H.h. Gregg Cites Weather Among Factors Contributing to Pre-Announced Q4 Loss

H.h. gregg pre-announced Tuesday a net loss per diluted share of 25 cents for fiscal Q4 ended March 31, ahead of the company’s earnings call scheduled for May 20. The net loss includes about $4 million of pre-tax expenses related to inventory write-down for h.h. gregg’s exit from the contract-based mobile phone business and related expenses, it said in an SEC filing. The contract-based business historically was a drain on overall operating profitability and the shift away from it “better aligns with long-term strategic initiatives,” it said.

H.h. gregg’s adjusted earnings per share loss for fiscal Q4 was estimated at $0.17 cents, compared with adjusted net income per share of $0.31 in the year ago quarter, the company said. Comp store sales were down 9.9 percent, it said. In a statement, CEO Dennis May cited extreme weather, particularly in the Mid-Atlantic and Midwest in January, February and early March, that impacted store traffic and operating performance. H.h. gregg estimates net sales to be about $538.3 million for fiscal Q4, down 10 percent from sales of $597.6 million in the year-ago quarter.

Analyst David Strasser of Janney Montgomery Scott attributed the loss to margin weakness and comp store declines that exceeded Janney’s estimates by 2.6 percent. Even when weather improved, h.h. gregg “still did not see much improvement to the overall business,” Strasser said. Comps outperformed h.h. gregg in some markets with better weather, such as Florida, he said, saying it’s “something to watch” over the next few months.

CE sales were expected to tumble 19 percent for the quarter, h.h. gregg said. The retailer is banking on Ultra HD and larger TV screen sizes to create a “stronger innovation cycle” later this year that “should drive higher” average selling prices, May said. The retailer expects to benefit from “renewed interest” in TVs in future quarters, it said.

May said on the Q3 earnings call that h.h. gregg wants to be seen as an “appliance company that sells electronics” and that in the future it wants to be a “home products retailer.” He said CE would be part of the home products solution with large-screen TVs, home theater products and connected devices, but appliances are the biggest opportunity.

H.h. Gregg’s adjusted net income per diluted share for 2014 is expected to be $0.09 compared to the fiscal 2013 adjusted net income per diluted share of $0.74. Shares closed 9.5 percent lower Tuesday at $7.88.