hhgregg Net Falls 37.6 Percent in 2Q
November 2, 2012,
INDIANAPOLIS-Declining sales and rising expenses as a percentage of sales hammered hhgregg's bottom line in its second fiscal quarter. Net income totaled $3.8 million, down 37.6 percent from the second quarter of last year.
Net sales in the quarter, which ended on Sept. 30, fell 5 percent to $587.6 million, including an 8.8 percent drop in same-store sales. A major factor in the sales falloff was the 17 percent drop in comparable-store sales in the "other" product category, which includes furniture, mattresses, audio, fitness equipment and personal electronics. In addition, hhgregg's video category suffered from a 20.5 percent same-store sales decrease.
Although selling, general and administrative expenses slipped by 1.5 percent, they increased 80 basis points as a percentage of sales to 21.4 percent. Net advertising expense rose 50 basis points to 5.4 percent. Both of these expense categories trumped a 108 basis-point pickup in gross margin, which finished the quarter at 29.6 percent.
Dennis May, hhgregg's president and CEO, acknowledged that the video category hurt the retailer's second quarter, and added that although a switch to larger-screen televisions bolstered gross margin, the company was disappointed at the market share it lost in televisions. "Over the next few quarters, we will continue to refine our strategy to find the right mix between gross margin rate and market share," May said.