Appliance and electronics retailer hhgregg, Inc.(HGG) Tuesday said it expects a lower third-quarter earnings from the prior year and that came in below Street view. Further, the company cut its full-year 2012 outlook, citing weakness in the video category. Shares of the Indianapolis, Indiana-headquartered company are down over 13 percent on the news.
For the third quarter, the company expects net income of about $22.5 million or $0.60 per share, compared to year-ago period net income of $26.9 million or $0.66 per share. Third-quarter sales are expected to rise about 26.9 percent to $829.5 million from $653.7 million in the year-ago quarter.
On average, 16 analysts polled by Thomson Reuters currently expect earnings of $0.77 per share for the third quarter on revenue of $812.5 million. Analysts' estimates typically exclude special items.
Comparable store sales are estimated to be up 3.9 percent in the third quarter, on increases of 6.8 percent in the appliance category and 91.4 percent in the home office category. The video category is expected to be down 4.8 percent, while Other category is expected to drop 7.1 percent.
The company said the video industry experienced heavier than expected promotional activity across all screen sizes, which negatively impacted industry average selling prices and margins. Another factor impacting the third quarter was increased advertising spend aimed at gaining market share and launching the mobile category.
Dennis May, president and CEO, said," While we believe we maintained our market share in video during the quarter, the difficult industry trends negatively impacted our results beyond our expectations."
hhgregg expects weakness in the video category to continue into the fourth quarter, ending in March.
The company cut its earnings guidance for the full year to a range of $1.05 to $1.15 per share, from the prior range of $1.26 to $1.41 per share. Wall Street expect earnings of $1.34 per share for the full year.
The revised outlook contrasts with the upbeat mood on November 2, when the company had provided the outlook.
The lower outlook corresponded to a 1 percent downgrade in comparable store sales guidance, which is now expected to come in from flat to positive 2 percent. The previous guidance was flat to positive 3 percent.
Net sales for the full year are now expected to increase 22 to 24 percent, while earlier the projected range was up 20 to 25 percent. The company's guidance translates to a range of $2.534 billion to $2.576 billion. Street currently expect revenues of $2.500 billion for the fiscal year ending in March 2012.
HGG is currently trading at $11.41, down $1.72 or 13.10%, on the NYSE. Over the past year, the stock traded in a range of $8.88 - $20.09.
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