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hhgregg Reports Net Loss, Lower Sales

8/04/2011 10:29:15 AM Eastern

Indianapolis - hhgregg reported a net loss, a 1 percent drop
in sales and 13.2 percent decrease in comp-store sales in its fiscal first
quarter, ended June 30.

The chain reported a net loss of $761,000 in the quarter,
compared with net income of $2.7 million in the previous year's first quarter.

Net
sales were $431.5 million, compared with sales of $435.9 million in the prior
year's opening quarter.

The
retailer blamed the loss in the quarter on a comp-store sales decrease of 13.2
percent, an increase in SG&A as a percentage of net sales, a decrease in
gross margin rate, and an increase in net advertising expense as a percentage
of net sales, partially offset by the net addition of 23 stores in the past 12
months.

Dennis
May, president/CEO, commented, "As expected, our fiscal first quarter was a
challenging period. We faced the lapping of last year's appliance stimulus
program, the grand-opening sales from 26 new stores during Q1 last year and our
most difficult comp-store sales comparisons in the past 11 quarters."

He
noted, "Despite these difficult comparisons, strong inventory management
allowed us to reduce inventory per store by nearly 9 percent. Our new stores
continue to open strong, and our new store sales productivity continues to be
over 100 percent. Additionally, we continue to make significant progress on
launching our strategic initiatives designed to grow our appliance market
share, reposition our online capabilities, expand our home-office category and
drive brand awareness, all of which we believe will benefit us in future
periods."

The
decrease in net sales in the quarter was attributable to the comp-store sales
decline along with the unfavorable comparison of only 7 store grand openings in
the current quarter compared to 26 in the prior year period. These sales
factors were partially offset by a net increase of 23 stores in the past 12
months, the chain said.

 Net sales mix by product category for the
quarter compared with the prior year was as follows: video 37 percent (down 5
percent); appliances 44 percent (up 2 percent); home office 7 percent (up three
percent); other unchanged at 12 percent.

Comp
store sales per category compared to the fiscal first quarter of last year were
as follows: video down 20.6 percent; appliances down 12.6 percent; home office
up 54.6 percent; and other down 10.3 percent.

During
the quarter the chain's net sales mix continued to shift due to
continued industry weakness in the video category along with an increased
internal focus on the appliance and home-office categories. The decrease in
comp-store sales for the appliance category for quarter was primarily due to
lapping the increased demand in the prior year period that resulted from the
government funded appliance stimulus programs, which were not repeated this
year. The increase in the comp-store sales for the home-office category was due
to an increased offering of computers and tablets along with associated
peripherals.