What will retailers gain from HHGregg’s loss?
HHGregg isn’t looking to prolong its suffering. The bankrupt chain, which announced it was shuttering its 220 stores by the end of May, began running going-out-of-business deals this past weekend. In the short term, discounts offered by the chain may put pressure on rivals selling appliances and consumer electronics. Longer term, the removal of a competitor from the market offers opportunities for those left standing.
Best Buy, not surprisingly, is considered to be among the likely beneficiaries of HHGregg’s demise.
Mike Baker, an analyst for Deutsche Bank, released a research report this weekend, according to The Star Tribune, that estimated Best Buy could add $335 million in revenue if it were able to capture 20 percent of HHGregg’s sales. That would mean an increase of 0.9 in comparable store sales for Best Buy. While it might now sound like that much, Best Buy has forecast flat sales and profits for 2017.
Mr. Baker estimates that Best Buy picked up between 20 and 30 percent of Circuit City’s sales when that chain closed in 2009. Of course, the market has changed substantially in recent years. Amazon.com has picked up share in consumer electronics while new players such as J.C. Penney have ventured into selling major home appliances.
Best Buy reported a decline in same-store sales during the fourth quarter, but the chain pointed to 18 percent growth in online sales and a 27 percent jump in profits as positives for the company.
In an email to RetailWire last month, Charlie O’Shea, the lead retail analyst at Moody’s, wrote of Best Buy’s fourth quarter results: “We continue to believe that Best Buy is one of the brick-and-mortar ‘leaders’ in the push online, and expect the company to continue to make incremental progress in its quest to become a true multi- and then omnichannel retailer.”
- HHGregg to close all stores after failing to find a buyer – The Indianapolis Star
- HHGregg’s demise could help Best Buy – Star Tribune
- Did Wall Street miss on Best Buy’s Q4 results? – RetailWire
- Has Best Buy solved the Amazon riddle? – RetailWire
DISCUSSION QUESTIONS: How should competing retailers respond to HHGregg’s going-out-of-business offers? What retailers do you expect to benefit from HHGregg’s demise?