hhgregg Posts 21% Increase In Q2 Volume
By Alan Wolf -- TWICE, 11/19/2007
INDIANAPOLIS — Strong sales across virtually all categories, plus the opening of eight new stores over the past year, sent hhgregg's revenue soaring 21.1 percent to $287.9 million during its second fiscal quarter, ended Sept. 30.
Comp-stores sales, which include net e-commerce revenue, rose 8.9 percent for the period.
The multiregional white- and brown-goods chain reported a $6.9 million loss for the quarter due to an early pay-down of $21.1 million in debt as part of a refinancing related to its initial public offering in July.
The comp-store gains reflected higher average selling prices driven by continued increases in sales of higher-ticket items in video, major appliances and mattresses, the company said. Video sales performance was fueled by triple-digit growth in flat-panel LCD TVs, particularly in larger screen sizes, outpacing a double-digit sales decline in projection and tube televisions. Executives said that 1080p flat panel comprises 70 percent of their TV business, and that 30 percent of TV sales are in advanced 120Hz LCD sets.
The retailer also reported a 24 percent sales increase in the catchall CE and mattress category, which includes computer notebooks, audio, personal electronics, furniture and accessories.
Sales of major appliances were up 5.7 percent during the quarter, reflecting "continuing, increased demand" for high-efficiency refrigerators, ovens and dishwashers.
Gross profit rate decreased by 1.1 percent to 30.8 percent due to aggressive promotional activity during the first part of the quarter, which helped the company capture market share in video and appliances amid a soft retail environment. The chain was able to pull back on its promotions midway through the period to re-focus on margin growth, executives said.
Selling, general and administrative expenses (SG&A) decreased by 1.2 percent as a percentage of sales to 22.2 percent, primarily attributable to the leveraging effect of sales growth across many expense categories including payroll, rent and professional fees.
In a conference call, chairman/CEO Jerry Throgmartin said the company is well-prepared for the coming holiday selling season, having stocked up four weeks ahead of schedule on select flat panel TVs — ostensibly large-screen 1080p models — that are expected to be in short supply this quarter.
President/COO Dennis May said that based on a review of Black Friday circulars online, and despite some programmed price moves by manufacturers, pricing will be "a little more stable, a little more rational" this Thanksgiving weekend compared to last year. While hhgregg will play in that arena with stockpiles of commodity inventory, "Pricing is only one component of our sales plan," he told analysts. The company's consultative sales force can nimbly direct customers to its "sweet spot," he explained, which regularly shifts by vendor or screen size. "It lets us navigate the business very well."
Looking ahead, the chain plans to open five to seven new stores in Ohio, North Carolina, Tennessee and northern Florida during the current quarter and 13 to 15 new stores during its next fiscal year.
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