Is being called the new Best Buy
A few years ago, it would have clearly been a major accolade. These days, it's the mother of all insults.
After all, Best Buy has posted three consecutive quarters of year-over-year declines in profitability, and same-store sales have been negative, too. Best Buy is the new Circuit City, so that would make hhgregg
The rise of Amazon.com
William Blair analyst Mark Miller seems to think the fast-growing chain will be the next to fall, downgrading the retailer yesterday. All but roughly a quarter of the 100 items that Miller randomly selected through hhgregg are available at Amazon. Adding insult to injury, the average price of those items at hhgregg was $80 higher, about a 12% savings.
I'm not as concerned. The typical hhgregg store stocks 100 different digital TVs, and Amazon likely sells most of them cheaper. However, every hhgregg also has more than 500 major appliances in stock. Good luck getting a dishwasher at Amazon. If your freezer breaks down, good luck trying to get a replacement fridge from Amazon before your ice cream melts.
Amazon has evolved since its days of peddling light media items, but heavy-duty appliances seem to be a safe turf for now.
This obviously isn't reason alone to believe that hhgregg will outlive Miller's bearish call. A strong reputation when it comes to appliances hasn't helped Sears Holdings
However, there's still something to be said for being opportunistic. Making the most of desperate strip mall landlords with vacant anchor locations to occupy, hhgregg is probably getting some spectacular deals as it blankets the country. It will hold a grand opening for 10 new stores in South Florida this week. It's set to open 14 new stores in Chicago in the fall. This is some pretty heady territorial expansion for a chain that will have only 185 stores open by the end of this week.
The threats are real, but the same can be said of its opportunities. It's true that hhgregg will never be the Best Buy of yesterday, but it doesn't have to become the Best Buy of tomorrow.
Can physical stores selling consumer electronics be considered a growth industry? Share your thoughts in the comment box below.
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Longtime Fool contributor Rick Munarriz doesn't shop at Best Buy as much as he used to, and he's tickled to find that one of the hhgregg stores opening in Miami will be in the same strip mall as a Best Buy. Food fight! He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.