Appliance and electronic retailer
) reported a loss of 4 cents in the first quarter of fiscal 2014,
narrower than the prior-year quarter loss of 16 cents per share.
The reported loss was also narrower than the Zacks Consensus
Estimate of 15 cents loss per share.
The narrower loss was driven by comparable store sales growth
and cost cutting measures. A decrease in selling, general &
administrative expenses (SG&A) ratio and a decline in net
advertising expense ratio also contributed to the improvement in
first quarter results and managed to offset the impact of a
decline in gross margins. Share count declined 13.6% in the
quarter which contributed to the earnings growth.
Quarter in Detail
hhgregg's net sales climbed 7.2% year over year to $524.9
million in the reported quarter due to comparable store sales
growth and the addition of 18 new stores in the last 12 months.
Sales also beat the Zacks Consensus Estimate of $520.0
Comparable store sales increased 0.8% in the quarter compared
to a 5.1% decline in the previous year, driven primarily by
growth in the appliances, computing and wireless and home
products categories and partially offset by a decline in the
consumer electronics category.
Gross margin contracted 40 basis points (bps) to 29.5% in the
quarter, resulting from decreases in gross profit margin rates in
the consumer electronics and computing and wireless categories,
partially offset by a slight increase in gross profit margin rate
in the appliance category.
During the quarter, hhgregg repurchased 698,369 shares for
$10.3 million, under the company's share repurchase program of
The company reports its business under the following product
Comparable store sales for this category improved to 7.5% in the
current quarter from 6.3% last year driven by an increase in both
average selling price and units sold.
Computing and Wireless Category
: This category witnessed same store sales growth of 13.2% led by
increased demand for tablets, partially offset by a decline in
mobile phones and notebook computers. Last year, comp sales
: The category showed significant improvement and reported same
store sales growth of 84.5% in the quarter versus a decline of
6.8% last year. The improvement was primarily a result of double
digit comparable store sales increase in mattresses, in addition
to sales from the introduction of furniture and fitness equipment
: Same store sales for this category declined 15.0% in the
quarter due to double digit comparable store sales decrease in
televisions, largely resulting from the strategy of offering
fewer entry level models. However, the decline in comp sales was
better than the prior-year quarter decline of 18%.
The company's initiatives to restructure its sales mix, expand
customer base and enhance its service offerings bore fruits and
hhgregg posted a comparable store sales increase in the quarter.
In fact, hhgregg has been growing its business with the
introduction of new products in the furniture and fitness
categories. The company also expanded its computing and mobile
phones category to drive additional traffic and increase
The initiatives have pulled the company out from the continued
weakness in the video category. 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 was severely impacting
overall store traffic and video category sales.
With its persistent efforts to restructure the sales mix, the
company has managed to improve the overall mix of business. We
believe hhgregg will continue to focus on driving sales and
profit growth through its cost control measures and initiatives
to improve its merchandise, sales mix, service offerings and
expand its customer base. hhgregg holds a Zacks Rank #1 (Strong
Other retail and wholesale stocks that are performing well
Ingles Market Inc
Best Buy Inc
). While Conns and Ingles Markets hold a Zacks Rank #1, Best Buy
carries a Zacks Rank #2 (Buy).
BEST BUY (BBY): Free Stock Analysis Report
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HHGREGG INC (HGG): Free Stock Analysis Report
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