* Q1 EPS 7 cents vs Street view 2 cents
* Sales rise 53.3 pct to $436 mln, topping estimates
* Says aiming to become national electronics chain
* Shares up 6.6 pct
(Adds more analyst reaction, CEO interview comments)
By Dhanya Skariachan
NEW YORK, Aug 5 U.S. appliance and electronics
chain hhgregg Inc (HGG.N) blew past quarterly profit and sales
expectations, helped by strength in appliances and new stores,
and said it plans to keep expanding into new markets.
The retailer, which already runs 157 stores in the
Midwestern, Mid-Atlantic and Southeastern regions of the United
States, recently confirmed its plans to enter Pittsburgh and is
on track to enter the Washington, D.C., market this fall.
It is hoping to create more than 600 jobs in that market
next quarter and stay "aggressive" on the hiring front as it
ramps up expansion, Chief Executive Dennis May told Reuters.
Net income in the fiscal first quarter ended June 30 rose
to $2.7 million, or 7 cents a share, from $1.5 million, or 4
cents a share, a year earlier.
Analysts on average were expecting 2 cents a share,
according to Thomson Reuters I/B/E/S.
Sales rose 53.3 percent to $436.0 million, topping
analysts' forecast for $397.5 million. Sales at stores open at
least a year rose 6.3 percent.
After starting out as a small operation in 1955, the
company has stepped up expansion in recent years in a bid to
fill the void left by bankrupt rival Circuit City Stores Inc
CCTYQ.PK and to compete better with mainstream players like
Best Buy Co Inc (BBY.N).
In an interview, May said that attractive rents, especially
in key markets in the Mid-Atlantic region, are among the boons
of a weak economy.
"Though we look at the macro economy with a high degree of
concern, that macro economy also has helped create the
opportunities that make accelerated expansion so compelling and
attractive," May said.
On Thursday, the company pointed out that it had gained
market share in its existing markets. And some analysts said it
could be a decent rival to the industry goliaths.
"We continue to view hhgregg as one of the best positioned
quality growth names in our space," Credit Suisse analyst Gary
Balter said, adding that the retailer "was best-positioned to
capture the incremental consumer interest in new and higher-end
technology which also provides a level of pricing protection."
BB&T Capital Markets' Anthony Chukumba praised hhgregg's
highly trained sales force and family-friendly store format,
but said it is still too small to threaten the larger players.
Chukumba has a "hold" rating on its shares.
"They are clearly getting Best Buy, Wal-Mart's attention,
but they are still not big enough for Best Buy or Wal-Mart
(Stores Inc (WMT.N)) to be too worried about them," Chukumba
said, adding that that will clearly change when the smaller
retailer expands further.
REBATES FUEL APPLIANCE SALES
In addition to a good boost from newer stores, the company
got help in the first quarter from state appliance rebate
programs in Alabama, Florida, Georgia, Kentucky, North
Carolina, Ohio and South Carolina.
Hhgregg, which is more skewed towards larger appliances
than bigger rivals, benefited a lot more than Best Buy from the
rebates, Chukumba said.
The company, which does not typically update its year
outlook after its first quarter, said it hopes to revise that
outlook at the end of the second quarter, citing the strong
first-quarter results and sales trends in July.
"We have seen improved traffic in both our appliance and
video categories, which has continued into the second fiscal
quarter," May said in a statement.
In May, hhgregg forecast full-year earnings of $1.35 to
$1.45 a share on sales growth of 40 percent to 45 percent. It
forecast same-store sales would range between flat and a rise
of 2 percent.
The company's shares were up 8.1 percent at $23.03. Since
touching a year high in June, the shares have fallen by more
than a quarter on concerns about consumer spending and unsteady
demand for electronics.
(Reporting by Dhanya Skariachan, editing by Gerald E.
McCormick and Dave Zimmerman)