When you walk into hhgregg (HGGGQ), you see a lot of bright lights, clear and easy-to-read signs indicating what you can find in each area of the store, and a salesperson willing to help you faster than a Peregrine Falcon diving toward its prey at 200 miles per hour.

The good news is that unlike salespeople at some other retailers, hhgregg employees are trained to offer advanced knowledge about product features without being rude. As an investor, this is the fine line you want to see with a company's sales force. At the same time, the sales force only has the potential to drive people out of the store, not into it. Currently, hhgregg has many headwinds to overcome.Let's see how they stack up against peers, Best Buy (BBY 0.89%) and Wal-Mart (WMT 0.53%)

Strong and weak
hhgregg sells many different types of products, but as of the six months ended Sept. 30, 86% of its net sales came from premium appliances and consumer electronics. hhgregg has seen nine consecutive quarters of comps growth in appliances, while suffering from consistently lower comps in consumer electronics. The latter has everything to do with the rise of smartphones, which has made cameras, camcorders, mp3 players, and GPS devices somewhat obsolete. Logically, hhgregg plans to focus more on appliances going forward, but it's not giving up on consumer electronics, either. 

hhgregg's three primary initiatives:

  • Reshape Sales Mix
  • Expand Customer Base
  • Enhance Service Offerings

Let's take a closer look.

Reshape sales mix
As stated above, hhgregg will focus more on appliances, with these goals at the forefront:

  • Increase Sales Prices Through Promotions of Kitchen Packages
  • Increase Sales Via promotion of hhgregg rebate card incentives
  • Rollout New Furniture Products After Successful Test of Furniture Assortment

Expand customer base
hhgregg will increase its credit card offerings with a new advertising campaign. This seems to be a sensible move since private label credit card penetration increased 332 basis points to 34% over the past year.

In addition to offering card holders a 5% discount on qualifying purchases, hhgregg will also offer a lease-to-own option if a customer is turned down for the credit card. Furthermore, a secondary finance offering will be available to low-income consumers. 

Enhance service offerings
This primarily pertains to increased product offerings on the company website, with some of these products only available online. As far as physical retail locations, a new in-store point-of-sale system will be established, which is expected to expedite checkout. 

Hope and concerns
hhgregg recently added Apple iPads and iPods to its stores. Better late than never. The company expects this move to increase the average sales units of its stores. However, this isn't going to help the decline in demand for flat-panel TVs. The decline in demand for these discretionary items has led to pricing pressure which has negatively affected margins. hhgregg has attempted to move toward larger screens with higher profit margins, but this has weakened comps results and led to lower market share in consumer electronics. 

On the potentially positive side, hhgregg cites a healthy housing market for increased demand in appliances. If the housing market is strong, people buy appliances. If the housing market is weak, they don't. Therefore, if you choose to invest in hhgregg, then you need to watch the housing market.

If the 30-year mortgage is below 5%, then barring a stock market collapse or unexpected company news, the stock is likely to appreciate. If the 30-year-fixed moves north of 5%, there's still potential, but momentum is likely to fade as investor nerves will set in. If the 30-year fixed moves to 6% or higher, it could get ugly. According to USA Today, the 30-year fixed currently stands at 4.1%. 

Stronger in consumer electronics
If you want to invest in a company that offers more potential in consumer electronics, then you might want to take a look at Best Buy(BBY 0.89%). I'm not an advocate of Best Buy, but that doesn't mean I'm incorrect. The stock has skyrocketed 272% year to date. With appreciation of 14% over the past month, that momentum doesn't seem to be slowing. 

The big news for Best Buy is about how it's combating showrooming by offering a low price guarantee. If you can find the same product on Amazon.com for a lower price, Best Buy will match that price. This is great in theory, but comps have still been negative for 10 consecutive quarters. Investors might continue their magic carpet ride with Best Buy for a while, and I could be 100% wrong if it becomes a great turnaround story. However, until comps turn consistently positive, it's going to be tough to sleep at night knowing that Best Buy is always on the fringe of a gap down if any negative news were to surprise the Street. 

Safety in numbers
hhgregg offers potential and it's a little under the radar. Best Buy is always an exciting conversation due to the passionate bulls and bears. Wal-Mart(WMT 0.53%) is boring. However, savvy long-term investors know that boring is good.

Wal-Mart is an example of a mature company that rakes in big profits while still finding ways to grow the top line. This leads to a lot of capital being returned to shareholders. For instance, Wal-Mart yields 2.40% whereas Best Buy yields 1.60% and hhgregg doesn't offer any yield. For hhgregg, there's no lifeboat if the ship starts sinking.

Despite Wal-Mart being known for volume instead of margins, it still sports a higher profit margin of 3.61% than hhgregg at 1.19% and Best Buy at (0.97%). At the same time, Wal-Mart trades at 14 times forward earnings while hhgregg and Best Buy trade at 17 and 16 times forward earnings, respectively.

The bottom line
hhgregg offers potential thanks to its recent initiatives and strength in appliances. However, that growth potential isn't enough to make it a better option than a safe dividend payer like Wal-Mart.