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Gregg Reports Q2 Profit, Sales Gain

11/15/2006 10:44:00 AM Eastern

Indianapolis — Gregg Appliances reported an 11.7 percent sales increase and increased earnings for its fiscal second quarter ended Sept. 30.

Gregg Appliances tallied an 11.7 percent increase in total sales for the quarter, to $237.7 million, compared with $212.9 million for the comparable prior-year period. This increase in sales was attributed to the addition of 10 stores during the past twelve months and a 1.2 percent comparable-store sales gain for the quarter.

The comp-store sales performance was driven by gains in major appliances, bedding and video, with flat-panel television sales growth outpacing the sales decline in projection and tube televisions. It is anticipated that the chain’s comp-store sales will be flat to slightly positive during the third quarter.

Net income for the quarter was $3.5 million as compared to a net loss of $4.2 million for the comparable prior year period. The increased earnings were primarily attributable to improved video and appliance merchandise margins. The prior year results also included a $2.5 million pretax charge associated with the decision to outsource product service and repair work to third-party providers.

Improvement in general and administrative expense leverage, expressed as a percentage of sales, was due to the outsourcing of product service and repair work last year and was offset by a similar drop in gross margin during the quarter ended Sept. 30.

In a conference call, chairman/CEO Jerry Throgmartin noted that the company had reduced its CRT RPTV assortment to three SKUs, and halved its microdisplay offering to between 20 and 26 models from last year. “Microdisplay is still a very big business, but it’s shrinking,” he noted. By contrast, the company has more than doubled its flat panel assortment to 92 SKUs, and tripled the number of larger screen models 46W-inches and larger, which are “driving and preserving” average selling prices and fueling home installation services, he said.

The chain will also begin selling a limited assortment of notebook computers this holiday season following a successful test of the category, and Throgmartin noted that its white goods business remains “very strong” in the high-middle to premium end of the product spectrum thanks to increasing demand for high-efficiency and fashion-oriented majaps.

Looking ahead to the coming holiday season, president/COO Dennis May said he anticipates “a more competitive environment than the prior quarter, but we are well-poised to compete in the marketplace.”

Gregg Appliances is a specialty retailer of consumer electronics, home appliances, bedding and related services. It operates under the hhgregg and Fine Lines brands in 74 retail stores in Alabama, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Tennessee. The company opened two stores this quarter and plans to open four additional locations in March.

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