Fast-growing hhgregg thrives in tough CE market

INDIANAPOLIS —In an era when regional CE chains are being muscled out of the business, Indiana-based hhgregg is an anomaly. The chain celebrated the opening of its 100th store in August and plans to add up to 20 stores this year.

“We’re in nine states now and we definitely plan to expand into more markets,” said Andy Giesler, director of investor relations for the 53-year-old chain. “But right now, we’re concentrating on expansion in our newest state, Florida.” The company opened its first store in the city of Lakeland in March and has six more openings planned this year in central and northern Florida.

While hhgregg isn’t a consumer electronics chain in the mold of Best Buy or Circuit City—it generates nearly half its revenue from home appliances and sells furniture—about 50% of its sales come from flat-panel TVs, DVD players and other CE products. It was founded as a home appliance store in 1955 and branched into TV sales a few years later.

For the first quarter ended June 30, hhgregg generated $2.1 million in earnings, compared to $2.6 million last year, in spite of a 2.6% drop in same-store sales. Sales of TVs and other electronics jumped 5.5% for the quarter, but were offset by a 9.7% decline in home appliances.

What sets hhgregg apart from other retailers in an era when mid-sized retailers are either struggling (Tweeter) or shutting down (The Good Guys, CompUSA, Tower Records) is rapid growth that targets small- and mid-sized markets with stores in the 20,000-square-foot to 30,000-square-foot range. The chain currently has stores in Alabama, Florida, Georgia, North Carolina, South Carolina, Ohio, Kentucky, Indiana and Tennessee.

At its 100th store opening in the Indiana town of Mishawaka in August, company chairman and ceo Jerry Throgmartin talked about hhgregg’s recent growth and plans for the future. “We’ve doubled our store count in the last four years and successfully built an infrastructure that will accommodate additional stores as we continue to expand our presence across the nation.”

The chain has 18-20 new openings planned for its fiscal year that ends March 2009. Last year, it opened 18 new stores and cracked the $1 billion mark in sales for the first time with revenue of $1.1 billion.

Given its growth pattern, the chain isn’t likely to expand beyond the Midwest and Southeast anytime soon. That type of sprawling expansion created problems for mid-sized retailers in the past, including Tweeter, a Northeast retailer that expanded into California in 2003 only to shutter its stores there in 2007.