Why HHGregg is shrinking and closing all its Philly-area stores

Spring fever?

More like liquidation season.

And if you've been in the market for a new washer and dryer, now may be the time to visit HHGregg before all eight stores in the Philadelphia/South Jersey/Delaware area close for good.

The stores are among 88 nationally that will be shuttered by mid-April as HHGregg "right-sizes" its store fleet.

So what went wrong? Some say HHGregg is just the latest victim of Amazon.

"There's just too much competition," said HHGregg regular Sonya Jones, 49, of Chesterfield, Burlington County, as she shopped with daughter Zharia, 6, last weekend at the Langhorne store. "It's very sad. It's a great store."

The big, bright-yellow signs hung all over the store to signal the end was near: "Everything on Sale!" and "Nothing Held Back!" Every item, from flat-panel TVs in the digital home theater area, to furniture and vacuums, to ranges and ovens in the appliance center, was marked 20  percent to 50 percent off.

Jones snatched up Emoji speakers for 30 percent off and a WiFi device for 40 percent off. She said she needed time to mull over whether to return for a discounted microwave.

Jones has her pick of closeout sales: Macy's, Sears, and JC Penney are closing hundreds of stores and offering steep discounts. Sears even said a few days ago that it might not be able to keep operating after seven years of losses.

Also in the last week, women's apparel store Bebe announced that it was shutting all 170 boutique and outlet stores to focus strictly on online sales. The Limited, another women's fashion retailer, beat it to the punch by almost three months when it abruptly pulled the plug on all of its stores in early January.

After two years of losses, HHGregg Inc., with 220 stores in 19 states, filed for Chapter 11 bankruptcy on March 6 – two days before another struggling electronics retailer, Radio Shack, also filed for bankruptcy protection. Radio Shack is closing 200 stores and evaluating the fate of its remaining 1,300.

Since 2008, HHGregg had taken over spaces in many shopping centers that were vacated by another bankrupt company, Circuit City. The stores average 25,000 to 40,000 square feet – about the same as Sports Authority stores, which are now being replaced after that chain declared bankruptcy last spring.

HHGregg did deals quickly at below-market rents during the downturn because it was capitalizing on the void left by Circuit City, said Dan Brickner, executive vice president at real estate firm Metro Commercial, who isn't involved in the disposition of HHGregg stores.

"The consumer electronics field is immensely competitive and many of the users in this category have struggled to distinguish themselves," Brickner said.  "Generally, the stores for these retailers are too big. Some have added furniture and expanded their appliance departments, but these are also competitive categories and getting more competitive every day."

Brickner predicted that the replacement tenants for the HHGregg spaces will likely be the same group that is backfilling the former Sports Authority stores:  a combination of discount apparel, entertainment, fitness, and specialty grocers.

"Other than a local player here and there, it is unlikely that there will be other consumer electronic users chasing the space," he said.

Steve Jellinek, vice president of Morning Star Credit Ratings LLC, said HHGregg followed a business plan of selling a lot of TVs and appliances, while competing against the internet, which offered not only every item, but also free delivery.

"It was a plan that was doomed to fail," Jellinek said. "It also tried to compete with traditional big boxes, such as Lowes, Home Depot, and Best Buy."

He said HHGregg created a high-end appliance and electronic  division – called Fine Lines — that never met targets.  Last year's same-store holiday sales fell 20 percent from 2015, but the retailer had been struggling with declining sales in the last four years.

Jellinek said an oversupply of retail in the U.S. didn't help. An October 2016 report by the International Council of Shopping Centers cited 23.5 square feet of retail space per person in the U.S., compared with 16.4 square feet per person in Canada, and 11.1 square feet per person in Australia.

When announcing its bankruptcy this month, HHGregg CEO Robert Riesbeck said the chain had found a buyer to take over the company's remaining assets after the closures. But that deal collapsed and HHGregg is back to entertaining offers.

"I don't think the company can turn things around," Jellinek said. "It's too competitive a market. There will be more store closings and they're not putting their struggles behind them."

​Some consumers, such as Frank Skrajewski, say HHGregg hurt itself by trying to be too much to all people.

"Big-box retailers have to walk a fine line," said Skrajewski, 26, who lives in Hamilton Township and works for the state of New Jersey. "They want to appeal to everybody."

But "you have to stick to what you're good at," he said. "HHGregg was known for electronics. There was no need for it to start selling Serta mattresses and patio furniture."

Ironically, that's what Skrajewski was looking at while at the Langhorne store — a boxed patio furniture set, marked 30 percent off.