Cost Cuts, Home Furnishings Lessen hhgregg's Q2 Losses

Stemming the sales declines
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hhgregg reported a $10.1 million net loss for its second fiscal quarter and lower net and comp store sales, but narrowed the rate of the declines.

hhgregg reported a $10.1 million net loss for its second fiscal quarter and lower net and comp store sales, but narrowed the rate of the declines.

The earnings shortfall came in below last year’s $10.4 million net loss, while net sales for the quarter ended Sept. 30 slipped 3.8 percent, to $486.9 million, compared to a year-ago decline of 11 percent.

Comps also showed a dramatic improvement, falling 3.5 percent last quarter vs. an 11.4 percent decline last year.

President/CEO Dennis May said the steadily improving results reflect the company’s focus on three key financial objectives, which it will likely meet or exceed this year:

*driving comp gains;

*cutting $50 million in costs; and

*posting positive EBITDA (earnings before interest, taxes, depreciation and amortization) for the fiscal year.

“We were pleased with the continued traction in our net sales during the second quarter driven by delivering on our fiscal 2016 revenue-generation initiatives,” he said in a statement.

“In addition, we have continued our cost-savings efforts and remain on track to meet our plan to save $50 million in fiscal 2016. The steady progress we have made with our transformation plan has positioned our company well as we embark on the holiday season.”

Driving the gains was a 22 percent increase in online comps, and positive comps in appliances and home products. The former, which now comprises 56 percent of the sale mix, edged up 0.8 percent, while the latter, represented mostly by furniture and mattresses, increased 4.4 percent, and rose 7 percent excluding fitness products.

But the increases were unable to offset steep declines in computer and tablet comps (down 30 percent) and CE, down 6.3 percent year over year.

Gross profit margin decreased 59 basis points to 28.5 percent due to lower margin rates in all categories except home, the company reported.

Costs were cut by $16.1 million during the quarter due to lower newspaper ad spend and decreases in wages and delivery services amid greater efficiencies in labor structure and truck routing, plus lower fuel prices.

The multiregional specialty retailer presently operates 227 stores across 20 states, and has put a hold on its quest to become a national chain by temporarily halting any new locations.

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