Hhgregg shares plunge, drag down Best Buy
(Reuters) - Shares of Hhgregg Inc (HGG.N) lost more than a third of their value on Wednesday and dragged down larger rival Best Buy, as a cut in the appliance and electronics chain's full-year forecast stoked fears that traditional stores were fast losing business to online competitors.
Brick-and-mortar retailers including Hhgregg and Best Buy Co Inc (BBY.N) have been struggling to maintain market share as customers get increasingly comfortable with making even large purchases online.
"I think Hhgregg results really show that it's become a difficult environment for traditional consumer electronics retailers," Morningstar analyst R J Hottovy told Reuters.
"We've seen a significant market share shift to Amazon (AMZN.O), and to a lesser extent companies like Apple (AAPL.O), Costco (COST.O) and Wal-Mart (WMT.N). So Best Buy too is facing pressure on a number of fronts."
Hhgregg, which had been ramping up advertising to spur sales of appliances as it attempts to move away from its video category, said Tuesday that it would cut ad spending and store level employment to adjust to the new sales environment.
"Despite these actions, selling and administrative expenses will deleverage for fiscal 2013," analyst David Strasser of Janney Montgomery Scott said in a note to clients.
The Indianapolis-based company cut its full-year profit outlook to 90 cents to $1.05 per share, from its previous view of a profit of $1.12 to $1.27 per share.
Stifel Nicolaus downgraded the company's stock to "hold" from "buy" and at least six other brokerages cut price targets.
Hhgregg shares were down 37 percent at $7.11 in midday trade, after hitting a 40-month low of $7.06 earlier. The stock was the top loser on the New York Stock Exchange.
Best Buy's stock was down about 5 percent at $19.98.
(Reporting by Aditi Shrivastava and Ranjita Ganesan in Bangalore; Editing by Maju Samuel, Anthony Kurian)