by Louis Basenese, Advisory Panelist

For the first time in six months, retail sales ticked higher in August.

Granted, it wasn’t by much – a scant 0.7% higher than July. But it’s inevitable that consumers will eventually get back to their spending ways as this recession subsides.

And if you’re looking for a way to play it, consider hhgregg, Inc. (NYSE: HGG). Here’s why…

hhgregg, Inc: This Retailer is Bucking the Industry Trend

Based in Indianapolis, the hhgregg operates 111 retail stores selling consumer electronics and home appliances. Yes, I know that’s the same stuff you can get at your typical Best Buy (NYSE: BBY), Home Depot (NYSE: HD), or Lowe’s (NYSE: LOW).

But this company is hardly typical.

While most retailers are focused on survival, hhgregg’s in full-on attack mode. It’s not pinching pennies to stay afloat. It’s not reducing the workforce. It’s not closing underperforming stores, or mothballing expansion plans.

Instead, it’s actually ratcheting up its expansion plans and hiring by the hundreds. In fact, in the next two years, the company plans to expand its footprint by 60%.

And there’s a good reason for it…

hhgregg’s “Extraordinary Opportunity” for Growth

hhgregg’s still a regional player, with countless metropolitan markets left to enter. Plus, the fundamentals make sense…

• The typical hhgregg store generates positive free cash flow quickly, within three months of opening.
• Not to mention, the company entered the recession in much better shape than most of its competitors.
• Most notably, it wasn’t overloaded with debt. In turn, management is exploiting the drop in commercial rental rates to secure prime locations, within miles of top competitors.

President, Dennis May, says, “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.”

At the same time, the bankruptcy of a once major retailer cracked open an $11 billion opportunity…

Two Ways That hhgregg Separates Itself From the Crowd

With Circuit City having gone bust, most investors expect Best Buy to scoop up all the business. But I’m convinced hhgregg will earn its fair share too, because it distinguishes itself from big box competitors in two notable ways.

1. All Commission… All Knowing: hhgregg employs an all-commission sales staff. So if they’re content to just show up, they go hungry. They need to make sales. Thus, hhgregg’s staff tends to be older and more informed about products than the hourly, 20-somethings over at Best Buy. And with big-ticket items, consumers put a premium on superior customer service.
2. Same-Day Delivery: hhgregg offers same-day delivery on most products. Instant gratification goes a long way in attracting new customers.

To be clear, however, hhgregg is sharing in the retail pain. Same-store sales dipped 14.7% in the most recent quarter. But analysts expected worse.

The key point to remember, though, is that we never buy a stock based on the current conditions. We buy based on the future. And I’m convinced that hhgregg will be locked-and-loaded for rapid earnings growth as the economy recovers.

And the fact that shares trade at a reasonable valuation of 14 times forward earnings only makes the opportunity more compelling.

Good investing,

Louis Basenese