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HHGregg shares swoon after quarterly report

November 9, 2010

HHGregg Inc. shares slid more than 9 percent Tuesday morning after the Indianapolis-based appliance and electronics retailer's quarterly performance missed analyst expectations.

The company's profit in its fiscal second quarter fell 20.4 percent from a year ago despite a big rise in revenue brought on by expansion.

For the quarter ended Sept. 30, HHGregg earned $3.9 million, or 10 cents per share, compared with $4.9 million, or 13 cents per share, in the year-ago period. Market analysts had expected earnings of 16 cents per share.

Revenue for the fiscal second quarter was up nearly 45 percent, to $481 million, aided by the addition of 51 new stores within the past 12 months.

HHGregg shares fell to $22.43 each in midday trading, down 9.04% percent on the day.

The company attributed the year-over-year decline in quarterly profit to smaller margins, increased advertising rates, expenses associated with the opening of 10 stores in the Washington, D.C., area, as well as a 1.5-percent decrease in same-store sales. Same-store sales reflect revenue from stores open at least a year.

“While the second quarter may be a reminder of the sensitive nature of the economic recovery and the consumer’s purchasing capacity, we continue to gain market share and remain excited about the company’s long-term growth prospects,” HHGregg CEO Dennis May said in a prepared statement.

Further reflecting the tenuous economic conditions was HHGregg’s decision to lower the bottom end of its fiscal-year earnings guidance from $1.35 to $1.30 per share. The company, however, remains confident it can achieve $1.45 per share, the top end of its guidance, CFO Jeremy Aguilar said in the statement.

“While our visibility into the important holiday and Super Bowl selling seasons remains limited due to the significant volatility in our product categories and challenging macro-economic environment, we remain cautiously optimistic that the top-end of our guidance range is achievable,” he said. “However, due to the headwinds in our industry, we believe it is appropriate to lower the bottom-end of our range to address the volatile industry trends we have been experiencing in our business.”

HHGregg opened 12 new stores in its fiscal second quarter and has opened 42 in the first six months of its fiscal year. It is on track to open a total of 43 stores in fiscal 2011. The company expects to open another 35 to 45 stores in fiscal 2012, most of which would be in the Miami and Pittsburgh markets.

Overall, HHGregg operates 173 stores in Alabama, Delaware, Florida, Georgia, Indiana, Kentucky, Maryland, Mississippi, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee and Virginia.

 

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