Shares of hhgregg, Inc. (HGG) crashed 22.48% yesterday after the company announced its preliminary sales results for the third quarter of fiscal 2015. hhgregg is expected to report weaker sales compared with the prior-year. The company has also withdrawn its EBITDA guidance for fiscal 2015.
This appliance and electronics retailer is scheduled to release its third quarter fiscal 2015 results on Jan 29.
Third Quarter Fiscal 2015 Prelim Sales
For the third quarter, the company expects net sales to decline approximately 6% year over year to $666 million, with a decline of approximately 6% in comparable store sales. The poor comparable sales performance is largely attributable to the computing and wireless category which is expected to decline around 35%. The primary reason for the decline in the computer and tablet industry is lower consumer demand.
Other categories of consumer electronics and home products are expected to decline about 4% and 9%, respectively. Appliance category sales are estimated to remain flat in the third quarter. The company’s e-commerce business is an exception as its comparable sales are expected to witness a solid increase of approximately 59% in the third quarter.
The company’s sales expectations lag the Zacks Consensus Estimate of $672 million. The Zacks Consensus Estimate for third quarter earnings is at break-even.
The company stated that it has been focusing on its strategic initiatives and changing its sales mix. As a result of this, the company has witnessed improvement in the consumer electronics and appliance business. It is to be noted that hhgregg has been disappointing its investors since more than a year now with sluggish results in its consumer electronic category.
Revenues in the category have declined due to lower-than-expected margins and declining industry demand for flat screen televisions. Though the continued efforts have moderated the rate of comp sales decline, category sales are expected to remain in the red. Moreover, the company expects continued volatility within the consumer electronics industry in the upcoming quarters.
In addition, in the preliminary results, the company stated that it does not expect to close any store location in fiscal 2015. Also, considering some non-cash charges and uncertain market conditions, the company has withdrawn its fiscal year 2015 EBITDA outlook.
hhgregg holds a Zacks Rank #5 (Strong Sell).
However, better-ranked stocks in the retail sector include Ingles Market, Inc. (IMKTA), Best Buy, Inc (BBY) and The Kroger Co. (KR). While Ingles Market sports a Zacks Rank #1 (Strong Buy), Best Buy and Kroger carry a Zacks Rank #2 (Buy).
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