Appliance and electronic retailer
) reported earnings of 12 cents in the second quarter of fiscal
2014, which lagged the Zacks Consensus Estimate of 14 cents per
share by 14.3% due to weaker-than-expected sales.
However, earnings increased 9.1% from the prior-year earnings
of 11 cents per share. The upswing in earnings was driven by a
decline in selling, general & administrative expenses
(SG&A) ratio by 22 basis points and lower share count owing
to share buyback.
Quarter in Detail
hhgregg's net sales declined 3.3% year over year to $568.3
million in the reported quarter due to decline in comparable
store sales. Comparable store sales were adversely affected by a
weak retail sales environment owing to low consumer confidence.
Sales lagged the Zacks Consensus Estimate of $608.0 million.
Comparable store sales decreased 6.2% in the quarter as
decline in the consumer electronics and computing and wireless
categories was partially offset by growth in the appliances and
home products categories. Comp sales declined 8.8% in the
Gross margin remained flat at 29.6% in the quarter as
favorable product sales mix shift was offset by modest gross
margin rate declines within most of the categories.
During the quarter, hhgregg repurchased 0.8 million shares for
$13.9 million, under the company's share repurchase program of
$50 million. The company opened 5 stores in the last 12 months
and now has 228 stores as of Sep 30, 2013.
The company reports its business under the following product
Comparable store sales for this category improved 2.6% in the
current quarter compared with 1.1% growth last year, driven by an
increase in average selling price.
Computing and Wireless Category
: Same store sales for this category declined 7.2% in the
quarter. The decline was due to lower sales of mobile phones and
notebook computers, partially offset by an increase in demand for
tablets. Year-ago quarter, comp sales increased 10.8%.
: The category showed significant improvement and reported same
store sales growth of 69.1% in the quarter versus a decline of
6.9% last year. The improvement was primarily a result of
increased sales from the introduction of furniture and fitness
: Same store sales for this category declined 20.4%, flat year
over year, in the quarter due to a double digit decline in
television sales, largely resulting from the strategy of offering
fewer entry level models.
We believe that the company is taking initiatives to
restructure its sales mix, expand customer base and enhance its
service offerings. hhgregg has been consistently improving its
comparable store sales growth rate in the appliance category. The
company has also been growing its business with the introduction
of new products in the furniture and fitness categories.
The company is also trying to improve its consumer electronics
category through its initiatives. However, the category is
suffering due to industry-wide headwinds such as a decline in
demand for flat screen LCD televisions. However, we believe that
the company's persistent efforts to restructure the sales mix
will improve overall store traffic and category sales in the
upcoming quarters. hhgregg holds a Zacks Rank #2 (Buy).
Other retail and wholesale stocks that are performing well
Best Buy Inc
Gamestop Corp Holding Co
Fortune Brands Home & Security
). While Best Buy holds a Zacks Rank #1 (Strong Buy), Gamestop
and Fortune Brands carry a Zacks Rank #2.
BEST BUY (BBY): Free Stock Analysis Report
FORTUNE BRD H&S (FBHS): Free Stock Analysis
GAMESTOP CORP (GME): Free Stock Analysis
HHGREGG INC (HGG): Free Stock Analysis Report
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