March 7 Update: hhgregg is filing Chapter 11.
hhgregg is closing 88 of its 220 stores and exiting four major markets in a retrenchment designed to improve liquidity and return to profitability.
The locations, which will begin liquidation sales tomorrow and close by mid-April, were deemed underperformers or had become poor traffic destinations due to changes in the local retail landscape, president/CEO Robert Riesbeck said. (See list of the targeted locations, below.)
hhgregg is also shutting three regional distribution centers, located in Philadelphia, Brandywine, Md., and Miami, and will accordingly pull out of and the greater Philadelphia area, including New Jersey, Delaware and Eastern Pennsylvania; the Baltimore-Washington metroplex; and large swaths of Florida and nearby Alabama.
The chain is also leaving Louisiana; closing its Buckhead store in Atlanta; and is thinning its roster of Chicagoland showrooms.
“We have determined that the economics of the affected locations will not allow us to achieve our overall goal of becoming a profitable company again,” Riesbeck said. Instead, the multiregional appliance, CE and furniture retailer is pulling back to its core markets, “where we have been, and will continue to be, important to our customers, vendor partners and communities.”
The move won’t come cheap: The chain will be on the hook for some $190 million in lease obligations, plus upward of $21 million in employee termination, asset impairment and other related costs, it said in an 8-K filing.
About 1,500 jobs will be lost as a result of the closings.
The decision, approved by hhgregg’s board of directors on Feb. 23, follows the recent hiring of investment banking firm Stifel Financial Corp. to help the company “pursue a range of potential strategic and financial transactions,” after sustaining its 13th successive quarterly loss.
The retrenchment represents a retreat from an aggressive geographic expansion devised by the late founding-family scion Jerry Throgmartin, which saw the Indianapolis retailer grow from 18 to 220 stores across 19 states over the past 20 years.
The strategy, fueled by chief investor Freeman Spogli & Co., a private investment firm, envisioned hhgregg as a national chain. But the plan was upended by a confluence of events, including Throgmartin’s untimely death; the recession; e-commerce competition; and disruptions within the TV business, the company’s bread-and-butter category.
Also plaguing the business was over-expansion, which stretched its leadership ranks and led to a succession of management teams; unsuccessful forays into exercise equipment and other merchandise categories; and, arguably, an assisted sales floor within a big-box format.
Looking ahead, Riesbeck said, “Our team is dedicated to moving forward and being a profitable 132-store, multiregional chain where we will continue to be a dominant force in appliances, electronics and home furnishings.”
Should hhgregg ultimately file for bankruptcy, Loop Capital retail analyst Anthony Chukumba believes that a complete liquidation is a more likely scenario than a restructuring.
In that event, the analyst wrote in a research note cited by Benzinga, Best Buy stands to be the biggest beneficiary, as “former hhgregg shoppers would be more likely to migrate to Best Buy stores than large-format discounters, home-improvement chains, or online given the latter’s more similar store format and customer service levels.”
hhgregg Store Locations Closing
Newark, Heath, OH
Fairlawn, Akron, OH
Stonecrest, Lithonia, GA
Gwinnett, Duluth, GA
Southlake, Morrow, GA
Pembroke Pines, FL
Sawgrass, Plantation, FL
Ft. Lauderdale, FL
Kendall, Miami, FL
West Palm Beach, FL
Boca Raton, FL
Mt. Juliet, TN
Buckhead, Atlanta, GA
Florida Mall, Orlando, FL
Short Pump, Henrico, VA
Newport News, VA
Virginia Beach, VA
Colonial Heights, VA
Lower Paxon, Harrisburg, PA
Dickson City, PA
King of Prussia, Berwyn, PA
Montgomeryville, North Wales, PA
Whitman Square, Philadelphia, PA
Deptford, Woodbury, NJ
Mays Landing, NJ
Bailey’s Crossroads, Falls Church, VA
Bel Air, MD
Glen Burnie, MD
North Hills, Pittsburgh, PA
Parkersburg, Vienna, WV
Arlington Heights, IL
Kenner Westgate, Metairie, LA
Westbank, Harvey, LA
Mall of Louisiana, Baton Rouge, LA
Tri-County, Springdale, OH
Treasure Coast Mall, Jensen Beach, FL