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With TV business ‘forever changed,’ HHGregg retools

March 16, 2013

After years of seeing TV sales head in the wrong direction, HHGregg Inc. finally has “capitulated,” as one analyst put it, and acknowledged that the halcyon days for the video business are never coming back.

“We see the HHGregg of the future as a home products store that also sells consumer electronics,” company CEO Dennis May said in a Jan. 31 conference call with analysts.

He added: “We expect [consumer electronics] will gradually represent a smaller and smaller part of our overall sales mix.”

Such statements would have been unfathomable just a few years ago. When the Indianapolis company went public in 2007, video products accounted for nearly half of sales. Today, they’re barely one-third and falling.

Investors are taking comfort in HHGregg management’s blunt assessment of the segment, figuring it’s better for the chain to shift its focus to more promising product categories—appliances, furniture and fitness equipment, for instance—than to cling to false hopes of a resurgence.

Since Dennis May on Jan. 31 declared that certain segments of the video business are “forever changed,” the company’s beaten-down stock has rallied 38 percent, climbing from $7.66 to $10.57.

The issues in the TV business are well-chronicled. Innovations in HD and flat-screen TVs sent consumers flocking into stores in the last decade. But the party ended when the housing market crashed, innovations tapered off, and a price war broke out, led by Internet retailers, warehouse clubs and other discounters.

The good news for HHGregg is that its appliance business is thriving—and doesn’t seem as susceptible to poaching by Amazon and other Internet rivals. Shipping of heavy products like refrigerators and ranges is trickier, and consumers can’t just open the box, connect a few cables, and turn them on.

In that realm, the company’s business model—which relies on using highly trained, commissioned salespeople to steer shoppers toward feature-rich, higher-margin products—is working. Appliances, which represented 40 percent of sales at the IPO, have swelled to 61 percent.

Analysts say the company is on the right track focusing on growing its market share in appliances, as well as using its existing delivery and installation network to branch into new products for the living room.

But they caution that the company won’t become expert marketers in new product categories overnight. HHGregg is making “a philosophical shift in the right direction,” J.P. Morgan analyst Christopher Horvers said in a report, “but a long journey [lies] ahead.”

Remy rewards departing CEO

John Weber, who guided Remy International Inc. out of bankruptcy in 2007 and transformed it into an efficient auto-parts maker, is receiving a lucrative pat on the back from the company’s board as he departs as CEO.

Weber, 56, received a lump-sum cash payment of $7 million after his resignation took effect Feb. 28, Remy said in a regulatory filing.

Under Weber, Remy closed 14 facilities, a streamlining that shifted nearly all the company’s manufacturing to low-cost countries, and cut its work force 48 percent, to 5,700.

Weber made no apologies that Remy, once one of Madison County’s big manufacturing employers, shifted production outside the United States.

“When someone finds me a customer willing to pay more money for a product made in Pendleton, Indiana, I will be glad to put a facility in Pendleton, Indiana. But I haven’t found that customer yet,” he told IBJ in 2011.

Key Bank exec aims even higher

When KeyCorp executive Beth Mooney visited Indianapolis in 2010, local Key chief Gary Hentschel predicted his Indianapolis region would win the company’s district-of-the-year award—recognition it indeed garnered in 2011.

When Mooney, the Cleveland bank’s CEO, paid another visit last summer, Hentschel turned even bolder, predicting his region would win again in 2012, becoming the first of Key’s 18 regions to win in consecutive years.

Right again, it turns out. Key recently gave the Central Indiana Region the honor—citing, among other things, the bank’s ranking as the largest SBA loan producer in Indiana.

So are Hentschel and his management team gearing up to win again for 2013?

“Actually, I have to tell you, we are,” Hentschel said. “We actually even looked up the official spelling for ‘three-peat.”•

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