hhgregg 4Q Earnings & Rev Fall Y/Y, Gives View - Analyst Blog
May 22 2013 - 10:15AM
Zacks
Appliance and electronic retailer
hhgregg Inc.’s (HGG) fourth quarter fiscal 2013
earnings of 31 cents per share declined from the prior-year
quarter’s adjusted earnings (excluding one-time charge) of 39 cents
by 20.5%. The results, however, 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.
The video category has been
suffering from significant top-line pressure since the last few
quarters due to fundamental shifts and lower-than-expected margins
across all screen sizes. In addition, declining industry demand for
flat screen LCD televisions is severely impacting overall store
traffic and video category sales.
Quarter in
Detail
hhgregg’s net sales dropped 2.6%
year over year to $597.6 million in the reported quarter due to a
decline in comparable store sales. Sales also fell shy of the Zacks
Consensus Estimate of $627.0 million. However, the company opened
20 new stores in the last 12 months.
Comparable store sales declined
9.8% in the quarter much more than the previous-year’s decline of
0.7% as poor performance of video, computing and mobile phones and
other categories overshadowed the improved results in the appliance
category.
Gross margin contracted 66 basis
points (bps) to 29.9% in the quarter, resulting from lower gross
margin rates within categories. The decline also partially offset
the favorable shift in net sales mix to the appliance category.
Category
Details
The company reports its business
under the following product categories:
Video: Comparable
store sales for this category declined 25.1% in the current
quarter, resulting from a double-digit decline in units sold. The
decline was slightly offset by a low single-digit increase in
average selling price during the quarter.
Appliances: The
Appliance category witnessed same store sales growth of 5.2% driven
by an increase in units sold, offset by a decline in average
selling prices.
Computing and mobile
phones: The category reported a decline in same store
sales of 7.1%. The quarter witnessed decreased demand for notebook
computers and mobile phones, with increased demand for tablets.
Other: Same store
sales for this category declined 3.1% in the quarter due to
double-digit decreases in cameras, camcorders, small electronics,
partially offset by increases in mattresses and sales from the
furniture and fitness equipment categories.
Fiscal 2013
Results
The company reported adjusted
earnings of 74 cents in fiscal 2013, which declined 65.7% from the
prior-year quarter earnings of $1.11 per share. The results were in
line with the Zacks Consensus Estimate.
hhgregg’s net sales declined 0.7%
year over year to $2.48 billion in fiscal 2013 due to a 8.7%
decline in comparable store sales. Sales also fell shy of the Zacks
Consensus Estimate of $2.506 billion.
Guidance
For fiscal 2014, hhgregg expects
its earnings in the range of 75 to 90 cents per share. Sales are
expected to increase in the range of 1.0% to 3.5%, while comparable
store sales are expected in the range of flat to negative 2.5%.
The company expects to open 5 new
stores and projects capital spending of approximately $28 million
to $32 million in fiscal 2014.
The Indianapolis-based retailer
continues to remain focused on driving sales and profit growth
through its cost control measures and initiatives to improve its
merchandise sales mix, expand its service offerings and its
customer base. The company has plans to roll out new home product
categories such as bedding, furniture and fitness equipment during
fiscal year 2014. Further, the company has plans to sell more of
small-to-medium screen sizes in the video category and dedicate
resources to larger screen sizes.
However, the industry-wide headwind
in video category has prompted the company to reduce its dependence
on new product innovations in the sector. hhgregg has also been
testing new merchandise categories to improve the overall mix of
business. However, the diversification is expected to take time and
thus we continue to expect sluggish performance in the video
category over the near term.
hhgregg holds a Zacks Rank #3
(Hold). Other retail and wholesale stocks that are performing well
currently include Conns, Inc. (CONN),
Green Mountain Coffee Roasters, Inc. (GMCR) and
The TJX Companies, Inc (TJX). While Conns and
Green Mountain hold a Zacks Rank #1 (Strong Buy), TJX carries a
Zacks Rank #2 (Buy).
CONNS INC (CONN): Free Stock Analysis Report
GREEN MTN COFFE (GMCR): Free Stock Analysis Report
HHGREGG INC (HGG): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis Report
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