Did lack of family involvement doom HHGregg?
Electronics retailer HHGregg, founded in 1955 by H.H. and Fansy Gregg in Indianapolis, announced March 2 that it was closing 88 of its 220 stores and filed for bankruptcy protection five days later, announcing that it planned to sell itself. “But no deal got beyond the letter-of-intent stage, and CEO Bob Riesbeck announced April 7 that the business would wind down this spring, dismissing the last of its more than 5,000 employees,” the Indianapolis Business Journal reported.
The business journal report noted, “It might not be a coincidence that the company took a precipitous turn for the worse once there was no longer a member of the founding family at the helm.”
Third-generation member Jerry Throgmartin led the company during what the article called its “golden age.” Jerry’s son Gregg Throgmartin joined the company in 2001 but left in 2014; he’s now an executive at a fashion company in California, the report said.
In January 2012, Jerry Throgmartin, who was then the company’s executive chairman, died unexpectedly at age 57. Three years earlier, longtime non-family executive Dennis May had succeeded Jerry as CEO. May resigned in February 2016 after a “horrendous Christmas shopping season,” the journal article said.
After that poor Christmas 2015 season, vendors began demanding payment on delivery; in response, HHGregg decreased its inventory. Because the company’s line of credit used inventory as collateral, the amount it was eligible to borrow decreased. HHGregg dropped its private-level credit card when the bank that provided it required the company to post a $17 million letter of credit, the article said.
HHGregg entered bankruptcy with a letter of intent from a prospective buyer, but the deal fell apart. It spoke to more than 50 other potential buyers -- reportedly including Gregg Throgmartin -- but failed to come to terms, the business journal noted.
Going-out-of-business sales for the 88 stores pulled in less money than expected, and one of HHGregg’s lenders declared the company in default and accelerated the timetable to find a buyer to April 7, the article said.
Brad Leonard, whose investment fund sold off its 7% stake in HHGregg in January, told the Indianapolis Business Journal that the company should have offered free shipping, built a strong online presence and diversified its product mix away from electronics.
Steve Stitle, an Indianapolis attorney and banker who knew Jerry Throgmartin, told the business journal it would have been interesting to see how he would have handled the challenges if he were still alive. The journal noted that Jerry often said in interviews that “competition does not put you out of business. You put yourself out of business because you stop delivering what the customer wants.” (Source: Indianapolis Business Journal, April 15, 2017.)