Video killed the Hhgregg star

INDIANAPOLIS — Electronics retailer Hhgregg announced that it has lowered its third-quarter forecast, reflecting weakness in the video category.

The company said that fiscal third quarter comparable-store sales are estimated to have increased 3.9%, with the video category expected to have decreased 4.8%, the appliance category expected to have increased 6.8%, the home office category expected to have increased 91.4% and the other category expected to have decreased 7.1%. 

Total sales for the quarter are expected to increase by 26.9% to $829.5 million, as compared with net sales of $653.7 million reported for the third quarter of fiscal 2011.

Hhgregg said it is expecting a drop in net income to approximately $22.5 million, or 60 cents per diluted share, from net income of $26.9 million, or 66 cents per diluted share, for the comparable prior-year period. According to the company, third-quarter earnings were negatively impacted by lower than expected margins in the video category and increased advertising spend aimed at gaining market share and launching its mobile category.

Dennis May, president and CEO commented, "We are pleased to report our second consecutive quarter of positive comparable-store sales, which resulted in market share gains in the appliance and home office categories. In addition, we remain pleased with our performance in the new markets we entered in fiscal 2012 and our execution throughout this holiday season. However, the video industry experienced heavier than expected promotional activity across all screen sizes, which negatively impacted industry average selling prices and margins. While we believe we maintained our market share in video during the quarter, the difficult industry trends negatively impacted our results beyond our expectations."

Due to the expected weakness in third-quarter sales and earnings, Hhgregg said it now anticipates that annual net income per diluted share will be within a range of $1.05 to $1.15 for fiscal 2012. This compares to previous guidance of net income per diluted share of $1.26 to $1.41 in fiscal 2012. The company also expects that fiscal 2012 comparable-store sales will be flat to positive 2%, as compared with previous guidance of flat to positive 3%. Net sales for the year are expected to increase 22% to 24%, as compared with previous guidance of net sales increase of 20% to 25%

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