Update: hhgregg Earnings

| About: hhgregg, Inc. (HGG)


The company missed fiscal 1Q 2015 consensus on the top and bottom lines.

This reiterates our long-term thesis that hhgregg’s business model is a poor investment.

We felt the company would miss fiscal 1Q expectations given the increased competition.

hhgregg (NYSE:HGG) posted fiscal 1Q earnings of $0.36 a share loss (versus consensus for a $0.16 loss) and revenues were $472 million (below $454 million consensus). Sales were down 10% y/y and comparable store sales were down 10.2%. The company didn't offer any fiscal 2015 guidance given the volatility in the consumer electronics industry. It also doesn't expect to generate positive EBITDA for this fiscal year.

The stock has tumbled 17% since posting earnings. Shares are down 65% since we first covered the company back in September of last year, and down 8% since our February note. As we noted last in February, there's little value proposition to hhgregg, especially in a market that's adding jobs, stating,

As well, hhgregg's major revenue generator, appliances, is seeing increased competition. These include the likes of Home Depot and Lowe's, not to mention Sears. During this past holiday season, hhgregg's competitors engaged deep discounts with their promotions. hhgregg chose not to answer these pricing pressures and also opened two hours later than most of its competitors.

We updated our price target to $6, suggesting another 15% downside. Bearish on the rent-to-own sector is nothing new for us, however, with bearish pieces on Aaron's and update here, and Rent-A-Center and update here.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.