hhgregg will enter the Baltimore, Philadelphia and Washington markets next year as part of a major expansion into the Mid-Atlantic states.
The chain plans to open as many as 45 stores and its fourth central distribution center to support the push, which will target large and midsized metropolitan markets.
The retailer has begun to execute leases for the new stores, with 18 locations already approved by hhgregg's board, and is currently exploring various financing alternatives, including equity and debt, to fund the growth.
The expansion represents a key leg in hhgregg's plans to become a second national CE and appliance specialty chain, and to fill the void left by Circuit City. President, COO and CEO-elect Dennis May made the company's ambitions clear last month at an investor conference when he noted, “Manufacturers are struggling significantly with profitability and are extremely excited about us becoming a national retailer like the Circuit City of 10 or 15 years ago.” (See TWICE, June 15, p. 1.)
“We have an extraordinary opportunity to gain market share by taking advantage of the current rental rates and excess availability in the real estate market,” May said about the Mid-Atlantic expansion. “The combination of our effective operating model, an opportunistic real estate environment, strong partnerships with key vendors, and the availability of talented field-level personnel create a significant opportunity for the company to accelerate its growth while continuing to provide customers with a superior customer purchase experience.”
Meanwhile, hhgregg has accelerated its growth plans for the current year, raising its goal of 16 to 18 new stores to between 20 and 22. Sites will include the new markets of Richmond, Va. — the former hometown of Circuit City — as well as Memphis and Tampa, Fla., and will be funded by cash from operations and the retailer's revolving credit facility.
The chain will boost its capital expenditures, net of sale and leaseback proceeds, from previous projections of $30 million to $35 million to between $45 million and $50 million for the current fiscal year. The increase primarily reflects the incremental capital expenditures expected to be incurred this year for next year's 40 to 45 store openings, the company said.