Friday, March 3, 2017

hhgregg Closing 88 Stores to Get Back in the Black

Saying it needs to retrench in order to return to profitability, national electronics and appliance retailer hgregg Inc. (NYSE:HGG) announced plans to close three distribution facilities and 88 of its stores as it reallocates resources back to its core markets and online sales efforts.

“We are strategically exiting markets and stores that are not financially profitable for us,” said Robert J. Riesbeck, hhgregg's president and CEO. “This is a proactive decision to streamline our store footprint in the markets where we have been, and will continue to be, important to our customers, vendor partners and communities.”

The stores being closed were identified as being in locations “that are no longer strong shopping destinations due to changes in the local retail shopping landscape,” he said. Following the closures, The Indianapolis-based chain said it will continue to operate 132 stores.

The closings, which eliminate 1,500 positions, will hit the Mid-Atlantic region hardest with 15 store closures in Pennsylvania and Virginia and 11 in Maryland. Another 15 hhgregg stores are also being closed in Florida with smaller numbers of stores being closed in other states.

In addition, hhgregg will close its distribution and delivery centers in Brandywine, MD; Miami and Philadelphia.

“We have determined that the economics of the affected locations will not allow us to achieve our overall goal of becoming a profitable company again,” Riesbeck said.

hhgregg announced plans to expand across the Mid-Atlantic with up to 45 new stores in the summer of 2009 - six months after rival Circuit City decided to shut down 567 stores and let go 30,000 workers. hhgregg jumped at the opportunity it saw to gain market share and take advantage of cheap rental rates due to an excess supply of available real estate.

At the time, the aggressive expansion strategy was seen as in keeping with the firm's longterm national growth plans under its late founding-family head, Jerry Throgmartin, and backed by investment firm Freeman Spogli & Co.

However, analysts said the firm ran into unexpected setbacks, including Throgmartin’s untimely death, disruptions in its core television business, as well as suffering from bad timing expanding in a recession and increased e-commerce competition from and others.

Last month, hhgregg engaged Stifel Financial Corp. to pursue a range of potential strategic and financial transactions.

“We are committed to improving our results through our business strategy, including investments made to shift our focus to appliances and furniture, and additional expected cost reductions,” Riesbeck said about the hiring.

Current inventory in the affected stores will be sold over the coming weeks, with final store closings expected to be complete by mid-April.

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