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hhgregg's Profits Increase 24% In Fiscal Q4

6/16/2008 02:00:00 AM Eastern

Multiregional white- and brown-goods dealer hhgregg posted a 24 percent increase in net income for its fiscal fourth quarter, to $10.3 million.

The chain attributed the gain to improved expense leverage and increased sales of higher-priced LCD TVs and major appliances.

Net sales for the four months, ended March 31, rose 14.4 percent to $324.2 million as the company opened six new stores. Same-store sales rose 0.8 percent, reflecting the soft economic environment; a weak majap market; and tough year-ago comparisons, when comp sales increased 13 percent, executives said.

For the full fiscal year, net income was flat at $21.4 million, excluding the tax benefit of an early debt settlement. Including the tax benefit, profits rose 56 percent to $34.6 million. Net sales rose 18.6 percent to $1.3 billion due to the addition of 14 new stores, and comp sales grew 4.8 percent, reflecting higher average selling prices in TVs, white goods and mattresses.

During the quarter, video represented 50 percent of net sales, up from 49 percent the year prior. Video comps increased 2.9 percent, led by double-digit comp gains in LCD TV, particularly in larger screen sizes, which offset double-digit declines in tube and rear-projection TV.

Majap sales comprised 37 percent of the fourth-quarter mix, down from 39 percent the year prior. Comps declined 4.9 percent, reflecting weakness at the opening- and midlevel price points, although comp sales of advanced laundry products and French door refrigerators increased by double digits.

The company's catch-all "other" category, which includes audio, personal electronics, notebook computers, accessories, furniture and mattresses, comprised 13 percent of net sales, up from 12 percent last year. Comp sales grew 10.8 percent, reflecting "rapid sales growth" in personal electronics and notebook PCs, president Dennis May said during a conference call this morning.

May told analysts the company has been expanding its assortment of notebooks, cameras and camcorders to help drive traffic, and that its commissioned sales force continues to enjoy high close rates while up-selling customers on premium-priced 1080p, 120Hz LCD TVs. He also described Blu-ray Disc players as an important selling tool for fully featured flat-panel TVs.

Looking ahead, May said he expects consumer demand to be soft for the foreseeable future, leading to a low-single-digit comp-sales decline for the current fiscal year. The company projects net sales to rise 19 percent to 21 percent due to 15 to 17 new store openings planned for this year, with the majority scheduled to open by Thanksgiving.

CEO Jerry Throgmartin said it was hard to tell whether the federal government's stimulus checks were having any effect on sales, although higher fuel prices are clearly impacting consumers shopping at the lower end of the product spectrum.

The executives said the company is trying to mitigate higher fuel costs internally by making its distribution and transportation model as efficient as possible, and that hhgregg has also upgraded its demand management and forecasting systems to improve inventory control.

May added that the company is pleased with the performance of its new Florida stores, which are supplied by a distribution center in Davenport, Fla., and a regional facility in Jacksonville, Fla. The company is sticking to its plan of 15 percent to 18 percent annual storefront growth overall, with the ultimate goal of operating 400 locations in the United States.

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