Indianapolis, Ind. - Increased ad spending and promotions and lower TV margins led to a 19.5 percent decline in fiscal third-quarter profits for hhgregg.
The multi-regional CE and appliance chain earned $22.5 million for the three months ended Dec. 31 on net sales of $829.5 million, according to preliminary estimates, as the company sought to grow market share through increased promotions and advertising. Sales rose nearly 27 percent, driven in part by continued regional expansion, and comparable store sales increased almost 4 percent.
Most of the growth and much of the ad spend was in home office, a relatively new category for the retailer, where comp sales rose 91.4 percent. Majap comps also grew, by 6.8 percent, while video declined 4.8 percent.
"Our recent initiatives focused on driving market share gains in the appliance and home office categories are clearly gaining traction," noted president/CEO Dennis May. "However, the video industry experienced heavier- than-expected promotional activity across all screen sizes, which negatively impacted industry average selling prices and margins," and pressured results beyond company projections.
Nevertheless, hhgregg believes it maintained its TV market share during the quarter and said it is pleased with its performance in new markets. During the quarter the company also invested in new mobile product offerings and a new web platform to enhance its multi-channel strategy.
"We are excited about our positioning in the marketplace as we continue to execute on these important initiatives and enhance our overall customer shopping experience," May said.
Looking ahead, the company has lowered its annual earnings guidance and comp sale projections as industry-wide pressure on TV sales and margins continue into its fiscal fourth quarter, CFO Jeremy Aguilar said.
The chain plans to open 35 new stores during its next fiscal year.
hhgregg will report it finalized third-quarter results on Feb. 8.