CE Retailers Report Slower Holiday Sales

NEW YORK — Consumer electronics dealers may have fared better than most merchants during holiday 2007, but all of retail felt the pinch of a stingier Santa this Christmas.

"We finished in line with the national numbers," reported John LaRegina, senior TV and video buyer for P.C. Richard & Son, the country's largest independent brown- and white-goods chain. "We entered the period with cautious optimism because of the weak economic news, and the holidays met our expectations."

National same-store sales were generally in the low single-digit range, compared with the high single-digit comps enjoyed during the 2006 holiday. According to MasterCard Advisors, the professional services arm of MasterCard Worldwide, retail sales for the period between Black Friday and Dec. 24 grew by a seasonally adjusted 3.6 percent year-over-year, as soaring energy prices, a weak housing market and more rational price promotions put a crimp in consumer spending.

"Overall, sales came in just above the lower end of the range we were expecting, maintaining the slower, modest growth we've been seeing throughout the year," said Michael McNamara, the group's research and analysis VP. "Anyone who was looking for this holiday season to kick-start a new wave of growth would find these numbers falling short of expectation."

Like most product categories, CE sales surged on Black Friday, lagged midseason and rallied to the finish line as last-minute shoppers flocked to stores the weekend before Christmas. MasterCard Advisors, which lumps major appliances in with CE, said electronics sales grew 15 percent on Black Friday, 5.8 percent by midseason and ended the period with a "very moderate" 2.7 percent gain.

Still, CE was the go-to category for gift giving this holiday season, with GPS systems, digital picture frames, LCD TVs and notebook computers enjoying double- and triple-digit growth, The NPD Group reported. For Best Buy, those categories plus gaming software and consoles helped deliver a record third quarter and high hopes for a merry Christmas. "We're prepared for a strong finish after a slower December," senior VP/interim chief financial officer Jim Muehlbauer told analysts during a Dec. 18 conference call. "We're preparing for a rush at the close of the holiday season," he said.

Best Buy CEO Brad Anderson added that consumers in the home stretch of their holiday shopping tend to "return to where they purchased before," while Shari Ballard, retail channel management executive VP, saw a "huge opportunity to close out the holiday" by simply catering to customers who couldn't find what they were looking for elsewhere.

Other retailers had less cause for celebration. Target, unable to maintain the momentum of Black Friday, announced on Christmas Eve that December same-store sales would likely fall "well short" of earlier forecasts of 3 percent to 5 percent growth, and that projected comps for the period of Dec. 2-Jan. 5 would likely be plus or minus 1 percent. Similarly, Circuit City said it would likely deliver a modest loss for the December-February quarter based on current sales and margin trends as the chain battled warehouse clubs and e-commerce sites for market share. Those channels, said general merchandise manager John Kelly during a pre-Christmas conference call, remained as competitive as the year before. "It's a sign of the economy that customers are responding to promotions," he told analysts.

Nevertheless, CE retailers resisted the urge to slash prices, making for a refreshingly rational, if more modest, holiday season. "This year most retailers went to market with a little more common sense," said P.C. Richard's LaRegina. "We got somewhat aggressive on Thanksgiving," he said of his own chain, "but even though it got a little quiet into the season, we felt it wasn't necessary to promote during the final week. We had a good surge regardless."

Looking ahead, LaRegina expected a strong post-Christmas period for flat-panel TV with the approach of Super Bowl, but a more challenging marketplace overall. "Retailers are going to have to hunker down now given the tough economic climate," he said. "They've got to manage their inventory and keep expenses down."