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hhgregg Reports Strong Q4

6/02/2009 11:48:00 AM Eastern

Indianapolis — Reigning in expenses, opening new stores, and leveraging buying and market share opportunities post-Circuit City helped hhgregg grow sales and earnings during its fiscal fourth quarter.

Moreover, the company may aggressively expand into new markets next year amid a glut of cheap, plentiful and quality storefront locations wrought by the recession, the retailer said.

Net sales for the three months, ended March 31, rose 12.5 percent to $365 million while net income increased 35 percent to nearly $13.9 million.

Same-store sales decreased 6.5 percent for the quarter, due mainly to a 20 percent decline in comp-store sales for major appliances.

“We are pleased with our fourth-quarter performance and our ability to adjust our business execution around what proved to be both a challenging and opportunistic quarter,” said president, COO and CEO-elect Dennis May. “While the weak economic environment continued to weigh on consumer demand and spending levels, the closure of a major consumer electronics chain also led to some unique buying opportunities and market share increases for the company.

“By tightly managing expenses, inventory and working capital, we were able to deliver strong earnings growth that was driven by across-the-board improvements in sales, margins and expense leverage,” he said.

For the full fiscal year, net sales rose 11.1 percent to $1.4 billion, net income increased 71 percent to $36.5 million, and same-store sales slipped 8.3 percent.

During the year the company opened 20 new stores, including two during the fourth quarter, for a total of 111 locations in nine states. For the current fiscal year, hhgregg plans to open 16 to 18 new stores, including five to seven locations in the new markets of Tampa, Fla., and Memphis, with capital expenditures of between $30 million and $35 million. Like last year, the build out will be funded internally by free cash flow.

hhgregg could substantially increase its expansion plans for 2010. In a conference call, chairman/CEO Jerry Throgmartin said the company is examining multiple markets where the availability of quality retail sites with reasonable rents would permit rapid saturation — a strategy hhgregg has previously employed to help leverage advertising and distribution costs.

“We’re looking at some things that will allow us to make some pretty dramatic leaps in [fiscal] 2011,” Throgmartin said.

An aggressive, multi-market build-out would be in line with past projections by management of a 400-store chain within the decade.

“It’s a very good time to be a growth company,” May told analysts on the call. “Opportunities like this don’t come around that often.”


For the balance of the current fiscal year the company is projecting net sales growth of 3 percent to 7 percent and same-store sales declines of 7 percent to 12 percent, attributable, analysts said, to its 30-percent mix of major appliances and difficult year-over-year comparisons for the first half.

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