1) In the CC of 8/2/12, the CEO said: In the appliance category, we are continuing to gain market share and are becoming the appliance retailer of choice in our markets. Our growth in the category remains robust, and is likely that appliance will grow to be our largest product category this fiscal year. See link1
2) In the CC, the CFO said that HGG seeks shareholder value along with zero debt He also said opening of new stores will slow down significantly in the next months. See link1
3)To improve profit margin , HGG is adding fitness equipment , special furniture and more Apple products. See link1
4) HGG will continue its $50M shares repurchase plan . $50M is 22% of the market cap of $227M. See link2
5) BBY put Circuit City (CC) out of business in the recession of 2009 because CC had large debt. HGG has zero debt and is replacing CC stores only in prime locations. HGG will not end up in BK because it has 58 years policy of avoiding debt.
6)Even after the warning, HGG expects to have about $1.1 EPS implying low PE of 6. See link2
7) Insiders hold 54% of outstanding shares and the tiny float of 16M shares could be big trouble for shorts considering the $50M repurchase plan. Recently insiders bought 5K shares . See link2
8) HGG is extremely oversold after 52% meltdown in 3 weeks.
9) At 228M cap, HGG is a takeover target by Home Depot , BBY or Low's. Home depot CEO said that he is interested to enter the electronics retailer business.
10) The large short ratio of 51% of float and the $50M repurchase plan should fuel a big rally soon.
Circuit City actually had very little debt when it went out of business and, when cash was factored in, had a net cash position. That is what made their bankruptcy filing so surprising at the time. I believe they filed because the had a crisis of confidence by their suppliers.
In all likelihood, yesterday's takeover of Best Buy initiated an unwinding of a pair trade that consisted of shorting electronics retailers and going long Amazon.com.
As an aside, these electronics retailers (HGG , CONN) now have margins that are comparable or greater than Amazon.com's margins. So the thesis that Amazon.com is going to drive them all out of business is beginning to sound not so plausible -- especially since Amazon.com is now starting to be forced to collect sales taxes in the most populous states (Texas and California), which wipes out a large advantage it had in big-ticket electronics sales.