Passing Clouds Or Stormy Weather?
By Steve Smith -- TWICE, 9/4/2006
Fall has seemed to come early to the Northeast this year. At least the rainy season has, with precipitation prior to Labor Day for more than a week, cooler temperatures and overcast skies the norm. Based on some market indicators heard in recent days the gloomy weather here could be a metaphor for the upcoming holiday sales season.
While this isn't one of those cases where people are talking themselves into a downturn, on the economic front there are plenty of worries out there. The housing market seems to be stalling. New home and existing home sales have lagged. Mass merchants are scaling down sales estimates for the fourth quarter, fearing that higher energy costs across the board are finally taking their toll on consumers, whose confidence seems to be faltering.
The venerable Conference Board issued its August report last week and it wasn't pretty. The Consumer Confidence Index for the month declined sharply and is now at the lowest level this year. It said that “less favorable business conditions” among other factors resulted in the largest one month decline since Hurricane Katrina. The Conference Board said that “the glass remains half empty as consumers grow increasingly more pessimistic about the short term outlook.”
Ouch.
Closer to home NPD's industry analysis VP Steve Baker said at Fall RetailVision last week that flat-panel TV, HD video and computer accessories will do well this holiday season, but satellite radio and MP3 players will have trouble meeting last year's sales numbers. Baker also thought that digital cameras, car navigation and HD camcorders will do well. (One questions how well the “HD video twins” will do, HD DVD and Blu ray, due to the usual confusion and format battle questions surrounding them aside from economic concerns.)
But demand for flat panel displays, either plasma or LCD, has been a common thread of good news in recent weeks. Demand is still there and it seems to be peaking as the new TV and football seasons begin and we approach the Major League Baseball playoffs in October.
Nationwide Marketing Group president Ed Kelly gave us some good news this week, starting with flat-panel TVs, where he is seeing his members get “much higher growth in units” and said he never attended a meeting of his group that was so “upbeat. Overall business for our members has been good.”
(Which reminds me, if supplies of plasma and LCD TVs are tight and the industry is facing a possible breakout season for HDTV, why would top manufacturers launch another round of price cuts, which hurts everyone's profitability? I don't understand it, but then I'm not an MBA.)
But back to Kelly, who candidly told TWICE that in certain parts of the country business is “softening,” with members being concerned about the housing slowdown which could affect major appliance sales across the country. And Stewart Rose, chairman/CEO of Rex Stores, the regional electronics/appliance chain, commented during an analyst conference call on the chain's earnings that retail has hit a “tough patch” in the last quarter.
To end with this weather theme, the current market conditions could consist of just some passing clouds or be an indication of some stormy weather ahead. Either way, keep an umbrella handy. You never know if it will be just a cloudy day where you are or a stormy one.
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