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hhgregg Inc. (HGG - Analyst Report) is set to report its first quarter fiscal 2015 results before the opening bell on Jul 31. Last quarter, this specialty retailer of consumer and other home products posted in-line results. Let’s see how things are shaping up prior to the announcement.

Factors to Consider

hhgregg has disappointed its investors in the past one year with sluggish results, particularly due to its consumer electronic category. The revenues or growth in the category have declined due to lower-than-expected margins and declining industry demand for flat screen televisions. Weak promotional activities are also adding to the woes. In addition, lack of innovation in televisions has been severely impacting overall store traffic.

The company also witnessed sluggishness in same-store sales in the computing and wireless category in all the quarters of fiscal 2014. Weak comps were the result of a decline in demand for laptops and lower average selling price for tablets. Category comps declined due to the underperforming contract-based mobile phone business, which the company exited during the fourth quarter.

The company’s home products category, which showed signs of weakness during the third quarter declined further in the fourth quarter.

However, the company is employing different initiatives to revive its business such as product innovation, shifting focus from one furniture brand to five brands and even exiting underperforming businesses. The company is also focusing on its appliance category, which continues to gain market share through higher sales since the past 11 quarters. We believe these initiatives will take some time to bear fruits, but can still expect some signs of improvement in the first quarter of fiscal 2015.

Earnings Whispers?

Our proven model does not conclusively show that hhgregg is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The ESP for hhgregg is 0.00% as both the Zacks Consensus Estimate and the Most Accurate estimate stand at a loss of 17 cents per share.

Zacks Rank: hhgregg has a Zacks Rank #2 (Buy) which when combined with an ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Other stocks in the retail sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Citi Trends Inc. (CTRN - Analyst Report), with Earnings ESP of +6.90% and a Zacks Rank #1 (Strong Buy).

Abercrombie & Fitch Co. (ANF - Analyst Report), with Earnings ESP of +18.18% and a Zacks Rank #2 (Buy).

Conn's Inc. (CONN - Snapshot Report), with an Earnings ESP of +2.70% and a Zacks Rank #2.

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