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hhgregg Lauds New Vendor Pricing Policies

2/13/2012 12:01:00 AM Eastern

INDIANAPOLIS – Dramatic changes in TV vendors’
pricing and channel management policies
were lauded by hhgregg president/CEO Dennis
May for their potential to stabilize average selling
prices (ASPs) and restore profitability to the video
business.

Speaking with analysts during the retailer’s fiscal
third-quarter earnings call last week, May said
manufacturers are making “sweeping changes” in
minimum advertised price (MAP) policy and in some
instances are instituting minimum unilateral retail
price (MURP) programs that will result in consistent
pricing online, in print and in stores.

The policy changes have long been sought by
brick-and-mortar retailers to help offset the tax and
overhead advantages of online-only merchants, and
to balance that channel’s generally lower selling
prices.

Manufacturers too are seeking pricing discipline
in the marketplace, May said, pointing to mounting
challenges to their profitability.

The new measures, which will go into effect with
the 2012 TV lines, represent “the most significant”
policy changes in 30 years, he said.

“Manufacturers want to stabilize ASPs and restore
profitability to the video business,” which he
said would benefit the entire industry.

The TV business will also get a big boost from new
technologies and larger screen sizes, he predicted.
Eighty-inch, 84-inch and even 90-inch LED displays
will have a “major impact” this year, while the advent
over the next 12 to 24 months of OLED displays,
face-, voice- and hand-recognition features, as well as a possible Apple TV product
“will be just what the doctor ordered.”

Regarding his own business and its
16.5-percent decline in third-quarter
earnings, May said hhgregg “learned
something over the holidays about the
balance between traffic and profitability,”
and promised to adjust the company’s
promotional stance accordingly.

Elsewhere, he said appliances will become
the chain’s largest category and,
without naming Sears, said changes in
the competitive landscape will create
“a significant opportunity” for hhgregg
to play a leadership role in the industry.

The company will also support its
rapidly-expanding home office business
– up 91.4 percent in the quarter – by
creating a dedicated sales team for the
category and rolling out new interactive
displays for tablets, smartphones and
other mobile products.

The retailer plans to add 20 to 25
new stores this year, mostly in secondary
markets outside of Chicago, as it
pursues its goal of becoming a national
chain, and will continue to invest in its
e-commerce business. Online sales
tripled in the third quarter, May said,
and drove 70 percent of customers to
hhgregg’s brick-and-mortar stores.

May began the conference call by
paying tribute to the company’s late executive
chairman Jerry Throgmartin, “an
inspirational leader who always lived life
to the fullest” and who “played a critical
role in building and growing our company
over his exceptional 36-year career.”

Throgmartin died unexpectedly on
Jan. 22 at the age of 57.

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