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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended December 31, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  To

Commission file number 001-33600

LOGO

hhgregg, Inc.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-8819207                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|4151 East 96thStreet Indianapolis, IN                          |  | 46240                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(317) 848-8710

(Registrants telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting
company in Rule 12b-2 of the Exchange Act.



|                           |  |                      |  |                                               |  |                             
|-------------------------- |  | -------------------- |  | --------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈ |  | Accelerated Filer  x |  | Non-accelerated filer   ̈                      |  | Smaller reporting company   ̈
|                           |  |                      |  | (Do not check if a smaller reporting company) |  |                             

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the
Act).     ̈  Yes    x  No

The number of shares of hhgregg, Inc.s common stock outstanding as of January 30, 2009 was 32,427,942.









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HHGREGG, INC. AND SUBSIDIARIES

Report on Form 10-Q

For the Quarter Ended December 31,
2008



|                              |  |          |  |                                                                                                            |  |     
|----------------------------- |  | -------- |  | ---------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |          |  |                                                                                                            |  | Page
|Part I. Financial Information |  |         
|                              |  |          | 
|                              |  | Item 1.  |  | Condensed Consolidated Financial Statements (unaudited):                                                   |  |     
|                              |  |          | 
|                              |  |          |  | Condensed Consolidated Statements of Income for the Three and Nine Months Ended December 31, 2008 and 2007 |  | 3   
|                              |  |          | 
|                              |  |          |  | Condensed Consolidated Balance Sheets as of December 31, 2008 and March 31, 2008                           |  | 4   
|                              |  |          | 
|                              |  |          |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2008 and 2007       |  | 5   
|                              |  |          | 
|                              |  |          |  | Notes to Condensed Consolidated Financial Statements                                                       |  | 6   
|                              |  |          | 
|                              |  | Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                      |  | 11  
|                              |  |          | 
|                              |  | Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                                                 |  | 19  
|                              |  |          | 
|                              |  | Item 4.  |  | Controls and Procedures                                                                                    |  | 19  
|                              | 
|Part II. Other Information    |  |         
|                              |  |          | 
|                              |  | Item 1.  |  | Legal Proceedings                                                                                          |  | 19  
|                              |  |          | 
|                              |  | Item 1A. |  | Risk Factors                                                                                               |  | 20  
|                              |  |          | 
|                              |  | Item 6.  |  | Exhibits                                                                                                   |  | 21  
|                              |  |         
|Signatures                    |  |          |  | 22                                                                                                        



2



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|Part I: | Financial Information
|------- | ---------------------



|ITEM 1. | Condensed Consolidated Financial Statements
|------- | -------------------------------------------

HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)



|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|-------------------------------------------- |  | ----------------------------------------------- | ---------- | - | ----------------- | - | ---------- | ---------------- |  | - | ---------------- | - |  | - | ---------- | -
|                                             |  | Three Months Ended                              |            |   | Nine Months Ended |  
|                                             |  | December 31,2008                                |            |   | December 31,2007  |   |            | December 31,2008 |  |   | December 31,2007 |  
|                                             |  | (In thousands, except share and per share data) |           
|Net sales                                    |  | $                                               | 416,106    |   |                   | $ | 390,416    |                  |  | $ | 1,031,823        |   |  | $ | 932,472    |  
|Cost of goods sold                           |  |                                                 | 285,652    |   |                   |   | 271,523    |                  |  |   | 712,404          |   |  |   | 645,641    |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Gross profit                                 |  |                                                 | 130,454    |   |                   |   | 118,893    |                  |  |   | 319,419          |   |  |   | 286,831    |  
|Selling, general and administrative expenses |  |                                                 | 77,998     |   |                   |   | 70,761     |                  |  |   | 214,256          |   |  |   | 188,167    |  
|Net advertising expense                      |  |                                                 | 17,904     |   |                   |   | 16,909     |                  |  |   | 49,505           |   |  |   | 40,505     |  
|Depreciation and amortization expense        |  |                                                 | 3,953      |   |                   |   | 3,287      |                  |  |   | 12,049           |   |  |   | 9,169      |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Income from operations                       |  |                                                 | 30,599     |   |                   |   | 27,936     |                  |  |   | 43,609           |   |  |   | 48,990     |  
|Other expense (income):                      |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Interest expense                             |  |                                                 | 1,924      |   |                   |   | 2,582      |                  |  |   | 5,725            |   |  |   | 8,734      |  
|Interest income                              |  |                                                 | (2         | ) |                   |   | (6         | )                |  |   | (9               | ) |  |   | (45        | )
|Loss related to early extinguishment of debt |  |                                                 |           |   |                   |   |           |                  |  |   |                 |   |  |   | 21,695     |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Total other expense                          |  |                                                 | 1,922      |   |                   |   | 2,576      |                  |  |   | 5,716            |   |  |   | 30,384     |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Income before income taxes                   |  |                                                 | 28,677     |   |                   |   | 25,360     |                  |  |   | 37,893           |   |  |   | 18,606     |  
|Income tax expense                           |  |                                                 | 11,557     |   |                   |   | 10,258     |                  |  |   | 15,271           |   |  |   | 7,523      |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Net income                                   |  | $                                               | 17,120     |   |                   | $ | 15,102     |                  |  | $ | 22,622           |   |  | $ | 11,083     |  
|                                             |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Net income per share                         |  |                                                 |            |   |                   |   |            |                  |  |   |                  |   |  |   |            |  
|Basic                                        |  | $                                               | 0.53       |   |                   | $ | 0.47       |                  |  | $ | 0.70             |   |  | $ | 0.36       |  
|Diluted                                      |  | $                                               | 0.52       |   |                   | $ | 0.45       |                  |  | $ | 0.69             |   |  | $ | 0.35       |  
|Weighted average shares outstanding-basic    |  |                                                 | 32,372,419 |   |                   |   | 32,241,868 |                  |  |   | 32,343,995       |   |  |   | 30,780,294 |  
|Weighted average shares outstanding-diluted  |  |                                                 | 32,617,557 |   |                   |   | 33,424,055 |                  |  |   | 32,997,168       |   |  |   | 31,880,811 |  

See accompanying notes to condensed consolidated financial statements.



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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)



|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                                                                                      |  | December 31,2008                  |         |   | March 31,2008 |  
|                                                                                                                                                                      |  | (In thousands, except share data) |        
|Assets                                                                                                                                                                |  |                                   |         |   |               |   |         |  
|Current assets:                                                                                                                                                       |  |                                   |         |   |               |   |         |  
|Cash and cash equivalents                                                                                                                                             |  | $                                 | 1,684   |   |               | $ | 1,869   |  
|Accounts receivabletrade, less allowances of $912 and $450, respectively                                                                                             |  |                                   | 10,416  |   |               |   | 8,121   |  
|Accounts receivableother, less allowances of $3 and $35, respectively                                                                                                |  |                                   | 14,314  |   |               |   | 14,263  |  
|Merchandise inventories, net                                                                                                                                          |  |                                   | 188,362 |   |               |   | 133,368 |  
|Prepaid expenses and other current assets                                                                                                                             |  |                                   | 2,353   |   |               |   | 3,741   |  
|Deferred income taxes                                                                                                                                                 |  |                                   | 4,629   |   |               |   | 2,129   |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Total current assets                                                                                                                                                  |  |                                   | 221,758 |   |               |   | 163,491 |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Net property and equipment                                                                                                                                            |  |                                   | 85,924  |   |               |   | 77,794  |  
|Deferred financing costs, net                                                                                                                                         |  |                                   | 2,791   |   |               |   | 3,292   |  
|Deferred income taxes                                                                                                                                                 |  |                                   | 81,289  |   |               |   | 85,012  |  
|Other                                                                                                                                                                 |  |                                   | 391     |   |               |   | 330     |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Total long-term assets                                                                                                                                                |  |                                   | 170,395 |   |               |   | 166,428 |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Total assets                                                                                                                                                          |  | $                                 | 392,153 |   |               | $ | 329,919 |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Liabilities and Stockholders Equity                                                                                                                                  |  |                                   |         |   |               |   |         |  
|Current liabilities:                                                                                                                                                  |  |                                   |         |   |               |   |         |  
|Accounts payable                                                                                                                                                      |  | $                                 | 101,546 |   |               | $ | 80,533  |  
|Line of credit                                                                                                                                                        |  |                                   | 14,798  |   |               |   |        |  
|Current maturities of long term debt                                                                                                                                  |  |                                   | 681     |   |               |   |        |  
|Customer deposits                                                                                                                                                     |  |                                   | 18,093  |   |               |   | 18,039  |  
|Accrued liabilities                                                                                                                                                   |  |                                   | 42,002  |   |               |   | 36,799  |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Total current liabilities                                                                                                                                             |  |                                   | 177,120 |   |               |   | 135,371 |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Long-term liabilities:                                                                                                                                                |  |                                   |         |   |               |   |         |  
|Long-term debt, excluding current maturities                                                                                                                          |  |                                   | 91,927  |   |               |   | 92,608  |  
|Other long-term liabilities                                                                                                                                           |  |                                   | 15,575  |   |               |   | 20,266  |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Total long-term liabilities                                                                                                                                           |  |                                   | 107,502 |   |               |   | 112,874 |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Total liabilities                                                                                                                                                     |  |                                   | 284,622 |   |               |   | 248,245 |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Stockholders equity:                                                                                                                                                 |  |                                   |         |   |               |   |         |  
|Preferred stock, no par value; 10,000,000 shares authorized; no shares issued and outstanding as of December 31 and March 31, 2008                                    |  |                                   |        |   |               |   |        |  
|Common stock, no par value; 105,000,000 shares authorized; 32,401,275 and 32,285,267 shares issued and outstanding as of December 31 and
March 31, 2008, respectively |  |                                   | 162,080 |   |               |   | 159,149 |  
|Accumulated other comprehensive loss                                                                                                                                  |  |                                   | (1,027  | ) |               |   | (1,292  | )
|Accumulated deficit                                                                                                                                                   |  |                                   | (53,373 | ) |               |   | (75,995 | )
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|                                                                                                                                                                      |  |                                   | 107,680 |   |               |   | 81,862  |  
|Note receivable for common stock                                                                                                                                      |  |                                   | (149    | ) |               |   | (188    | )
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Total stockholders equity                                                                                                                                            |  |                                   | 107,531 |   |               |   | 81,674  |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  
|Total liabilities and stockholders equity                                                                                                                            |  | $                                 | 392,153 |   |               | $ | 329,919 |  
|                                                                                                                                                                      |  |                                   |         |   |               |   |         |  

See accompanying notes to condensed consolidated financial statements.



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HHGREGG, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                  |  |                   |         |   |                  |   |          |  
|--------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | -------- | -
|                                                                                  |  | Nine Months Ended |        
|                                                                                  |  | December 31,2008  |         |   | December 31,2007 |  
|                                                                                  |  | (In thousands)    |        
|Cash flows from operating activities:                                             |  |                   |         |   |                  |   |          |  
|Net income                                                                        |  | $                 | 22,622  |   |                  | $ | 11,083   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                   |         |   |                  |   |          |  
|Depreciation and amortization                                                     |  |                   | 12,049  |   |                  |   | 9,169    |  
|Amortization of deferred financing costs                                          |  |                   | 501     |   |                  |   | 665      |  
|Accretion of original issue discount                                              |  |                   |        |   |                  |   | 188      |  
|Stock-based compensation                                                          |  |                   | 1,993   |   |                  |   | 1,274    |  
|Excess tax benefits from stock based compensation                                 |  |                   | (161    | ) |                  |   |         |  
|Loss on sales of property and equipment                                           |  |                   | 46      |   |                  |   | 25       |  
|Loss on early extinguishment of debt                                              |  |                   |        |   |                  |   | 21,695   |  
|Deferred income taxes                                                             |  |                   | 1,029   |   |                  |   | (934     | )
|Changes in operating assets and liabilities:                                      |  |                   |         |   |                  |   |          |  
|Accounts receivabletrade                                                         |  |                   | (2,295  | ) |                  |   | (1,074   | )
|Accounts receivableother                                                         |  |                   | (51     | ) |                  |   | (6,580   | )
|Merchandise inventories                                                           |  |                   | (54,994 | ) |                  |   | (62,968  | )
|Prepaid expenses and other assets                                                 |  |                   | 216     |   |                  |   | 381      |  
|Deposits                                                                          |  |                   | 1,111   |   |                  |   | 3,516    |  
|Accounts payable                                                                  |  |                   | 16,256  |   |                  |   | 13,521   |  
|Customer deposits                                                                 |  |                   | 54      |   |                  |   | 2,345    |  
|Other accrued liabilities                                                         |  |                   | 3,669   |   |                  |   | 11,671   |  
|Other long-term liabilities                                                       |  |                   | (926    | ) |                  |   | (1,070   | )
|                                                                                  |  |                   |         |   |                  |   |          |  
|Net cash provided by operating activities                                         |  |                   | 1,119   |   |                  |   | 2,907    |  
|                                                                                  |  |                   |         |   |                  |   |          |  
|Cash flows from investing activities:                                             |  |                   |         |   |                  |   |          |  
|Purchases of property and equipment                                               |  |                   | (27,841 | ) |                  |   | (25,361  | )
|Proceeds from sale leaseback transactions                                         |  |                   | 10,035  |   |                  |   | 2,300    |  
|Deposit (applied) received for sale leaseback transactions                        |  |                   | (2,858  | ) |                  |   | 1,400    |  
|Proceeds from sales of property and equipment                                     |  |                   | 58      |   |                  |   | 64       |  
|                                                                                  |  |                   |         |   |                  |   |          |  
|Net cash used in investing activities                                             |  |                   | (20,606 | ) |                  |   | (21,597  | )
|                                                                                  |  |                   |         |   |                  |   |          |  
|Cash flows from financing activities:                                             |  |                   |         |   |                  |   |          |  
|Proceeds for issuance of common stock                                             |  |                   |        |   |                  |   | 48,750   |  
|Transaction costs for stock issuance                                              |  |                   |        |   |                  |   | (5,410   | )
|Proceeds from exercise of stock options                                           |  |                   | 716     |   |                  |   | 12       |  
|Excess tax benefits from stock based compensation                                 |  |                   | 161     |   |                  |   |         |  
|Net increase in bank overdrafts                                                   |  |                   | 3,527   |   |                  |   | 28,642   |  
|Net borrowings on line of credit                                                  |  |                   | 14,798  |   |                  |   |         |  
|Payments on notes payable                                                         |  |                   |        |   |                  |   | (500     | )
|Payment of financing costs                                                        |  |                   |        |   |                  |   | (2,930   | )
|Proceeds from issuance of term loan                                               |  |                   |        |   |                  |   | 100,000  |  
|Payment related to early extinguishment of debt                                   |  |                   |        |   |                  |   | (148,082 | )
|Other, net                                                                        |  |                   | 100     |   |                  |   | 27       |  
|                                                                                  |  |                   |         |   |                  |   |          |  
|Net cash provided by financing activities                                         |  |                   | 19,302  |   |                  |   | 20,509   |  
|                                                                                  |  |                   |         |   |                  |   |          |  
|Net (decrease) increase in cash and cash equivalents                              |  |                   | (185    | ) |                  |   | 1,819    |  
|Cash and cash equivalents                                                         |  |                   |         |   |                  |   |          |  
|Beginning of period                                                               |  |                   | 1,869   |   |                  |   | 1,498    |  
|                                                                                  |  |                   |         |   |                  |   |          |  
|End of period                                                                     |  | $                 | 1,684   |   |                  | $ | 3,317    |  
|                                                                                  |  |                   |         |   |                  |   |          |  
|Supplemental disclosure of cash flow information:                                 |  |                   |         |   |                  |   |          |  
|Interest paid                                                                     |  | $                 | 6,575   |   |                  | $ | 7,728    |  
|Income taxes paid                                                                 |  | $                 | 12,349  |   |                  | $ | 6,881    |  

See accompanying notes to condensed consolidated financial statements.



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HHGREGG, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)



|(1) | Summary of Significant Accounting Policies
|--- | ------------------------------------------

Description of
Business

hhgregg, Inc. (the Company) is a specialty retailer of
consumer electronics, home appliances, mattresses and related services operating under the names hhgreggTMand Fine LinesTM. As of December 31, 2008, the Company had 108 stores located in Alabama, Florida, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and
Tennessee. The Company operates in one reportable segment.

Interim Financial Information

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the United States
Securities and Exchange Commission (the SEC). In the opinion of the Companys management, these unaudited condensed consolidated financial statements reflect all necessary adjustments, which are of a normal recurring nature, for a
fair presentation of such data. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules
and regulations. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of hhgregg, Inc. and the notes thereto for the fiscal year ended March 31, 2008, included in
the Companys Annual Report on Form 10-K filed with the SEC on June 3, 2008. The condensed consolidated results of operations and financial position for interim periods are not necessarily indicative of those to be expected for a full
year. Further, the Company has made a number of estimates and assumptions relating to the assets and liabilities and the reporting of revenue and expenses to prepare these financial statements in conformity with U.S. generally accepted accounting
principles. Actual results could differ from those estimates.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of hhgregg, Inc. and its wholly-owned subsidiary, Gregg Appliances, Inc. (Gregg
Appliances). The financial statements of Gregg Appliances include its wholly-owned subsidiary HHG Distributing LLC (HHG) which has no assets or operations.

Property and Equipment

The Company sold six buildings in the nine months ended
December 31, 2008. The Company leased the buildings back applying the provisions of Statement of Financial Accounting Standards (SFAS) No. 98, Accounting for Leases. Proceeds from the transactions were $10.0
million. The deferred gain of $1.3 million on the transactions, which is recorded in other long-term liabilities, is being amortized over the life of the leases. The Company does not have any continuing ownership interest with these buildings. The
leases are accounted for as operating leases.



|(2) | Recently Issued Accounting Pronouncements
|--- | -----------------------------------------

In
December 2007, the FASB issued SFAS No. 141 (revised 2007),Business Combinations(SFAS No. 141R). The statement retains the purchase method of accounting for acquisitions, but requires a number of changes,
including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research
and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008. The Company will adopt SFAS No. 141R beginning in the
first quarter of the fiscal year ending March 31, 2010 and will apply the standard prospectively to business combinations completed on or after that date.



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In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities, an amendment of SFAS No. 133(SFAS No. 161). SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entitys financial position, financial performance and cash flows. Entities are required to provide enhanced disclosures about: how and why an entity uses derivative instruments; how
derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and how derivative instruments and related hedged items affect an entitys financial position, financial performance and
cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company will adopt SFAS No. 161 beginning in the fourth quarter of the current fiscal
year.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS No. 159). SFAS No. 159 provides companies with an option to report selected financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings at each subsequent reporting date. SFAS No. 159 was effective for fiscal years beginning after November 15, 2007, which was the year beginning April 1, 2008 for the
Company. The Company did not elect to begin reporting any financial assets or liabilities at fair value upon adoption of SFAS No. 159.



|(3) | Fair Value Measurements
|--- | -----------------------

In September 2006, the
FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value
measurements required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. In February 2008, the FASB issued FSP 157-2, Effective Date of FASB
Statement No. 157 which permits a one-year deferral for the implementation of SFAS No. 157 with regard to non-financial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The Company elected to defer adoption of SFAS No. 157 for such items and it does not currently anticipate that full adoption in fiscal 2010 will materially impact the Companys results of
operations or financial condition.

On April 1, 2008, the Company adopted the provisions of SFAS No. 157 related to its financial
assets and liabilities. The following table presents the fair values for those assets and liabilities measured on a recurring basis as of December 31, 2008 (in thousands):



|                                                |  |                            |         |                                                   |         |   |         |   |       |  |   |  
|----------------------------------------------- |  | -------------------------- | ------- | ------------------------------------------------- | ------- | - | ------- | - | ----- |  | - | -
|                                                |  | Fair ValueDecember 31,2008 |         | Fair Value MeasurementsUsing Inputs Considered as
|                                                |  |                            | Level 1 |                                                   | Level 2 |   | Level 3
|Financial instruments classified as liabilities |  |                            |         |                                                   |         |   |         |   |       |  |   |  
|Interest rate swap                              |  | $                          | 1,712   |                                                   | $       |  |         | $ | 1,712 |  | $ | 

The fair value of the Companys interest rate swap was determined based on LIBOR yield curves
at the reporting date.



7



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##### Table of Contents

|(4) | Properties and Equipment
|--- | ------------------------

Property and equipment
consisted of the following at December 31, 2008 and March 31, 2008 (in thousands):



|                                               |  |                  |         |   |               |   |         |  
|---------------------------------------------- |  | ---------------- | ------- | - | ------------- | - | ------- | -
|                                               |  | December 31,2008 |         |   | March 31,2008 |  
|Land                                           |  | $                | 1,000   |   |               | $ |        |  
|Buildings                                      |  |                  | 3,439   |   |               |   | 5,084   |  
|Machinery and equipment                        |  |                  | 12,128  |   |               |   | 9,528   |  
|Office furniture and equipment                 |  |                  | 68,325  |   |               |   | 59,148  |  
|Vehicles                                       |  |                  | 6,186   |   |               |   | 5,869   |  
|Signs                                          |  |                  | 7,346   |   |               |   | 5,705   |  
|Leasehold improvements                         |  |                  | 47,565  |   |               |   | 41,669  |  
|Construction in progress                       |  |                  | 12,805  |   |               |   | 13,405  |  
|                                               |  |                  |         |   |               |   |         |  
|                                               |  |                  | 158,794 |   |               |   | 140,408 |  
|Less accumulated depreciation and amortization |  |                  | (72,870 | ) |               |   | (62,614 | )
|                                               |  |                  |         |   |               |   |         |  
|Net property and equipment                     |  | $                | 85,924  |   |               | $ | 77,794  |  
|                                               |  |                  |         |   |               |   |         |  



|(5) | Net Income per Share
|--- | --------------------

Net income per basic share is
calculated based on the weighted-average number of outstanding common shares in accordance with SFAS No. 128, Earnings Per Share. Net income per diluted share is calculated based on the weighted-average number of outstanding
common shares plus the effect of potential dilutive common shares. When the Company reports net income, the calculation of net income per diluted share excludes shares underlying outstanding stock options that would be anti-dilutive. Potential
dilutive common shares are composed of shares of common stock issuable upon the exercise of stock options. The following table presents net income per basic and diluted share for the three and nine months ended December 31, 2008 and 2007 (in
thousands, except share and per share amounts):



|                                                        |  |                    |            |                   |   |                  |  |                  |            |  |   |           
|------------------------------------------------------- |  | ------------------ | ---------- | ----------------- | - | ---------------- |  | ---------------- | ---------- |  | - | ----------
|                                                        |  | Three Months Ended |            | Nine Months Ended
|                                                        |  | December 31,2008   |            | December 31,2007  |   | December 31,2008 |  | December 31,2007
|Net income (A)                                          |  | $                  | 17,120     |                   | $ | 15,102           |  | $                | 22,622     |  | $ | 11,083    
|Weighted average outstanding shares of common stock (B) |  |                    | 32,372,419 |                   |   | 32,241,868       |  |                  | 32,343,995 |  |   | 30,780,294
|Dilutive effect of employee stock options               |  |                    | 245,138    |                   |   | 1,182,187        |  |                  | 653,173    |  |   | 1,100,517 
|                                                        |  |                    |            |                   |   |                  |  |                  |            |  |   |           
|Common stock and common stock equivalents (C)           |  |                    | 32,617,557 |                   |   | 33,424,055       |  |                  | 32,997,168 |  |   | 31,880,811
|Net income per share:                                   |  |                    |            |                   |   |                  |  |                  |            |  |   |           
|Basic (A/B)                                             |  | $                  | 0.53       |                   | $ | 0.47             |  | $                | 0.70       |  | $ | 0.36      
|Diluted (A/C)                                           |  | $                  | 0.52       |                   | $ | 0.45             |  | $                | 0.69       |  | $ | 0.35      

Antidilutive shares not included in the net income per diluted share calculation for the three
months ended December 31, 2008 and 2007 were 3,331,329 and 675,000, respectively. Antidilutive shares not included in the net income per diluted share calculation for the nine months ended December 31, 2008 and 2007 were 2,154,166 and
1,332,500, respectively.



|(6) | Inventories
|--- | -----------

Net inventories consisted of the
following at December 31, 2008 and March 31, 2008 (in thousands):



|           |  |                  |         |               |   |        
|---------- |  | ---------------- | ------- | ------------- | - | -------
|           |  | December 31,2008 |         | March 31,2008
|Appliances |  | $                | 61,136  |               | $ | 45,518 
|Video      |  |                  | 92,414  |               |   | 59,898 
|Other      |  |                  | 34,812  |               |   | 27,952 
|           |  |                  |         |               |   |        
|           |  | $                | 188,362 |               | $ | 133,368
|           |  |                  |         |               |   |        



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|(7) | Debt
|--- | ----

A summary of debt at December 31, 2008
and March 31, 2008 is as follows (in thousands):



|                                                                                                                      |  |                  |         |   |               |   |       
|--------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------- | - | ------
|                                                                                                                      |  | December 31,2008 |         |   | March 31,2008
|Line of credit                                                                                                        |  | $                | 14,798  |   |               | $ |      
|Senior secured term loan B maturing on July 25, 2013, interest due quarterly                                          |  |                  | 89,250  |   |               |   | 89,250
|9.0% Senior notes, interest due in arrears on a semi-annual basis on February 1 and August 1 through February 3,
2013 |  |                  | 3,358   |   |               |   | 3,358 
|                                                                                                                      |  |                  |         |   |               |   |       
|Total debt                                                                                                            |  |                  | 107,406 |   |               |   | 92,608
|Less current maturities of long-term debt                                                                             |  |                  | (681    | ) |               |   |      
|Less line of credit                                                                                                   |  |                  | (14,798 | ) |               |   |      
|                                                                                                                      |  |                  |         |   |               |   |       
|Total long-term debt                                                                                                  |  | $                | 91,927  |   |               | $ | 92,608
|                                                                                                                      |  |                  |         |   |               |   |       

On July 25, 2007, Gregg Appliances entered into a senior credit agreement (the Term B
Facility) with a bank group obtaining a $100 million senior secured term loan B maturing on July 25, 2013. Interest on borrowings is payable in defined periods or quarterly, depending on Gregg Appliances election of the banks prime
rate or LIBOR plus an applicable margin, currently 200 basis points.

The loans under the Term B Facility were originally scheduled to be
repaid in consecutive quarterly installments of $250,000 each with a balloon payment at maturity, but as Gregg Appliances made an optional $10 million prepayment during fiscal 2008 the remaining scheduled quarterly principal installments are reduced
to $227,099 each with a balloon payment at maturity. In accordance with the Term B Facility, the next principal payment is due on June 30, 2009. In addition, Gregg Appliances is also required to prepay the outstanding loans, subject to certain
exceptions, with annual excess cash flow and certain other proceeds (as defined in the Term B Facility).

As of December 31, 2008,
under the revolving credit facility, Gregg Appliances had approximately $14.8 million of cash borrowings outstanding and $4.1 million of letters of credit outstanding which expire through December 31, 2009. As of December 31, 2008, the
total borrowing availability under the revolving credit facility was $81.1 million. The weighted average interest rate of the $14.8 million of cash borrowings outstanding at December 31, 2008 was 3.4%.



|(8) | Stock-based Compensation
|--- | ------------------------

The following table
summarizes the activity under the Companys Stock Option Plans:



|                                 |  |                             |   |  |                                         |      
|-------------------------------- |  | --------------------------- | - |  | --------------------------------------- | -----
|                                 |  | Number of SharesOutstanding |   |  | Weighted AverageExercise Priceper Share
|Outstanding at March 31, 2008    |  | 4,568,001                   |   |  | $                                       | 7.65 
|Granted                          |  | 599,000                     |   |  |                                         | 12.25
|Exercised                        |  | (116,008                    | ) |  |                                         | 6.17 
|Canceled                         |  | (44,332                     | ) |  |                                         | 9.20 
|                                 |  |                             |   |  |                                         |      
|Outstanding at December 31, 2008 |  | 5,006,661                   |   |  | $                                       | 8.22 
|                                 |  |                             |   |  |                                         |      



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|(9) | Comprehensive Income
|--- | --------------------

SFAS No. 130,
Reporting Comprehensive Income, establishes standards for the reporting and presentation of comprehensive income and its components. Comprehensive income is computed as net income plus certain other items that are recorded
directly to stockholders equity. In addition to net income, comprehensive income for the three and nine months ended December 31, 2008 and 2007 includes the changes in fair value of the Companys interest rate swap, net of tax.
Comprehensive income for the three and nine months ended December 31, 2008 and 2007 is calculated as follows (in thousands):



|                                                                                 |  |                    |        |   |                   |   |        |                  |  |   |                  |   |  |   |        |  
|-------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------ | ---------------- |  | - | ---------------- | - |  | - | ------ | -
|                                                                                 |  | Three Months Ended |        |   | Nine Months Ended |  
|                                                                                 |  | December 31,2008   |        |   | December 31,2007  |   |        | December 31,2008 |  |   | December 31,2007 |  
|Net income, as reported                                                          |  | $                  | 17,120 |   |                   | $ | 15,102 |                  |  | $ | 22,622           |   |  | $ | 11,083 |  
|Reclassification adjustment for loss (gain) reclassified into income, net of tax |  |                    | 275    |   |                   |   | (39    | )                |  |   | 484              |   |  |   | (135   | )
|Unrealized loss on hedge arrangement, net of tax                                 |  |                    | (654   | ) |                   |   | (343   | )                |  |   | (219             | ) |  |   | (459   | )
|                                                                                 |  |                    |        |   |                   |   |        |                  |  |   |                  |   |  |   |        |  
|Comprehensive income                                                             |  | $                  | 16,741 |   |                   | $ | 14,720 |                  |  | $ | 22,887           |   |  | $ | 10,489 |  
|                                                                                 |  |                    |        |   |                   |   |        |                  |  |   |                  |   |  |   |        |  



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|ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

Managements Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is designed to provide a reader of our financial
statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in six sections:



| |  |  | Overview
| | - |  | --------



| |  |  | Critical Accounting Policies
| | - |  | ----------------------------



| |  |  | Results of Operations
| | - |  | ---------------------



| |  |  | Liquidity and Capital Resources
| | - |  | -------------------------------



| |  |  | Recently Issued Accounting Standards
| | - |  | ------------------------------------



| |  |  | Outlook
| | - |  | -------

Our MD&A should be read
in conjunction with the Consolidated Financial Statements for the fiscal year ended March 31, 2008, included in our latest Annual Report on Form 10-K, as filed with the SEC on June 3, 2008, as well as our subsequent reports on Form 8-K and
other publicly available information.

Overview

hhgregg, Inc. (We or Us) is a specialty retailer of consumer electronics,
home appliances, mattresses and related services operating under the names hhgreggTMand Fine LinesTM. As of December 31, 2008, we operated 108 stores in Alabama, Florida, Georgia, Indiana, Kentucky, North Carolina, Ohio, South Carolina and Tennessee.

This overview section is divided into five sub-sections discussing our operating strategy and performance, store development strategy, industry and
economic factors, material trends and uncertainties and seasonality.

Operating Strategy and Performance.We focus the majority of
our floor space, advertising expense and distribution infrastructure on the marketing, delivery and installation of a wide selection of premium video and appliance products. We display over 100 models of flat panel televisions and 400 major
appliances in our stores with an especially broad assortment of models in the middle- to upper-end of product price ranges. Video and appliance net sales comprised 82% of our net sales mix for the three months ended December 31, 2008 and 2007
and 85% of our net sales mix for the nine months ended December 31, 2008 and 2007.

We strive to differentiate ourselves through our
customer purchase experience starting with a highly-trained, consultative commissioned sales force which educates our customers on the features and benefits of our products, followed by rapid product delivery and installation, and ending with
helpful post-sales support services. We carefully monitor our competition to ensure that our prices are competitive in the market place. Our experience has been that informed customers often choose to buy a more heavily-featured product once they
understand the applicability and benefits of its features. Heavily-featured products typically carry higher average selling prices and higher margins than less-featured, entry-level price point products.

We focus on leveraging our semi-fixed expenditures in advertising, distribution and regional management through closely managing our inventory, working
capital and store development expenditures. Our inventory has averaged 7.0 turns per year over the past three fiscal years. Our working capital, expressed as a percentage of sales, has averaged 1.8% over the past three fiscal years. Our net capital
expenditures, expressed as a percentage of sales, have averaged 2.1% over the past three fiscal years. These factors, combined with our strong store-level profitability, have contributed to the generation of significant free cash flow over the past
three fiscal years. This has enabled us to de-leverage our balance sheet and internally fund our store growth.



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Store Development Strategy.Over the past several years, we have adhered closely to a development
strategy of adding stores to metropolitan markets in clusters to achieve rapid market share penetration and more efficiently leverage our distribution network, advertising and regional management costs. Our expansion plans include looking for new
markets where we believe there is significant underlying demand for stores, typically in areas that demonstrate above-average economic growth, strong household incomes and growth in new housing starts and/or remodeling activity. Our markets
typically include most or all of our major competitors. We plan to continue to follow our approach of building store density in each major market and distribution area, which in the past has helped us to improve our market share and realize
operating efficiencies.

During the past twelve months, we opened a net total of 23 new stores of which 17 were located in new markets. The
new markets included Greensboro, North Carolina; Charleston, South Carolina; Tampa, Florida; Jacksonville, Florida and Orlando, Florida. During the past twelve months, we also opened a new regional distribution center in Jacksonville, Florida, and a
third central distribution center in Davenport, Florida to support our growth plans.

Industry and Economic Factors.Over the past
several years, the consumer electronics and home appliance industries have experienced attractive growth rates driven by product innovations and introductions particularly in the premium segment that we target.

Despite an industry-wide slowdown in wholesale unit shipments of appliances (discussed in more depth below in Material Trends and Uncertainties),
our average selling prices for major appliances have continued to increase this fiscal year as they have for the last three fiscal years due to demand for higher-price point, high-efficiency appliances including front-load laundry and refrigeration.
This trend has historically added stability to our sales performance relative to our consumer electronics-focused competitors. Given recent and planned pricing changes by major appliance vendors, the trend in average unit selling prices of major
appliances is not expected to change dramatically for the foreseeable future.

The consumer electronics industry depends on new products
and larger television screen sizes to drive sales and profitability. Our highly-trained and consultative sales force, which can effectively educate the consumer on the benefits of innovative technology, coupled with our strong delivery and
installation competencies enable us to sell a more heavily-featured mix of large, flat screen video product than many of our competitors. As a result, the average unit selling price of the video products we carry and the quantity we sell have risen
in each of the last three fiscal years. During the quarter ended December 31, 2008, we experienced a significant contraction in average selling prices primarily due to an industry-wide excess supply of inventory. It is not clear whether our
historical trend of increasing average selling prices of video products will resume in the foreseeable future.

Material Trends and
Uncertainties.The innovation in certain consumer electronic product categories, such as DVD players, camcorders and audio products, has not been sufficient to maintain average selling prices. These mature products have become commoditized and
have experienced price declines and reduced margins. As certain of our products become commodities, we focus on selling the next generation of these affected products, carefully managing the depth and breadth of commoditized products that we offer
and introducing all-together new product lines that are complementary to our existing product mix.

There has been price compression in
flat panel televisions for equivalent screen sizes over the past few years. As with similar product life cycles for console televisions, VHS recorders and large-screen projection televisions, we have responded to this risk by shifting our sales mix
to focus on newer, higher-margin items such as 1080p and 120Hz technologies (two technological developments that enhance display quality), larger screen sizes and, in certain circumstances, increasing our unit sales at a rate greater than the
decline in product prices. As mentioned above, it is not clear whether our historical trend of increasing average selling prices of video products will resume in the foreseeable future.

The Association of Home Appliance Manufacturers (AHAM) attributed an 8.9% decline in year-over-year, major appliance unit shipments for the
twelve months ended December 31, 2008 to the downturn in the housing market and the sub-prime mortgage crisis. We have, as in past housing downturns, attempted to tailor our appliance category assortment toward middle- to upper-price point
appliances which have, in our experience, been less impacted by these downturns. For the nine months ended December 31, 2008, we continued to execute our strategy and grow our major appliance market share as we recorded flat net sales in our
appliance category while AHAM reported that unit shipments of major appliances declined 8.7% during that same period.



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Substantial market volatility stemming from recent turmoil in the financial and credit markets, high
profile financial institution failures, growing unemployment and weak prospects for improvement in these conditions for the foreseeable future have contributed to economic uncertainty. We believe that this economic uncertainty contributed to a
significant drop in customer traffic since the last two weeks in September of this year. It is difficult to gauge how long this economic uncertainty will persist and impact our customer traffic.

Seasonality.Our business is seasonal, with a higher portion of net sales and operating profit realized during the quarter that ends
December 31 due to the overall demand for consumer electronics during the holiday shopping season. Appliance revenue is impacted by seasonal weather patterns but is less seasonal than our electronics business and helps to offset the seasonality
of our overall business.

Critical Accounting Policies

We describe our critical accounting policies and estimates in Managements Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended March 31, 2008 in our latest
Annual Report on Form 10-K filed with the SEC on June 3, 2008. There have been no significant changes in our critical accounting policies and estimates since the end of fiscal 2008.

Results of Operations

Operating Performance.The following table presents selected condensed
consolidated financial data (dollars in thousands, except per share amounts):



|                                                                 |  |                    |         |    |                   |   |         |                  |  |   |                  |    |  |   |         |  
|---------------------------------------------------------------- |  | ------------------ | ------- | -- | ----------------- | - | ------- | ---------------- |  | - | ---------------- | -- |  | - | ------- | -
|                                                                 |  | Three Months Ended |         |    | Nine Months Ended |  
|(unaudited)                                                      |  | December 31,2008   |         |    | December 31,2007  |   |         | December 31,2008 |  |   | December 31,2007 |   
|Net sales                                                        |  | $                  | 416,106 |    |                   | $ | 390,416 |                  |  | $ | 1,031,823        |    |  | $ | 932,472 |  
|Net sales % increase                                             |  |                    | 6.6     | %  |                   |   | 16.5    | %                |  |   | 10.7             | %  |  |   | 20.2    | %
|Comparable store sales % (decrease)/increase(1)                  |  |                    | (13.2   | )% |                   |   | 3.0     | %                |  |   | (8.9             | )% |  |   | 6.3     | %
|Gross profit as % of net sales                                   |  |                    | 31.4    | %  |                   |   | 30.5    | %                |  |   | 31.0             | %  |  |   | 30.8    | %
|SG&A as % of net sales                                           |  |                    | 18.7    | %  |                   |   | 18.1    | %                |  |   | 20.8             | %  |  |   | 20.2    | %
|Net advertising expense as a % of net sales                      |  |                    | 4.3     | %  |                   |   | 4.3     | %                |  |   | 4.8              | %  |  |   | 4.3     | %
|Depreciation and amortization expense as a % of net sales        |  |                    | 0.9     | %  |                   |   | 0.8     | %                |  |   | 1.2              | %  |  |   | 1.0     | %
|Income from operations as a % of net sales                       |  |                    | 7.4     | %  |                   |   | 7.2     | %                |  |   | 4.2              | %  |  |   | 5.3     | %
|Net interest expense as a % of net sales                         |  |                    | 0.5     | %  |                   |   | 0.7     | %                |  |   | 0.6              | %  |  |   | 0.9     | %
|Loss related to early extinguishment of debt as a % of net sales |  |                    |        | %  |                   |   |        | %                |  |   |                 | %  |  |   | 2.3     | %
|Net income                                                       |  | $                  | 17,120  |    |                   | $ | 15,102  |                  |  | $ | 22,622           |    |  | $ | 11,083  |  
|Net income per diluted share                                     |  | $                  | 0.52    |    |                   | $ | 0.45    |                  |  | $ | 0.69             |    |  | $ | 0.35    |  
|Number of stores open at the end of period                       |  |                    | 108     |    |                   |   | 85      |                  |  |   |                  |    |  |   |         |  



|(1) | Comprised of net sales at stores in operation for at least 14 full months, including remodeled and relocated stores, as well as net sales for our e-commerce site.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net sales for the three months ended December 31, 2008 increased 6.6% over net sales for the comparable prior year
period to $416.1 million. Net sales for the nine months ended December 31, 2008 increased 10.7% to $1.03 billion compared to $932.5 million for the comparable prior year period. The increase in sales for the three and nine months ended
December 31, 2008 was primarily attributable to the net addition of 23 stores during the past 12 months partially offset by a 13.2% and 8.9% decrease in comparable store sales, respectively.



13



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##### Table of Contents

Net sales mix and comparable store sales percentage changes by product category for the three and nine
months ended December 31, 2008 and 2007 were as follows:



|           |  |                                |   |  |                                |   |  |                                |   |  |                               |   |  |       |    |  |      |    |  |       |    |  |      |  
|---------- |  | ------------------------------ | - |  | ------------------------------ | - |  | ------------------------------ | - |  | ----------------------------- | - |  | ----- | -- |  | ---- | -- |  | ----- | -- |  | ---- | -
|           |  | Net Sales Mix Summary          |   |  | Comparable Store Sales Summary |  
|           |  | Three Months EndedDecember 31, |   |  | Nine Months EndedDecember 31,  |   |  | Three Months EndedDecember 31, |   |  | Nine Months EndedDecember 31, |  
|           |  | 2008                           |   |  | 2007                           |   |  | 2008                           |   |  | 2007                          |   |  | 2008  |    |  | 2007 |    |  | 2008  |    |  | 2007 |  
|Video      |  | 54                             | % |  | 51                             | % |  | 48                             | % |  | 45                            | % |  | (6.9  | )% |  | 2.2  | %  |  | (2.1  | )% |  | 5.4  | %
|Appliances |  | 28                             | % |  | 31                             | % |  | 37                             | % |  | 40                            | % |  | (21.9 | )% |  | (0.7 | )% |  | (15.6 | )% |  | 3.9  | %
|Other(1)   |  | 18                             | % |  | 18                             | % |  | 15                             | % |  | 15                            | % |  | (14.6 | )% |  | 13.3 | %  |  | (10.5 | )% |  | 17.5 | %
|           |  |                                |   |  |                                |   |  |                                |   |  |                               |   |  |       |    |  |      |    |  |       |    |  |      |  
|Total      |  | 100                            | % |  | 100                            | % |  | 100                            | % |  | 100                           | % |  | (13.2 | )% |  | 3.0  | %  |  | (8.9  | )% |  | 6.3  | %
|           |  |                                |   |  |                                |   |  |                                |   |  |                               |   |  |       |    |  |      |    |  |       |    |  |      |  



|(1) | Primarily consists of audio, personal electronics, mattresses, notebook computers and furniture and accessories.
|--- | ----------------------------------------------------------------------------------------------------------------

Our 13.2% and 8.9% comparable store sales decreases for the three and nine months ended December 31, 2008, respectively, were driven by double-digit
comparable store unit sales declines of major appliance products, particularly at entry-level and lower mid-price points. High efficiency front-load laundry and refrigeration experienced comparable store unit sales decreases during the third
quarter, albeit significantly better than the appliance category average, while the higher average selling prices for these items contributed to slightly higher average selling prices for the appliances category in total. The comparable store sales
decrease for the three-month period in the video category was primarily driven by the compression in average selling prices of flat panel televisions slightly outpacing double-digit comparable store sales unit increases. The comparable store sales
decrease in the other product category was primarily due to decreased sales of mattresses and personal electronics.

Net income was $17.1
million, or $0.52 per diluted share, for the three months ended December 31, 2008, compared to net income of $15.1 million, or $0.45 per diluted share, for the comparable prior year period. Net income for the nine months ended December 31,
2008 was $22.6 million, or $0.69 per diluted share, compared to net income of $11.1 million, or $0.35 per diluted share, for the nine months ended December 31, 2007, which included a pre-tax loss on the early extinguishment of debt of $21.7
million, or $0.41 net loss per diluted share. The increase in our third quarter earnings primarily reflected an improvement in our gross profit margins which more than offset the effect of a 13.2% comparable store sales decrease coupled with
investments in distribution and management infrastructure to support our new store growth in Florida.

Three Months Ended December 31, 2008
Compared to Three Months Ended December 31, 2007

Gross profit margin, expressed as gross profit as a percentage of net sales,
improved 90 basis points for the three months ended December 31, 2008 compared with the prior year period. The appliance gross profit margins exceeded the consolidated gross profit margins, but the appliance category accounted for approximately
three percentage points less of the consolidated net sales relative to the comparable prior year period, thereby negatively impacting the consolidated gross profit margin. Buying opportunities in the video category, attributable in large part to
supply imbalances, had a distinct positive impact on the consolidated gross profit margin rate compared with the prior year period. Small changes within the other product categorys net sales composition had a modest positive impact on the
consolidated gross profit margin when compared with last year.

SG&A expense, as a percentage of net sales, increased 62 basis points
when compared to the prior year. The increases were primarily due to growth investments, totaling 30 basis points, largely comprised of new store pre-opening expenses associated with six new stores, as well as distribution and management
infrastructure investments in Florida. These growth investments and the effect of our comparable store sales decline were partially offset by effective cost controls over general and administrative expense including a reduction in bonus expense.

Net advertising expense, as a percentage of net sales, decreased three basis points compared to the comparable prior year period. This was
achieved despite the effect of our comparable store sales decline.

Depreciation and amortization expense, as a percentage of net sales,
increased primarily due to growth investments in new stores and related infrastructure support.



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Other expense decreased $0.7 million compared to the comparable prior year period, reflecting a decrease
in net interest expense attributable to our debt refinancing in July 2007.

Income tax expense increased to $11.6 million for the three
months ended December 31, 2008 compared to $10.3 million for the comparable prior year period. This increase was primarily the result of an increase in income before income taxes in the current year compared to the comparable prior year period.
Our effective income tax rate for the three months ended December 31, 2008 was consistent with our effective income tax rate for the comparable prior year period.

Nine Months Ended December 31, 2008 Compared to Nine Months Ended December 31, 2007

Gross
profit margin, expressed as gross profit as a percentage of net sales, increased 20 basis points for the nine months ended December 31, 2008 versus the comparable prior year period. The appliance gross profit margins exceeded the consolidated
gross profit margins, but the appliance category accounted for approximately three percentage points less of the consolidated net sales relative to the comparable year period, thereby negatively impacting the consolidated gross profit margin.
Improvement in the video categorys gross profit margin contributed to modest improvements in the consolidated gross profit margin as compared with the prior year-to-date period due to attractive buying opportunities during the third quarter
arising from supply imbalances. A slight shift in sales mix within the other product category had a modest negative impact on the consolidated gross profit margin compared to the prior year.

SG&A expense, as a percentage of net sales, increased 59 basis points compared to the comparable prior year period. The increase was primarily due to
growth investments, totaling 55 basis points, largely comprised of new store pre-opening expenses associated with 18 new stores, as well as the opening of a new central distribution center and creation of a divisional management team designed to
support over 30 stores in central and northern Florida. These growth investments and the effect of our comparable store sales decline were partially offset by effective cost controls over general and administrative expense and a reduction in bonus
expense.

Net advertising expense, as a percentage of net sales, increased 45 basis points when compared with the comparable prior year
period. The increase was largely driven by the effect of our comparable store sales decline, coupled with the heavy advertising spend associated with the launch of new markets in Florida.

Depreciation and amortization expense, as a percentage of net sales, increased primarily due to growth investments in new stores and related
infrastructure support.

Other expense decreased $24.7 million compared to the comparable prior year period. This decrease was largely due
to a $21.7 million loss on early extinguishment of debt in the prior year period and a decrease of $3.0 million in net interest expense primarily arising from our debt refinancing completed in July 2007.

Income tax expense increased to $15.3 million for the nine months ended December 31, 2008 compared to $7.5 million for the comparable prior year
period. This increase was primarily the result of an increase in income before income taxes in the current year compared to the comparable prior year period. Our effective income tax rate for the nine months ended December 31, 2008 was
consistent with our effective income tax rate for the comparable prior year period.

Liquidity and Capital Resources

The following table presents a summary on a consolidated basis of our net cash (used in) provided by operating, investing and financing activities
(dollars are in thousands):



|                                          |  |                   |         |   |                  |   |         |  
|----------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                          |  | Nine Months Ended |        
|                                          |  | December 31,2008  |         |   | December 31,2007 |  
|Net cash provided by operating activities |  | $                 | 1,119   |   |                  | $ | 2,907   |  
|Net cash used in investing activities     |  |                   | (20,606 | ) |                  |   | (21,597 | )
|Net cash provided by financing activities |  |                   | 19,302  |   |                  |   | 20,509  |  

Our liquidity requirements arise primarily from our need to fund working capital requirements and
capital expenditures.



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Capital Expenditures. We make capital expenditures principally to fund our expansion strategy,
which includes, among other things, investments in new stores and new distribution facilities, remodeling and relocation of existing stores, as well as information technology and other infrastructure-related projects that support our expansion.
Gross capital expenditures were $29.1 million and $25.4 million for the nine months ended December 31, 2008 and 2007, respectively. The increase in gross capital expenditures during the nine months ended December 31, 2008 was primarily
attributable to a greater number of store openings during the current year period. We opened 18 new stores during the nine months ended December 31, 2008 compared to eight stores in the prior year period. We plan to open two additional stores
during the fiscal year ending March 31, 2009. In addition, we plan to continue to invest in our infrastructure, including our management information systems and distribution capabilities, as well as incur capital remodeling and improvement
costs. We expect capital expenditures, net of anticipated sale and leaseback proceeds, to range between $24 million and $26 million for fiscal 2009.

Cash Provided by Operating Activities. Cash provided by operating activities primarily consists of net income as adjusted for increases or decreases in working capital and non-cash depreciation and
amortization. Cash provided by operating activities was $1.1 million and $2.9 million for the nine months ended December 31, 2008 and 2007, respectively. The decrease in cash provided by operating activities for the nine months ended
December 31, 2008 compared to the prior year period was primarily the result of a decline in inventory productivity which in turn reduced our accounts payable leverage, expressed as accounts payable divided by inventories. This reduction in our
accounts payable leverage resulted in the increase of borrowings on our line of credit. This decrease was partially offset by an increase in net income for the nine months ended December 31, 2008 compared to the prior year period.

Cash Used in Investing Activities. Cash used in investing activities was $20.6 million and $21.6 million for the nine months ended
December 31, 2008 and 2007, respectively. The cash used in investing activities for the nine months ended December 31, 2008 decreased from the comparable prior year period due to an increase in proceeds for sale leaseback transactions,
partially offset by increased capital expenditures associated with new store openings.

Cash Provided by Financing Activities. Cash
provided by financing activities was $19.3 million and $20.5 million for the nine months ended December 31, 2008 and 2007, respectively. The change for the nine months ended December 31, 2008 as compared to the comparable prior year period
is primarily attributable to the increase of borrowings on the line of credit as noted above offset by a decrease in bank overdrafts. In addition, the prior year period included proceeds for issuance of common stock and proceeds for issuance of the
term loan offset by payments related to early extinguishment of debt and transaction costs for stock issuance.

Senior Secured Term
Loan.On July 25, 2007, Gregg Appliances, Inc. (Gregg Appliances) entered into a senior credit agreement (the Term B Facility) with a bank group obtaining a $100 million senior secured term loan B maturing on
July 25, 2013. Interest on borrowings is payable in defined periods or quarterly, depending on our election of the banks prime rate or LIBOR plus an applicable margin, currently 200 basis points.

The loans under the Term B Facility were originally scheduled to be repaid in consecutive quarterly installments of $250,000 each with a balloon payment
at maturity, but as Gregg Appliances made an optional $10 million prepayment during fiscal 2008, the remaining scheduled quarterly principal installments are reduced to $227,099 each with a balloon payment at maturity. In accordance with the Term B
Facility, the next principal payment is due on June 30, 2009. In addition, Gregg Appliances is also required to prepay the outstanding loans, subject to certain exceptions, with annual excess cash flow and certain other proceeds (as defined in
the Term B Facility). As of December 31, 2008, $89.25 million of term loans were outstanding.

The Term B Facility contains customary
representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on incurrence of additional debt, liens, dividends and other restricted payments, asset sales, investments, mergers and
acquisitions and affiliate transactions. The only financial covenant included in the Term B Facility is a maximum leverage ratio. Events of default under the Term B Facility include, among others, nonpayment of principal or interest, covenant
defaults, material breaches of representations and warranties, bankruptcy and insolvency events, cross defaults and a change of control. Gregg Appliances was in compliance with the restrictions and covenants in the Term B Facility at
December 31, 2008.



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Senior Notes. In connection with our recapitalization on February 3, 2005, we issued $165
million in unsecured 9% senior notes (senior notes). Interest on the senior notes is payable in arrears twice a year on February 1 and August 1. The senior notes will mature on February 3, 2013. There were approximately
$3.4 million of the senior notes outstanding at December 31, 2008.

Revolving Credit Facility. On July 25, 2007, Gregg
Appliances entered into an Amended and Restated Loan and Security Agreement with a bank group for up to $100 million. Borrowings under the credit agreement are subject to a borrowing base calculation based on specified percentages of eligible
accounts receivable and inventories. Interest on borrowings are payable monthly at a fluctuating rate based on the banks prime rate or LIBOR plus an applicable margin. Under the amended agreement the annual commitment fee is 1/4% on the unused
portion of the facility and 1.25% for outstanding letters of credit. The asset backed credit facility does not require Gregg Appliances to comply with any financial maintenance covenant, unless it has less than $8.5 million of excess availability at
any time, during the continuance of which event Gregg Appliances is subject to compliance with a fixed charge coverage ratio of 1.1 to 1.0. In addition, if Gregg Appliances has less than $5.0 million of excess availability, it may, in certain
circumstances more specifically described in the Amended and Restated Loan and Security Agreement, become subject to cash dominion control. The credit agreement is guaranteed by Gregg Appliances wholly-owned subsidiary, HHG Distributing LLC
(HHG), which had no assets or operations. The guarantee is full and unconditional and Gregg Appliances has no other subsidiaries. In addition, there are no restrictions on HHGs ability to pay dividends under the arrangement. Gregg
Appliances was in compliance with the restrictions and covenants in the debt agreements at December 31, 2008.

As of December 31,
2008, Gregg Appliances had approximately $14.8 million of borrowings outstanding under the revolving credit facility and $4.1 million of letters of credit outstanding which expire through December 31, 2009. As of December 31, 2008, the net
borrowing availability under the revolving credit facility was $81.1 million. The weighted average interest rate of the $14.8 million of cash borrowings outstanding at December 31, 2008 was 3.4%.

Long Term Liquidity. Anticipated cash flows from operations and funds available from our credit facilities, together with cash on hand, should
provide sufficient funds to finance our operations for at least the next twelve months. As a normal part of our business, we consider opportunities to refinance our existing indebtedness, based on market conditions. Although we may refinance all or
part of our existing indebtedness in the future, there can be no assurances that we will do so. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may require us to seek additional debt or
equity financing. There can be no guarantee that financing will be available on acceptable terms or at all. Additional debt financing, if available, could impose additional cash payment obligations and additional covenants and operating
restrictions. Pursuant to the terms of our Term B Facility, we also have the capacity to repurchase our outstanding Senior Notes at our discretion so long as we have excess availability of $10,000,000 after the repurchase.

Cash Flow Hedge.During fiscal 2008, we entered into an interest-rate related derivative instrument to manage our exposure on our debt
instruments. The derivative instrument hedges $50,000,000 of Term B Facility debt and expires on October 25, 2009.

We assess interest
rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We maintain risk management control systems to monitor
interest rate cash flow risk attributable to both our outstanding or forecasted debt obligations as well as our offsetting hedge positions. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity
analysis, to estimate the expected impact of changes in interest rates on our future cash flows.

We use variable-rate debt to finance our
operations. The debt obligations expose us to variability in interest payments due to changes in interest rates. We believe that it is prudent to limit the variability of a portion of our interest payments. To meet this objective, we entered into an
interest rate swap agreement to manage fluctuations in cash flows resulting from changes in the benchmark interest rate of LIBOR on $50 million of our Term B Facility. This swap changes the variable-rate cash flow exposure on the debt obligations to
fixed cash flows. Under the terms of the interest rate swap, we receive LIBOR based variable interest rate payments and make fixed interest rate payments, thereby creating the equivalent of fixed-rate debt for the notional amount of the debt that is
hedged.



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Changes in the fair value of our interest rate swap which is designated as a hedging instrument that
effectively offsets the variability of cash flows associated with variable-rate, long-term debt obligations are reported in accumulated other comprehensive income. These amounts subsequently are reclassified into interest expense as a yield
adjustment of the hedged interest payments in the same period in which the related interest affects earnings.

During the three months
ended December 31, 2008 the hedge was considered highly effective and a net cumulative unrealized loss of $1.0 million was recorded in accumulated other comprehensive loss in our condensed consolidated balance sheets.

Recently Issued Accounting Standards

See Notes 2 and
3 to the Condensed Consolidated Financial Statements of this report for further details of recently issued accounting standards.

Outlook

Our outlook for fiscal 2009 is based on information presently available and contains certain assumptions regarding future economic
conditions. Differences in actual economic conditions compared with our assumptions could have a material impact on our fiscal 2009 results. Please refer to the Risk Factors section of our Annual Report on Form 10-K, filed with the SEC
on June 3, 2008 for additional important factors that could cause future results to differ materially from those contemplated by the following forward-looking statements.

Continued economic uncertainty resulting from the turmoil in the financial markets and growing unemployment has significantly impacted customer traffic
patterns since the middle of September this year. Customer traffic patterns are much more volatile and less predictable than we have historically experienced. Consequently, despite efforts to closely manage our gross profit margins, SG&A expense
and working capital position, we maintain a broad range of projected results for fiscal 2009. Based on a comparable store sales decline of between 7% and 11% for the fourth quarter of the fiscal year, net income per diluted share for fiscal 2009
would range between $0.85 and $0.95 as compared with previous net income per diluted share guidance of $0.75 to $0.90. This would result in a comparable store sales decline of 8% to 10% for fiscal 2009 as compared with an 8% to 12% comparable store
sales decline under prior guidance. Net sales would grow between 9% and 12% for the fourth quarter of the fiscal year which would result in net sales growth of between 9% and 12% for the fiscal year as compared with 9% and 13% in previous guidance.
We plan to open 20 new stores during fiscal 2009 of which 18 have been opened. Capital expenditures, net of sale and leaseback proceeds, are expected to range between $24 million and $26 million for fiscal 2009 as compared with prior guidance of $29
to $31 million. We expect to finance these capital expenditures with cash from operations and do not expect to be drawn on our revolving credit facility as of March 31, 2009.

Forward-Looking Statements

Some of the statements in this document and any documents incorporated by
reference constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance and involve known and
unknown risks, uncertainties and other factors that may cause our businesses or our industries actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking
statements. Such statements include, in particular, statements about our plans, strategies, prospects, changes, outlook and trends in our business and the markets in which we operate under the heading Managements Discussion and Analysis
of Financial Condition and Results of Operations. In some cases, you can identify forward-looking statements by terminology such as may, will, could, would, should,
expect, plan, anticipate, intend, tends, believe, estimate, predict, potential or continue or the negative of those terms or
other comparable terminology. These statements are only predictions. Actual events or results may differ materially because of market conditions in our industries or other factors. All of the forward-looking statements are qualified in their
entirety by reference to the factors discussed under Managements Discussion and Analysis of Financial Condition and Results of Operations herein and Managements Discussion and Analysis of Financial Condition and Results
of Operations in our latest Annual Report on Form 10-K filed with the SEC on June 3, 2008, and any documents incorporated by reference that describe risks and factors that could cause results to differ materially from those projected in
these forward-looking statements. The forward-looking statements



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are made as of the date of this document or the date of the documents incorporated by reference in this document, as the case may be, and we assume no
obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.



|ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk.
|------- | -----------------------------------------------------------

We are exposed to market risk from changes in the floating rate of interest on the outstanding debt under our revolving credit facility and on $39,250,000 of our Term B Facility which is not subject to an interest rate hedge. Interest on
borrowings under our revolving credit facility is payable monthly at a fluctuating rate based on the banks prime rate or LIBOR plus an applicable margin. As of December 31, 2008, the weighted average interest rate of the $14.8 million of
cash borrowings outstanding under our revolver was 3.4%. Additionally, interest on our Term B Facility is payable in defined periods or quarterly, depending on our election of the banks prime rate or LIBOR plus an applicable margin. For the
nine months ended December 31, 2008, the interest rate based on LIBOR for the $89.3 million outstanding on our Term B Facility was 4.7%, however as stated above, $50.0 million of this debt is subject to an interest rate hedge. A hypothetical
100 basis point change in interest rate would change our annual pretax income by approximately $0.6 million. We are not currently exposed to market risk from currency fluctuations as all of our purchases are dollar-denominated.



|ITEM 4. | Controls and Procedures.
|------- | ------------------------

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange
Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and regulations, and that the information is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures based closely on the definition of disclosure controls and procedures in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934.

We carried out an evaluation, under the supervision and with
the participation of our management, including our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2008. Based on this
evaluation, we concluded that our disclosure controls and procedures were effective as of such date.

Changes in Internal Control over Financial
Reporting

For the quarter ended December 31, 2008, there were no changes in our internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there is only
reasonable assurance that our controls will succeed in achieving the stated goals under all potential future conditions.

Part IIOther Information



|ITEM 1. | Legal Proceedings
|------- | -----------------

The Company is engaged in
various legal proceedings in the ordinary course of business and has certain unresolved claims pending. The ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time. However, management believes, based on the
examination of these matters and experiences to date, that the ultimate liability, if any, in excess of amounts already provided for in the condensed consolidated financial statements is not likely to have a material effect on our financial
position, results of operations or cash flows.



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|ITEM 1A. | Risk Factors
|-------- | ------------

There have been no material changes
from the risk factors previously disclosed in Risk Factors in the Companys Annual Report on Form 10-K filed with the SEC on June 3, 2008.



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|ITEM 6. | Exhibits
|------- | --------



|      |  |                                                                                                                                                                                                       
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.35 |  | Amendment No. 2 to Employment Agreement dated December 29, 2008 between Gregg Appliances and Jerry W. Throgmartin.                                                                                    
|      | 
|10.36 |  | Amendment No. 1 to Employment Agreement dated December 30, 2008 between Gregg Appliances and Dennis L. May.                                                                                           
|      | 
|31.1  |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|      | 
|31.2  |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
|      | 
|32.1  |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                
|      | 
|32.2  |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



HHGREGG, INC.By:

/s/ Donald J.B. Van der WielDonald J.B. Van der WielPrincipal Financial and Accounting Officer


Dated: February 5, 2009



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