IBJNews

Tight credit or no credit? HHGregg wants your business

Back to TopCommentsE-mailPrintBookmark and Share

HHGregg Inc. always has cast itself as a purveyor of premium products. That’s great if you have the means to purchase big-ticket items. But a vast swath of the American consumer does not.

The Indianapolis-based appliance and electronics retailer is quietly making a fundamental shift to cast its net more widely—starting with stepped-up promotion of its private-label credit card.

That card, offered through GE Capital with an annual rate of 29.99 percent, can take it only so far—given that one-third of its applicants get rejected.

So HHGregg is racing to put together credit options for customers with spottier credit. And it also has rolled out rent-to-own, an option it now offers in more than half of its 228 stores.

It’s a dicey business to lend money to people with credit problems. But HHGregg is not the party taking the risk. All those offerings are through third-party vendors and are non-recourse to the company.

Even so, the aggressiveness of the push has surprised some analysts. On the company’s May 20 conference call, Janney Montgomery Scott analyst David Strasser said that, given what he thought was the chain’s higher-end customer base, he wouldn’t have expected to hear management discussing rent-to-own opportunities or the positive boost it got from IRS refund checks.

“Yeah,” HHGregg CEO Dennis May responded, “in today’s economy, I think it is a wider customer base. I think that is an impact of the overall economic environment we live in.”

The broader credit offerings also stem from the chain’s decision to de-emphasize weak-selling large-screen televisions and introduce a host of other big-ticket items for the home, including furniture and fitness equipment.

Buyers of such products—along with purchasers of appliances, now HHGregg’s biggest segment—“crave” financing options, May said. Private-label credit card purchases now represent 35 percent of sales, up from 29 percent two years ago.

HHGregg projects rent-to-own will become only a sliver of its business. But it has big ambitions for the credit programs that would target customers who failed to qualify for the private-label card.

“We believe that by enhancing our credit offerings, we will be able to generate greater brand loyalty, higher average sales per transaction, and increased premium service plans,” May said on the call.

But analysts say lining up credit providers willing to shoulder the risk won’t be easy.

“We first heard management was looking for partners last summer, so it has already been a long road to get to this point,” Jefferies analyst Daniel Binder said in a report. “Given the lack of a single source for this kind of credit, management will attempt to set up a network of credit providers.”

Binder added: “This is where the biggest opportunity could be if management can form the right relationships and get past system and regulatory hurdles.”

For now, most analysts aren’t factoring successful execution of those programs into their outlook for the company. But even without that boost, they see the future brightening after a long string of painful quarters in which consumer-electronics sales plunged.

Same-store sales of appliances now have risen seven consecutive quarters, in part because of the recovery of the housing market. And the new product lines, especially furniture, are beginning to pick up slack from the weak TV business.

The company also is getting a rub-off effect from the resurgence of its chief rival, Best Buy. Growing sentiment that Best Buy management has righted the ship has pushed that chain’s shares up 138 percent from their December low. HHGregg shares are up 145 percent from their October low.

Milestone for Interactive

It took 13 years, but Indianapolis-based software developer Interactive Intelligence Group Inc. shares finally surpassed the high they reached in 2000 at the height of the dot-com boom.

Interactive went public in 1999 at $13 a share. The stock rocketed past $31 in its first day of trading and reached $50.50 the following March. But then the bubble burst, and by 2002 the shares were fetching less than $2.

Interactive shares finally eclipsed their 2000 high on May 8, reaching $51.29. They have since settled back to $49, but still are up 46 percent for the year.

There is a lot more to support today’s stock price than when shares were last in this range. For starters, quarterly revenue now tops $73 million, 10 times where it was in 2000.•

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. The east side does have potential...and I have always thought Washington Scare should become an outlet mall. Anyone remember how popular Eastgate was? Well, Indy has no outlet malls, we have to go to Edinburgh for the deep discounts and I don't understand why. Jim is right. We need a few good eastsiders interested in actually making some noise and trying to change the commerce, culture and stereotypes of the East side. Irvington is very progressive and making great strides, why can't the far east side ride on their coat tails to make some changes?

  2. Boston.com has an article from 2010 where they talk about how Interactions moved to Massachusetts in the year prior. http://www.boston.com/business/technology/innoeco/2010/07/interactions_banks_63_million.html The article includes a link back to that Inside Indiana Business press release I linked to earlier, snarkily noting, "Guess this 2006 plan to create 200-plus new jobs in Indiana didn't exactly work out."

  3. I live on the east side and I have read all your comments. a local paper just did an article on Washington square mall with just as many comments and concerns. I am not sure if they are still around, but there was an east side coalition with good intentions to do good things on the east side. And there is a facebook post that called my eastside indy with many old members of the eastside who voice concerns about the east side of the city. We need to come together and not just complain and moan, but come up with actual concrete solutions, because what Dal said is very very true- the eastside could be a goldmine in the right hands. But if anyone is going damn, and change things, it is us eastside residents

  4. Please go back re-read your economics text book and the fine print on the February 2014 CBO report. A minimum wage increase has never resulted in a net job loss...

  5. The GOP at the Statehouse is more interested in PR to keep their majority, than using it to get anything good actually done. The State continues its downward spiral.

ADVERTISEMENT