Best Buy, hhgregg Holding Off On Promos For Now

By TWICE Staff -- TWICE, 11/6/2008

New York — Despite pressures from the weak sales environment and store liquidations by Circuit City and Tweeter, CE retailers and manufacturers are holding their promotional fire, at least for the time being, executives at Best Buy and hhgregg said.

“Although I can’t predict the future, I haven’t heard of any irrational promotional actions of any real consequence,” Best Buy’s Mike Vitelli, customer operating group executive VP, told TWICE.

What’s more, Best Buy’s president/COO Brian Dunn, speaking last week before a small media gathering at company headquarters, pledged the No. 1 consumer electronics chain “won’t initiate any irrational moves,” as a price spiral “is not in anyone’s best interest.”

Dennis May, president/COO of hhgregg, the multiregional CE and appliance chain, similarly described the current marketplace and the industry’s planned holiday promotions “as relatively rational.”

Speaking to analysts during an earnings conference call this morning, May noted, “The holidays are always competitive, but the promotions we see are not much different that what we’ve seen day in, day out.”

Both companies acknowledged that vendors too are feeling the pain of an ailing economy and a consolidating retail landscape. But rather than simply squeeze their suppliers for better pricing, the chains are using the opportunity to work more closely with their key vendors and create strategic business plans that stretch well beyond the current quarter.

“Our vendor relationships have never been stronger or more effective,” Dunn said. “We’re focused on strategic arcs. We believe we should try to grow the pie.”

Jerry Throgmartin, chairman/CEO of hhgregg, assured analysts that “the sun will come out tomorrow,” and that his company will be well-positioned when it does by having strong supplier relationships in place.

In the meantime, the close partnerships have allowed both chains to nimbly navigate a volatile marketplace by modifying their plans on a weekly basis in response to changes in their sales mix.

In addition, store closures by Tweeter, Circuit City and perhaps additional retailers are presenting opportunities to grow sales, market share and store counts, the executives said.

“We’re aggressively competing in the marketplace to get our share,” said Throgmartin, who noted that 30 of Circuit City’s targeted stores overlap with hhgregg locations.

Likewise, Best Buy’s Dunn said his company is ready to “jump in” and take advantage of real estate opportunities and “connect with consumers” after storefronts close.

hhgregg’s May described the short-term impact of Circuit City’s fire sales as negligible, with no significant volume shift or impact on margins. “The inventory is liquidated quickly and not discounted much,” he said.