Talk of restructuring and turnaround has morphed into discussion of a Chapter 11 bankruptcy filing for struggling electronics retailer HHGregg, according to Bloomberg.
Although HHGregg continues working on a restructuring solution that won’t involve bankruptcy, the filing could be made as soon as March, sources told Bloomberg.
"We're focused on continuing to execute our business strategy, as planned, and returning this company to profitability," HHGregg CEO Robert Riesbeck (who grabbed the helm last summer after serving as interim chief following Dennis May's abrupt February 2016 resignation) wrote in an email to Reuters, declining to offer any additional comments.
HHGregg, which has 226 stores in 20 states, is coming off a disappointing holiday shopping season on top of a couple of years of revenue declines: 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.
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 is reportedly mulling bankruptcy.