Hhgregg Expects Q3 Revenue To Drop 6%, Withdraws 2015 EBITDA Outlook

(RTTNews) - Consumer goods retailer hhgregg, Inc. or Gregg Appliances, Inc. (HGG) announced Tuesday that it expects sales for the third quarter to decline about six percent from last year.

Meanwhile, the company withdrew its EBITDA outlook for the full-year 2015, citing the projected non-cash charges to be incurred related to a valuation allowance for its deferred tax assets and impairment of certain stores coupled with uncertain current market conditions.

"The Company continues to execute on its strategic initiatives focused on transforming our sales mix. The Company has made progress improving on our previous quarters' sales trends, in particular in the consumer electronics and appliance business," President and CEO Dennis May said in a statement.

The Indianapolis, Indiana-based company now projects net sales of about $666 million for the third quarter, down 6 percent from $707 million in the year-ago quarter.

On average, 13 analysts polled by Thomson Reuters expect the company to report revenues of $670.07 million for the quarter.

Comparable store sales for the quarter are estimated to have decreased about 6 percent, with appliance category remaining relatively flat, and the consumer electronics category decreasing about 4 percent.

The home products category is estimated to have decreased about 9 percent as well as the computer and tablet category is projected to have declined about 35 percent. The company projects e-commerce business comparable sales were up about 59 percent.

"The computer and tablet industry continues to be negatively impacted by declining consumer demand. Additionally, we made a decision not to participate in certain areas of the computer and tablet business that were not profitable," May added.

Further, the company said it is withdrawing its EBITDA guidance for the full-year 2015, outlook fiscal year 2015 EBITDA outlook due to the projected non-cash charges to be incurred related to a valuation allowance for its deferred tax assets and impairment of certain stores coupled with uncertain current market conditions. The charges are related to the quarter ended December 31, 2014.

The company said it expects the combined impact of these non-cash pre-tax charges to be $60 million to $70 million and is currently in the process of finalizing that determination.

The company added that the impairment charge is based on current trends in under-performing markets and the lack of visibility to the recoverability of the assets associated with those stores. However, it does not currently have plans to close any of its store locations.

Robert Riesbeck, CFO said, "While the accounting related charges are significant, it is important to note that these charges are non-cash items. The company finished the quarter in a strong liquidity position with a cash balance of approximately $27 million and no outstanding borrowings."

The company scheduled to report financial results for the third quarter on January 29, 2015.

HGG closed Monday's regular trading session at $7.25, down $0.10 on a volume of 0.23 million shares.