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hhgregg Takes Q2 Drubbing

Indianapolis — hhgregg posted another disappointing quarter as it continues to remerchandise its stores and invest in infrastructure.

The multiregional CE, majap and furniture chain reported a net loss of $10.4 million for its fiscal second quarter, ended Sept. 30, compared with a year-ago profit of $3.7 million.

Net sales slid 11 percent to $506 million, and comp-store sales declined 11.4 percent, reflecting market share losses in computers/tablets, TVs and major appliances.

Computer/tablet comps took the biggest hit, falling nearly 34 percent during the quarter, followed by CE, down 16 percent, and majaps, down nearly 6 percent.

The retailer attributed the decline in computer/tablet comps to decreased demand, lower average selling prices (ASPs) and its exit from the post-paid mobile business.

CE comps were impacted by a double-digit decline in TV unit volume, which was slightly offset by higher ASPs as the chain sold more larger-screen and premium-featured models.

The majap comp hit stemmed mainly from a decline in unit volume, the company said.

The comp declines were partially offset by an increase in the home products category, which was lifted by sales of mattresses, sofas and dinette sets.

In contrast, e-commerce comps rose 59 percent during the quarter.

Gross profit margin slipped from 29.6 percent to 29.1 percent of sales due to lower margins in all categories except CE, and a new free-delivery offer on select majaps. The decline was partially offset by a product mix-shift to higher-margin categories.

“Our quarterly results continue to reflect the challenges and volatility inherent to our business and the consumer electronics category,” president/CEO Dennis May said in a statement. “While we have made progress in repositioning our merchandise offering towards appliances and other home products, this transition is ongoing. We will continue to make investments in our infrastructure and merchandising initiatives in future quarters and we believe we are well positioned to monetize on the investments made in the first half of the year during the holiday selling period and beyond.”

May said the company has begun seeing improvements in business trends across all product categories, with post-Labor Day sales falling by a reduced mid-single-digit rate.

Looking ahead, the retailer is projecting full-year comps in the negative high-single to negative mid-single digits, and improved performance in the back half of its fiscal year.

The company closed one store during the quarter, lowering its store count to 228 locations, but plans to open a new location this quarter or next. A second new store opening planned for the current fiscal year has been pushed back to next spring.

In a research note, Janney Capital Markets retail analyst David Strasser said  hhgregg’s turnaround “remains a work in progress,” but was encouraged by rising TV ASPs and share gains in large-screen and 4K models, which “bodes well for holiday,” he observed.