Electronics, appliance giant hhgregg adding furniture to its stores

Clint Engel -- Furniture Today, November 16, 2012

INDIANAPOLIS — Electronics and appliance retailer hhgregg is rolling out furniture to all 228 of its stores by the end of this year.

That news follows a test at a number of stores of upholstery, occasional tables, consoles and more from Ashley Furniture Inds.' Signature line - developed for non Ashley Furniture HomeStores retailers.

It's unclear if a full-scale rollout will be Ashley-only product or open to other sources.

Jeff Pearson, senior vice president of marketing for hhgregg, said in an email that the chain already has Ashley furniture in 228 stores in 20 states.

"We feel that our current customer base skews female and so this is the perfect opportunity for hhgregg. We also have an educated sales force and distribution network in place to deliver the products," he said.

Hhgregg said more details will be provided in coming weeks. Ashley's Kerry Lebensburger said Ashley doesn't have a "locked in deal," nor has it signed any agreements with the Indianapolis-based retailer.

What is clear is that other large electronics and appliance dealers, including Richfield, Minn.-based Best Buy and Beaumont, Texas-based Conn's, have tested the home furnishings waters in a push for better margins and more female shoppers, and hhgregg has taken notice.

In the earnings release for its fiscal second quarter ended Sept. 30, hhgregg President and CEO Dennis May said that in this third quarter, which runs through the end of the year, "We expect to fully rollout furniture and exercise equipment to all of our stores."

In a transcript of the retailer's investment community conference call posted on the Seeking Alpha website, May goes on to say the company is pleased with the results of the new businesses - both the consumers' and employees' acceptance of the new products, "and I think when you visit the stores, you really like the way not only furniture and fitness looks in those store, but how the entire store looks."

Asked if the new business could combine for 10% of sales or 15% of gross profits next year, May said that's an aggressive projection, but added the that company believes furniture and exercise equipment are "going to be a good fit for us."

In the retailer's Greensboro, N.C., store on Hornaday Road, hhgregg - which already was selling bedding, including Tempur-Pedic and Serta mattresses - now also features Ashley Signature living room packages, recliners, televisions consoles and more.

Signage on the left wall over the dedicated space reads, "Furniture Home Solutions," and the display included four sectionals, four five-piece living room packages and about a dozen recliners as well as a handful of stationary chairs, small recliner side tables and a large home entertainment wall, the latter retailing for $899.

Most of the upholstery was covered in leather or bonded leather, and room packages with sofas, loveseats and three tables ranged from $2,499 to $2,799.

The consoles were stacked three high and ranged from $279 to $373, and the recliners ran from about $300 to more than $600.

"What every electronics store has learned - Best Buy, (the former) Circuit City, you name it - is that the woman hates their stores, but she loves to buy TVs in furniture stores," Ashley's Lebensburger said.

Then, along came furniture industry players such as Rooms To Go, Ashley and others, "and we proved it," he said. "Every time you run these TV package deals, it has proven to these (electronics dealers that that TVs sell in furniture stores, when it's in the right environment, and women would rather buy it that way."

He said Circuit City tested Ashley furniture, including bedroom furniture, about a year before the electronics chain folded. A three-month test in Boston was so successful that the company expanded it to Baltimore, but "it came too late to save them," he said.

Ashley also helped Conn's get started in the furniture category. It no longer sells that retailer, but Conn's furniture business continues to be its shining star.

In its quarter ended Oct. 31, Conn's said furniture and bedding sales were up 31.7% over the same period a year ago, to $32.3 million, representing 19.3% of total sales and outpacing the sales growth of its other categories. A year ago, furniture and bedding accounted for just lest than 16% of sales at the chain.

Lebensburger said hhgregg sees that Conn's is doing well, sees that Best Buy testing the water by placing Gardner-White furniture areas within two Detroit-area Best Buy locations, and decided it needed to test furniture, too.

It started with Ashley in about 20 stores over the summer, Lebensburger said, and has been expanding. He said his "gut feeling" is that the retailer's management is pleased with the, partly because furniture brings female consumer into the stores.

That's not to mention the improved margin opportunity that comes with furniture. "Everyone knows there's no margin left in TVs," he said.

"When and if they decide it makes sense, everyone in the industry will have a shot at their business," Lebensburger said, noting that Ashley hasn't signed non-compete or any other types of agreements with the chain.