Scott Olson, The IBJ
solson@ibj.com
HHGregg said this morning that the bankruptcy of competitor Circuit City should enable the company to open more stores within the next few years than previously expected.
The Indianapolis-based electronics and appliances retailer now plans to open between 20 and 22 stores in fiscal 2010, which began March 31, up from previous estimates of 16 to 18 stores. In addition, HHGregg said it expects to open between 40 and 45 more stores in fiscal 2011.
The company opened 20 stores in fiscal 2009.
The company said Virginia-based Circuit City's demise and the real estate available from the store closings prompted executives to accelerate the growth strategy.
"These changes have created significant opportunities for the company to expand at growth rates greater than previously projected," the company said in a prepared statement.
Cities targeted for store openings next year include Tampa, Fla.; Memphis, Tenn.; and Richmond, Va.; as well as Philadelphia, Baltimore and Washington, D.C., in fiscal 2011.
The company has lease agreements for nearly all of the new stores expected to open during fiscal 2010, at a cost of roughly $45 million to $50 million. It also has begun to execute leases for stores that should open the next fiscal year. HHGregg so far has approved 18 locations for 2011.
Stores opening in fiscal 2010 will be funded from cash from operations and the company's revolving credit line. HHGregg said it is exploring various financing alternatives, including equity and debt, to fund the opening of remaining stores.
The company is undertaking the expansion despite a highly competitive environment for electronics and appliance retailers, and a challenging economic climate.
In early June, HHGregg reported an 8.3-percent drop in fiscal 2009 same-store sales, a key measure of health for retailers. The company expects to report another 7-percent to 12-percent drop during the current fiscal year. Same-stores sales measure revenue at stores open at least a year.
HHGregg currently operates 112 stores in nine states, mostly in the Midwest and South.
Company shares opened this morning at $14.59, down from a 52-week high of $19.10 in April.
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