Hhgregg Inc. (HGG) reported its first-quarter income from continuing operations of $2.7 million or 7 cents per share, surpassing the Zacks Consensus Estimate of 2 cents. This also compares favorably with the income of $1.5 million or earnings of 4 cents in the year-ago quarter. The improved showing was attributable to higher-than-expected sales aided by additions from same store sales and gross margins.
Quarter in Detail
Hhgregg’s net sales rose 53.3% to $436.0 million in the reported quarter. This was due to a net addition of 46 stores during the past one year and a significant improvement of 6.3% in comparable store sales. Strong demand from Hhgregg’s major product categories was the main driver of this increase.
The increase in same store sales of Hhgregg was attributable to the rise in comparable store sales in the video and appliances categories. This was driven by strong unit demand and the government’s appliance stimulus program, partially offset by a fall in average selling prices. However, same store sales decreased in the Other category primarily due to plummeting comparable store sales in small electronics and camcorders.
Gross profit based on net sales increased 59 basis points to 30.4% in the current quarter. This was due to the improved gross profit margin in the video and appliance categories, partially offset by a decline in gross profit margin in the other category.
SG&A based on net sales climbed approximately 23 basis points to 23.1% in the first quarter of 2011 due to costs associated with the launch of stores in the Mid-Atlantic region, partially offset by the decrease in occupancy costs as a result of comparable store sales increases.
Net advertising expense based on net sales increased approximately 43 basis points to 4.6% in the reported quarter, driven by increased spending on the launch of 26 stores during the period.
Guidance
Hhgregg has reiterated its earnings per share guidance of $1.35 to $1.45 for fiscal 2011 and remains impressed by the current business trends and its ability to deliver strong financial results.
Hhgregg also remains on track to opening another 12 stores by the end of the second fiscal quarter of 2011 and aggregating 40-45 new stores in fiscal year 2011.
Outlook
Hhgregg is well positioned with a profitable store model and growth strategy. The company’s store model continues to produce profitable results driven by existing store execution, new store performance and its differentiated business model. While, Hhgregg faces stiff competition from its peers and the macro headwinds, the increased demand from the core categories and the productivity of new stores are expected to raise market share in the current environment.
Quarter in Detail
Hhgregg’s net sales rose 53.3% to $436.0 million in the reported quarter. This was due to a net addition of 46 stores during the past one year and a significant improvement of 6.3% in comparable store sales. Strong demand from Hhgregg’s major product categories was the main driver of this increase.
The increase in same store sales of Hhgregg was attributable to the rise in comparable store sales in the video and appliances categories. This was driven by strong unit demand and the government’s appliance stimulus program, partially offset by a fall in average selling prices. However, same store sales decreased in the Other category primarily due to plummeting comparable store sales in small electronics and camcorders.
Gross profit based on net sales increased 59 basis points to 30.4% in the current quarter. This was due to the improved gross profit margin in the video and appliance categories, partially offset by a decline in gross profit margin in the other category.
SG&A based on net sales climbed approximately 23 basis points to 23.1% in the first quarter of 2011 due to costs associated with the launch of stores in the Mid-Atlantic region, partially offset by the decrease in occupancy costs as a result of comparable store sales increases.
Net advertising expense based on net sales increased approximately 43 basis points to 4.6% in the reported quarter, driven by increased spending on the launch of 26 stores during the period.
Guidance
Hhgregg has reiterated its earnings per share guidance of $1.35 to $1.45 for fiscal 2011 and remains impressed by the current business trends and its ability to deliver strong financial results.
Hhgregg also remains on track to opening another 12 stores by the end of the second fiscal quarter of 2011 and aggregating 40-45 new stores in fiscal year 2011.
Outlook
Hhgregg is well positioned with a profitable store model and growth strategy. The company’s store model continues to produce profitable results driven by existing store execution, new store performance and its differentiated business model. While, Hhgregg faces stiff competition from its peers and the macro headwinds, the increased demand from the core categories and the productivity of new stores are expected to raise market share in the current environment.
HHGREGG INC (HGG): Free Stock Analysis Report
Zacks Investment Research
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