hhgregg

Brand Acquisition
Opportunity


INTRODUCTION

Hilco Streambank is currently seeking offers to acquire the intellectual property and related assets (the “Assets”) of hhgregg including its trademarks, domain names, website, and customer database. The Company is currently operating as a Debtor under Chapter 11 in the United States Bankruptcy Court for the Southern District of Indiana.

BACKGROUND

hhgregg is a nationally recognized and trusted retailer of household appliances, consumer electronics, furniture and mattresses. Headquartered in Indianapolis, IN, hhgregg is the fifth largest national appliance retailer in the US. At its peak, the company operated 229 store locations across the Midwest and Southeast and the website: www.hhgregg.com. Priding itself on creating a differentiated purchasing experience, the hhgregg® brand is known for industry leading customer service, seamless delivery and installation capabilities, and a highly trained and knowledgeable sales staff.

The hhgregg.com website won J.D. Power’s “Highest in Appliance Retailer Customer Satisfaction” award in 2014. In CY2016, the platform generated $106M in total revenues and was experiencing 20%+ growth YOY. The online platform was completely integrated with the retail channel to allow the fulfillment of online sales by in store pick up.  The breakdown of online sales for CY2016 was about 45% pure e-commerce, 48% in-store pickup, and 7% drop ship.

hhgregg’s current product sales mix is about 61% appliances, 32% electronics, and 6% home furnishings. The Company positioned its product mix towards higher growth and higher margin products and significantly expanded the breadth of its product offerings to include furniture and bedding.

hhgregg partnered with Synchrony Bank to offer a private label credit card currently carried by approximately 2 million customers. hhgregg’s private label credit cards have a penetration rate of 42.9% (CY2016) among its customer base. 

FINANCIALS

Active Rewards - Loyalty Rewards Program

In CY2016, hhgregg generated approximately $1.8B in total revenue through the following channels:

  • Retail - $1.66B
  • E-Commerce - $106.4M
    • $7.6M in revenue was generated through a dropship program


Retail

In CY2016, hhgregg operated 220 retail stores throughout the Midwest and Southeastern US generating revenues of $1.66B.

  • Stores were primarily located in metropolitan markets, within power centers, and freestanding locations in high traffic areas.

  • Average store size was about 31,000 sq ft, however some locations were outfitted with an additional 4,500 sq ft dedicated exclusively to the Fine Lines departments which offered premium appliances only.

E-Commerce

Within the last decade, hhgregg made major strides toward the development of an effective e-commerce channel. The e-commerce channel was a key component of hhgregg’s omni-channel strategy “Store2Door service” focusing on driving growth across multiple points of purchase.

  • Generated revenues of $106.4M in CY2016; Up from $91.3M in CY2015
  • Over 25.1 M unique visitors in 2016
  • Average Order Size of $521.29 in 2016.
  • Won J.D. Power highest in appliance retailer customer satisfaction in 2014
  • Mobile optimized utilizing responsive design providing an enhanced online shopping experience by adapting to any device.
  • Shoppers are able to schedule delivery and professional installation services online, view personally curated lists of products based on shopping history, and apply for the Synchrony credit card directly from the site.
  • The site leverages a 3rd party differentiated dynamic pricing model allowing customers to compare 15 competitive sites daily and provides pricing to merchant team.
  • hhgregg utilized links with online marketplaces such as Jet.com and NewEgg.com to leverage its traffic to sell non-stocked products. From 2015 to 2016, hhgregg was able to achieve an increase in dropship orders from $1.8M to $7.6M.

 

hhgregg Customer Demographics:

The typical hhgregg customer falls into the following demographic categories:

  • Own a home
  • Annual income of over $75K
  • Married
  • Average purchase values well above $700

Product Categories:

Appliances:

Appliances remain the centerpiece of hhgregg’s sales, representing about 61% of FY17 sales and expected to grow to nearly 70% of sales by FY19. The hhgregg® brand supports sales in all major appliance categories including refrigerators, cooking ranges, dishwashers, washers and dryers.

Selected Appliance Vendors:


hhgregg1

Fine Lines:

hhgregg launched the hhgregg® Fine Lines sub-brand (www.hhgreggfinelines.com) to support sales of ultra-premium appliances from manufacturers  such as Sub-Zero®, Wolf® , Thermador®, and Viking®. Stores with Fine Lines departments generated around double the appliance sales vs. regular hhgregg® stores. The investment associated with starting a Fine Lines department was recouped in the first or second year.  The success of the Fine Lines sub-brand demonstrates the opportunity to generate incremental customer traffic and sales of higher price point and higher margin products.

Selected Fine Lines Vendors:


hhgregg2

Home Products

The Home Products category product assortment includes chairs, sofas, loveseats, sectionals, dining (primarily sold in sets), headboards, mattresses, coffee tables, rugs, lighting and more, and represents about 6% of Company sales in FY17 up from about 5% in FY15. Recently, hhgregg had reconfigured its stores so that furniture comprised 30% of floor space with placement at the front of the store to increase product focus. Within Home Products, the strongest subcategory is seating, which accounts for around 70% of Home Products sales. hhgregg’s furniture merchandising strategy focused on creating “great room” assortments characterized by large rooms combining features of living and dining / family rooms. hhgregg had also recently added an experienced furniture merchant team to help optimize pricing and evaluate potential margin opportunities by category. 

Consumer Electronics

hhgregg offered an extensive mix of premium audio, video and accessories in-store, as well as a broader product mix online, including tablets, computers and personal electronics. The consumer electronics product category represents about 32% of FY17 sales. Recent strategies in the electronics category have shifted focus towards larger ticket items and higher profit margins, such as larger screen TVs, as well as diversifying sales mix by improving audio, accessories, video and services sub-categories. 

Available Assets:

Trademarks

hhgregg®  |  Fine Lines®  |  FOBO®  |  Fill Your Home With Happy®  |  Extraordinary Appliances For The Heart Of Your Home® & More

Website

  • Website with responsive design - www.hhgregg.com

Brand Related Domain Names Including

abouthhgregg.com  |  greggoutdoors.com  |  hhgregg.co  |  hhgregg.eu  |  hhgregg.us  |  hhgreggelectronics.com  |  hhgreggfinelines.com  |  myhhgregg.com  |  and more

Social Media

  • YouTube Channel – 670 unique videos &  3,572 Subscribers

  • Facebook – 831,792 Likes & 788,280 Followers

  • Instagram – 4,032 Followers

  • Twitter – 34,600 Followers

  • Pinterest – 10,371 Followers


Customer Data

hhgregg maintains a database of approximately 16 million customer files. Customer data was captured at multiple points, including in-store at the POS, multiple locations on the website, and with the purchase of any warranty product. Transaction histories were captured and associated to each customer using email addresses, physical address and/or phone number. Physical mailing addresses were captured when customers opted for product delivery or in-home installation services. hhgregg frequently communicated with its customer via email and direct mail marketing. Emails were sent to subsets of the customer database 3-4 times per week. hhgregg also conducted approximately 5 direct mailing campaigns each year. hhgregg has its own branded credit card through Synchrony. About 40% of sales are completed with the hhgregg® Credit Card.

  • Approximately 16MM total customer records:
    • 5MM with valid email addresses
    • 1.13MM with valid email addresses completed at least one transaction in CY2016 (online or in-store)

Diligence & Sale Process:

Access to an online Data Room with detailed diligence information regarding the offerings will be provided upon execution of a non-disclosure agreement. The Assets will be sold through a Bankruptcy Court-approved sale process and transferred subject to a Bankruptcy Court order.