Indianapolis — The addition of three new stores in the Atlanta market and one unit each in Alabama and Tennessee, partially offset by the closing of one location, helped retailer Gregg Appliances increase fiscal fourth-quarter sales by 11.8 percent, hitting $205.6 million, up from $183.9 million in the year-ago three months.
Strong performance in the video category, particularly flat-panel televisions, partially offset by weaker CRT-TV sales, increased comp-store sales 5.3 percent in the quarter, ended March 31. Previous-year comps had climbed 6.7 percent.
Net income in the fourth quarter rose to $14.1 million, nearly triple the $4.9 million registered in the same three months in 2004. Net income for the most recent fourth quarter reflects a tax benefit of $14.8 million, partially offset by recapitalization transaction costs of $4.7 million.
Income from operations for the fourth quarter increased 45.8 percent, reaching $7 million, compared with the prior year’s $4.8 million. As a percentage of net sales, gross profit increased to 33.3 percent for the fourth quarter, up from 31.6 percent a year earlier, due primarily to the improvement of gross margin in the retailer’s major appliance and video categories.
However, expenses jumped 15.3 percent in the three months, rising to $58.9 million from a year-on-year $51.1 million. As a percentage of net sales, expenses were 28.7 percent in the fourth quarter, compared with 27.8 percent in the same period in 2004. The expense increase was due primarily to increases in advertising costs and other expenses.
For the 12 months, Gregg Appliances sales rose 6.6 percent to $803.2 million, from $753.2 million the previous fiscal year. Comp-store sales came in at a 0.4 percent increase, due to a strong performance in flat-panel TVs. Comp-store sales the previous year rose 1.3 percent.
Net income for the 12 months climbed 3.5 percent, reaching $29.2 million, up from $28.2 million in the prior year. Gross profit margin was flat for the 12 months, at 31.8 percent, which reflects similar vendor support for new stores and margins remaining relatively stable across all product lines.
However, income from operations for the 12 months slid 21.5 percent, down to $22.3 million, compared with $28.4 million the previous 12 months. The decrease reflects a $6.9 million increase in stock-based compensation related to recapitalization, due to an increase in the value of common stock and other matters.
As a percentage of net sales, expenses increased slightly, reaching 27.9 percent from a year-earlier 27.8 percent, due primarily to rent and tax increases.
Gregg is planning to open nine new stores in the current fiscal year, which end in March 2006. These include seven locations in the North Carolina and South Carolina markets; one relocated store in Columbus, Ohio; and one relocated unit in Bowling Green, Ky. The chain opened two stores in April in the Charlotte, N.C., market, and plans an additional store there in the current fiscal first quarter.
Last February, Gregg issued $165 million principal amount of notes aimed at recapitalization. At that time, an entity formed by an affiliate of Freeman Spogli became the majority shareholder.
