Indianapolis — hhgregg said steep holiday promotions and a lack of channel discipline within the CE industry led to falling profits and sales during its third fiscal quarter, ended Dec. 31.
Net income fell 71 percent to $5 million on net sales of $707 million, which decreased 11.6 percent from the prior-year period due to a comp-store sales decline of 11.2 percent.
In a statement, president/CEO Dennis May said, “The broad distribution of [CE, computing and mobile products] across a variety of retail formats combined with the intensely promotional environment led to a challenging operating environment for hhgregg.”
He said those factors have reinforced management’s strategic decision to diversify its assortment with appliances and home furnishings, and that the company will continue to invest in initiatives to drive traffic and profitable sales in those categories.
Broken out by category, comp sales of computers, mobile phones and tablets took the biggest hit, falling 24.5 percent on lower demand for laptops and phones and lower average selling prices (ASPs) for tablets.
Comp sales of TVs, audio, accessories and personal electronics declined 19.7 percent, dragged down by a double-digit comp decline in video. The chain said its decision to not fully participate in the holiday discounting led to the weakness in TV.
The declines were partially offset by increases in majaps and home products. Appliance comps edged up 1.5 percent on higher unit volume, representing the company’s 10th consecutive quarterly increase for the category, while comps for home products, including mattresses, furniture and fitness equipment, rose 36.1 percent on strength in the two latter categories.
May said the chain was able to manage its inventory levels to match product demand, and would work to broaden its reach to new and existing customers, ostensibly through more flexible financing offers.
The third-quarter results prompted the chain to lower its full-year sales projections, to a range of -5.5 percent to -4 percent, from -1.5 percent to flat, and to scrap plans to open a new store during the current fiscal year, ending March 31.
The company currently operates 228 stores in 20 states east of the Mississippi.