Appliance and electronic retailer
) fourth quarter fiscal 2013 earnings of 31 cents per share
declined from the prior-year quarter's adjusted earnings
(excluding one-time charge) of 39 cents by 20.5%. The results,
however, beat the Zacks Consensus Estimate by a penny.
Decline in revenues and comparable store sales, especially in
the video category, gross margin shortfall and higher advertising
expense ratio led to the year-over-year decline in earnings. The
decline also partially offset the benefit from addition of new
The video category has been suffering from significant
top-line pressure since the last few quarters due to fundamental
shifts and lower-than-expected margins across all screen sizes.
In addition, declining industry demand for flat screen LCD
televisions is severely impacting overall store traffic and video
Quarter in Detail
hhgregg's net sales dropped 2.6% year over year to $597.6
million in the reported quarter due to a decline in comparable
store sales. Sales also fell shy of the Zacks Consensus Estimate
of $627.0 million. However, the company opened 20 new stores in
the last 12 months.
Comparable store sales declined 9.8% in the quarter much more
than the previous-year's decline of 0.7% as poor performance of
video, computing and mobile phones and other categories
overshadowed the improved results in the appliance category.
Gross margin contracted 66 basis points (bps) to 29.9% in the
quarter, resulting from lower gross margin rates within
categories. The decline also partially offset the favorable shift
in net sales mix to the appliance category.
The company reports its business under the following product
Comparable store sales for this category declined 25.1% in the
current quarter, resulting from a double-digit decline in units
sold. The decline was slightly offset by a low single-digit
increase in average selling price during the quarter.
The Appliance category witnessed same store sales growth of 5.2%
driven by an increase in units sold, offset by a decline in
average selling prices.
Computing and mobile phones:
The category reported a decline in same store sales of 7.1%. The
quarter witnessed decreased demand for notebook computers and
mobile phones, with increased demand for tablets.
Same store sales for this category declined 3.1% in the quarter
due to double-digit decreases in cameras, camcorders, small
electronics, partially offset by increases in mattresses and
sales from the furniture and fitness equipment categories.
Fiscal 2013 Results
The company reported adjusted earnings of 74 cents in fiscal
2013, which declined 65.7% from the prior-year quarter earnings
of $1.11 per share. The results were in line with the Zacks
hhgregg's net sales declined 0.7% year over year to $2.48
billion in fiscal 2013 due to a 8.7% decline in comparable store
sales. Sales also fell shy of the Zacks Consensus Estimate of
For fiscal 2014, hhgregg expects its earnings in the range of
75 to 90 cents per share. Sales are expected to increase in the
range of 1.0% to 3.5%, while comparable store sales are expected
in the range of flat to negative 2.5%.
The company expects to open 5 new stores and projects capital
spending of approximately $28 million to $32 million in fiscal
The Indianapolis-based retailer continues to remain focused on
driving sales and profit growth through its cost control measures
and initiatives to improve its merchandise sales mix, expand its
service offerings and its customer base. The company has plans to
roll out new home product categories such as bedding, furniture
and fitness equipment during fiscal year 2014. Further, the
company has plans to sell more of small-to-medium screen sizes in
the video category and dedicate resources to larger screen
However, the industry-wide headwind in video category has
prompted the company to reduce its dependence on new product
innovations in the sector. hhgregg has also been testing new
merchandise categories to improve the overall mix of business.
However, the diversification is expected to take time and thus we
continue to expect sluggish performance in the video category
over the near term.
hhgregg holds a Zacks Rank #3 (Hold). Other retail and
wholesale stocks that are performing well currently include
Green Mountain Coffee Roasters, Inc.
The TJX Companies, Inc
). While Conns and Green Mountain hold a Zacks Rank #1 (Strong
Buy), TJX carries a Zacks Rank #2 (Buy).
CONNS INC (CONN): Free Stock Analysis Report
GREEN MTN COFFE (GMCR): Free Stock Analysis
HHGREGG INC (HGG): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis
To read this article on Zacks.com click here.