Consumer electronics retailer to open stores in Richmond

A fast-growing regional consumer electronics retailer plans to open multiple stores in the Richmond area this year, likely taking over some former Circuit City locations.

The announcement yesterday by hhgregg Inc. about its entry into the Richmond market comes four months after Henrico County-based Circuit City, once the nation's second-largest consumer electronics chain, closed its last stores nationwide.

The Richmond-area stores would be hhgregg's first locations in Virginia.

"This is the right move for them," said Bradley B. Thomas, an analyst with KeyBanc Capital Markets Inc. who follows hhgregg.

"They have an impressive record of new-market entry," he said. "They open in a new market and open right across the street from competitors. They have not had problems going head-to-head."

Indianapolis-based hhgregg, which sells electronics and appliances by using a commissioned sales staff, declined to say how many stores the chain would open locally or where.

But industry and real estate experts say hhgregg likely will take two or more of the six former local Circuit City locations. The chain was reported to be considering the Circuit City store at Short Pump Town Center in western Henrico and one near Chesterfield Towne Center in Chesterfield County.

Company officials and industry analysts say hhgregg is accelerating its growth this year and next year largely because of Circuit City's demise.

The chain believes it can increase sales and profit while making opportunistic deals of prime real estate locations left behind by defunct retailers including Circuit City and household furnishings chain Linens'n Things.

In 1955, hhgregg began as a small appliance store in Indianapolis and has grown from 54 stores in early 2004 to 112 locations in nine states today.

Besides opening stores in the Richmond area, hhgregg plans to add multiple stores this year in Tampa, Fla., and Memphis, Tenn. -- all markets where Circuit City formerly had a strong presence.

And in the following fiscal year, the company plans to open most of its 40 to 45 new stores in mid-Atlantic markets, including Washington, Baltimore and Philadelphia -- also former strongholds for Circuit City.

"We have an extraordinary opportunity to gain market share by taking advantage of the current rental rates and excess availability in the real estate market," said Dennis May, hhgregg's president and chief operating officer who becomes its CEO next month.

"They are smart to step up and make these real estate moves now," KeyBanc's Thomas said.

The company, he said, conducted exhaustive research before accelerating its plans.

For instance, Jerry W. Throgmartin, the retailer's chairman and CEO, spent several weeks touring Richmond and the other new markets as part of the chain's review of potential sites, Thomas said.

The majority of the new hhgregg stores in the three new markets will be former Circuit City or Linens'n Things locations, which will require minimal construction work, he said.

Thomas said he believes hhgregg has the smarts and opportunity to pick the best sites, even though some of Circuit City's stores were in poor locations.

"Given the importance of this decision and the fact that Jerry was out looking at store sites . . . points to how seriously they take this issue and decision," Thomas said.

In many ways, hhgregg is similar to Circuit City: Its typical store size -- 30,000 square feet -- and color scheme -- yellow and red -- are similar to former Circuit City stores.

But there are differences: hhgregg still pays store employees a commission, an arrangement Circuit City eliminated in early 2003. And hhgregg continues to sell appliances, which generated 31 percent of its sales last fiscal year. Circuit City stopped selling appliances in 2000.

The retailer said it has executed leases for nearly all of the new stores expected to open during the current fiscal year, which ends March 31, and its board has approved nearly half of the store locations for the following year.

David Smith with Thalhimer/Cushman & Wakefield brokerage, who is handling hhgregg's local leasing, would not comment on where the retailer would locate stores.

Also, hhgregg has been wooing former Circuit City customers since the chain filed for bankruptcy protection last fall and then announced earlier this year it was going out of business.

For instance, hhgregg had accepted Circuit City gift cards through April 1 and assisted customers in establishing factory-authorized service on manufacturer-warranted items that customers bought from Circuit City.

Contact Gregory J. Gilligan at (804) 649-6379 or .

Staff writer Louis Llovio contributed to this report.