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Retailer Reports Illustrate Challenges

2/13/2012 12:01:00 AM Eastern

NEW YORK – Three well-known CE retailers released
financials for the holiday seasons and illustrated
the challenges facing the industry.

TV promotions hurt the bottom line, as well as an
over-reliance on mobile products. Yet major appliances,
furniture and bedding seemed to help.

At hhgregg, holiday TV promotions and increased
ad spending took a toll on hhgregg’s profits in its
fiscal third quarter.

Conn’s used higher average selling prices, an
expanded furniture and mattress assortment, the
closure of less productive stores – and passing on
massive TV promotions – to post comp-store sales
gains.

RadioShack said its preliminary fourth-quarter
earnings show “significant declines” due to its
Sprint wireless business and an overly promotional
holiday season.

Starting with hhgregg, net income for the multiregional
CE, majap and furniture chain fell 16.5 percent
to $22.5 million for the three months, ended
Dec. 31, while the addition of 35 new stores over
the trailing 12 months boosted net sales nearly 27
percent to $829.5 million.

Comp-store sales increased 3.9 percent during
the quarter on strength in major appliances and
home office, which partially offset declines in video, camcorders and personal electronics. Majap comps
rose 6.8 percent on increased demand and higher
average selling prices (ASPs).

Comp sales of home office products, comprised
mainly of computers, mobile phones and tablets,
rose 91.4 percent during the period. The category
represented 11 percent of total sales, up from 6 percent
last year.

Video, hhgregg’s largest category with 46 percent
of sales, saw comps fall 4.8 percent due to a midsingle
digit decrease in ASPs, partially offset by increased
unit demand.

Gross profit margin fell 8.1 percent to 27.2 percent
during the quarter due largely to increased TV
promotions and the lower gross profit margin home
office category.

Conn’s reported a 12.1 percent boost in compstore
sales with net sales up rose 4.2 percent to
$7.6 million for the three months, ended Jan. 31,
the multiregional CE, majaps and furniture chain
reported.

Broken out by category, CE comp sales fell 9.8
percent due primarily to a 30.6 percent decline in
unit sales of TVs. The decrease was driven largely
by the company’s decision to not participate in Black
Friday and fourth-quarter promotions, which contributed
to a 23.4 percent increase in ASPs.

Majap comps increased 21.2 percent during the
quarter on a 21.5 percent increase in ASPs. Home
office comps rose 29.8 percent, due primarily to increased
tablet sales and higher laptop, desktop and
netbooks ASPs. And Furniture and mattress comps
increased 46 percent due to category expansion.
Conn’s reports its full fourth-quarter results on April
3.

RadioShack reported preliminary fourth-quarter
earnings show “significant declines” due to its Sprint
wireless business and an overly promotional holiday
season. The chain’s final, audited 2011 fourth-quarter
and full-year results are expected on Feb. 21.

Gross profit margin is expected to be about 35
percent, compared with 41 percent in the prior-year
period, due to a shift in mobile product towards
tablets, e-readers and certain lower margin smartphones.

Total net sales and operating revenues from continuing
operations increased about 6 percent to $1.4
billion, and comp-store sales for company-operated
locations increased about 2 percent.

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