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Msg  2 of 4  at  3/2/2011 1:16:21 PM  by

capital_4_gains


The Challenge

 Management has failed miserably in recent quarters as it attempts to expand hgg's footprint.  In the most simplistic terms it is outrunning its cash flow because its inventory mgt. has been awful.
 
With the share price dropping from the mid to upper 20s to currently below 15, the appreciation potential is compelling.
 
I would prefer that management slow down the rapid expansion and limit the growth to the amount that can be financed with operating cash flow.  To have operating cash flow of negative 90 million for the last three quarters is unsustainable.  I expect operating cash flow to be positive in Hgg's fiscal fourth quarter that ends March 31.
 
Mgt. gave explanations for the explosive growth in inventory on the last CC.  Including: growth in stores, lower than projected christmas sales, advance purchasing to secure lower prices on appliances, and the fact that inventory was lower than required at the end of Dec 2009.  The snow in the mid-atlantic states was certainly problematic this winter.
 
 
 
 


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