.8 million, or nine cents per diluted share, versus $25.7 million, or 74 cents per diluted share, for the year prior. The company stated that the drop in adjusted net income was largely due to a comparable store sales decrease of 7.3% and a decrease in the gross margin rate.

In the fourth quarter, hhgregg reported a net loss of $7.2 million, or 25 cents per diluted share, versus net income of $9.9 million, or 31 cents per diluted share, for year-earlier period. Net sales came in at $538.3 million versus $597.6 million in the prior-year period.

The three-month period ended March 31 included charges of approximately $4 million, or $2.4 million after-tax, related to the write down of inventory for the planned exit from the contract-based mobile phone business and the write-off of store fixtures associated with the company’s changing product mix. Adjusted net loss for the quarter was $4.8 million, or 17 cents per diluted share, versus the year prior period, hhgregg related. The slide in adjusted net income primarily resulted from a 9.9% comp decline and a decrease in gross profit as a percentage of net sales, as well as an increase in net advertising and SG&A expense, the company added.

The loss for the quarter was in line with a Thomson Reuters analyst estimate.

Dennis May, hhgregg president and CEO, in discussing the financial results, said that the company faced “a number of headwinds during the quarter, which led to disappointing financial results. In addition to continued volatility in the consumer electronics business, extreme weather in January, February and the beginning of March negatively impacted traffic and operating performance in the majority of our stores, particularly those located in the Midwest and Mid-Atlantic regions, where the weather was the most severe. Despite these challenges, the company was able to report a comparable sales increase in its appliance category, which marked its 11th consecutive quarter of comparable store sales increases in the appliance category.

“Despite the challenges of last year, we are excited about the current fiscal year and our opportunity to transform our business through a number of strategic initiatives. During the fiscal year, we will focus on redefining our sales mix, enhancing and differentiating our customer experience, expanding our e-commerce capabilities, and launching new customer facing technologies. We believe our responsibility is to inspire and delight our customers with a truly differentiated purchase experience to help bring their homes to life. In doing so, we will improve our financial and operating results, and will solidify our brand relevance within the marketplace.”