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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowHHGregg Inc. said this morning it projects fiscal first-quarter profit to beat analyst expectations despite shrinking revenue and a sharp decline in same-store sales.
The Indianapolis-based appliance and electronics retail chain also announced plans today to sell at least 3 million additional shares of its common stock at a to-be-determined price.
For the quarter ended June 30, HHGregg said it expects earnings of 3 cents to 4 cents per share, beating analysts’ break-even predictions.
The retailer predicted revenue of $284.4 million, a 3.7-percent decrease from the same period a year ago. Analysts expect revenue of $294 million.
HHGregg attributed the revenue drop to an estimated 14.7-percent decline in same-store sales. The same-store sales decrease was driven by a 17-percent drop in appliance and video-related product sales. Same-stores sales measure revenue at stores open at least a year.
The company expects to release official fiscal first-quarter earnings in early August.
HHGregg did not say how much it expects to make from it stock offering. Selling 3 million shares at today’s opening price of $16.89 would raise $50.7 million.
Up to 15 percent more stock could be sold if investor demand is sufficient, the company said. Credit Suisse Securities LLC and Barclays Capital Inc. are the joint underwriters for the offering. They have a 30-day option to buy an additional 450,000 shares from the company at an undisclosed price.
An offering of 3 million shares would dilute current shareholders’ stock by nearly 9 percent.
Earlier this month, HHGregg Inc. said that the bankruptcy of competitor Circuit City should enable it to open more stores within the next few years than previously expected.
The company now plans to open between 20 and 22 stores in fiscal 2010, which began March 31, up from previous estimates of 16 to 18 stores. In addition, HHGregg said it expects to open between 40 and 45 more stores in fiscal 2011.
Cities targeted for store openings next year include Tampa, Fla.; Memphis, Tenn.; and Richmond, Va.; as well as Philadelphia, Baltimore and Washington, D.C., in fiscal 2011.
The company has lease agreements for nearly all of the new stores expected to open during fiscal 2010, at a cost of roughly $45 million to $50 million. It also has begun to execute leases for stores that should open the next fiscal year. HHGregg so far has approved 18 locations for 2011.
Stores opening in fiscal 2010 will be funded from cash from operations and the company’s revolving credit line. HHGregg said it is exploring various financing alternatives, including equity and debt, to fund the opening of remaining stores.
The company is undertaking the expansion despite a highly competitive environment for electronics and appliance retailers, and a challenging economic climate.
Last week, Standard & Poor’s Ratings Services put its junk-level credit ratings on HHGregg on watch for downgrade, noting the financial risks associated with the retailer’s plan to accelerate new store openings.
HHGregg shares fell 55 cents this morning, or 3.3 percent, to $16.26 each.
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