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hhgregg Reports Fiscal Second Quarter Operating Results
Nov 09, 2009 (Close-Up Media via COMTEX) --
hhgregg reported net income of $4.9 million for the three months ended September 30, or $0.13 of net income per diluted share, compared with net income of $3.4 million, or $0.10 of net income per diluted share, for the comparable prior year period.
In a November 5 release, hhgregg said that for the six month period ended September 30, net income was $6.4 million, or net income per diluted share of $0.18, compared with net income of $5.5 million, or $0.17 of net income per diluted share for the comparable prior year period. The 46 percent increase in earnings for the three month period ended September 30, was the result of a modest increase in sales, a flat gross margin, and a modest decrease in operating expenses. The 16.6 percent increase in earnings for the six month period ended September 30, was the result of a modest decrease in operating expenses and modest increase in sales, partially offset by a decrease in gross margin.
"We are encouraged with our quarterly operating performance and our ability to drive growth in earnings and operating cash flow by preserving margins and managing expenses, all while continuing to add new stores," said Dennis May, President and CEO. "While the overall environment remains challenging, we are encouraged by the improving traffic and sales trends we experienced throughout the quarter."
Net sales for the three and six months ended September 30, increased 3.7 percent and 0.1 percent, respectively, compared to the comparable prior year period to $332.2 million and $616.6 million, respectively. The increase in sales for the three and six months ended September 30, was primarily attributable to the net addition of 15 stores during the past 12 months, partially offset by a 9.4 percent and an 11.9 percent decrease in comparable store sales, respectively.
hhgregg's 9.4 percent and 11.9 percent comparable store sales decreases for the three and six months ended September 30, respectively, primarily reflect continued weakness in consumer demand in the both the video and appliance categories. For the three and six month periods, the decrease in comparable store sales for the video category was due primarily to a decline in average selling prices primarily from consumers trading down in screen sizes partially offset by increases in sales of LED televisions. Sales in the appliance category continued to decrease for both the three and six months ended September 30, however, the trend for the three months ended September 30, significantly improved from the previous three month period. For the three and six months ended September 30, the comparable store sales increase in the other category was due to triple digit comparable store sales increases in the computer category offset by double digit comparable store sales decreases in the mattress category.
Gross profit margin, expressed as gross profit as a percentage of sales, remained consistent year over year for the three months ended September 30, at 30.8 percent and decreased for the six months ended September 30, from 30.7 percent to 30.3 percent. The appliance and video gross profit margins exceeded the company average as a percentage of sales during the three and six month period ended September 30. The other category gross profit margin was below the company average for both the three and six month periods as a result of a higher mix of notebook computers, which carry a gross margin percentage significantly less than the company average.
Net advertising expense, as a percentage of sales, decreased approximately 125 basis points during the three months ended September 30, and decreased approximately 100 basis points during the six months ended September 30, when compared with the respective comparable prior year periods. Despite the comparable store sales declines during both periods, decreases in net advertising expenses as a percentage of sales were driven by reduced advertising rates coupled with higher advertising expenses in the prior year period from the launch of new markets in Florida.
The company further noted it is updating its earnings and sales guidance for fiscal 2010. Based on current trends in the business and year-to-date performance, the Company is tightening its annual net income per diluted share guidance to $0.90 to $1.00 from a previous range of $0.85 - $1.00. This update to guidance incorporates the dilution impact of the common stock offering and private placement completed in July of 2009. Additionally, the Company is updating its guidance for net sales growth of 6 percent to 9 percent for the fiscal year, which implies an expectation of a comparable store sales decline of 6 percent to 9 percent for fiscal 2010, from previous guidance of sales growth of 3 percent to 7 percent, which had implied an expectation of a comparable store sales decline of 7 percent to 12 percent.
hhgregg is a specialty retailer of consumer electronics, home appliances, mattresses and related services operating under the names hhgregg and Fine Lines. hhgregg currently operates 126 stores in Alabama, Florida, Georgia, Indiana, Kentucky, Mississippi, North Carolina, Ohio, South Carolina and Tennessee.
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