Indianapolis – hhgregg
reported higher sales but lower comp-store sales and lower adjusted net income
for its fiscal year and fiscal fourth quarter, ended March 31.
Net income for the
quarter was $53.6 million, compared with $14.6 million for the prior year’s
fourth quarter.
However, those
results include $39.6 million of net income related to life insurance proceeds
received from a key man life insurance policy net of severance paid to the
estate of former executive chairman Jerry Throgmartin, who passed away on Jan.
22. The fiscal fourth quarter of 2012 also includes a $800,000 ($500,000
after-tax) charge related to impairment for two store locations.
Net income for the
quarter, as adjusted for these two items, was $14.5 million, a 9.1 percent
decrease when compared with the prior year period. The decrease in adjusted net
income was the result of a decrease in gross margin rate and an increase in net
advertising expense as a percentage of net sales, offset by an increase in net
sales due to the net addition of 35 stores during the past 12 months.
Net income for the
fiscal year was $81.4 million, compared with net income of $48.2 million for
the prior fiscal year.
Excluding the
items involved in the fiscal fourth quarter, adjusted net income for the year
was $42.2 million, a 14.7 percent decrease in adjusted net income when compared
with the prior year period. The decrease in adjusted net income was the result
of a decrease in gross margin rate and an increase in net advertising expense
as a percentage of net sales, offset by an increase in net sales due to the addition
of 35 stores during the past 12 months.
Net sales for the quarter
increased 21.1 percent to $613.8 million. Net sales for the fiscal year
increased 20 percent to $2.5 billion. The increases in net sales for the fiscal
fourth quarter and the fiscal year were primarily attributable to the net
addition of 35 stores during the past 12 months, partially offset by decreases
of 0.7 percent and 1.1 percent in comp-store sales, respectively, the retailer
said.
The decreases in comp-store
sales for the video category in the quarter were due primarily to a double-digit
decline in average selling prices. The decreases in the comp-store sales for
the video category for the fiscal year were due primarily to a double-digit
decline in average selling prices partially offset by increased unit demand.
The increases in
comp-store sales within the appliance category for the three- and 12-month
periods were due to an increase in both unit demand and average selling prices,
driven largely “by our initiatives to capture market share and outpace the
marketplace in comparable store sales growth,” the retailer said.
The increases in
the computing and mobile phone category were driven by increased demand in
notebook computers and the additional offering of tablets and mobile phones in
fiscal 2012. The decrease in the other category was due primarily to comp-store
sales decreases in small electronics, cameras and camcorders, offset by strong
double-digit growth in mattresses.
Gross profit
margin decreased in the quarter to 30.5 percent, from 31.5 percent for the
comparable prior-year period, and decreased in the fiscal year to 28.9 percent,
from 30.3 percent for the prior year. The decreases in gross profit margin for
the three- and 12-month periods were largely due to gross profit margin
pressure within the video category, which is primarily the result of increased
promotional activity in the category.
Dennis May,
president/CEO, commented: “Our fourth-quarter results were driven by solid
market share gains in the appliance and home office categories, offset by
continued headwinds in the video category. Through the launch of a number of
strategic initiatives earlier this year, we continue to strengthen our
positioning in appliances, expand our assortments in home office products and
build our mobile business. We remain pleased with our progress in these key
areas and believe recent investments in our multichannel platforms and our
unparalleled customer service better position us in a changing retail
environment.”
He added, “Looking
ahead, we believe there is a significant opportunity utilizing additional
initiatives to continue growing the appliance business while strengthening our
home office, computing and mobile offerings. We are encouraged by recent
strength in larger-size televisions and believe we are positioned well to take
advantage of this trend.”
Separately, the
retailer’s board elected
Gregg W.
Throgmartin as a director of to fill a vacant seat on the board. Throgmartin
currently serves as executive VP and COO of hhgregg. The board also appointed
Michael L. Smith, a current director, as chairman. Smith formerly served as executive
VP and chief financial officer at Anthem Blue Cross and Blue Shield.
