Corporate Finance

HHGregg Files Chapter 11, Plans Sale of Stores

After pushing a turnaround, the retailer decides a restructuring through Chapter 11 is "the best path forward to ensure long-term success."
Matthew HellerMarch 8, 2017
HHGregg Files Chapter 11, Plans Sale of Stores

After four years of declining sales, appliance and electronics retailer HHGregg has filed for bankruptcy protection with an agreement to sell the business to an unidentified party.

As part of a turnaround effort, HHGregg had announced last week that it would close 88 stores, leaving it with 132 stores and eliminating 1,500 jobs. Sales at stores that have been opened for at least a year declined 22.2% during the most recent fiscal quarter.

But the Indianapolis-based company abandoned that effort on Monday, filing Chapter 11 petitions for itself and its Gregg Appliances unit.

A Better Way to Do Ecommerce

A Better Way to Do Ecommerce

Learn how Precision Medical leveraged OneWorld to cut the cost of billing in half and added $2.5M in annual revenue.

“We’ve given it a valiant effort over the past 12 months,” HHGregg CEO Robert J. Riesbeck said in a news release. “We have conducted an extensive review of alternatives and believe pursuing a restructuring through Chapter 11 is the best path forward to ensure HHGregg’s long-term success.”

HHGregg said it had signed “a term sheet with an anonymous party to purchase the assets of the company, which is intended to allow the company to exit Chapter 11 debt free with significant improvement in liquidity for the future stability of the business.”

As the Indianapolis Business Journal reports, HHGregg, which was founded in 1955 by the Throgmartin family, “lost its way after going public in 2007 and launching an aggressive push to go national. The expansion coincided with price deflation and increased competition in consumer electronics, which used to generate the majority of its sales.”

Between 2007 and 2012, the chain expanded to 220 stores from about 100, with sales rising to more than $2.5 billion from less than $1 billion. But it “has struggled for market share against online retailers and traditional big-box stores such as Best Buy,” the Indianapolis Star reported.

HHGregg has a relatively light debt load, just $30 million as of Dec. 31, but it is burdened with $190 million in lease obligations on the stores and three distribution centers slated for closure. “Retailers that file Chapter 11 typically get off the hook for unwanted leases as part of their restructuring,” the IBJ said.