Appliance and electronics retailer
) announced the preliminary results for the third quarter fiscal
2013 (ended December 31, 2012), which is scheduled to release on
January 31. hhgregg has also revised its guidance for fiscal 2013
ending March 31, 2013.
For the third quarter, the company expects net sales to
decline approximately 3.6% year over year to $799.6 million, with
a decline of approximately 9.7% in comparable store sales. The
poor comparable sales performance is expected to come from both
the video and other categories, which are expected to decline
24.6% and 23.7%, respectively.
This decline is expected to overshadow the positive comparable
sales in the appliance category as well as the computing and
mobile phones category, which are expected to increase
approximately 6.1% and 16.2%, respectively.
Further, lower-than-expected sales performance in the video
category is expected to impact third quarter earnings. Excluding
one-time store impairment charge, hhgregg projects a decline of
approximately 21.3% in third quarter fiscal 2013 adjusted
earnings to 52 cents.
Following the weak preliminary third quarter results, the
Indianapolis-based retailer revised its guidance for fiscal 2013.
hhgregg has reduced its earnings forecast for fiscal 2013 to a
range of 70 to 80 cents per share, compared with the previous
guidance of 90 cents to $1.05 per share.
The company has also lowered its comparable store sales
guidance and expects it in the range of negative 8.5% to negative
7.5%, compared with the prior guidance range of negative 6.0% to
negative 4.0%. Net sales are now expected to increase in the
range of flat to 1.0%, much lower than the previous growth range
of 3.0% to 6.0%. In addition, the company expects capital
spending in the range of $35.0 million to $40.0 million, also
lower than the previous guidance of $50.0 million to $55.0
hhgregg has been growing its appliance business, expanding
computing and mobile phones category and focusing on initiatives
to drive additional traffic and increase sales. Despite of
continued focus on these initiatives, hhgregg has been
experiencing disappointing results in the video category due to
fundamental shifts in the video category and lower-than-expected
margins across all screen sizes.
In addition, declining industry demand for flat screen
televisions severely impacted the overall store traffic and video
category sales. The company has thus reduced its dependence on
new product innovations in the video sector.
In order to turn around the performance in the video category,
the company has reduced its focus on promotional activity within
the video category in the quarter which thereby improved the
gross profit margin rate for the video category and the total
company gross margin rates. hhgregg has also been testing new
merchandise categories to improve the overall mix of business
from the video category. However, the diversification is expected
to take time and thus we continue to expect sluggish performance
in the video category.
hhgregg holds a Zacks Rank #3 (Hold), while its close peer
) carries a Zacks Rank #1 (Strong Buy). Other stocks which are
favorable in the industry are
), which hold a Zacks Rank #2 (Buy).
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