hhgregg plans to be a major player in the tablet PC market and anticipates strong growth in 3D and smart TVs this year.
In an analysts’ conference call following release of its third quarter earnings, president/CEO Dennis May said tablets will play a major role in the CE industry and that the multiregional A/V and appliance chain is positioning itself as a destination for the burgeoning category.
“We will be heavily invested in it,” he promised, beginning with “a significant assortment” in the March to April period that will expand as manufacturers including Acer, Hewlett-Packard and Toshiba introduce more models.
May said hhgregg will also have access to the Apple iPad, as well as the CDMA iPhone, through its in-store Verizon Wireless kiosk program, but is also holding direct discussions with Apple over broadening its assortment of Apple products. The chain began carrying Apple TV in December.
As a nascent business, tablets provide an opportunity for a new entrant to gain share, he said. To that end, the company plans to leverage its marketing muscle (“We’re going to let consumers know we have these products”); its assisted sales floor (“Wi-Fi is complicated and consumers have questions”); and its wide selection (“This is not a one-horse race — there’s a broad breadth of manufacturers in this business”).
Separately, May said the company’s TV mix is shifting to smart and 3DTVs following a holiday season that was dominated by entry-level models and smaller screen sizes. Indeed, industrywide sales of advanced TVs should boom this year as prices come down, 3D is repositioned as a feature rather than a category, more 3D content becomes available, and manufacturers and retailers refocus their consumer education efforts.
May said a projected 4 million to 5 million 3D sets will be sold this year as they begin appearing broadly throughout manufacturers’ product lines, and that consumers will buy some 11 million smart TVs as prices enter the affordable “power alley” range of $1,199 to $1,499.
But despite the promise of tablets and premium TVs, the industry still faces significant challenges, including continuing macroeconomic headwinds, tough comparisons to year-ago appliance sales that were stimulated by government rebates, and a weather-beaten Super Bowl season.
Nevertheless, May believes the industry is nearing the end of a threeyear down cycle and that good times lie ahead. “This is a very cyclical industry and we always see ups and downs, usually in a three- to five-year cycle,” he told analysts. “We’re in a tough environment right now, but the cycle will turn back in the other direction.”
In other hhgregg news, May said the company is overhauling its website to replicate the in-store experience online, and is planning a relaunch for holiday 2011. The chain is also staggering its previously announced entries into Pittsburgh, which will begin this spring; Miami, which will begin in the summer; and Chicago, which will commence in early fall and become a new distribution hub.
May seemingly dismissed rumors that hhgregg plans to acquire shuttered Ultimate Electronics stores after that company liquidates in mid- April. “While we look at every opportunity, we have a very methodical approach to expansion,” he said. “We sell big-box products — 40 percent of our business is major appliances — and distribution is a key component to drive efficiencies” and control costs.
As for its fiscal third quarter ended Dec. 31, 2010, hhgregg reported a 30.6 percent net increase in sales and an 18.4 percent increase in net income.
Sales were $653.7 million, up from the prior year’s $500.4 million, while comp-store sales decreased 6.2 percent during the quarter. In compstore sales by category in the quarter, video was down 5.9 percent, appliances decreased 5.7 percent and other was down 7.9 percent.
The chain operated 172 stores by the end of the period, up from 127 in the prior year’s quarter.
Net income was $26.9 million, up from the prior year’s $22.7 million.