hhgregg Downgraded to Underperform - Analyst Blog
04 3월 2013 - 9:10PM
Zacks
On Feb 28, we downgraded hhgregg Inc. (HGG) to
Underperform due to a disappointing third quarter fiscal 2013
(ended December 31, 2012) and a consequent cut in fiscal 2013
outlook, particularly due to continued decline in the video
category.
Why the Downgrade?
Appliance and electronics retailer, hhgregg has witnessed sharp
downward estimate revisions after it announced weak preliminary
results for the third quarter fiscal 2013 on Jan 14. hhgregg later
delivered weak third quarter results on Jan 31 and also slashed its
earnings, sales and comparable sales guidance for fiscal 2013 due
to sluggish video category sales.
hhgregg’s third quarter earnings declined 13.3% from the
prior-year quarter due to revenue and comparable-store sales
decline, especially in the video category. Sales dropped 3.6% year
over year due to a decline in comparable store sales. Sales also
fell shy of the Zacks Consensus Estimate. The company also reported
higher selling, general and administrative (SG&A) expense
ratio, which resulted in the decline.
Following the release of third quarter results, the Zacks
Consensus Estimate for fiscal 2013 has gone down 1.4% to 75 cents
per share. The Zacks Consensus Estimate for fiscal 2014 has also
declined 1.2% to 84 cents per share. With the Zacks Consensus
Estimates going down, the company now has a Zacks Rank #5 (Strong
Sell).
Cause for Concern
hhgregg’s video category is suffering from significant top-line
pressure due to fundamental shifts and lower-than-expected margins
across all screen sizes. In addition, declining industry demand for
flat screen LCD televisions is severely impacting 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
total company gross margin rates.
Though hhgregg has slightly improved its margins in the third
quarter fiscal 2013 and also been testing new merchandise
categories to improve overall mix in the video category, we believe
that the industry-wide headwind in video category has overshadowed
the company’s efforts to improve the overall mix of business.
Moreover, we continue to expect sluggish performance in the video
category over the near term.
Other Stocks to Consider
Not all stocks are performing as poorly as hhgregg. Other retail
and wholesale stocks that are presently doing favorable business
include Green Mountain Coffee Roasters, Inc.
(GMCR), Safeway Inc. (SWY), and Natural
Grocers by Vitamin Cotta (NGVC). Green Mountain holds a
Zacks Rank #1 (Strong Buy), while Safeway and Natural Grocers carry
a Zacks Rank #2 (Buy).
GREEN MTN COFFE (GMCR): Free Stock Analysis Report
HHGREGG INC (HGG): Free Stock Analysis Report
NATURAL GROCERS (NGVC): Free Stock Analysis Report
SAFEWAY INC (SWY): Free Stock Analysis Report
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HHGREGG (CE) (USOTC:HGGGQ)
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HHGREGG (CE) (USOTC:HGGGQ)
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