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Gregg Appliances: Large Flat Panels Still Scarce

2/15/2006 11:41:00 AM Eastern

Indianapolis — Consumer demand for larger-size flat-panel displays continues to exceed supply, reported Gregg Appliances, and inventory constraints will continue to impact the company’s sales until the pipeline begins filling with new product in late spring or early summer.

Jerry Throgmartin, CEO of the 67-store brown- and white-goods chain doing business as H.H. Gregg, said in a conference call that the shortages are being compounded by a decline in rear-projection TV (RPTV) sales. In a reversal of traditional consumer behavior, customers are choosing form factor over screen size, he explained, and are opting for smaller LCD TVs and 37W-inch to 42W-inch plasma display panels, which are now widely available at discount chains.

Similarly, demand for direct-view TVs has also eroded, he said, as consumers migrate to smaller LCD models.

Throgmartin expects that consumer preference for larger flat-panel screen sizes will return this summer after new models begin arriving from vendors, and prices continue to decline. Indeed, 50W-inch and larger plasma display models are expected to fall within Gregg’s “power alley” of popular retail price points this autumn, he said.

Gregg also has a competitive advantage within the big-screen category due to its assisted selling floor and in-home installation offering, Throgmartin noted.

In the meantime, however, severe supply constraints put a crimp in the company’s Super Bowl business, said president Dennis May, and will likely lead to a 3 percent to 5 percent decline in comparable store sales during Gregg’s fiscal fourth quarter, which ends March 31.

“The supply issues began in November and are most significant in 50W-inch and higher plasma,” May said. “It was particularly bad in January, and it’s still severely constrained.”

Nevertheless, with triple-digit growth, 50W-inch-plus flat panels still represent the company’s fasting growing segment in dollars, while RPTV still represents a “sizeable segment” of its overall video business, Throgmartin noted.

Elsewhere, the company is looking to expand its small MP3 player business, which enjoyed “spectacular triple digit increases” during the fiscal third quarter, May said. He also described hard disc drive camcorders and high definition DVD players and recorders as “hot sub-categories,” though not of a material size to the chain.

By contrast, major appliances continue to perform well at Gregg, with third-quarter comp sales increasing by the mid-single digits. Top-selling products included front load washers and three-door refrigerators, Throgmartin said.

The company opened five H.H Gregg stores during the third quarter, ended Dec. 31, including one store each in Ohio and North Carolina, and three locations in South Carolina. Since then, Gregg has also opened two Fine Lines premium appliance boutiques, in North Carolina and Ohio. No new stores are currently planned for fiscal 2007.

The conference call followed yesterday’s release of Gregg’s third-quarter earnings results.

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