An appliance and electronic retailer
) posted second quarter 2012 earnings of 11 cents per share,
exceeding the Zacks Consensus Estimate of 9 cents by 22%.
However, the quarter's earnings lagged the prior-year quarter
earnings of 16 cents by 31%.
Revenue and comparable store sales decline and higher selling,
general and administrative (SG&A) expense ratio partially
offset benefit from improved gross margins which led to the year
over year decline in earnings.
Quarter in Detail
hhgregg's net sales dropped 5% year over year to $587.6
million in the reported quarter due to a decline in comparable
store sales. Sales also fell shy of the Zacks Consensus Estimate
of $640 million. However, the company opened 19 new stores in the
last 12 months.
Comparable store sales witnessed an 8.8% decline in the
quarter compared to the previous- year period due to the poor
performance of video and other categories. The appliance and
computing and mobile phones categories delivered improved
Gross margin expanded 107 basis points (bps) to 29.6% in the
quarter, resulting from improved margin rates in the video and
appliance category offset by a decline in computing and mobile
phone and other categories.
Selling, general and administrative expenses (SG&A), as a
percentage of net sales, increased 80 bps in the quarter to
21.4%, due to higher employee wage expenses. Net advertising
expense as a percentage of net sales also climbed 50 bps to 5.4%
in the reported quarter, due to the deleveraging effect of the
net sales decline.
The company reports its business under three product
category, the company offers premium video products, branded
appliances, audio products and accessories in its stores. Net
sales in the Video category climbed 36% year over year while
comparable store sales in the segment went down 20.5% due to
decline in unit demand partially offset by increase in average
selling prices during the quarter.
category offers a broad selection of major appliances, including
latest range of refrigerators, cooking ranges, dishwashers,
freezers, washers and dryers, sold under a variety of leading
brand names. The Appliance category witnessed sales growth of 46%
and same store sales growth of 1.1%, driven by improved average
Computing and mobile phones
category, the company offers a broad selection of computer and
mobile phone products, including notebook computers, tablets and
mobile phones. Computing and mobile phones reported sales growth
of 9% with same store sales growth of 11.8%. The quarter
witnessed increased demand for tablet computers and mobile
phones, with less demand for notebook and netbook computers.
Apart from the mentioned products, the company also sells
products like audio systems, furniture, mattresses and other
select popular consumer electronics and accessories. These
products reported sales growth of 9%, while same store sales
declined 17.0% due to low comparable sales of cameras, camcorders
and small electronics, partially offset by growth in the mattress
Other Financial Details
hhgregg repurchased 1.2 million shares during the reported
quarter for a total cost of $8.3 million. The share buyback was
part of the $50 million share repurchase program that commenced
in May, 2012. As of September 30, 2012, the company had $30.5
million worth of shares outstanding under the current share
Management reiterated its fiscal 2013 outlook, with earnings
in the range of 90 cents to $1.05 per share. Net sales for fiscal
2013 are expected to increase in the 3%-6% range, while
comparable store sales are expected to be in the range of
negative 6% to negative 4%. hhgregg now expects to open 20 new
stores in fiscal 2013 compared with the previous forecast of 20
to 22 new stores.
hhgregg, which competes with
Best Buy Co. Inc.
), currently has a Zacks #5 Rank (short-term Strong Sell rating).
We have a Neutral recommendation on the stock over the long
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