Indianapolis - An aggressive store build-out and reduced
operating expenses helped hhgregg's profits grow nearly 33 percent to $22.7
million, while net sales rose 20.3 percent to $500.4 million during its fiscal
third quarter ended Dec. 31.
But president/CEO Dennis May warned that continued industry-wide
shortages in LED and 52-inch LCD TVs could crimp earnings for the current
Indeed, the company attributed flat third-quarter comp sales to
tight supplies of advanced TVs, a higher mix of smaller-sized models, and lower
averaging selling prices.
In a conference call, May said TV manufacturer inventories were
clean after Christmas, giving vendors little incentive to lower LED pricing or
provide instant rebate promotions. Had they done so, "LED would have been a
bigger part of our sales," he said.
The company's business was buoyed instead by a rebound in the
appliance category, where comps grew 7.5 percent during the quarter, and by
double-digit comp growth in computers and related accessories and services.
Gross profit margin slipped from 31.4 percent to 30.5 percent due
to lower TV and majap margins, coupled with a higher sales mix of lower margin
categories like notebook computers.
May said the TV shortages were compounded by a unusually early
new-model transition cycle, but that an influx of wireless IP and 3D TVs
beginning in early spring will help improve the company's video business in the
back-half of the fiscal year.
Nevertheless, the company still faces challenges from the
macro-economy, noted chairman Jerry Throgmartin, and must continue to navigate
a volatile retail market.
May said the company was particularly pleased with its successful
third-quarter entry into the Tampa, Memphis and Richmond
markets with 10 new stores, bringing the total store count to 127, and will
continue its saturation strategy of simultaneous, multi-store openings when it
enters the Baltimore, Philadelphia
and Washington, D.C. areas later this year.
Plans to open 40 to 45 new stores in the Mid-Atlantic region in
2010 are ahead of schedule, and a new central distribution center to support
them will open next month. More than half of the new locations will open this
spring, with the vast majority of the remaining stores expected to open prior
to the 2010 holiday selling season.
"We're pleased with the execution and sales performance of our
new stores," May said. "Customers are looking for a different way to shop."