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hhgregg Posts Lower Sales, Profits

Indianapolis – hhgregg reported a 5 percent drop in net sales and lower net earnings for the second quarter, ended Sept. 30.

Net sales for the quarter decreased to $587.6 million from $618.6 million in the comparable prior-year period. The decrease for the three month period was the result of a comparable store sales decrease of 8.8 percent along with the lapping of strong grand opening sales performance from stores that opened in the prior fiscal year, partially offset by the net addition of 19 stores during the past 12 months.

Net income was $3.8 million, down $6.0 million for the comparable prior year period, a result of a decrease in comparable store sales, an increase in net advertising expense as a percentage of net sales and an increase in SG&A expense as a percentage of net sales, and other factors, the company said.

Dennis May, president and CEO commented, “While the video category remained challenging across the industry in our second fiscal quarter, we were pleased with the early progress of strategic initiatives designed to enhance store productivity. While we improved our video sales mix to focus on larger screen televisions which improved our gross margin rate, we were disappointed by the amount of overall market share of televisions we lost. Over the next few quarters we will continue to refine our strategy to find the right mix between gross margin rate and market share.”

May noted, “We continue to see positive results in our appliance business and are continuing to test new merchandise and tailor our assortment around products that leverage our consultative sales force, delivery and installation network and private-label credit offering. In our fiscal third quarter, we expect to fully roll out furniture and
exercise equipment to all of our stores, along with continuing to roll out to a selective number of stores an expanded offering of tablet and handheld consumer products.”

Net sales mix and comparable store sales percentage changes by product category for the three and six months ended Sept. 30, 2012, and 2011, were as follows: appliance sales were 46 percent of hhgregg’s business in the quarter, up 3 percent from last year. Comp-store sales in the category were up 1.1 percent. Video was 36 percent of sales, down 6 percent from last year’s mix. Video comp-store sales were down 20.5 percent in the quarter. Computing and mobile phones were 9 percent of sales up, up 1 percent and its comp-store sales were up 11.8 percent. The “other” category – audio, furniture, accessories, mattresses and others – was 9 percent of mix, down 1 percent. Comp-store sales for that category was down 17 percent.