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Weak appliance sales hurt HHGregg profit

August 6, 2008
A downturn in sales of high-margin appliances contributed to a 26.8-percent decline in net profit in HHGregg Inc.'s first fiscal quarter, the Indianapolis-based retailer reported this morning.

HHGregg, which also sells electronics, turned in $2.1 million in profit for the period ended June 30. The 6 cents a share fell well below the 9 cents anticipated by analysts surveyed by Thomson Financial.

Slow appliance sales dragged down overall sales of stores open at least a year by 2.6 percent, HHGregg said.

Appliances typically make up the bulk of sales during the summer, while electronics usually sell better in the winter, CEO Jerry Throgmartin said in a conference call with analysts.

Attractive features and increasingly competitive prices on electronics, particularly flat-panel televisions, should bring in considerable profits in the next quarter, Throgmartin said.

"There is so much new technology in the marketplace today," he said. "We're really seeing...good things for that area as we look into the fall selling season."

Throgmartin blamed the difficulty in appliance sales mostly on the economy rather than on manufacturers' price increases, noting that costumers generally buy appliances based more on budget than features, simply choosing different models if prices increase.

Also contributing to the profit decline were costs associated with opening its first stores in Florida. Those costs included personnel, advertising and the opening of a warehouse.

However, total sales, including new stores, increased 16 percent, to $295.4 million.

HHGregg also reaffirmed that it expects profit of $1.13 to $1.20 a share in 2009.

Gregg shares fell 30 cents, to $9.76, in morning trading.

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