hhgregg Outlines New Merchandising Strategies

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hhgregg announced a series of in-store, online and marketing initiatives to further drive sales and share.

The plans include a renewed focus on major appliances; a change in store-level management structure; a redesigned e-commerce site and smaller brick-and-mortar stores; a more a tailored TV assortment and expanded IT selection; and a new marketing campaign built around The Beatles’ song “Help!”

In appliances, the 175-store chain sees “a significant opportunity to grow share,” president/CEO Dennis May told analysts during a fourth-quarter earnings call late last month, and promised to become “more aggressive” in the category. Among the changes: splitting the role of store sales manager into two positions, with one dedicated to CE and the other to white-goods and furniture.

The company is also launching a white-glove installation service for majaps, will keep more inventory within the stores to accommodate take-with purchases, and will commit more marketing funds to the category.

The new website, developed with interactive marketing agency Rosetta using IBM WebSphere software, will launch this fall with enhanced functionality. New features include in-store pick-up and ship-from-store fulfillment options, as well as enhanced product selection and knowledge base.

May said the concept is to match the online experience with the sales-assisted in-store experience, and to adapt the business to changes in consumer shopping habits. To that end, the retailer is also launching a sister mobile-commerce site.

At the same time, the chain is moving to a smaller, 25,000-square-foot brick-and-mortar format, compared to its typical 30,000-square-foot boxes. May said the new size is more in line with real estate opportunities going forward, and can be realized without any significant SKU reduction due to the thinner nature of TVs.

In TV, the company will concentrate on larger screen sizes, with a focus on 3D and smart models, and will edit its assortment accordingly. Nevertheless, May said the availability of 3D and connected features in mid-sized displays will help buoy average selling prices this year, and could help offset pricing pressure on entry-level models.

hhgregg will also place a greater emphasis on IT, with an expanded assortment including 12 tablets SKUs by summer, and continued investment in computer support services. May said an opportunity exists to reposition the chain as an IT retailer, and that the category’s lower gross margins are more than offset by increased traffic, warranty and service attachments, and the lower cost of IT transactions, compared with shipping and warehousing major appliances and large-screen TVs.

Elsewhere, the John Lennon tune “Help!” was licensed for a new print, TV, online and in-store marketing campaign called “We Help,” which emphasizes the retailer’s knowledgeable sales assistance.

On the same day as the conference call hhgregg said that due to the addition of 42 new stores hhgregg’s fiscal fourth quarter profits increased 45.7 percent to $14.6 million. Net sales for the three months ended March 31 rose 21.5 percent to $507 million, but samestore sales declines across all major categories led to a 10.8 percent drop in comparable store sales.

Looking ahead, the company said it will open 35 to 40 new stores during the current fiscal year, with the majority in Chicago, Miami and Pittsburgh, and is projecting net sales increases of 15 percent to 20 percent, and comp store sales of negative 3 percent to flat.

Said CFO Jeremy Aguilar, “As we progress through the fiscal year and move beyond the anniversary of the appliance stimulus program, we expect to face more favorable comparable store sales comparisons in the second half of the fiscal year. While we expect the video industry to continue to face challenges in fiscal 2012, we believe the video comparisons are more favorable in the second half of the fiscal year.”


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