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HHGregg's stock swoons after quarterly report disappoints

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HHGregg Inc.'s stock price swooned in after-hours trading Monday and continued to fall Tuesday morning after the retailer reported quarterly sales that were short of analyst expectations.

HHGregg shares closed Monday at $15.61 each, a 52-week high, but had dropped 13 percent by Tuesday mid-morning, to $13.60 a share.

The Indianapolis-based retailer saw a big drop in earnings in its latest quarter on decreased sales, lower profit margins and higher advertising expenses, it said Monday.

The company reported earnings of $9.9 million, or 31 cents per share, for the fiscal fourth quarter, which ended March 31. That compared with $53.6 million, or $1.45 per share, in the same period a year ago.

Last year's quarter, however, included $39.6 million in earnings from a key-man life insurance payment. Adjusted earnings for the year-ago period were $14.5 million, or 39 cents per share.

Revenue for the latest quarter fell 2.6 percent, to $597.6 million.

Analysts had predicted quarterly revenue of $623 million and earnings of 29 cents per share.

Comparable store revenue, which measures sales at stores open more than a year, fell 9.8 percent.

HHGregg continued to see declines in TV sales and increases in appliance sales. About 43 percent of the company's sales came from appliances in the latest period, compared to 37 percent a year ago.  Roughly 36 percent of the retailer's sales came in the video category in the last quarter, down from 43 percent last year.

The retailer saw double-digit comparable-store sales decreases in cameras, camcorders and small electronics, partially offset by increases in sales from mattresses, furniture and fitness equipment.

CEO Dennis May told analysts that the company will continue to narrow its TV offerings to feature larger, pricer models while expanding its line of home-theater furniture options.

It also plans to increase its marketing efforts in the appliance category to coincide with improvement in the U.S. housing market.

In a conference call, May said the company plans to expand its lease-to-own program and offer additional credit options.

HHGregg predicted earnings per share for fiscal 2014 in the range of 75 cents to 90 cents and  sales growth in the range of 1 percent to 3.5 percent.

May said the company would limit store openings to five in the next fiscal year.
 

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