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Tablet PCs, TVs Are 2011 Targets For hhgregg

2/21/2011 12:01:00 AM 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 an analysts’ conference call following release
of its third quarter earnings, 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 threeyear
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.

As for its fiscal third quarter ended
Dec. 31, 2010, hhgregg reported a
30.6 percent net increase in sales
and an 18.4 percent increase in net
income.

Sales were $653.7 million, up from
the prior year’s $500.4 million, while
comp-store sales decreased 6.2
percent during the quarter. In compstore
sales by category in the quarter,
video was down 5.9 percent, appliances
decreased 5.7 percent and
other was down 7.9 percent.

The chain operated 172 stores by
the end of the period, up from 127 in
the prior year’s quarter.

Net income was $26.9 million, up
from the prior year’s $22.7 million.

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