hhgregg Falls on Lowered 2012 Guidance

Shares of appliance and electronics retailer, hhgregg

are under much pressure in Tuesday's trading session as the company announced its third quarter and 2012 guidance. For Q3 2012, hhgregg estimated net sales to be $829.5 million, an increase of approximately 26.9% as compared to net sales of $653.7 million reported for Q3 2011, versus the $812.5 million estimate. However, hhgregg now anticipates 2012 net income per diluted share will be within a range of $1.05-$1.15 versus analyst estimates of $1.34. This also compares to previous guidance of net income per diluted share of $1.26-$1.41. Commenting on the events, CFO Jeremy Aguilar said, “As part of our go-to-market strategy during the quarter, we made investments to grow market share through increased promotions and marketing spend. While we continue to expect to gain market share and drive positive comparable store sales in the appliance and home office categories, we believe the industry-wide pressure on sales and margin within the video category will continue into the fourth fiscal quarter and will negatively affect our fiscal 2012 earnings, as reflected in our revised guidance.” After the news was reported, Piper Jaffray

on hhgregg, which they lowered the price target from $15 to $13 after the company reported disappointing guidance. However, maintained its Neutral rating on hhgregg. In the report, Piper Jaffray writes, "HGG announced better than expected Q3 sales of ~$829.5M vs. consensus of $812.5M and PJC of $807.3M. Additionally, the company expects comps to be +3.9% (-4.8% Video, +6.8% Appliances, +91.4% Home Office and -7.1% Other) vs. PJC of +4%. However, due to lower than expected margins in the Video category and advertising spend to generate sales in the Mobile category, HGG guided Q3 EPS to $0.60, which is below consensus and PJC of $0.77. For F12, the company slightly reduced comp and EPS expectations to a range of flat to +2% and $1.05 to $1.15 vs. PJC estimates of +0.9% and EPS of $1.35 (consensus $1.34). Recall that previous F12 comp guidance was flat to +3% and that previous EPS guidance was $1.26 to $1.41." Currently, shares of hhgregg are trading 12% lower at $11.50.