The stock began to fall after the home appliance retail chain announced a sharp decrease in sales and said FQ4 profit will be below expectations.
In a report announcing their preliminary fourth fiscal quarter sales the company "estimates net sales to be approximately $538.3 million, a decrease of approximately 9.9% as compared to net sales of $597.6 million reported for the fourth fiscal quarter of 2013."
Comparable store sales for the fourth quarter have also decreased 9.9%, consumer electronic sales decreased 18.9% and computing and wireless sales are down 22.6%.
"For the fiscal year ended March 31, 2014, the company expects to report net sales of approximately $2.3 billion and expects net income per diluted share of $0.01," the company said in its report.
TheStreet Ratings team rates HHGREGG INC as a Hold with a ratings score of C. TheStreet Ratings 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 reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, feeble growth in the company's earnings per share and deteriorating net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HGG's debt-to-equity ratio is very low at 0.05 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.17 is very weak and demonstrates a lack of ability to pay short-term obligations.
- HGG, with its decline in revenue, slightly underperformed the industry average of 6.3%. Since the same quarter one year prior, revenues fell by 11.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- HHGREGG INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, HHGREGG INC reported lower earnings of $0.77 versus $2.19 in the prior year. For the next year, the market is expecting a contraction of 54.5% in earnings ($0.35 versus $0.77).
- 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 significantly decreased by 71.0% when compared to the same quarter one year ago, falling from $17.39 million to $5.05 million.
- You can view the full analysis from the report here: HGG Ratings Report