Appliance and electronics retailer
) announced weak preliminary sales for the third quarter of
fiscal 2014 (ended Dec 31, 2013), final results of which are
scheduled to be released on Jan 30.
For the third quarter, the company expects net sales to
decline approximately 11.6% year over year to $799.6 million, due
to a decline of approximately 11.2% in comparable store sales.
The decline in comparable sales is the result of anticipation of
double-digit decline from both the consumer electronic and
computing and wireless categories, which are expected to decline
19.7% and 24.5%, respectively.
This decline is expected to overshadow the positive comparable
sales in the appliance category as well as the home products
category, which are expected to increase approximately 1.5% and
Further, the company cautioned that a volatile retail sales
environment and lower-than-expected sales in the consumer
electronic and computing and wireless categories are expected to
impact third quarter earnings as well as fiscal 2014 results. The
company expects third quarter earnings to be below its previous
expectations. The Zacks Consensus Estimate for the third quarter
and fiscal 2014 are 48 cents and 86 cents per share,
The anticipation of sluggish sales in the third quarter comes
mainly on account of relatively weak sales in the holiday season.
In order to compete with big-box retailers like
Wal-Mart Stores Inc
Best Buy Co.
), the company offered aggressive promotions on items like
televisions and tablets, which dragged down its holiday sales
margins. However, hhgregg has now decided to curb its promotional
spending during the third quarter and instead shift its focus
toward a broader mix of home products, including appliances and
We note that hhgregg has been delivering disappointing results
in the consumer electronic category since the past year due to
lower-than-expected margins across all screen sizes. In addition,
declining industry demand for flat screen televisions severely
impacted overall store traffic and consumer electronic category
The company is trying to improve its consumer electronics
category through various initiatives. hhgregg has been growing
its appliance business and focusing on initiatives to drive
additional traffic and increase sales. 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. However, the improvement
in the consumer electronic category is expected to take time and
thus we continue to expect a sluggish performance in fiscal 2014.
hhgregg holds a Zacks Rank #3 (Hold).
) is a better-ranked stock in the same sector, sporting a Zacks
Rank #1 (Strong Buy).
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