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hhgregg Targets Tablet Market, Sees TV Rebound

2/08/2011 01:21:53 PM Eastern

Indianapolis - hhgregg
plans to be a major player in the tablet PC market and anticipates strong
growth in 3D and smart TVs this year.

In a third-quarter
earnings call with analysts this morning, president/CEO Dennis May said tablets
will play a major role in the CE industry and that the multiregional A/V and
appliance chain is positioning itself as a destination for the burgeoning
category.

"We will be heavily
invested in it," he promised, beginning with "a significant assortment" in the
March to April period that will expand as manufacturers including Acer,
Hewlett-Packard and Toshiba introduce more models.

May said hhgregg will
also have access to the Apple iPad, as well as the CDMA iPhone, through its
in-store Verizon Wireless kiosk program, but is also holding direct discussions
with Apple over broadening its assortment of Apple products. The chain began
carrying Apple TV in December.

As a nascent business,
tablets provide an opportunity for a new entrant to gain share, he said. To
that end, the company plans to leverage its marketing muscle ("We're going to
let consumers know we have these products"); its assisted sales floor ("Wi-Fi
is complicated and consumers have questions"); and its wide selection ("This is
not a one-horse race -- there's a broad breadth of manufacturers in this
business").

Separately, May said the
company's TV mix is shifting to smart and 3DTVs following a holiday season that
was dominated by entry-level models and smaller screen sizes. Indeed, industrywide
sales of advanced TVs should boom this year as prices come down, 3D is
repositioned as a feature rather than a category, more 3D content becomes
available, and manufacturers and retailers refocus their consumer education
efforts.

May said a projected 4
million to 5 million 3D sets will be sold this year as they begin appearing
broadly throughout manufacturers' product lines, and that consumers will buy some
11 million smart TVs as prices enter the affordable "power alley" range of
$1,199 to $1,499.

But despite the promise
of tablets and premium TVs, the industry still faces significant challenges,
including continuing macroeconomic headwinds, tough comparisons to year-ago
appliance sales that were stimulated by government rebates, and a
weather-beaten Super Bowl season.

Nevertheless, May
believes the industry is nearing the end of a three-year down cycle and that
good times lie ahead. "This is a very cyclical industry and we always see ups
and downs, usually in a three- to five-year cycle," he told analysts. "We're in
a tough environment right now, but the cycle will turn back in the other
direction."

In other hhgregg news,
May said the company is overhauling its website to replicate the in-store
experience online, and is planning a relaunch for holiday 2011. The chain is
also staggering its previously announced entries into Pittsburgh, which will
begin this spring; Miami, which will begin in the summer; and Chicago, which
will commence in early fall and become a new distribution hub.

May seemingly dismissed
rumors that hhgregg plans to acquire shuttered Ultimate Electronics stores
after that company liquidates in mid-April. "While we look at every
opportunity, we have a very methodical approach to expansion," he said. "We
sell big-box products -- 40 percent of our business is major appliances -- and
distribution is a key component to drive efficiencies" and control costs.

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