hhgregg Downgraded to Strong Sell - Analyst Blog
18 1월 2013 - 3:10AM
Zacks
Zacks Investment Research downgraded hhgregg
Inc. (HGG) to a Zacks Rank #5 (Strong Sell) on Jan 16.
Expectations of a disappointing third quarter fiscal 2013 and a
consequent cut in the fiscal 2013 outlook, particularly due to
continued decline in video category, are the reasons for the
downgrade.
Why the Downgrade?
Appliance and electronics retailer, hhgregg has witnessed sharp
downward estimate revisions after it announced preliminary results
for the third quarter fiscal 2013 (ended December 31, 2012), which
is scheduled to release on Jan 31. hhgregg has also revised its
guidance for fiscal 2013 ending March 31, 2013.
For the third quarter, the company expects net sales to decline
approximately 3.6% year over year to $799.6 million, with a decline
of approximately 9.7% in comparable store sales. The poor
comparable sales performance is expected to come from both the
video and other categories, which are expected to decline 24.6% and
23.7%, respectively.
This decline is expected to overshadow the positive comparable
sales in the appliance category as well as the computing and mobile
phones category, which are expected to increase approximately 6.1%
and 16.2%, respectively.
Further, lower-than-expected sales performance in the video
category is expected to impact third quarter earnings. Excluding
one-time store impairment charge, hhgregg projects a decline of
approximately 21.3% in third quarter fiscal 2013 adjusted earnings
to 52 cents.
Guidance
Following the weak preliminary third quarter results, the
Indianapolis-based retailer revised its guidance for fiscal 2013.
hhgregg has reduced its earnings forecast for fiscal 2013 to a
range of 70 to 80 cents per share compared with the previous
guidance of 90 cents to $1.05 per share.
The company has also lowered its comparable store sales guidance
and expects it in the range of negative 8.5% to negative 7.5%,
compared with the prior guidance range of negative 6.0% to negative
4.0%. Net sales are now expected to increase in the range of flat
to 1.0%, much lower than the previous growth range of 3.0% to 6.0%.
In addition, the company expects capital spending in the range of
$35.0 million to $40.0 million, also lower than the previous
guidance of $50.0 million to $55.0 million.
hhgregg has been experiencing disappointing results in the video
category since last few quarters due to fundamental shifts in the
video category and lower-than-expected margins across all screen
sizes. In addition, declining industry demand for flat screen
televisions severely impacted overall store traffic and video
category sales.
Moreover, promotional activities or product innovation within
the video category has further declined the gross profit margin
rate for the video category and the total company gross margin
rates.
Though hhgregg has also been testing new merchandise categories
to improve overall mix in the video category, we continue to expect
sluggish performance in the video category.
All the estimates declined for the third quarter over the past 7
days and the Zacks Consensus Estimate decreased 11.9% to 52 cents
per share. For 2013, all the estimates were revised downward over
the same timeframe, sinking the Zacks Consensus Estimate by 19.4%
to 75 cents per share. For 2014, most of the estimates declined,
which dropped the Zacks Consensus Estimate 9.3% to 88 cents per
share over the last 7 days.
Other Stocks to Consider
Not all stocks are performing as poorly as hhgregg. Other
computer & electronics retail industry stocks with favorable
Zacks Rank include Conn’s, Inc. (CONN) with a
Zacks Rank #1 (Strong Buy) and Aaron’s Inc (AAN)
and Radioshack Corp (RSH) with a Zacks Rank #2
(Buy).
AARONS INC (AAN): Free Stock Analysis Report
CONNS INC (CONN): Free Stock Analysis Report
HHGREGG INC (HGG): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
HHGREGG (CE) (USOTC:HGGGQ)
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