James Briggs

james.briggs@indystar.com

Maybe if HHGregg had gone after the high-end appliance market sooner, things would be different.

Perhaps if the Indianapolis-based retailer hadn't attempted a national expansion in 2010 — a year when Americans weren't exactly awash in disposable income — things would have turned out better.

It's impossible to say. But here's what we know: HHGregg is circling the drain. The company has lost money for the past two years, largely driven by plummeting consumer electronic sales.

The drip, drip, drip of bad news coming from HHGregg's 96th Street headquarters has been relentless so far this year, starting with the release of terrible holiday sales figures. The company on Thursday said it would close 40 percent of its stores, as well as three distributions centers, by mid-April. That announcement came days after HHGregg was delisted by the New York Stock Exchange.

Before all that, Bloomberg reported the company is preparing to file for bankruptcy this month. HHGregg in mid-February hired Stifel, Nicolaus & Co. and Miller Buckfire & Co. to find ways to "improve liquidity and return to profitability."

HHGregg tried to avoid this downward spiral. Under CEO Robert Riesbeck, who took over in February 2016 after Dennis May resigned, HHGregg has sought to downplay its position in the fiercely competitive electronics market and become a go-to appliance store, particularly under the banner of its luxury Fine Lines brand. Fine Lines is a store within a store that features some of the most upscale appliances on the market.

There are signs that it has been a smart strategy. Appliances have been a strong growth category, accounting for 53 percent of HHGregg's sales in the fiscal third quarter. Yet, HHGregg hasn't been able to sell enough refrigerators and dishwashers to make up for the beating it has been taking on computers, tablets and smartphones.

During the most recent quarter, which included the crucial holiday shopping season, HHGregg's consumer electronic sales at stores open for at least a year cratered by 38.6 percent. Overall, same-store sales dropped by 22.2 percent in the quarter. Those are the kinds of numbers that put retailers out of business.

"Our entire team is disappointed with this performance," Riesbeck said in the company's Jan. 26 earnings call.

An HHGregg spokeswoman said Riesbeck was not immediately available for an interview because he was addressing employees who will be affected by the upcoming closings. HHGregg is closing 88 stores in 15 states — not including Indiana — as well as distribution centers in Brandywine, Md., Miami and Philadelphia. The moves will eliminate 1,500 jobs.

Riesbeck in a statement said he expects the closings to help HHGregg become a "profitable 132-store, multiregional chain where we will continue to be a dominant force in appliances, electronics and home furnishings.”

But HHGregg's planned downsizing, as well as its reinvention as a luxury appliance store, might have come too late. The company lost a staggering $58.3 million during its third quarter. At least one competitor is openly talking about picking up scraps of HHGregg's carcass.

Best Buy CEO Hubert Joly was asked about HHGregg's potential bankruptcy during an earnings call this past week. "We're not going to mention the name of this particular retailer," Joly said March 1, before adding that he would expect HHGregg's demise to open up a potential $1 billion for companies like his to fight over.

"If they do file (for bankruptcy) and close their stores, which we have no information about, then you can assume that the $1 billion would be shared across a variety of players," Joly said.

Joly added that capturing HHGregg's revenue is "not something transformative for us."

In other words, HHGregg is barely a blip on Best Buy's radar.

The painful reality for HHGregg is that it failed to become a national player in electronics and it is on the verge of failing to become a regional player in appliances. The company likely waited too long to give Fine Lines a chance to succeed.

HHGregg's store-closing plan suggests it's making tough choices in a last-ditch effort to stay afloat. But a funny thing happened after HHGregg announced that it would shutter 88 stores: Best Buy's stock jumped.

Investors, who abandoned HHGregg in recent months, seem to think the company's chances for a turnaround are behind it. HHGregg is running out of time to prove them wrong.

HHGregg closing 88 stores amid bankruptcy rumors

Call IndyStar business columnist James Briggs at (317) 444-6307. Follow him on Twitter: @JamesEBriggs.