hhgregg (HGG) Falls on Withdrawal of 2015 EBITDA Guidance
Founded in 1955, hhgregg, Inc. is a retailer of home appliances, televisions, computers, consumer electronics, mattresses and related services operating under the name hhgregg.
Shares of Indianapolis, Indiana, based hhgregg (HGG) fell sharply on Tuesday, against the backdrop of a down day in stocks overall. hhgregg's stock fell 22.48%, losing $1.63 per share, to close at $5.62, on volume of 1,653,380 shares. The company's stock began selling off after it announced that it is withdrawing its Fiscal Year 2015 EBITDA guidance at this time, based on a decrease in net sales.
On Tuesday hhgregg withdrew it's earnings before interest, taxes, depreciation and amortization (EBITDA) guidance for its fiscal year 2015, ending March 31, 2015. The decision was prompted by an estimated 6% decline in net sales for its fiscal third quarter, which reflects the holiday buying season. Investors reacted by selling off the stock heavily.
The company estimates that its net sales for its fiscal third quarter, ended December 31, 2014, will be approximately $666 million, reflecting a 6% drop from net sales of $707 million for the same quarter one year earlier. Comparable store sales are also estimated to have fallen by 6%.
Consumer electronics are estimated to have fallen by 4%, home products by 9%, while the appliance category remained flat. The greatest damage however is in the computer and tablet category, which is estimated to have experienced a 35% decrease in net sales.
Reversing the overall trend in declining sales however was hhgregg's e-commerce business. Comparable sales were estimated to be up 59%. The company also reported that it finished its fiscal third quarter with a cash balance of approximately $27 million and no outstanding borrowings.
The Company expects to incur non-cash charges related to a valuation allowance for its deferred tax assets and impairment of certain stores in the quarter ended December 31, 2014. They expect that the combined impact of these non-cash pre-tax charges to be $60 - $70 million. The combination of these charges, coupled with uncertain current market conditions, caused the company to withdraw its fiscal year 2015 EBITDA outlook.
"The Company continues to execute on its strategic initiatives focused on transforming our sales mix. The Company has made progress improving on our previous quarters' sales trends, in particular in the consumer electronics and appliance business." said Dennis May, President and CEO of hhgregg. "The computer and tablet industry continues to be negatively impacted by declining consumer demand. Additionally, we made a decision not to participate in certain areas of the computer and tablet business that were not profitable. The Company remains active in executing our transformation strategies, and we are confident in our ability to make meaningful improvements in the coming fiscal year."
More information will be forthcoming when hhgregg reports its third fiscal quarter results on January 29, 2015.
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