The addition of three new stores in the Atlanta market and one unit each in Alabama and Tennessee, partially offset by the closing of one location, helped retailer Gregg Appliances, d.b.a. H.H. Gregg, increase fiscal fourth-quarter sales by 11.8 percent, hitting $205.6 million, up from $183.9 million in the year-ago three months.
The release of Gregg's quarterly results represents a new transparency for this once closely held family business, which was bought out in January by a partnership of Freeman Spogli & Co., a private investment firm, and the retailer's management team, led by chairman Jerry Throgmartin.
Strong performance in the video category, particularly flat-panel televisions, partially offset by weaker CRT TV sales, increased comp-store sales 5.3 percent in the quarter, ended March 31. Previous-year comps had climbed 6.7 percent.
Net income in the fourth quarter rose to $14.1 million, nearly triple the $4.9 million registered in the same three months in 2004. Net income for the most recent fourth quarter reflects a tax benefit of $14.8 million, partially offset by recapitalization transaction costs of $4.7 million.
As a percentage of net sales, gross profit increased to 33.3 percent for the fourth quarter, up from 31.6 percent a year earlier, due primarily to the improvement of gross margin in the retailer's major appliance and video categories.
However, expenses jumped 15.3 percent in the three months, rising to $58.9 million from a year-on-year $51.1 million. As a percentage of net sales, expenses were 28.7 percent in the fourth quarter, compared with 27.8 percent in the same period in 2004. The expense increase was due primarily to increases in advertising costs and other expenses.
For the 12 months, Gregg's sales rose 6.6 percent to $803.2 million, from $753.2 million the previous fiscal year. Comp-store sales came in at a 0.4 percent increase, due to a strong performance in flat-panel TVs. Comp-store sales the previous year rose 1.3 percent.
Gregg is planning to open nine new stores in the current fiscal year, which end in March 2006. These include seven locations in the North Carolina and South Carolina markets; one relocated store in Columbus, Ohio; and one relocated unit in Bowling Green, Ky.
The company has begun an orderly transition to a new IT platform, a three- to four-year process, and will also begin outsourcing extended service plans for CE products.
In a conference call, president Dennis May said the company is countering flat-panel price declines with an improved product mix that has led to “strong” average selling prices in TV at Gregg. Similarly, the chain has sidestepped promotional activity in low-end white goods by focusing on better products and a “high-serve business model, “Throgmartin noted.