NEW YORK (TheStreet) -- Hhgregg (HGG - Get Report) took a dive on Tuesday, plummeting 11.1% to $11.49 by late afternoon. The small-cap electronic retailer announced a day earlier that comparable store sales sank 11.2% over its third quarter, well below analyst estimates. While sales of appliances and home products rose, consumer electronics dropped 19.7% and computing and wireless products plunged 24.5%. The company blamed aggressive discounting and cutthroat promotions over the holiday period.
In sympathy, major competitor Best Buy (BBY - Get Report) fell 2.8% to $38.31. The retailer noted late last year that its deep-discounting promotions over the holidays would likely affect its bottom line.
TheStreet Ratings team rates HHGREGG INC as a Hold with a ratings score of C+. The team has this to say about their recommendation:
"We rate HHGREGG INC (HGG) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, reasonable valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 90.09% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- HHGREGG INC has improved earnings per share by 9.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HHGREGG INC reported lower earnings of $0.77 versus $2.19 in the prior year. This year, the market expects an improvement in earnings ($0.85 versus $0.77).
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. In comparison to the other companies in the Specialty Retail industry and the overall market, HHGREGG INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has decreased by 2.1% when compared to the same quarter one year ago, dropping from $3.76 million to $3.68 million.
- You can view the full analysis from the report here: HGG Ratings Report