hhgregg, Inc. (NYSE: HGG) ("hhgregg" or the "Company") today
announced operating results for the first fiscal quarter ended
June 30, 2016 as compared to the first fiscal quarter ended
June 30, 2015.
First Fiscal Quarter
Summary
- Net sales decreased 4.0% to $424
million compared to prior year first fiscal quarter.
- Comparable store sales decreased
3.9% compared to the prior year first fiscal quarter, a sequential
improvement compared to the prior year fiscal quarter. Appliance
comparable store sales increased 3.7%.
- Continued to successfully shift more
sales mix to appliances, which accounted for 64% of sales for the
first fiscal quarter.
- Gross margin increased to 31.0%
compared to 30.5% in the prior year first fiscal quarter.
- Net loss per diluted share was
$0.26. Net loss per diluted share, as adjusted, was $0.21. In the
prior year first fiscal quarter, net loss per diluted share was
$0.32 and net loss per diluted share, as adjusted, was
$0.17.
- As of June 30, 2016, there were no
borrowings outstanding on the recently amended $300 million credit
facility.
Robert Riesbeck, President and Chief Executive Officer and Chief
Financial Officer, commented, “We delivered a solid first fiscal
quarter and are off to a positive start to our fiscal year. We made
progress toward our top company goal of driving revenue. We
improved comps sequentially from last quarter and year-over-year,
driven by appliances, which generated a 3.7% comparable store sales
increase in the quarter, along with our continued growth in
furniture. We improved our top-line in appliances while protecting
our margins. Our total company gross margin increased and we were
able to generate positive EBITDA. As the fiscal year progresses we
will continue to invest in Fine Lines and store resets to help with
our relentless efforts to grow net sales and profitability this
fiscal year."
Three Months Ended June 30, (unaudited,
amounts in thousands, except share and per share data)
2016
2015 Net sales $ 423,572 $ 441,063 Net sales %
decrease (4.0 )% (6.6 )% Comparable store sales % decrease (1) (3.9
)% (6.3 )% Gross profit as a % of net sales 31.0 % 30.5 % SG&A
as a % of net sales 25.5 % 25.2 % Net advertising expense as a % of
net sales 5.4 % 5.2 % Depreciation and amortization expense as a %
of net sales 1.6 % 1.9 % Loss from operations as a % of net sales
(1.5 )% (1.9 )% Net interest expense as a % of net sales 0.2 % 0.1
% Net loss $ (7,227 ) $ (8,755 ) Net loss, as adjusted (2) $ (5,742
) $ (4,822 ) Net loss per diluted share $ (0.26 ) $ (0.32 ) Net
loss per diluted share, as adjusted (2) $ (0.21 ) $ (0.17 )
Adjusted EBITDA $ 2,016 $ 4,132 Weighted average shares
outstanding—diluted 27,741,261 27,680,209 Number of stores open at
the end of period 226 227
(1)
Comprised of net sales at stores in
operation for at least 14 full months, including remodeled and
relocated stores, as well as net sales for the Company’s e-commerce
site.
(2)
Amounts are adjusted to exclude the impact
of severance and personnel costs related to organizational changes
related to our transformation efforts, consulting expenses paid to
outside parties to assist with our transformation efforts, costs
associated with our logistics optimization project and debt
issuance costs written off with the June 2016 amendment to our
Facility. See the attached reconciliation of non-GAAP measures to
GAAP measures
HIGHLIGHTS FOR THE FIRST FISCAL QUARTER
Revenue Highlights
The Company's net sales performance for the quarter was driven
primarily by a comparable store sales decline. Net sales mix and
comparable store sales percentage changes by product category for
the three month periods ended June 30, 2016 and 2015 were as
follows:
Net Sales Mix Summary Comparable Store
Sales Summary Three Months Ended June 30 Three Months
Ended June 30 2016 2015 2016
2015 Appliances 64 % 59 % 3.7
%
(2.2 )% Consumer electronics (1) 30 % 35 % (17.4 )% (14.8 )% Home
products (2) 6 % 6 % 0.3
%
12.1
%
Total 100 % 100 % (3.9 )% (6.3 )%
(1)
Primarily consists of televisions, audio,
personal electronics, computers and tablets and accessories.
(2)
Primarily consists of furniture and
mattresses.
The Company's comparable store sales drivers for the three
months ended June 30, 2016 are summarized below:
Comparable StoreSales
Average Selling Price Sales Unit Volume
Appliances 3.7
%
Decrease Increase Consumer electronics (1) (17.4 )% Decrease
Decrease Home products (2) 0.3
%
Increase Decrease Total (3.9 )%
Gross Margin Highlights
The Company's gross profit margin, expressed as gross profit as
a percentage of net sales, increased for the three month period
ended June 30, 2016 to 31.0% from 30.5% for the comparable
prior year period.
- The Company's increase in gross profit
margin for the period was primarily a result of a favorable product
sales mix to categories with higher gross margin rates in addition
to higher gross margin rates in appliances and home products,
partially offset by lower gross profit margin rates in consumer
electronics.
Cost Structure Highlights
The Company continues to manage its cost structure to align with
its expected sales levels and to keep the Company positioned for
EBITDA growth.
Teleconference and Webcast
hhgregg will be conducting a conference call to discuss
operating results for the three months ended June 30, 2016, on
Thursday, August 4, 2016 at 9:00 a.m. (Eastern Time). Our call
will be hosted by Robert Riesbeck, our President and CEO and CFO
and Lance Peterson, our Director of Finance & Investor
Relations.
Interested investors and other parties may listen to a
simultaneous webcast of the conference call by logging onto
hhgregg’s website at www.hhgregg.com. The on-line replay will be
available for a limited time immediately following the call. The
call can also be accessed live over the phone by dialing (877)
304-8963. Callers should reference the hhgregg earnings call.
About hhgregg
hhgregg is an appliance, electronics and furniture retailer that
is committed to providing customers with a truly differentiated
purchase experience through superior customer service,
knowledgeable sales associates and the highest quality product
selections. Founded in 1955, hhgregg is a multi-regional retailer
currently with 226 stores in 20 states that also offers
market-leading global and local brands at value prices nationwide
via hhgregg.com.
Forward Looking Statements
The following is a Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995:
This press release includes forward-looking statements,
including with respect to the Company’s financial performance,
ability to manage costs, ability to execute the Company's 2017
initiatives, innovation in the video industry, the impact and
amount of non-cash charges, and shifts in the Company’s sales mix.
hhgregg has based these forward-looking statements on its current
expectations, assumptions, estimates and projections. While hhgregg
believes these expectations, assumptions, estimates and projections
are reasonable, these forward-looking statements are only
predictions and involve known and unknown risks and uncertainties,
many of which are beyond its control. These and other important
factors may cause hhgregg’s actual results, performance or
achievements to differ materially from any future results,
performance or achievements expressed or implied by these
forward-looking statements. Some of the key factors that could
cause actual results to differ from hhgregg’s expectations are: the
ability to successfully execute the Company's strategies and
initiatives, particularly in returning the Company to profitable
growth; the Company's ability to increase customer traffic and
conversion; competition in the retail industry; the Company's
ability to maintain a positive brand perception and recognition;
the Company's ability to attract and retain qualified personnel;
the Company's ability to maintain the security of customer,
associate and Company information; rules, regulations, contractual
obligations, compliance requirements and fees associated with
accepting a variety of payment methods; the Company's ability to
effectively achieve cost cutting initiatives; the Company's ability
to generate strong cash flows to support its operating activities;
the Company's relationships and operations of its key suppliers;
the Company's ability to generate sufficient cash flows to recover
the fair value of long-lived assets; the Company's ability to
maintain and upgrade its information technology systems; the
fluctuation of the Company's comparable store sales; the effect of
general and regional economic and employment conditions on the
Company's net sales; the Company's ability to meet financial
performance guidance; disruption in the Company's supply chain;
changes in trade regulation, currency fluctuations and prevailing
interest rates; and the potential for litigation.
Other factors that could cause actual results to differ from
those implied by the forward-looking statements in this press
release are more fully described in the “Risk Factors” section in
the Company’s Annual Report on Form 10-K for fiscal year 2016 filed
May 19, 2016. Given these risks and uncertainties, you are
cautioned not to place undue reliance on these forward-looking
statements. The forward-looking statements included in this press
release are made only as of the date hereof. hhgregg does not
undertake, and specifically declines, any obligation to update any
of these statements or to publicly announce the results of any
revisions to any of these statements to reflect future events or
developments.
HHGREGG, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED)
Three Months Ended June 30, 2016
June 30, 2015 (In thousands, except share and per
share data) Net sales $ 423,572 $ 441,063 Cost of goods sold
292,063 306,706 Gross profit 131,509 134,357 Selling,
general and administrative expenses 108,109 111,104 Net advertising
expense 22,869 23,054 Depreciation and amortization expense 6,978
8,369 Loss from operations (6,447 ) (8,170 ) Other
expense (income): Interest expense 785 590 Interest income (5 ) (5
) Total other expense 780 585 Loss before income
taxes (7,227 ) (8,755 ) Income taxes — — Net loss $
(7,227 ) $ (8,755 ) Net loss per share Basic and diluted $ (0.26 )
$ (0.32 ) Weighted average shares outstanding-basic and diluted
27,741,261 27,680,209
HHGREGG, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(AS A PERCENTAGE OF NET
SALES)(UNAUDITED)
Three Months Ended June 30, 2016
June 30, 2015 Net sales 100.0 % 100.0 % Cost of goods sold
69.0 69.5 Gross profit 31.0 30.5 Selling, general and
administrative expenses 25.5 25.2 Net advertising expense 5.4 5.2
Depreciation and amortization expense 1.6 1.9 Loss
from operations (1.5 ) (1.9 ) Other expense (income): Interest
expense 0.2 0.1 Interest income — — Total other
expense 0.2 0.1 Loss before income taxes (1.7 ) (2.0
) Income taxes — — Net loss (1.7 ) (2.0 )
Certain percentage amounts do not sum due
to rounding
HHGREGG, INC. AND
SUBSIDIARIESCONSOLIDATED BALANCE SHEETSJUNE 30,
2016, MARCH 31, 2016 AND JUNE 30, 2015
(UNAUDITED)
June 30, 2016 March 31, 2016
June 30, 2015 (In thousands, except share data)
Assets Current assets: Cash $ 1,214 $ 3,703 $ 9,742 Accounts
receivable—trade, less allowances of $3, $5 and $13 as of June 30,
2016, March 31, 2016 and June 30, 2015, respectively 17,131 11,106
17,178 Accounts receivable—other 18,672 14,937 16,109 Merchandise
inventories, net 292,025 256,559 324,551 Prepaid expenses and other
current assets 10,021 6,333 10,229 Income tax receivable 1,107
1,130 5,345 Total current assets 340,170
293,768 383,154 Net property and equipment
85,236 87,472 123,985 Deferred financing costs, net 2,432 1,257
1,661 Deferred income taxes — — 7,816 Other assets 3,239
2,855 2,914 Total long-term assets 90,907
91,584 136,376 Total assets $ 431,077 $
385,352 $ 519,530
Liabilities and Stockholders’
Equity Current liabilities: Accounts payable $ 145,383 $
107,474 $ 167,108 Line of credit — — — Customer deposits 54,682
43,235 49,737 Accrued liabilities 49,466 43,370 52,161 Deferred
income taxes — — 7,816 Total current
liabilities 249,531 194,079 276,822 Long-term
liabilities: Deferred rent 56,598 59,101 66,107 Other long-term
liabilities 10,381 10,818 10,870 Total
long-term liabilities 66,979 69,919 76,977
Total liabilities 316,510 263,998 353,799
Stockholders’ equity: Preferred stock, par value $.0001; 10,000,000
shares authorized; no shares issued and outstanding as of June 30,
2016, March 31, 2016 and June 30, 2015, respectively — — — Common
stock, par value $.0001; 150,000,000 shares authorized; 41,291,415,
41,204,660 and 41,204,660 shares issued; and 27,794,733, 27,707,978
and 27,707,978 outstanding as of June 30, 2016, March 31, 2016, and
June 30, 2015, respectively 4 4 4 Additional paid-in capital
304,765 304,325 302,578 Accumulated deficit (39,974 ) (32,747 )
13,377 Common stock held in treasury at cost; 13,496,682 shares as
of June 30, 2016, March 31, 2016, and June 30, 2015 (150,228 )
(150,228 ) (150,228 ) Total stockholders’ equity 114,567
121,354 165,731 Total liabilities and stockholders’
equity $ 431,077 $ 385,352 $ 519,530
HHGREGG, INC. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH
FLOWSTHREE MONTHS ENDED JUNE 30, 2016 AND
2015(UNAUDITED)
Three Months Ended June 30, 2016
June 30, 2015 (In thousands) Cash flows from
operating activities: Net loss $ (7,227 ) $ (8,755 ) Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities: Depreciation and amortization 6,978 8,369 Amortization
of deferred financing costs 135 135 Stock-based compensation 440
898 Excess tax benefit from stock based compensation 126 — Gain on
sales of property and equipment (63 ) (78 ) Tenant allowances
received from landlords — 580 Changes in operating assets and
liabilities: Accounts receivable—trade (6,025 ) (5,277 ) Accounts
receivable—other (3,735 ) 46 Merchandise inventories (35,466 )
(67,082 ) Income tax receivable 23 (19 ) Prepaid expenses and other
assets (4,004 ) (3,645 ) Accounts payable 44,905 55,081 Customer
deposits 11,447 995 Accrued liabilities 6,096 5,438 Deferred rent
(2,503 ) (1,848 ) Other long-term liabilities (370 ) (1,072 ) Net
cash provided by (used in) operating activities 10,757
(16,234 ) Cash flows from investing activities: Purchases of
property and equipment (3,910 ) (4,304 ) Proceeds from sales of
property and equipment 4 11 Purchases of corporate-owned life
insurance (68 ) (73 ) Net cash used in investing activities (3,974
) (4,366 ) Cash flows from financing activities: Net repayments on
inventory financing facility (7,836 ) (59 ) Payment of financing
costs (1,436 ) — Net cash used in financing activities
(9,272 ) (59 ) Net decrease in cash and cash equivalents (2,489 )
(20,659 ) Cash and cash equivalents Beginning of period 3,703
30,401 End of period $ 1,214 $ 9,742
Supplemental disclosure of cash flow information: Interest paid $
647 $ 459 Income taxes (received) paid $ (23 ) $ 19 Capital
expenditures included in accounts payable $ 2,105 $ 1,352
HHGREGG, INC. AND
SUBSIDIARIESNON-GAAP RECONCILIATION OF NET LOSS, AS ADJUSTED
ANDDILUTED NET LOSS PER SHARE, AS
ADJUSTED,(UNAUDITED)
Three Months Ended June 30, (Amounts in thousands,
except share data) 2016 2015 Net loss as
reported $ (7,227 ) $ (8,755 ) Non-cash adjustments to net loss:
Severance and personnel costs (1) 674 — Consulting fees (2) 138
3,933 Other (3) 673 — Net loss, as adjusted $ (5,742
) $ (4,822 ) Weighted average shares outstanding – Diluted
27,741,261 27,680,209 Net loss per diluted share as reported $
(0.26 ) $ (0.32 ) Net loss per diluted share, as adjusted $ (0.21 )
$ (0.17 )
(1)
Expenses incurred related to our
organizational changes in our transformation efforts.
(2)
Costs paid to outside consultants to
assist with the Company's transformation efforts.
(3)
Consists of $0.5 million of costs
associated with our logistics optimization project and $0.1 million
of deferred amortization fees written off with the June 2016
amendment to our Facility.
Three Months Ended June 30, (Amounts in
thousands) 2016 2015 Net loss as
reported $ (7,227 ) $ (8,755 ) Adjustments: Depreciation and
amortization 6,978 8,369 Interest expense, net 780 585 Income tax
expense — — EBITDA $ 531 $ 199 Severance and
personnel costs (1) 674 — Consulting fees (2) 138 3,933 Other (3)
673 — Adjusted EBITDA $ 2,016 $ 4,132
(1)
Expenses incurred related to our
transformation efforts.
(2)
Costs paid to outside consultants to
assist with the Company's transformation efforts.
(3)
Consists of $0.5 million of costs
associated with our logistics optimization project and $0.1 million
of deferred amortization fees written off with the June 2016
amendment to our Facility.
We believe that the non-GAAP measures described above provide
meaningful information to assist shareholders in understanding our
financial results and assessing our prospects for future
performance. Management believes adjusted net loss, adjusted net
loss per diluted share, EBITDA and Adjusted EBITDA are important
indicators of our operations because they exclude items that may
not be indicative of or are unrelated to our core operating results
and provide a baseline for analyzing trends in our underlying
businesses. Management makes standard adjustments for items such as
non-cash asset impairments, consulting fees, severance costs, as
well as adjustments for other items that may arise during the
period and have a meaningful impact on comparability.
The above information provides reconciliations from net loss,
the most comparable financial measure calculated and presented in
accordance with accounting principles generally accepted in U.S.
(“GAAP”), to non-GAAP financial measures. The Company has provided
non-GAAP financial measures, which are not calculated or presented
in accordance with GAAP, as information supplemental and in
addition to the financial measures presented in the accompanying
earnings release that are calculated and presented in accordance
with GAAP. Such non-GAAP financial measures should not be
considered superior to, as a substitute for, or as an alternative
to, and should be considered in conjunction with, the GAAP
financial measures presented in the earnings release. The non-GAAP
financial measures in the accompanying earnings release may differ
from similar measures used by other companies.
EBITDA represents net loss before income tax expense, interest
income, interest expense, depreciation and amortization. The
Company has presented EBITDA because it considers it an important
supplemental measure of its performance and believes it is
frequently used by analysts, investors and other interested parties
in the evaluation of companies in its industry. Management uses
EBITDA as a measurement tool for evaluating its actual operating
performance compared to budget and prior periods. EBITDA is not a
measure of performance under US GAAP and should not be considered
as a substitute for net loss prepared in accordance with GAAP.
EBITDA has limitations as an analytical tool, and you should not
consider these in isolation or as a substitute for analysis of the
Company's results as reported under GAAP.
Some of the limitations of EBITDA measures are:
- EBITDA does not reflect the Company's
cash expenditures, or future requirements, for capital expenditures
or contractual commitments;
- EBITDA does not reflect interest
expense or the cash requirements necessary to service interest
payments on the Company's debt;
- EBITDA does not reflect tax expense or
the cash requirements necessary to pay for tax obligations;
and
- Although depreciation and amortization
are non-cash charges, the asset being depreciated and amortized
will often have to be replaced in the future, and EBITDA does not
reflect any cash requirements for such replacements.
The Company compensates for these limitations by relying
primarily on its GAAP results and using EBITDA only as a
supplement.
HHGREGG, INC. AND
SUBSIDIARIESStore Count by Quarter for Fiscal Years 2015,
2016 and 2017 (Unaudited)
FY2015 FY2016 FY2017
Q1 Q2 Q3 Q4
Q1 Q2 Q3 Q4
Q1 Beginning Store Count 228 229 228 228 228 227 227 227 226
Store Openings 1 — — — 1 — — — — Store Closings — (1 ) —
— (2 ) — — (1 ) — Ending Store Count
229 228 228 228 227 227
227 226 226
Note: hhgregg, Inc.’s fiscal year is comprised of four quarters
ending
June 30th, September 30th, December 31st
and March 31st.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160804005327/en/
hhgregg, Inc.Lance Peterson, 317-848-8710Director, Finance &
Investor Relationsinvestorrelations@hhgregg.com
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