hhgregg Lauds New Vendor Pricing Policies

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Dramatic changes in TV vendors’ pricing and channel management policies were lauded by hhgregg president/CEO Dennis May for their potential to stabilize average selling prices (ASPs) and restore profitability to the video business.

Speaking with analysts during the retailer’s fiscal third-quarter earnings call last week, May said manufacturers are making “sweeping changes” in minimum advertised price (MAP) policy and in some instances are instituting minimum unilateral retail price (MURP) programs that will result in consistent pricing online, in print and in stores.

The policy changes have long been sought by brick-and-mortar retailers to help offset the tax and overhead advantages of online-only merchants, and to balance that channel’s generally lower selling prices.

Manufacturers too are seeking pricing discipline in the marketplace, May said, pointing to mounting challenges to their profitability.

The new measures, which will go into effect with the 2012 TV lines, represent “the most significant” policy changes in 30 years, he said.

“Manufacturers want to stabilize ASPs and restore profitability to the video business,” which he said would benefit the entire industry.

The TV business will also get a big boost from new technologies and larger screen sizes, he predicted. Eighty-inch, 84-inch and even 90-inch LED displays will have a “major impact” this year, while the advent over the next 12 to 24 months of OLED displays, face-, voice- and hand-recognition features, as well as a possible Apple TV product “will be just what the doctor ordered.”

Regarding his own business and its 16.5-percent decline in third-quarter earnings, May said hhgregg “learned something over the holidays about the balance between traffic and profitability,” and promised to adjust the company’s promotional stance accordingly.

Elsewhere, he said appliances will become the chain’s largest category and, without naming Sears, said changes in the competitive landscape will create “a significant opportunity” for hhgregg to play a leadership role in the industry.

The company will also support its rapidly-expanding home office business – up 91.4 percent in the quarter – by creating a dedicated sales team for the category and rolling out new interactive displays for tablets, smartphones and other mobile products.

The retailer plans to add 20 to 25 new stores this year, mostly in secondary markets outside of Chicago, as it pursues its goal of becoming a national chain, and will continue to invest in its e-commerce business. Online sales tripled in the third quarter, May said, and drove 70 percent of customers to hhgregg’s brick-and-mortar stores.

May began the conference call by paying tribute to the company’s late executive chairman Jerry Throgmartin, “an inspirational leader who always lived life to the fullest” and who “played a critical role in building and growing our company over his exceptional 36-year career.”

Throgmartin died unexpectedly on Jan. 22 at the age of 57.


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