The electronics retail business is a tough one. If you don't
believe me, go ask
). They've been struggling to become more than Amazon's show room
for quite some time. With the ease of access to products via the
internet, investing tons of money in a brick and mortar location is
becoming less and less profitable. You could look back and find
plenty of examples of these types of locations going under and
ultimately going broke.
That's why I can't help but think of today's Bear of the Day,
, as the next Circuit City. Remember that old electronics store
that lost out to Best Buy and went under? I've set foot in an
hhgregg location that was in the same building that used to house
Circuit City. And there they were, selling electronics just like
Circuit City did before going under.
I actually enjoyed my shopping experience at HGG. The people
working there were very friendly and helped me pick out a computer
for my Mom's Christmas present. I got a great deal and thought to
myself, "How can this place stay in business selling things this
That's exactly what hhgregg does. They are a specialty retailer of
premium video products, appliances, audio products, computers and
accessories with seventy nine stores in Alabama, Georgia, Indiana,
Kentucky, North Carolina, Ohio, South Carolina and Tennessee. If
you ever go to one I'm sure you'll see it the same way that I did,
like a Circuit City.
Analysts are equally unimpressed with this Zacks Rank #5 (Strong
Sell). Over the last 30 days, ten analysts have lowered their
earnings estimates for the current quarter, next quarter, and the
current year. Next year isn't looking much better as eight analysts
lowered their bar. The revisions have pushed the consensus estimate
for the current year down from a 12 cent gain to a 31 cent loss per
share. Next year's numbers have fallen from a 12 cent gain to a 21
Usually when looking for a company to invest your hard earned
dollars in, you want to see a company that has earnings growth or
at the very least stability. In the case of HGG, you get neither.
You're getting a company with shrinking profits in an industry that
is shrinking. In fact, this industry ranks in the Bottom 6% of our
Zacks Industry Rank.
If that wasn't enough to warn you about this stock, the chart will
be the icing on the cake. After a stellar run for three-quarters of
2013 took the stock from $7 all the way to $12 the stock began to
fall apart. In October 2013 HGG broke below its 25 day moving
average shifted by 5 days where it would remain until the stock
shed half its value, finally popping back above in late January
2014. This year has been no cakewalk either. HGG has run out of
gas, gapping down on earnings once again and now trades all the way
down at $7.68.
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