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HHGregg vying to win customers of Circuit City

February 9, 2009

Steep discounts resulting from the liquidation of Circuit City Stores Inc. are expected to have a short-term negative impact on Indianapolis retailer HHGregg Inc., company officials said Feb. 5 in a conference call with investors.

But, ultimately, they think HHGregg is well-positioned to fill the void that the nation's No. 2 electronic retailer will leave when its stores are closed.

"We are aggressively pursuing Circuit City's market share," President Dennis May said. "However, at this point, we cannot accurately estimate the impact."

HHGregg likely will not reap any substantial benefits until after March, when much of Circuit City's inventory is liquidated, he said.

Sales of laptop computers and video games, which are relatively new product lines at HHGregg, are expected to present the biggest opportunities.

The Indianapolis retailer also has agreed to provide discounts in exchange for Circuit City gift cards until April and is creating a service to handle warranty issues for products purchased from its bankrupt competitor.

Still, the electronics and appliance industry is highly competitive, an analyst pointed out, as was evidenced by the aggressive advertising campaign HHGregg competitor Sears launched during the holiday season.

The nation's financial crisis also has taken a toll. Customer traffic patterns have been more volatile than normal since mid-September, company officials said.

On a positive note, the contracting economy is giving the company ammunition to negotiate better lease rates and terms, May said.

Particularly harsh economic conditions in Florida continue to be challenging, he said, but the company remains "bullish" on the market.

Going forward, the company will continue to focus on what it can best control, namely reducing expenses, CEO Jerry Throgmartin said.

"Longer-term, we are confident that we are ideally suited to take advantage of the industry dynamics," he said.

HHGregg stock is trading at around $9.75, up 12 percent on the year.

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