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hhgregg (HGG) Well Poised on Initiatives, Volatility Continues

Zacks Equity Research

Despite continued volatility, hhgregg Inc. HGG has been gaining momentum buoyed by its strategic efforts and savings initiatives. The stock, with a Zacks Rank #3 (Hold), has a long-term earnings growth rate of 10%. Also, the share price has increased nearly 4% over the past six months.

Let’s delve deeper to find out what’s happening at this Indianapolis, IN-based retailer.

Factors at Play

hhgregg has implemented several initiatives to revive its business, which encompass driving store traffic, enhancing brand recognition, cost containment and  a multi-channel approach. Notably, product innovation, discounts and promotional offers, improvement in home-delivery facilities, exiting underperforming businesses and store openings are some of the measures undertaken by the company to boost sales.

Alongside, hhgregg has been focusing on its e-commerce business. Also, the company has invested in infrastructure upgrades, additional web application capabilities, expansion of the assortment and a new mobile app to boost the e-commerce business.

The company’s strategic efforts have led to an improvement in its appliances, premium TV and furniture categories. Also, it has started displaying furniture at the front portion of its stores, making it easier for customers to see the assortment immediately on entering the location. Further, the company is revamping its stores in order to drive overall sales. hhgregg expects the home products category, specifically furniture, to aid growth in the coming quarters.

HHGREGG INC Price and Consensus

 

HHGREGG INC Price and Consensus | HHGREGG INC Quote

In terms of revenue opportunities, the company is pinning its hopes on the appliance category, as this happens to be the key revenue driver. Fine Lines departments incorporate ultra-premium appliances brands that have historically generated higher revenues. In order to revive the appliance business, the company plans to refresh the assortment and experience across channels, while continuing to enhance its product selection by creating additional Fine Lines departments. Management plans to open 25−30 Fine Lines appliance stores over the next two years. In fiscal 2018, hhgregg will open 10−15 additional Fine Lines locations. It currently has 14 Fine Lines stores.

Moreover, hhgregg is focused on innovations like 4K ultra high definition, curve TVs and OLED TVs to boost category sales of consumer electronics. The company will continue to utilize its financing options to drive sales in the consumer electronics business. Further, to revive the appliance business, it plans to refresh the assortment across channels while continuing to enhance its product selection by creating additional Fine Lines departments.

However, we note that hhgregg has been reporting losses and declining revenues for the past many quarters, primarily due to weak comparable store sales. Though the company’s strategic initiatives have the potential to revive declining comps, we believe the improvement will take time as it is still under a lot of pressure and facing volatility. Sales from its consumer electronics business will likely remain in the red in the coming quarters.

Stocks to Consider

Some well-positioned retailers include The Children's Place, Inc. PLCE, Tilly's, Inc. TLYS and Urban Outfitters Inc. URBN. All of them sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children’s Place has an average positive earnings surprise of 33.06% in the trailing four quarters. It also has a long-term earnings growth rate of 10.33%.

Tilly’s has an average positive earnings surprise of 73.74% in the trailing four quarters with a long-term earnings growth rate of 15.50%.

Urban Outfitters has an average positive earnings surprise of 6.70% in the trailing four quarters with a long-term earnings growth rate of 15.00%.

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URBAN OUTFITTER (URBN): Free Stock Analysis Report
 
CHILDRENS PLACE (PLCE): Free Stock Analysis Report
 
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