NEW YORK – h.h.gregg and Conn’s are looking more and more alike these days.
True, both are big-box, multiregional sellers of major appliances, CE and home furnishings. But recent discussions by senior management suggest they’re also studying each other’s playbooks, as Conn’s mulls a major multi-state expansion, h.h.gregg develops easy-credit offers, and both continue to bolster their furniture assortments.
The biggest news comes from Conn’s, which revealed in an investor presentation that it’s considering a major build-out from its Texas base. Fueled by a new store format that has accelerated sales of highmargin furniture and mattresses, the company is envisioning a 200-store chain that spans the country’s southern tier, from Nevada and Colorado in the West to Georgia and the Carolinas in the East.
The strategy appears to ignore CE retailing’s oft-repeated cycle of rapid expansion followed by retrenchment or worse. Sixth Avenue Electronics, which once operated 19 stores in four states, and Ritz Camera, which built an empire of 1,000 specialty shops, are only the latest in a long line of dealer casualties that, like Icarus, flew too high and fell.
Even h.h.gregg has hit a rough patch. The chain, which began its coast-to-coast quest for 400 stores prior to the recession, last month reported a 10 percent drop in comp-store sales and an 81 percent plunge in profits in its fiscal fourth quarter.
But Conn’s chairman/CEO Theo Wright assured investors on a recent earnings call that his company has the resources to support the expansion, and that it will begin stepping up store openings in 2015. The chain presently has lease or purchase agreements for 15 locations, is close to closing deals on four more, and will soon enter new states including Nevada. Plans call for store-count unit growth of 10 percent to 15 percent per year, which will be increased if new stores maintain their performance metrics.
To further increase store productivity, he said the company is “significantly” expanding its assortment of living room furniture and accessories, is refocusing its marketing message on Conn’s in-house credit offers, and will extend its training for new sales hires to two weeks, as does h.h.gregg.
Analysts who watched Wright bring Conn’s back from the brink and achieve record profitability have signed on to the coming juggernaut.
Observed Oppenheimer analyst Brian Nagel, “We look on Conn’s as one of the most compelling new unit expansion stories in hardlines. Under the leadership of a new CEO, Conn’s tweaked its store format and enhanced its merchandising effort to better connect with its core low- to middle-income consumers. The better-than-expected first-quarter results that Conn’s reported [this month] demonstrate clearly that the company’s renewed corporate focus is spurring significant fundamental momentum at the chain. The Conn’s investment story is far from over.”
Eying Conn’s success, h.h.gregg similarly announced a three-point plan to boost comp sales and profitability, which includes a new marketing slant, increased consumer financing offers, and an expanded furniture assortment.
During his own earnings call, president/CEO Dennis May said the company is expanding its living room offerings and is testing dinette sets and bedroom furniture in 17 Chicago stores in preparation for a Labor Day rollout. The moves follow a successful launch of home theater furniture last fall.
h.h.gregg is also looking to widen its customer base by offering shoppers easier credit terms. The financing vehicles include a rent-to-own program and a secondary offering for consumers who don’t qualify for the company’s private-label credit card, which itself represents some 34 percent of sales. The rent-to-own program is currently available in two-thirds of h.h.gregg stores and will be offered chain-wide by the holidays.
h.h.gregg and Conn’s also share a fondness for major appliances, another category where margins continue to climb, and both have narrowed their TV assortments to large, fully featured panels with higher prices and profits.
But their paths diverge on store expansion. While Conn’s is moving full speed ahead into new markets, h.h.gregg is limiting its rollouts to five locations this year as it trials its new initiatives. The company remains committed to building a national footprint, May said, but is more immediately focused on growing sales and profits within its current trading areas.