hhgregg (HGG) Reports 11% Drop in Q3 Comps

hhgregg, Inc. (NYSE: HGG) announced preliminary net sales results for the third fiscal quarter ended December 31, 2015. The Company also announced information on certain non-cash charges and details of its third fiscal quarter earnings conference call.

All figures in this release are preliminary and remain subject to the completion of normal quarter-end accounting procedures and adjustments, which could result in changes to these preliminary results. hhgregg will provide additional information regarding its quarterly results when it reports its third fiscal quarter results on January 28, 2016.

Preliminary Net Sales Results

For the third fiscal quarter of 2016, the Company estimates net sales to be approximately $593 million, a decrease of approximately 11% as compared to net sales of $666 million reported for the third fiscal quarter of 2015. Third fiscal quarter comparable store sales are estimated to have decreased approximately 11%, with the appliance category estimated to have decreased approximately 10%, the consumer electronics category estimated to have decreased approximately 8%, the home products category estimated to have increased approximately 3%, and the computer and tablet category estimated to have decreased approximately 35%.

Dennis May, President and CEO, commented, “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. 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.”

Non-Cash Asset Impairment Charge

The Company expects to incur a non-cash charge for asset impairment of certain locations in the quarter ended December 31, 2015. 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 expects the impact of this non-cash pre-tax charge to be $15 million to $25 million and is currently in the process of finalizing that determination.

Robert Riesbeck, CFO, commented, “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. Our inventory balance as of December 31, 2015 was more than $40 million lower than the inventory balance at December 31, 2014.”

Conference Call to Discuss Full Operating Results for the Third Fiscal Quarter 2016

hhgregg will be conducting a conference call to discuss operating results for the three months ended December 31, 2015, on Thursday, January 28, 2016 at 9:00 a.m. (Eastern Time). Interested investors and other parties may listen to a simultaneous webcast of the conference call by logging onto hhgregg's website at www.hhgregg.com. The on-line replay will be available for a limited time immediately following the call. The call can also be accessed live over the phone by dialing (877) 304-8963. Callers should reference the hhgregg earnings call.

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