Hhgregg has holiday sales disaster

Same store sales declined 11% at Hhgregg during the company’s third quarter ended Dec. 31 with the retailer of appliances, electronics and furniture citing competitive pressures as the source of weakness.

Official results will be released on January 28, but the preliminary results the company shared before the market opened on Jan. 6, showed same store sales and total sales at the company’s 227 stores declined 11% to $593 million from sales of $666 million during the comparable period the prior year. The same store sales decline was most pronounced in the computer and tablet category where comps declined an estimated 35%. Comps in the home products category increased 3%, but that wasn’t enough to offset declines of 8% in consumer electronics and 10% in appliances.

“During the quarter, we were challenged by the competitive pressures in the market. Although we are disappointed with our overall performance during the quarter, we are pleased with many of the strategic investments we have made for our transformation,” said Dennis May, president and CEO of Hhgregg. “Our investment in the furniture category drove an increase of approximately 16% in furniture comparable store sales during the quarter. Our focus on large-screen, premium video drove 59% of our TV sales in the quarter to be 4K TVs, up from 50% in the second fiscal quarter. We are also pleased with the continued cost savings initiatives and remain on track to achieve more than $50 million of cost savings in fiscal 2016. We remain confident, in line with our prior expectations, that we will generate positive adjusted EBITDA for the fiscal year.”

The company also said it expects to incur a $15 million to $25 million non-cash charge for asset impairment of certain locations. The impairment charge is based on current trends in certain under-performing markets and the lack of visibility to the recoverability of the assets associated with those locations, the company said.

“While the accounting related charge is significant, it is important to note that this charge is non-cash. We finished the quarter in a strong liquidity position with a cash balance of approximately $7 million and no outstanding borrowings and continue to efficiently manage our working capital,” said CFO Robert Riesbeck.