Indianapolis, Ind. — Leading white- and brown-goods regional chain Gregg Appliances reported a net loss of $1.4 million for its first fiscal quarter ended June 30 and a $2.2 million decline in gross profit compared to the year-ago period.
The company attributed the declines primarily to a shift in the timing of the recognition of certain vendor rebates.
Net sales for the three-month period grew nearly 10 percent to $203.2 million, aided by the addition of eight stores over the past twelve months. Same store sales edged up 1 percent for the quarter, which president/COO Dennis May attributed to a falloff in traffic caused by economic uncertainty tied to Middle East unrest, a slowing housing market and higher interest rates.
Specifically, sales of major appliances grew by the low single digits as volume in high-efficiency laundry, cooking products and top-mount refrigerators offset declines in room air. In video, low triple digit gains in sales of flat panel TVs offset double digit declines in Gregg’s tube and rear projection TV businesses.
In a conference call, May said the company faces “some headwind” as it transitions out of the rapidly declining rear projection TV category, where Gregg had made a significant investment, and positions itself as dominant “power player” in flat panel. To that end, the company has added Samsung and Philips to its flat panel assortment, adjusted its marketing message, and has earmarked part of its capital expenditures toward enhancing its flat panel display areas in stores. The company also reported that the tightness in supplies of large flat panel TVs has substantially corrected itself.
During the quarter, Gregg also completed the chain-wide rollout of bedding, a new, higher margin category for the company which displaces certain small electronics and other small, declining categories, said CEO Jerry Throgmartin.
The company, which operates under the trade name hhgregg, plans to open three new stores during the current fiscal quarter ending Sept. 30, and will add an additional three stores by the end of its current fiscal year on March 31, 2007, bringing its total store count to 77 units. Gregg will also relocate one store this quarter and open its 78th store in fiscal year 2008.
Looking ahead, the company projects that same store sales will range between flat and the low single digits for the current quarter, and that EBITDA (earnings before interest, taxes, depreciation and amortization) should equal or exceed the prior-year period thanks to improving merchandise margins and savings from outsourcing its product repair function last year.