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ABC Warehouse Eyes Modest CE Growth In Q4

8/11/2013 08:00:00 PM Eastern

PONTIAC, MICH. – From a single Michigan location that opened in 1963, ABC Warehouse has grown into the state’s largest native CE and appliance dealer with 45 superstores across Michigan, northern Indiana and Ohio.

The privately held business, which also operates the 16-store Mickey Shorr car electronics chain and two premium Hawthorne Home Appliances and Electronics showrooms, has diversified its merchandise mix with the addition of bedding and furniture to help blunt the effect of the soft CE market, and more recently became the first dealer in its trading area to carry LG’s 84-inch Ultra High-Definition Cinema 3D smart TV.

To get a read on the coming holiday season, TWICE asked Dan Schuh, ABC’s director of TV and A/V products, for his take on the fourth quarter and the video category’s prospects for Christmas. Here’s what he had to say.

TWICE: What is your outlook for the fourth quarter? Will you be planning aggressively?

Dan Schuh, ABC Warehouse: While we are hopeful that Q4 will be positive relative to prior years, we just don’t see an aggressive growth path for CE. With last year’s industry number up a couple of points we would expect a similar range of results this year. CE is a mature marketplace and aggressive growth – over 5 percent by our definition – is very difficult to accomplish in a mature, saturated marketplace.

TWICE: Which CE categories will be the most popular with holiday shoppers?

Schuh: CE is not a monolithic industry, and there will clearly be some pockets of significant opportunity during the holiday. We see continued strong demand for large-screen TVs, the new game consoles and entry-level tablets.

TWICE: What’s your Q4 game plan for TV, and will Ultra HD be a game changer?

Schuh: TV remains an enigma for holiday. Except for some highly promotional size ranges, under-50- inch product sales continue to flounder. And while above-50-inch remains robust we are concerned about pricing.

ASPs [average selling prices] are firm above 50 inches, as the falling prices of the largest screens – those above 70 inches – add significant dollar volume to help stabilize pricing. But the collapse of the 40- to 49-inch market could put pressure on much of the 50- to 65-inch segment over the holiday.

Much will depend therefore on the strength of 4K, which could drive some badly needed dollars back into the category at higher and more profitable price points. That said, while 4K isn’t a volume game changer, its success is crucial to the large-screen market remaining stable this holiday.

TWICE: What about the resurgence of audio? Hasn’t that been a savior for CE?

Schuh: Home audio has likely peaked and has seen considerable shifts to new form factors. Those form factors are still providing a net positive to the market, but ASPs are falling heading into the holiday.

TWICE: Given all that, will you be adding more non-CE items to the mix?

Schuh: We expect continued success around easy categories like mattresses, and furniture in our stores continues to be successful as well.

TWICE: Do you expect that Black Friday promotions will be planned and controlled, or are you anticipating a pricing free-for-all?

Schuh: Black Friday is hard to read today. We are guessing that it will be highly promotional, more so than in the past due to the weakness in some high visibility categories, like under-50-inch TVs, where there is sure to be significant product availability and a history of consumer demand to support some aggressive actions.

The emergence of Chinese availability in high-end TVs also makes this category vulnerable to more than typical promotional activity as newcomers target the most significant growth opportunities for price disruption.