HHGregg seizes opportunity as others close
Tampa Bay Business Journal - by Janet Leiser Staff Writer
The Tampa Bay area is a key expansion site for HHGregg, which plans to add as many as 67 stores nationally in the next two years to take advantage of low rental rates, the appliance and electronics retailer announced Wednesday.
The contraction of other retailers has presented opportunities for HHGregg, based in Indianapolis. The company is taking advantage of excess inventory in the retail real estate market to gain market share, Dennis May, president and chief operating officer, said in a statement.
“The combination of our effective operating model, an opportunistic real estate environment, strong partnerships with key vendors and the availability of talented field-level personnel creates a significant opportunity for the company to accelerate its growth,” May said.
The chain (NYSE: HGG) is opening stores in Tampa Palms, Clearwater, Spring Hill and Lakeland.
A limited number of retailers, including Aldi’s and Ross Dress for Less, are also expanding locally, but HHGregg is being more aggressive, said David Conn, southeast director of retail services at CB Richard Ellis Inc. in Tampa.
Many of the chains expanding locally are discount retailers, which are being selective about location, price and terms, including co-tenancy clauses, Conn said.
HHGregg plans to open between 20 and 22 stores during the current fiscal year that ends March 31, up from 16 to 18 as announced previously.
There also will be multiple openings in Memphis, Tenn., and Richmond, Va.
Capital expenditures, net of sale and leaseback proceeds, are expected to range between $45 million and $50 million for the fiscal year, up from previous expectations of $30 million to $35 million, according to the company.
The increase primarily reflects the incremental capital expenditures expected to be incurred in late fiscal 2010 for increased store openings in early fiscal 2011.
In fiscal 2011, the company expects to open between 40 and 45 stores. The majority will be in large- and mid-sized metropolitan markets in the Mid-Atlantic region, including Philadelphia, Baltimore and Washington.
HHGregg also plans to open its fourth central distribution center for the Mid-Atlantic region in early fiscal 2011.
The company has executed leases for nearly all of the stores projected to open in fiscal 2010 and has begun to execute leases for fiscal 2011.
HHGregg’s board has approved 18 locations for 2011.
The company is using cash and a credit facility to pay for the expansion, but it’s also exploring the use of equity and debt as an alternative financing option.
HHGregg now has 112 stores in Florida, Alabama, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Tennessee.
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