UPDATE: Hhgregg Ramps Up Wireless Strategy With Phone Kiosks

Growing electronics and appliance chain Hhgregg Inc. (HGG) is ratcheting up its focus on wireless technology and placing its money on Verizon Wireless.

The regional retailer on Monday announced a partnership with Verizon retailer The Cellular Connection to roll out single-branded kiosks in Hhgregg's more than 150 stores in 15 states by the end of the year.

Partnerships with AT&T (T) and Tracfone, which is owned by America Movil SAB de CV (AMX), will expire once the kiosks are rolled out to all the stores, according to Hhgregg.

"By the time we roll it out to all stores, at that point, Verizon will be our exclusive carrier," Hhgregg Vice President of Marketing Jeff Pearson said in an interview.

The 150-square-foot kiosks operated by Marion, Indiana-based The Cellular Connection will offer the same services as any other Verizon store, including bill paying and service upgrades, Pearson said.

Flat-panel televisions and major appliances are Hhgregg's most important product categories, generating 82% of fiscal 2010 sales, which totaled $1.5 billion. But the Indianapolis retailer has already expanded its products and services in the center of the store to tap into demand for notebook computers, digital cameras and video game systems.

"It's the items that consumers are wanting and are coming in to shop for and purchase," he said.

Indeed, Hhgregg's Dennis May last month hinted that the retailer had bigger plans for the wireless category as it works toward becoming a national retailer of electronics and appliances.

"We think the mobile category and the mobile technology is a real opportunity for us," May said on May 27. "And as we've gotten larger, we think that we have new opportunities for us to play in that business differently, at a different level. And we think as we look into the future, that's something that we can really leverage."

Financial details of the agreement weren't disclosed, and Hhgregg declined to comment on the potential financial impact of the move.

Pearson said the retailer about a year ago began looking at ways to grow its mobile phone business. Circuit City Stores Inc.'s (CCTYQ) store closings last year, which simultaneously resulted in more than 100 in-store Verizon kiosks closing, presented an opportunity for another retailer to step in with a larger mobile presence, he said.

Verizon Wireless, the biggest wireless carrier in the U.S., is jointly owned by Verizon Communications Inc. (VZ) and the U.K.'s Vodafone Group PLC (VOD, VOD.LN).

Despite the growth planned at Hhgregg, including 40 to 45 new stores this year, the retailer's retail footprint for wireless phones and services will remain far smaller than the leading U.S. consumer electronics retailer, Best Buy Inc. (BBY).

Best Buy has more than 1,000 big-format stores selling several carriers' service plans and several handset makers' products, and it has more than 70 standalone Best Buy Mobile stores.

RadioShack Corp. (RSH), too, is a bigger wireless player than Hhgregg, with 4,680 company-operated stores in the U.S. and Mexico selling several phones and service plans. RadioShack also operates 550 wireless phone kiosks and runs some of Target Corp.'s (TGT) mobile-phone departments.

The Cellular Connection, which bills itself as "the largest Verizon Wireless premium retailer in the Midwest," said it will begin opening the kiosks in Hhgregg stores late this month.

Hhgregg last month said its fiscal fourth-quarter profit dropped 28% as its same-store sales and margins fell and new store openings increased expenses.

Shares of Hhgregg recently fell 4.1% to $26.15; while Best Buy shares were down 2% to $38.09 and RadioShack shares declined 2.1% to $20.87.

Hhgregg shares had risen 78% in the past year ahead of Monday's news.

-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; maryellen.lloyd@dowjones.com

(Nathan Becker contributed to this article.)

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