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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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