Best Buy’s Unique Holiday View
Best Buy posted strong fiscal second-quarter sales and earnings this week; however, during its conference call with analysts, Jim Muehlbauer, chief financial officer of U.S. operations, made a curious statement about the promotional atmosphere for this year’s holiday season.
"What we’ve heard from vendors and customers … we will have a more rational promotional environment [compared to last year]. There is a long way to go yet, but from a competitive standpoint there will be less retail space, less stores from CompUSA and Tweeter.”
I don’t know who he’s been talking to but vendors and retailers that we spoke to at CEDIA, the Nationwide Marketing Group and Brand Source conventions take the entirely opposite view. In fact, a report on the flat-panel TV market by Current Analysis West, an NPD Group company, clearly indicates that this category will see “aggressive” activity.
Maybe Muehlbauer’s comment means that Best Buy will be less aggressive in offering deep promotional prices during the holiday season, but I doubt it, especially if the general economy gets softer.
Adam Cauble commented:
This fourth quarter may make or break the fragile economy for 2008.
Many consumers recently have taken a hit in their pocketbooks with
the rise in their adjustable mortgage rates, as well as the job
losses in the real estate, mortgage banking, and construction
industries. If consumers see anything less than absolutely "hot"
deals in CE products this holiday season, then Best Buy (and
others) should prepare for a lower-than-expected, or worse, Q'4 of
2007. However, 'luke-warm' discounts for CE products this holiday
season might save the CE manufacturers and retailers from a rapidly
hemorrhaging profit margin. However, without the customer foot
traffic, the sales of high margin products and services will suffer
instead. With the current state of the economy, it will take one
helluva price-point balancing act this fourth quarter to both bring
in the foot traffic and keep margins at a level where the company
sign(s) can still remain lit.
Adam Cauble commented:
This fourth quarter may make or break the fragile economy for 2008.
Many consumers recently have taken a hit in their pocketbooks with
the rise in their adjustable mortgage rates, as well as the job
losses in the real estate, mortgage banking, and construction
industries. If consumers see anything less than absolutely "hot"
deals in CE products this holiday season, then Best Buy (and
others) should prepare for a lower-than-expected, or worse, Q'4 of
2007. However, 'luke-warm' discounts for CE products this holiday
season might save the CE manufacturers and retailers from a rapidly
hemorrhaging profit margin. However, without the customer foot
traffic, the sales of high margin products and services will suffer
instead. With the current state of the economy, it will take one
helluva price-point balancing act this fourth quarter to both bring
in the foot traffic and keep margins at a level where the company
sign(s) can still remain lit.
Adam Cauble commented:
