We recently upgraded our recommendation from Underperform to
), a specialty retailer of premium video products. Fourth quarter
2012 earnings of 39 cents per share, exceeded the Zacks Consensus
Estimate by $0.02 per share. Sales also climbed 21% in the quarter
due to the addition of 35 new stores.
Our 2013 estimates have gone up from $1.20 to $1.21 per share
with our revenue estimate increasing from $2,764 million to $2,765
million. We are encouraged by the launch of a new mobile department
to drive sales. Hhgregg is also witnessing an improvement in
hhgregg has been expanding its stores into new markets for the
last few years. The company has opened or acquired stores in 14 new
metropolitan markets in the past five years, most recently in the
Chicago, Illinois and Miami, Florida markets. Hhgregg further plans
to open 20 to 22 new stores in fiscal 2013, predominately in St.
Louis, Missouri and Milwaukee, Wisconsin.
hhgregg has implemented several initiatives in fiscal 2012 to
drive additional traffic and increase sales like restructuring of
in-store management team and introducing new categories to grow its
appliance market share as well as develop its computing and mobile
phones category, which previously only included computers and
It also redesigned its website during the second quarter of
fiscal 2012, which offers options to buy products online and ship
products bought online directly to consumers. The new website
design thus provides an enhanced purchase experience and enhances
the company's multi-channel retail strategy.
However, the company has been experiencing disappointing results
in the video category, driven by lower than expected margins owing
to the promotional activities across all screen sizes. hhgregg's
gross margin, as a percentage of net sales, sunk 91 basis points to
30.5% in the fourth quarter, caused by changes in product mix due
to higher sales of computing and mobile phones which carry lower
In addition, promotional activity within the video category has
resulted in a reduction in the gross profit margin rate for the
category. Management also expects the scenario to remain the same
in fiscal 2103, when gross margin is expected to remain under
HHGREGG INC (HGG): Free Stock Analysis Report
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