Hhgregg Reports Disappointing Preliminary Q3'14 Results
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
First holiday report confirms season was no celebration for retailers this year
Hhgregg was the first major retailer to release its preliminary holiday results on Monday, confirming suspicions that it was a difficult season for businesses. The electronics retailer estimates that net sales for the third quarter ended Dec. 31 decreased roughly 12 percent, equaling $707 million. This amount is down from last year’s $799.6 million. Q3’14 same-store sales are estimated to have dropped approximately 11 percent. The company will report its third quarter on Jan. 30.
CEO Dennis May says the company’s Q3’14, “while solidly profitable, is expected to be materially below both our expectations and prior year for diluted earnings per share, driven by the net sales miss.” Sales were crippled, May says, primarily by the highly promotional atmosphere, as competitors, like Walmart and Best Buy, tried to seduce shoppers to pick up low-priced tablets and televisions this holiday season. Despite the fact that the retail industry was promotion-heavy this year, Hhgregg stuck to its decision to not participate fully in that trend. While sales were lackluster, May reports that store inventories coming out of the holiday season are below last year’s levels, which puts them in a better position to take on the New Year.
While electronics and computing/wireless products in particular saw decreasing sales throughout the quarter, the company experienced success with its appliances as well as home décor offerings — which increased 1.5 percent and 36 percent respectively. This should certainly be a bright spot for the retailer, which, for the past year, has been expanding into home furnishings and fitness equipment. This move was the retailer’s attempt to improve profits and to draw in a more diverse customer base in the face of the recession and the emergence of online retailers. Judging from the preliminary quarterly results, introducing home furnishings was a good decision for the company, and a well-timed one, considering improvements in the housing market have led more people to purchase items for their homes.
Like many electronics sellers, however, declining video sales, or sales for small and midsize TVs are causing problems for the retailer. As JP Morgan Securities analyst Christopher Horvers says, “The company spent a considerable time testing various merchandise over the past 12 months and appears set on a fresh, curated assortment going forward. We expect this to have a positive impact on traffic and productivity going forward, but anemic video trends continued to be the elephant in the room.” Considering CEO May specifically pointed to excess promotions for televisions throughout the industry this holiday season, its clear this sector will probably persist being a competitive area for the retailer to secure as it aspires to become a national retailer.
In addition to furniture, the company finished rolling out its new mobile e-commerce platform in time for Black Friday. VP of Marketing J.J. Pearson is optimistic that, while this investment might not necessarily raise profits, it will have other benefits. Pearson says, “We think our voice and reach to potential customers will be stronger.”
Read "Mobile's Impact On Retail."
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