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Reduced expenses and strong same-store sales of higher margin products helped fuel strong earnings and revenue growth at hhgregg for its first fiscal quarter, ended June 30.
Net sales for the three months rose 25 percent to $254.2 million while same-store sales — including remodeled and relocated stores and net online revenue — increased 8.8 percent. Net income was $2.9 million, compared with a net loss of $1.4 million during the year-ago period.
The multi-regional white- and brown-goods retailer attributed its top-line growth to the addition of ten stores over the past year and its strong comparable store sales. Comps, in turn, primarily reflected higher average selling prices driven by increases in sales of bigger ticket video, major appliance and mattress products.
Specifically, the chain enjoyed triple-digit growth in flat-panel TVs, particularly larger screen sizes, which offset double-digit declines in projection and tube TVs. Flat-panel represented 70 percent of the video mix, with microdisplay sets comprising most of the balance. Similarly, hhgregg experienced continuing, increased demand for bigger ticket, high-efficiency majaps, especially within the laundry, dishwasher and cooking categories, which helped drive white-goods comps up 6.9 percent.
Comp-store sales were also buoyed by the company-wide rollout of mattresses in the early part of the fiscal year.
In terms of sales mix, video remained static at 39 percent year over year, while majaps dropped one percentage point to 47 percent and "other" — comprised mainly of audio, personal electronics, computer notebooks and mattresses — increased one percentage point to 14 percent. Video and majaps together represented 86 percent of first quarter net sales, the company said.
Gross profit measured as a percentage of sales increased 0.5 percent to 31.2 percent due to improved product mix and margin in key product categories, while costs were curtailed through decreases in insurance and depreciation expense; by "leveraging the effect of our sales growth across many expense categories"; and by lowering advertising expenses due to increased vendor support.
The chain expects to open 13 to 15 new stores in total during the current fiscal year, including one in Fayetteville, N.C., this quarter, five in the third quarter, and upwards of seven stores in the fourth quarter, to be concentrated largely in the Birmingham, Ala., and Raleigh-Durham, N.C., markets, The company has also earmarked $22 million to $24 million in capital expenditures for fiscal 2008.
In a conference call, CEO Jerry Throgmartin said that the chain's strong performance within a soft marketplace underscored its competitive strengths, which include the ability to deliver a superior customer experience; to compete on price when necessary; and to successfully merchandise and sell higher margin, premium products. Indeed, hhgregg outperforms the industry in sales of 1080p and 120Hz flat-panel TVs, said president Dennis May, while 80 percent of its 100 flat-panel SKUs are in screen sizes of 40 inches or larger.
May added that improved vendor forecasting has helped slow price declines in flat panel from a rate of 40 percent last year to less than 20 percent this year, and may even lead to shortages in smaller screen sizes this fall.
The company completed its initial public offering on July 19, raising $48.8 million, and began trading on the New York Stock Exchange on July 20.
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