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HHGregg hires outside advisers to help with ongoing woes

February 15, 2017

Indianapolis-based HHGregg Inc. is turning to investment banks for help as the struggling appliance and electronics retailer battles sinking sales.

The company announced Wednesday afternoon that it has engaged subsidiaries of Stifel Financial Corp. “to pursue a range of potential strategic and financial transactions that will support the company’s initiatives to improve liquidity and return to profitability.”

The subsidiaries include Miller Buckfire & Co., which focuses on corporate restructurings, and Stifel Nicolaus & Co.

Miller Buckfire will advise HHGregg on plans involving how to deal with its debt and a possible turnaround, Bloomberg News reported Tuesday, citing sources with knowledge of the matter.

HHGregg also hired global law firm Morgan Lewis & Bockius LLP as legal adviser, the sources said.

“We are committed to improving our results through our business strategy, including investments made to shift our focus to appliances and furniture, and additional expected cost reductions,” HHGregg CEO Robert Riesbeck said in a written statement. “We believe it is an appropriate time to explore potential strategic transactions. As the company undertakes this exploration process, we are focused on the execution of our business strategy and remain fully committed to serving our customers’ needs.”

The retailer posted disappointing numbers for the crucial holiday season in the quarter ended Dec. 31, with sales plunging 24 percent, to about $453 million, from a year earlier.

The retailer took a whopping loss of $58.3 million in the quarter, more than double the loss of $26.9 million it took in the third quarter of the previous year.

The company has posted 13 straight quarterly losses and seen its stock price plummet along the way.

Earlier this month, the company received notice from the New York Stock Exchange for failing to meet the minimum listing price requirement. The company was warned that it could be delisted.

HHGregg shares dropped 4.4 percent Wednesday, to 43 cents each, after losing more than 60 percent in value last year.

HHGregg announced Feb. 3 that it had cut about 100 jobs, including 70 at its headquarters, in an effort to save $15 million a year.

Representatives for Stifel and Miller Buckfire declined to comment on the joint retention. Representatives at HHGregg and Morgan Lewis didn’t immediately respond to requests seeking comment.

The chain has struggled against online competition, as well as traditional retail outlets such as J.C. Penney Co., which added appliances last year.

HHGregg said it plans to "proceed in a timely and orderly manner," in exploring options with advisers, "but has not set a definitive timetable for completion of this process."

"There can be no assurance that this review process will result in a transaction or other strategic alternative of any kind," the company said.

Investment information site Debtwire reported earlier this month that HHGregg might need to "renegotiate contracts with its major suppliers this summer if it’s unable to turn around its operations." It cited multiple sources familiar with the situation.

The 220-store chain's major suppliers are LG, Samsung, Sharp, Sony and Toshiba, according to SEC filings. Debtwire said the suppliers are expected "to shorten payment terms in a move to shore up security that its inventory will be fully paid.

HHGregg as of September 2015 had cash on hand of $35 million and no debt. As of the end of 2016, it had $2 million in cash and had borrowed $30 million of the $94 million available under a line of credit.

“We have a great relationship with our lenders,” Riesbeck told IBJ this month. “I think there will be significant progress in the coming fiscal year. We have a long runway ahead of us.”

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