HHGregg mulls debt restructuring, turnaround
HHGregg is turning to the financial services community to explore its options for debt restructuring and a possible turnaround effort, Bloomberg reports.
The beleaguered electronics retailer, which has 226 stores in 20 states, has retained investment bank Miller Buckfire & Co., Miller Buckfire parent Stifel Financial Corp., and law firm Morgan Lewis & Bockius LLP in the process, sources with knowledge of the matter told Bloomberg.
HHGregg, which has struggled with sales and a failed expansion of its brick-and-mortar store fleet, last summer named Robert Riesbeck its permanent CEO. Riesbeck had served as interim chief after Dennis May abruptly left the company in February 2016.
Home electronics has been a tough space, not only because a few high-priced categories like smartphones have now become saturated, but also because many have also morphed into commodities — items that can be found at a range of retailers, forcing those merchants to compete on price. (A stark indication of the trend: Amazon accounted for a whopping 90% of the $5.6 billion growth in consumer electronics sales posted nationwide in 2015, according to a note last year from Deutsche Bank analysts.)
Responding to those challenges, Riesbeck has shaken up HHGregg's senior management, expanded its free delivery options, boosted the company’s digital efforts and streamlined logistics and supply chain. But the retailer has also had to contend with rising competition in the appliance space: In addition to longtime rival Best Buy, which has more than 1,400 U.S. stores and has gained traction in its turnaround of late, department store retailer J.C. Penney re-entered the space last year, and Sears has ramped up its own offerings in response.
HHGregg is coming off a disappointing holiday shopping season: Sales plummeted to about $453 million, down 24% compared to the year-ago quarter. 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 it could be delisted for failing to meet the minimum listing price requirement. HHGregg shares dropped as much as 7% Wednesday.
Last week, Riesback told the Indianapolis Business Journal that HHGregg is pinning its hopes in part on the continued rollout of its super-premium Fine Lines appliance stores: There are currently 17 Fine Line stores within existing HHGregg locations, and the company plans to add as many as 15 more over the course of 2017. Appliance sales in stores home to Fine Line efforts have doubled within 36 months, Riesback said, adding that HHGregg also plans to ramp up its furniture business, which occupies 30% of floor space but accounts for only 6% of sales.
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