HHGregg Inc. had only 18 stores when Dennis L. May left the bankrupt Sun Television and Appliances
chain in Ohio about 10
years ago to join the locally based company.
Today, HHGregg has 108 stores and stands as a rare survivor in a crowded field of home technology retailers. And the closure
of Circuit City Stores Inc. this month could give HHGregg, which was founded in 1955, a unique opportunity to grow from a
strong regional player into a national powerhouse.
May, 41, is slated to take over as the company’s CEO in August. He vows to continue growing what is already the nation’s largest
regional electronics player. The chain has 4,000 employees and now ranks third on a national level for consumer electronics
and appliances, behind only Best Buy and Sears.
May recently spoke about the outlook and challenges for HHGregg with IBJ. Here’s the
IBJ: You take over as CEO in August. You expect consumers
will start to wake up by then?
MAY: I certainly hope so. The key for us is what’s going to make the consumer respond,
and confidence is key. Two factors — jobless
rates and the housing market — aren’t helping.
IBJ: What are people buying?
MAY: The TV business continues to be relatively robust. Flat-panel TV is a great product
and still has a relatively low household
penetration — about 55 percent — and most of them have only one per home. It’s a product people want. Blu-ray has
IBJ: What else is cooking on the innovation front?
MAY: This fall, we’ll be selling LED flat-panel TVs, which have improved picture quality
and are even thinner. On the appliance
side, front-load laundry now represents one-third of the industry — it’s energy-efficient, saves water and electricity,
has style innovation.
IBJ: What steps are you taking to capitalize on the
demise of Circuit City?
MAY: I’ve been in the business for 20 years. If you had asked me any time in my career,
I could not have imagined this industry
without Circuit City. I feel horrible for those 36,000 families.
We’re reaching out to the Circuit City consumers, accepting Circuit City gift cards, helping facilitate warranties —
them to our level of service. We’re going to get our unfair share, that’s our goal.
As a company, we need to stay humble. We need to focus on customer needs and employee needs.
IBJ: HHGregg took over some of the old Sun locations
about 10 years ago. Do you expect you might do the same with some old
Circuit City stores?
MAY: There are quite a few closings-including Linens & Things and Circuit City-that
have created a pretty exciting opportunity
for HHGregg in terms of real estate. Also, lease rates are coming down-good news for an expanding retailer.
But we’re not going to overstretch our resources and liquidity as we grow. Our goal is to continue to expand out of our profits.
IBJ: Why are you taking over now? Is Jerry Throgmartin
OK, health-wise? (Throgmartin, 54, is the current CEO and a cancer
MAY: Everything’s fine. We felt the timing was appropriate as Jerry focuses on vision
and strategy and I focus on the day-to-day
business. I’ve been part of adding 90 stores to the company. I’ve grown up in retail.
IBJ: The company’s shares have recovered from a low
under $4 to more than $10. Are they still undervalued?
MAY: We have a policy not to comment on our stock price. We think our performance reflects
the strength of the model. We’ve
got a strong balance sheet, great momentum in a tough economy, and great support from our suppliers.
IBJ: You’ve got about $100 million in debt at a time
when Wall Street is uneasy about leverage. Are you comfortable with the
MAY: We’ve been able to grow and deleverage at the same time. You won’t find another
growth retailer with a better debt to
EBITDA (earnings before interest, taxes, depreciation and amortization) ratio.
IBJ: So it’s still possible to be a growth retailer
MAY: It’s safe as long as you apply the appropriate metrics to your expansions. Being
profitable is not optional for our new
IBJ: Where are you looking geographically for more
MAY: We have tremendous flexibility. We will continue to leverage our Florida distribution
facility (in Orlando). We now have
14 stores in Florida and have said we’d like to have 30. We’re also looking to backfill in existing markets, leveraging our
business model to be more efficient.