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Zacks Investment Research upgraded hhgregg Inc (HGG - Analyst Report) to a Zacks Rank #1 (Strong Buy) on Oct 9. The company’s strategic initiatives pulled the company out from persistent weakness and thereby helped it to deliver modest first quarter fiscal 2014 results.

Why the Upgrade?

On Aug 5, this appliances and electronic retailer reported first quarter fiscal 2014 results. hhgregg reported a loss of 4 cents per share in the first quarter of fiscal 2014, narrower than the prior-year quarter loss of 16 cents per share. The reported loss was also narrower than the Zacks Consensus Estimate of a loss of 15 cents per share. The narrower loss was driven by positive comps, cost savings and lower share count.

hhgregg’s net sales beat the Zacks Consensus Estimate and climbed 7.2% year over year, driven by positive comps in the quarter and a turnaround from declines seen in the last few quarters. Moreover, the addition of 18 new stores in the last 12 months also boosted top line growth. Comparable store sales were backed by the strong performance of the appliance category.

Lower operating expenses offset the impact of a decline in gross margins to lead to improved operating margins in the first quarter

Strategic Initiatives

The company has also taken up several strategic initiatives, which improved results in the first quarter of fiscal 2014. These initiatives mitigated the effects of the continued weakness in the consumer electronic category, which had been suffering since the past few quarters.

In order to improve overall comps and the performance of the consumer electronics category, the company designed three major initiatives for fiscal 2014. The company intends to increase market share of its appliance category, expand its customer base through advertising campaigns and focus on promoting consumer electronics through compelling offers. hhgregg also intends to increase category sales through its website capabilities.

Estimates have mostly increased after the strong first quarter results. The Zacks Consensus Estimate increased 2.2% to 93 cents per share for fiscal 2014, while it advanced 3.1% to 96 cents per share for fiscal 2015 over the past 60 days.

Other Stocks to Consider

Other stocks in the retail sector worth considering include Kirkland Inc (KIRK - Analyst Report), Best Buy Inc. (BBY - Analyst Report) and Gamestop Corp Holding Co (GME - Analyst Report). While Kirkland holds a Zacks Rank #1, Best Buy and Gamestop carry a Zacks Rank #2 (Buy).

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