Appliance and electronic retailer hhgregg Inc. (HGG) has re-opened its store at Southlake Mall in Morrow, Ga. after completing its renovation. The store had been damaged by the March hailstorm. The store has re-opened just ahead of the huge Memorial Day sale at the Southlake Community, which should be beneficial for the company. In order to attract customers, hhgregg is offering up to 25% off on appliances, TVs, furniture, and other products. Additionally, customers can get up to 24 months financing on total purchases done till Jun 1, 2013.
The company expects this store reopening to drive sales. In fact, hhgregg has been growing its appliances business with the introduction of new products in furniture and fitness categories. The company is also expanding its computing and mobile phones category and focusing on initiatives to drive additional traffic and increase sales.
However, hhgregg’s video category is suffering from significant top-line pressure due to fundamental shifts and lower-than-expected margins across all screen sizes. In addition, declining industry demand for flat screen LCD televisions severely impacted overall store traffic and video category sales.
The sluggish video category sales also led to weak fourth quarter fiscal 2013 results reported on May 20. Earnings of 31 cents per share declined 20.5% from the prior-year quarter’s adjusted earnings. However, it beat the Zacks Consensus Estimate by a penny. Decline in revenues and comparable store sales, especially in the video category, gross margin shortfall and higher advertising expense ratio led to the year-over-year decline in earnings. The decline also partially offset the benefit from addition of new stores.
We believe that the industry-wide headwind in video category has overshadowed the company’s efforts to improve the overall mix of business. Moreover, we continue to expect sluggish performance in the video category over the near term. In such a scenario, we appreciate the company’s efforts to attract customers through store openings and discounts on its products in comparison to its competitors. hhgregg holds a Zacks Rank #3 (Hold), while another appliance retailer Conns, Inc. (CONN) carries a Zacks Rank #1 (Strong Buy).
Other retail and wholesale stocks that are performing well currently include Green Mountain Coffee Roasters, Inc. (GMCR) and The TJX Companies, Inc (TJX). While Green Mountain holds a Zacks Rank #1 (Strong Buy), TJX carries a Zacks Rank #2 (Buy).
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