On Feb 20, we issued an updated research report on hhgregg, Inc. (HGG). This appliance and electronics retailer reported improved performance in the third quarter of fiscal 2015 on Jan 30.
Though hhgregg missed the Zacks Consensus Estimate for sales and reported wider-than-expected losses in the third quarter, gross margin increased after declining for several quarters. Comparable store (comp) sales declined 6.3%, due to lower unit demand.
However, it was better than the 11.2% drop in the year-ago quarter, which signals that hhgregg is making efforts to improve sales, particularly in the consumer electronics and appliance businesses. E-commerce comps also witnessed a solid increase of 60%.
We note that the company’s consumer electronic business has been witnessing sluggish comps for the last few quarters. However, backed by the improving mix with larger screen sizes and 4K ultra high definition TVs during the holiday season, hhgregg witnessed improvements in the consumer electronics category in the third quarter. In fact, the comps decline was far less than what it had been over the prior 11 quarters.
We believe hhgregg is leaving no stone unturned to revive its struggling business but a continued positive trend is yet to be seen, given the overall industry weakness. Product innovation, discounts and promotional offers, improvement in home-delivery facilities, focus on developing brands, exit from underperforming businesses and store openings are some of the measures undertaken by the company to boost sales.
Nevertheless, category sales are expected to remain in the red due to declining unit demand. Apart from consumer electronics, the company has been witnessing soft comps trend in the computing and wireless category over the past seven quarters. The weak comps resulted from lower demand for laptops and computers as well as a decline in average selling price for computers and tablets.
hhgregg has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked companies in the retail sector include Citi Trends, Inc. (CTRN), Stage Stores, Inc. (SSI) and The Men’s Wearhouse Inc. (MW). While Citi Trends and Stage Stores sport a Zacks Rank #1 (Strong Buy), Men’s Wearhouse holds a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment