On May 29, 2014, we issued an updated research report on
). This appliance and electronics retailer reported weak results
for fourth-quarter and fiscal 2014 on May 20, mainly due to harsh
winter weather and continued decline in consumer electronic
hhgregg reported adjusted loss of 17 cents in the fourth quarter
compared to the prior year adjusted net income of 31 cents per
share. The loss was due to a decline in comparable store sales,
lower gross margin and an increase in net advertising expense ratio
and SG&A ratio. hhgregg's net sales declined approximately 9.9%
due to a decline in comparable store sales. The primary reason
cited for weak sales was extreme cold weather. hhgregg witnessed
lower traffic in most of its stores, especially in the Midwest and
Mid-Atlantic regions due to harsh weather conditions in January,
February and the beginning of March.
The poor comparable sales performance is largely attributable to
the consumer electronic, computing and wireless and home products
categories, which declined during the quarter.
hhgregg has been delivering disappointing results in the
consumer electronic category since the past one year due to
lower-than-expected margins and declining industry demand for flat
screen televisions. Weak promotional activities are also adding to
the woes. In addition, lack of innovation in televisions has been
severely impacting overall store traffic.
The company also witnessed sluggishness in same store sales in
the computing and wireless category in all the quarters of fiscal
2014. Weak comps were due to a decrease in demand for laptops and
lower average selling price for tablets. Category comps declined
due to the underperforming contract-based mobile phone business,
which the company exited during the fourth quarter.
The company's home products category, which showed signs of
weakness during the third quarter declined further in the fourth
The company is therefore employing different initiatives to
revive its business such as product innovation, shifting focus from
one furniture brand to five brands and even exiting the
underperforming businesses. The company is also focusing on its
appliance category, which continues to gain market share through
higher sales in the appliance category over the past 11 quarters.
Moreover, the company is not relying much on consumer electronics
and computing and wireless categories.
hhgregg did not provide a guidance for fiscal 2015 as the
company is working on its strategic initiatives and is pressurized
by continued volatility within the consumer electronics industry.
The Zacks Consensus Estimate for fiscal 2015 is pegged at 12 cents
hhgregg holds a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
) are better-ranked stocks in the same sector, sporting a Zacks
Rank #1 (Strong Buy) and Zacks Rank #2 (Buy), respectively. Another
stock worth considering in the wider retail sector is
Citi Trends Inc
) with a Zacks Rank #1.
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