New stores help HHGregg boost profit-WEB ONLY

Indianapolis retailer HHGregg Inc. overcame a decline in comparable-store sales and the difficult economic environment during its third fiscal quarter, reporting profit of $17.1 million – a 13-percent improvement from the prior year period.

Sales during the quarter were up almost 7 percent, to $416 million.

Profit margins increased primarily because the company was able to make some good buys in key merchandise categories, President Dennis May said in a statement.

The results also were helped by the addition of six stores during the quarter. Excluding the new properties, sales were down about 13 percent.

HHGregg’s quarterly profit, which is equal to 52 cents per share, exceeded analysts’ average estimate of 38 cents per share. But revenue fell short of their $424.7 million prediction.

The company attributed the comparable-store sales drop to lower prices on flat-panel televisions and fewer sales of major appliances, mattresses and personal electronics.

The nation’s financial crisis also has taken a toll. Customer traffic patterns have been more volatile than normal since mid-September, company officials said. Even so, they expect sales to increase 9 percent to 12 percent in the fourth quarter, when two more stores are slated to open.

HHGregg also could benefit from the demise of one of its biggest rivals, Circuit City Stores Inc., which is closing all of its stores after filing for bankruptcy last year. The Indianapolis retailer also has positioned itself to step into that void, agreeing to provide discounts in exchange for Circuit City gift cards until April and creating a service to handle warranty issues for products purchased there.

Company officials did not directly address the demise of the nation’s No. 2 electronic retailer in this morning’s release, but CEO Jerry Throgmartin said HHGregg is “focused on maximizing the many opportunities that lie ahead.”

“We will continue to focus on what we can best control, namely reducing expenses, carefully managing inventory and cash flow, keeping our sales force highly motivated and providing our customers with an unmatched shopping experience,” he said. “Longer-term, we are confident that we are ideally suited to take advantage of the industry dynamics … [including] increased market share gains.”