hhgregg Q2 Profits Up 46%

Alan Wolf -- TWICE, 11/5/2009

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Indianapolis - hhgregg said it grew its second-quarter profits 46 percent by increasing sales, lowering costs and maintaining gross margins.

Net income was $4.9 million on net sales of $332.2 million for the three months, ended Sept. 30. Net sales rose 3.7 while comp-store sales fell 9.4 percent.

"We are pleased with our quarterly operating performance and our ability to drive growth in earnings and operating cash flow by preserving margins and managing expenses, all while continuing to add new stores," said president/CEO Dennis May.

In a conference call, May said he was optimistic about the holiday season and the post-holiday quarter based on improving traffic and sales trends. He also projected a return to "normal growth" in the appliance business next year, and a stabilization in average TV selling prices as consumers gravitate toward large-screen models with advanced features like LED backlighting, wireless connectivity and 3-D capabilities.

He added that the company has already secured 40 leases in the Mid-Atlantic States and will begin an aggressive rollout in that region by February. The expansion will be fueled by a recent stock offering that raised $78 million for the retailer's war chest.

The chain added seven news stores during the quarter and opened its first Mississippi location this month, bringing the current store count to 126.

The retailer attributed the quarter's 9.4 percent comp decline to weak demand for video and appliance products. Comps fell 16 percent in video and 7.5 percent in appliances during the three months, but increased by the triple-digits in computers.

Comp declines in TVs were largely due to lower selling prices as customers opted for smaller screen sizes. In contrast, sales "significantly improved" in appliances despite continued comp-store declines.