HHGregg on Thursday said it will close three distribution facilities and 88 underperforming stores (some 40% of its fleet), laying off about 1,500 workers, as part of its restructuring plans.
The company aims to return to profitability as a 132-store, multi-regional chain selling appliances, electronics and home furnishings, CEO Robert J. Riesbeck said in a press release. "This is a proactive decision to streamline our store footprint in the markets where we have been, and will continue to be, important to our customers, vendor partners and communities,” he said. “We feel strongly that the markets we will remain in are the right ones for our customers and our business model.”
Stores slated to close are in 15 states: Alabama, Delaware, Florida, Illinois, Georgia, Louisiana, Maryland, Missouri, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia. Distribution and delivery centers to close are in Maryland, Florida and Pennsylvania.
News of these assertive turnaround moves from HHGregg comes amid rumors that it’s preparing for a Chapter 11 filing after several quarters of difficulties and an especially tough holiday season. Last-quarter 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 could be delisted for failing to meet the minimum listing price requirement.
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. 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, an area it had hoped to expand through its Fine Line unit: 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.
"The management team has worked tirelessly over the past year to return HHGregg to profitability," Riesbeck said Thursday. "We have determined that the economics of the affected locations will not allow us to achieve our overall goal of becoming a profitable company again. After scrutinizing our real estate portfolio, we have identified a number of underperforming stores, as well as store locations that are no longer strong shopping destinations due to changes in the local retail shopping landscape."
If HHGregg opts for bankruptcy, it will be among several in recent weeks that have done so: The Limited Stores shuttered all stores and was acquired at a bankruptcy auction by private equity firm Sycamore Partners, SoCal teen apparel retailer Wet Seal filed for its second bankruptcy in 25 months, the intellectual property rights of American Apparel were acquired by Canadian apparel company Gildan (American Apparel's second bankruptcy in little over a year) and BCBG filed this week.