Over the last few years, HHGregg’s senior executives have been departing at a rapid clip, adding to instability at a time the chain was remaking itself to combat tumbling sales of consumer electronics.
With the hiring of Chief Financial Officer Robert Riesbeck last month, the new team surrounding longtime CEO Dennis May is now in place. The question is, can the incoming executives work some magic at the Indianapolis company as it lurches through what’s trending to be its seventh consecutive year of declining same-store sales?
Plenty of investors are skeptical of the company’s prospects, which helps explain why shares hit a 52-week low of $5.85 on Sept. 25. The shares have ticked up to $6.35 but remain 66 percent below where they were a year ago.
Analysts these days talk about the company like it’s a wayward child.
HHGregg “is struggling to find its identity in this rapidly changing world,” UBS analyst Michael Lasser wrote in July after the company reported a quarterly same-store sales decline of 10.2 percent and a larger-than expected loss.
“Its existential journey is challenged by the sub-par demand trends in its product categories, the intense competitive landscape and its own execution missteps.”
The company’s biggest challenge is outside its control. Demand plunged for consumer electronics—which used to be HHGregg’s biggest product line—after manufacturers’ efforts to innovate failed to entice shoppers.
HHGregg responded by broadening its product offerings to include other big-ticket items consumers often buy on credit, including furniture and fitness equipment. But results have been spotty.
The company has had success bulking up its appliance business, which now generates 57 percent of sales. But in the fiscal first quarter, which ended June 30, same-store appliance sales slipped for the first time in 11 quarters.
The company also rattled investors with other setbacks, including an unsuccessful effort to shift its advertising toward brand-building and away from promotions. After the move cost it sales, HHGregg in July dismissed the advertising firms it hired only last year and returned to its former agency.
Dennis May, through company representatives, declined an interview request. But in a July 31 conference call with analysts, he said the company continues to build the scaffolding—including improved e-commerce offerings and expanded furniture inventory—to pave the way for better sales.
No doubt, he’s hoping savvy guidance from his brain trust also will give him a boost. Here’s the new team:
• Riesbeck, the new chief financial officer, most recently was an executive with the Florida-based private equity firm Sun Capital Partners and before that was CFO of Sun-owned Marsh Supermarkets Inc. He replaces Jeremy Aguilar, who left in January to become CFO of the Colorado-based chain Sports Authority.
• Troy Risch, former executive vice president of store operations for Texas-based Radio Shack, joined HHGregg in May as chief operating officer. He replaced Gregg Throgmartin, who stepped down to become CEO of Florida-based bicycle retailer BikeStreet USA. His departure left HHGregg without a senior executive from the founding family for the first time since the company began in 1955.
• Julie Lyle, a former senior vice president of merchandising for Wal-Mart Stores Inc., became HHGregg’s chief marketing officer in December. The post had seen a revolving door, with two former Sears merchandising executives each lasting less than six months.
In an interview with Marketing Land last month, Lyle said her job requires her to think broadly about the future of retailing.
“I am constantly pondering the question, what’s the next big, BIG thing?” she told the publication. “How can we best engage with our customers in new and compelling ways that will reshape their expectations of the ideal shopping experience?
“As our CEO says, ‘The retail model we are creating doesn’t exist yet!’”
It’s unclear why so many executives moved along. None has said anything publicly to suggest a lack of faith in the HHGregg business model or in its CEO, May, a 15-year company veteran.
In fact, in an interview with the Miami Herald, Throgmartin singled out May for praise. Throgmartin noted that, during his 13 years at the company, the chain swelled from 33 stores to 228.
“A lot of the credit for that goes to Dennis May,” he said. “I’ve been around many retailers across a broad range of products, and Dennis ranks in the top 1 percent.”•