HH Gregg president and CEO Dennis May expected the company’s first quarter to be challenging, but he did not envision a 10.2% same store sales decline or a $10.3 million loss.
The operator of 228 appliance, electronics and furniture stores reported financial results for its first quarter ended June 30 and issued a dour outlook for the remainder of the year. Sales during the quarter declined 10% to $472.3 million from $524.9 million the prior year, due primarily to the 10.2% comp decline. With the company’s top line in decline, gross margins and profits came under pressure. The company reported a loss of $10.3 million, or 36 a share, compared to a prior year net loss of $1.3 million, or four cents a share. The earnings per share loss was 20 cents below analysts’ estimates.
To remedy the situation, May indicated the company will balance the need to drive near term results with long term investments execute a transformation around a broader assortment of home products.
“While we are making progress in many areas, we have opportunities for improvement in others. We have adjusted our advertising strategy to be more balanced, focusing more on traffic driving promotions versus the branding focused advertising that we did in the first quarter,” May said. “We are also making adjustments to the video and appliance categories and refocusing our broader efforts on driving traffic to our stores and website. We continue to make significant progress as it relates to the customer experiences inside our stores and on our website.”
Despite May’s assertion of “significant progress,” uncertainty around the time frame in which it will be achieve caused the company to suspend guidance for the remainder of the fiscal year. The company did provide some general direction on its performance though, indicating full year earnings would be below prior year results and that same store sales are expected to decline between high single digits and mid single digits, worse that an earlier forecast of a comps that ranged from flat to a low single digit decline.
“Management is executing its plans to transform our business and we are confident in our ability to establish HH Gregg as the home products retailer of choice for consumers,” May said. “We believe that executing on our initiatives of redefining our sales mix, differentiating our customer experience, enhancing our e-commerce capabilities and launching new IT based customer capabilities will improve the company's operating profitability.”