hhgregg, Inc. (NYSE:HGG)

I'm aware that I'm issuing a thumbs-down call AFTER the 12% drop in the stock yesterday. But there's nothing about this business that I like, and I think it's going to continue to underperform.

- Macro environment for bricks-and-mortar electronics stores. 1/3 of assets are in PP&E. Nothing new here: it's a rough industry to be in.
- EPS down 82% and Revenues down 2.6% vs last year. That's terrible for a retailer dependent on SSS growth.
- Company guidance is for $0.75 - $0.90 EPS for the year, which puts the P/E ratio at 16.5 at the midpoint of guidance. Still too high for a business that is becoming irrelevant.

There is of course a chance that I'm very wrong. HGG is already up 96% YTD. But with the company only opening 5 stores this year (vs what appears to be 20 last year) and a lack of any competitive advantage or catalyst, I'm going to issue them my first CAPS 'underperform' call.

HGG changed its strategy from consumer electronics to appliance jumping from the fire pot into the fire. They are adding stores and the stores are making less and less money every quarter. They are predicting selling less stuff and then sell less stuff than they were expecting. It's 175% growth in the stock price over the last 6 months is unsustainable.

Another big box retailer destined to join the likes of Circuit City, Borders and (soon) Office Depot in the retail graveyard. It's simply too difficult for hhgregg and other companies to compete with mass merchants (such as Target and Wal-Mart) and e-commerce giants (namely Amazon). Investors can say all they want about hhgregg's cash flows and apparent asset value, but if sales are destined to decline over time, there is no helping the company or the stock over the long term.

Sell at $18 http://www.gurufocus.com/stock/HGG

Significantly undervalued.

HGG is massively undervalued with a P/E of 5.4 and a P/B of 1.0 in an industry with an average P/E and P/B of 44.2 and 5.0 respectively. The low price of this company is not justified, because it is good financial health and is not shrinking.

Taken from the guy in Omaha, this is a cigar butt. Good for a few more puffs, but it's not gonna last. There's a need for this type of retailer, it's more nimble than BBY with great metrics. The big boxes and internet are really testing the biz model though.

They have a low cash to debt ratio and are in a good position to survive the recession. Once the economy actually recovers as measured by ratio people actually working (rather than the political "unemployment" numbers that don't reflect reality) vs those able to work I believe HHG will break out big. There are some other retailers that I have concerns about being able to survive the next 3-5 years of recession (BBY for example) based on their debt load.

Good entry point below $8 a share

Lack of training for employees.

H.H. Gregg sells large, high ticket items like televisions, appliances, and mattresses. This business has large entrenched competitors that are not going away. Costco, Sam's Club, Home Depot, Lowe's. Amazon threatens to move these products to an Internet sales venue. The television market is historically bust and boom. All their products are purchased very infrequently by consumers, so there is no regular walk through traffic. Now same store sales are down at a time when new construction and big ticket retail is rising. This is a signal that the thesis behind these stores is flawed.

No debt, growing, less than net tangible assets, low EV/rev.

Current Graham Number valuation $21.82

I am going to mark this as undervalued currently, however I am not as optimistic as some other fools appear to be. Recent numbers look great at a glance, but when i dig into them, I have some concerns.

From their annual report - "The increase in net income for fiscal 2012 as compared to fiscal 2011 was the result of the receipt of $40.0 million of life insurance proceeds and a 20.0% increase in net sales . . . "

I think they are doing well and fairly cheap, but the $40m noted on their most recent earnings report makes it look more attractive than it really is.

Expansion plans.

This stock is hopeless. I must have been crazy to buy a stock so dependent on the US consumer. Dumped it today and moving on.

This company is similar to Best Buy Electronics but as a regional expanding player. High end electronics during a struggling domestic economy - From what I read on the hgg boards - mediocer service / sales staff - Brick and Mortar retailer competing against on line retailers like Amazon ( Amazon has better prices and better service with no brick and mortar overhead.

I dont think HH Greg will turn around as quickly as everyone thinks. I believe the article "Why HH Greg's earnings are not so hot". I would be ok paying 8 dollars per share for this but not 10

Small company with tons of growth potential. Customer service will be the key, which they already do very well. They will need to upgrade there website if they want to make money online.