Somber September Sales Impact Q4 Outlook
By Amy Gilroy -- TWICE, 10/14/2002
Following a banner summer, suppliers are reporting a slowdown in retail sales for September, causing some concerns about the fourth quarter.
July sales to dealers were up almost 17 percent, according to CEA, and August sell-through sales to consumers were up 3 percent, according to NPDTechworld, Port Washington, N.Y. But many industry members said they saw a downturn in September, reflecting the general trend in consumer electronics. They attribute this to uncertainty in the economy, a possible war with Iraq and a focus on the one-year anniversary of Sept. 11.
"We are seeing a slowdown in September results as reported by many of the retailers. This appears to be the early stages of a [fourth quarter] slowdown," said Alpine marketing VP Stephen Witt. While amplifier and speaker sales have continued to be reasonably strong and high-end head units sales are brisk, entry-level AM/FM/CD players have declined," he said. "It's that critical high volume CD area that has slowed the most."
Tom Malone, Audiovox mobile electronics group senior VP, noted that while "everyone in consumer electronics has seen a slowdown from retailers," there is still a lot of optimism amongst retailers for a strong holiday season. "We don't know if that's just optimism. Right now the retailers we are talking to are taking a wait-and-see position. They are not being aggressive [in purchasing] and there's a cautious attitude in the field. Everyone's wondering how temporary this will be," he said.
Pioneer also said that retailers and distributors are reporting a slowdown. Kenwood sales and marketing VP Bob Law said, "It's our sense that September sales will be reported as difficult. It looks like no category in September is having a good time. Wal-Mart is revising their forecasts and so is Federated Dept. Stores."
Suppliers credit part of the slowdown to the anniversary of Sept. 11, but to other factors as well. "Pretty much every newspaper, magazine and TV news show is talking about Sept. 11 and potential invasion of Iraq, and today a major issue is the dock strike in California," Law continued.
He and others said that suppliers would not be impacted severely this quarter as many planned conservatively. "Where we might see the impact, if this continues, is as we start producing for 2003," Law said.
The slowdown is also aggravating product supply problems, which had already become a chief sore point for retailers during the past 12 months. Following Sept. 11 last year, suppliers adjusted their forecasts downward, only to see demand surge during the first half of 2002. Many were caught short in supply. Parts shortages further hampered production.
Tom Sweere, general manager of Beach Auto Sound, Huntington Beach, Calif., noted that some of his reps are claiming certain major suppliers will be out of stock of all inventory by October or November. He said he is reacting by loading up on inventory. "Judging by what happened last year when all the majors ran out of stuff in mid- or late November, I totally and wholeheartedly believe them," he said.
But not all retailers are taking the bait. Audio Express, Phoenix, said it is concerned the slowdown in September is an indicator of slower sales for the year. "We had to make some tough decisions. For most of our suppliers, we refused to load up and we passed up on many of the deals that were made," said merchandise manager Paul Gosswiller. He said there were more deals offered this year, but they "were not as deep as they had been in the past."
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