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Earnings Preview: hhgregg, Inc.

BBY HGG

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hhgregg, Inc (HGG - Analyst Report), a specialty retailer of consumer and other home products, is all set to unveil its second quarter 2013 results on November 2, 2012, before market opens. The Zacks Consensus Estimate for second quarter is pegged at 9 cents (estimated year-over-year growth of 50.0%) on revenues of $640 million (year-over-year increase of 17.9%).

First Quarter 2013 Recap

hhgregg, Inc’s adjusted loss of 16 cents per share in the first quarter of 2013 was narrower than the Zacks Consensus Estimate by a penny. The loss, however, was wider than the loss of 2 cents from the prior-year quarter. Decline in comparable store sales, gross margin contraction and higher selling, general and administrative expenses incurred during the period were responsible for the wider loss.

The company’s net sales of $490 million in the reported quarter were in line with the Zacks Consensus Estimate. Revenues grew 13.5% year over year, driven by 30 new store openings during the calendar year, partially offset by a decline in comparable store sales.

Agreement of Estimate Revisions    

Out of the 14 estimates for the second quarter of 2013, 2 were revised downward in the last 7 days.  Over the last 30 days, 3 out of the 14 estimates moved downwards.

Over the last 7 days, 2 out of the 14 estimates were revised downward for the full year 2013, while 3 out of the 14 estimates moved downwards over the last 30 days.

The downward pressure on estimates was due to increased competitiveness in television prices. Also some of the largest consumer electronics manufacturers introduced Unilateral Pricing Policies (UPP), which will impose certain restrictions on the sale and prices of high-end televisions.
 
Magnitude of Estimate Revisions

The Zacks Consensus Estimate for the second quarter of fiscal 2013 declined by a penny to 9 cents over the last 7 days. Similarly the Zacks Consensus Estimate for fiscal 2013 has declined by a penny to 92 cents over the last 7 days.

Surprise History

hhgregg, Inc has surpassed the Zacks Consensus Estimate in three out of the last four quarters while meeting in one. The company recorded a maximum positive surprise of 166.7% in the second quarter of 2012. On average, the earnings surprise is 59.3%.

Our Recommendation

hhgregg primarily competes with Best Buy Co. Inc. (BBY - Analyst Report). hhgregg currently has a Zacks #5 Rank (short-term Strong Sell rating).
 

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