Buy hhgregg, Sell Best Buy

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My fridge finally kicked the ice bucket over the weekend. Scrambling to find a replacement before I'd have to wade through a puddle of melted ice cream to get through my kitchen, I searched for a local appliance store offering same-day delivery.

I ran across an article on hhgregg (HGG), the fast-growing consumer electronics and appliance retailer that opened nearly a dozen stores in my South Florida hub this summer. I had driven by the nearest store a few times without going in, simply noting the brazenness -- or sheer stupidity -- of opening just a few doors down from a Best Buy (BBY) in the same strip mall.

However, in the article, hhgregg's CEO pointed out pointed out that if you order an appliance in the morning, it can be delivered later that night.

Sold!

I went to hhgregg just as the store opened on Monday, had a great experience with a knowledgeable salesman, and found the perfect replacement refrigerator. Unfortunately, the next available delivery wasn't until Tuesday afternoon. I had to toss out a lot of spoiling grub. (This Chunky Monkey's gone to heaven!) However, that was the only aspect of the hhgregg purchase and eventual delivery experience that didn't go well.

Media is the Message

Just as hhgregg is blowing into new markets -- Chicago is next -- Best Buy is struggling. The once-dynamic consumer electronics leader has posted three consecutive quarters of declining profitability and comparable-store sales.

Best Buy is getting knocked around by two of the same trends currently roughing up Wal-Mart (WMT): Consumers are turning to lower-priced e-tailers, and physical media is going digital. Best Buy stocks CDs, DVDs, video games, and books, and all of these media platforms are now being delivered directly to end users over the Internet.

Step into hhgregg, and you won't find the latest Lady Gaga CD or a Blu-ray copy of "Source Code." The store emphasizes large appliances, home theater systems, and mobile gadgetry that will never be replaced digitally. Good luck downloading tonight's meatloaf or tomorrow's laundry.

Best Buy Isn't Always the Better Buy

Analysts see Best Buy growing its sales by 4% this year and a little more than 2% next year. Those same pros believe hhgregg will grow at a 14% clip this year and 15% next year.

Both stocks trade at low P/E multiples. Best Buy is fetching just seven times next year's projected profitability, with hhgregg trading at eight times next year's bottom-line estimate. Given hhgregg's growth and its more e-tail-proof product mix, I know which company to bank on with my now-refrigerated lunch money.

I'll stick with hhgregg.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Wal-Mart Stores and Best Buy. Motley Fool newsletter services have recommended buying shares of hhgregg, Wal-Mart Stores, and Best Buy.


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6 Comments

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Dessy Anaiwan

Hhgregg and best buy are some of the good online stores to buy home and kitchen appliances online. While searching from the web, I have found another most popular and customer's favourite online store Appliances Connection for buying home and kitchen appliances. Everyone should visit Appliances Connection Online Store once for getting more information about it.

http://appliancesconnection.com/

Thank you.

January 06 2014 at 7:02 AM Report abuse rate up rate down Reply
Art & Linda

The problem I have with HHGregg is service. I had a Whirpool clothes washer that wasn't spinning all the water out. On the fourth service call the tech installed a new pump. The first time using the washer after that we smelled what we thought was an electrical problem and opened the lid to see the smoke pouring out. The motor had overheated. I reported the problem and the response was pour some bleach in the tub to get rid of the smell. About four years later I found a dishwasher at HHGregg that we liked. The salesman tried selling me the extended warranty and I told him HHGregg had no service. He asked to bring the store manager to me and I explained my earlier problem. The store manager told me if I purchased the extended warranty I was to call him and he would arrange the service call. Two years later we had a problem with the pump and I called the store manager and his response was that he no longer did that and I would have to call for service direct. I did, and GEZurich sent a tech who said they would have to order the motor and would have it in about 14 days. After two weeks I called and they couldn't locate any paper work on the order. I gave them the information again and after nine weeks and several phone calls the tech brought the motor, pulled the dishwasher out and installed the motor and shoved the dishwasher back under the counter but did not level it. Sadly the first time we started the dishwasher water poured out over the front of the dishwasher. HHGregg told me I could ask for a different service provider and I made such a request to GEZurich. The young man I spoke with told me that was correct and a different service provider would contact me within 24 hours. That didn't happen and when I called back I was told there was not any other providers and they would send the same tech out that had messed it up the first time. I told him not to bother because I would not let that guy in my house. Sorry, but twice bitten is enough for me. No more HHGregg. When I checked the Internet for problems with HHGregg service I found hundreds of stories similar to mine.

August 20 2011 at 3:05 PM Report abuse rate up rate down Reply
Sylvie

I avoid Best Buy because of their inferior return policy. No cash, no credit on your Visa or MasterCard - only a store credit. Who puts up with that in these times?

August 20 2011 at 4:58 AM Report abuse rate up rate down Reply
savemycountry911

Obama has just been endorsed by the Communist Party. Are you surprised?

August 19 2011 at 10:00 PM Report abuse +1 rate up rate down Reply
nvmaven

THE REASON I STOPED BUYING AT BEST BUY IS IF YOU HAVE A AD OF THEIRS FROM A STORE THAT THEY OPERATE IN THE NEARBY STATE THEY WILL NOT HONOR THAT AD AT A LOCAL STORE. I GUESS THEY FORGOT THAT THE CUSTOMER IS KING....

August 19 2011 at 4:40 PM Report abuse rate up rate down Reply
pfjw

Yikes!

I work in property management - and we have half-a-dozen BBs in the portfolio - and no HHGs (yet) - although they are across the street in several cases. Their prices are at-best indifferent, their selection OK but not great, but one cannot fault them on the quantity of sales-people they have on their floor - usually in small clusters, usually searching for something to do. I expect that once the novelty wears off, they will fail just as Circuit City (and others) did. Their growth at this moment is based on new-store sales, not year-on-year sales - and that will be the final measure of whether they go on or not - when the expansion stops and everyone stops to catch their breath.

August 19 2011 at 2:31 PM Report abuse rate up rate down Reply