HHGregg filed for Chapter 11 bankruptcy protection on Monday in the U.S. Bankruptcy Court for the Southern District of Indiana.
The electronics retailer has signed a term sheet with an anonymous party to purchase its assets, which will allow the company to exit the bankruptcy process debt-free.
Closure of 88 HHGregg stores (representing some 40% of its fleet) will continue as planned, and its remaining 132 stores will continue to operate as usual.
Home electronics has been a tough space for many players, not only because a few high-priced categories like smartphones have now become saturated, but also because many have also evolved into commodities — items that can be found at a range of retailers, forcing those merchants to compete on price. Even Best Buy, which enjoys fruitful store-within-store concessions relationships with several retail partners and a successful omnichannel approach, is struggling as Amazon takes significant electronics market share.
But HHGregg's troubles are particularly pronounced. The company closed stores and laid off some 1,500 employees in a cost-cutting measure days ahead of this Chapter 11 filing, and in its most recent quarter, sales plummeted to about $453 million, down 24% compared to the year-ago quarter. In all, HHGregg's stock value has declined more than 60% over the last year, and earlier this month, the New York Stock Exchange warned the company could be delisted for failing to meet the minimum listing price requirement.
“We’ve given it a valiant effort over the past 12 months,” CEO Robert J. Riesbeck said in a statement Monday. “We have conducted an extensive review of alternatives and believe pursuing a restructuring through Chapter 11 is the best path forward to ensure HHGregg’s long-term success. We are thankful for the continued support of our dedicated employees, valued customers, vendors and business partners as we navigate this process, and look forward to becoming a stronger company in the coming months.”
In addition to closing underperforming stores, HHGregg has “solidified” its senior management team and is dedicated to restructuring its business model for profitability and growth, Riesbeck also said. The company has recently expanded its free delivery options, boosted its digital efforts and streamlined logistics and supply chain. “Through these strategic steps, we plan to come out of this debt-free and more agile,” Riesbeck said.