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Best Buy, Circuit City Disappointed In Dec.

1/14/2005 02:35:00 PM Eastern

Las Vegas — December sales were below expectations for the two biggest specialty CE chains due to slow traffic and the promotional environment, the retailers reported during CES, here.

Best Buy’s U.S. sales rose 9 percent to $4.5 billion last month, but its domestic same store sales rose a more modest 2.6 percent, falling short of projections.

By contrast, Circuit City’s total U.S. sales slipped 3.7 percent year-over-year to $1.7 billion while comparable store sales slid 5.8 percent.

Best Buy CEO Brad Anderson said that high store productivity and a higher average ticket helped offset a “modest decline in customer traffic.” Top-selling products included MP3 players, up by triple digits; digital TVs, which enjoyed strong double digit comp gains; and notebook computers, up by the mid-teens. Business was also boosted by over $350 million in gift card sales, noted CFO Darren Jackson.

Declining categories included analog TV, video gaming, home audio, desktop computers and cellular phones.

The company said its 67 next-generation customer centricity stores continued to outpace the balance of Best Buy’s store base, although both net and comp sales at its high-end Magnolia Audio Video chain fell six percent.

Meanwhile, Circuit City chairman Alan McCollough said that year-over-year declines in traffic precluded customers from experiencing the company’s in-store improvements, and that the chain “must find more effective ways” to increase footprints.

Circuit City was also beset by declines in sales of desktop computers, exacerbated by aggressive promotions by competitors and vendors; DVD players, which have reached saturation levels among consumers; and video game products, driven by industry-wide hardware shortages, the company said.

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