INDIANAPOLIS-A drop in gross margin and a major increase in advertising expense cut into hhgregg’s third-quarter bottom line, which was $22.5 million, 16.5 percent less than in the third quarter of last year.
Gross margin took a dive of 240 basis points, to 27.2 percent, in the quarter, which ended on Dec. 31. The company cited poor margin results from the video category, which had increased promotional activity during the quarter. Net advertising expense rose a whopping 72 percent in dollars and 130 basis points as a percentage of sales, to 4.8 percent.
These factors offset a healthy gain of 27 percent in net sales, which totaled $829.5 million in the quarter. This included a gain of 3.9 percent in same-store sales. Selling, general and administrative expenses rose 19 percent in dollars, but fell off 110 basis points as a percentage of sales, to 17 percent.
Focusing on the positives from the quarter, Dennis May, hhgregg’s president and CEO, said the retailer is “gaining traction” from its initiatives to increase its market share in appliances and to boost sales in the home-office sector. “We are excited about the near-term success these initiatives have generated,” May said, “and believe these investments will continue to produce increased revenue and gross-margin dollars per store.”