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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.
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