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CE Holiday Haul: Units Up, Dollars Down

1/07/2010 02:00:00 AM Eastern

While strong demand for consumer electronics spurred solid fourth-quarter unit volume, rampant discounting ultimately resulted in revenue declines for the holiday selling season, retailers reported.

“We moved a lot of product,” said Bill Trawick, president and executive director of the $3 billion NATM Buying Corp. The group's 11 major regional dealers “all had a very good Black Friday weekend” and continued to see traffic in stores through December, when TV unit volume rose a couple of points over last year, he said.

But due to TV price declines of as much as 25 percent from September to October levels, margins and dollar volume were down collectively for NATM over the holiday season.

“TVs are starting to look more and more like computers in terms of margins,” Trawick said.

Jim Ristow, executive VP of Home Entertainment Source (HES), the $2 billion specialty A/V division of the Brand Source buying group, said his member dealers are contending with “the same margin challenges that all channels face.”

Although many HES dealers chose to not participate in Black Friday sales events, post-Thanksgiving promotions helped unit volume reach the high single digits for the holiday season. Sitting out the Black Friday fracas — and stepping up customers to more profitable products — also buttressed gross dollars, which were flat to slightly up from 2008, Ristow said.

According to projections by the International Council of Shopping Centers (ICSC), “catch-up” buying propelled December retail sales by 2 percent over the year-ago period, when comp-store sales fell by 4.6 percent.

The gains came despite a major East Coast snowstorm the weekend before Christmas that turned “Super Saturday” — traditionally the busiest shopping day of the season — into a “super disappointment,” according to ICSC chief economist Michael Niemira, who cited double-digit sales declines on Dec. 19.

Regional chains were particularly impacted, including New Jersey-based Sixth Avenue Electronics. Operations VP Tom Galanis described the timing of the storm as “a nightmare. Things were going well until the weekend,” he said.

Retailers responded nevertheless by extending store hours and cutoff dates for online Christmas orders. Indeed, e-tailers appear to have benefitted from the wintry weather, with sales spiking 13 percent that weekend to $767 million, resulting in the heaviest online spending week on record, at $4.8 billion, according to market research firm ComScore.

Others retailers, including Best Buy and Walmart, tried to carry the seasonal momentum past Christmas by pre-announcing post-holiday sales as early as Dec. 22. Those included a 10.1-inch Lenovo netbook that sold for $197 on Christmas Day at BestBuy.com, and an Xbox 360 Elite bundle with two games and a $50 gift card offered by Walmart from Dec. 26 through New Year's Day.

Margins aside, merchants were relatively pleased with the holiday results, given what Best Buy chief financial officer Jim Muehlbauer described as “continuing challenges on overall consumer spending in the retail environment.”

“We're not expecting the low double-digit Black Friday sales to continue in [fiscal] Q4, but we will see growth,” he told analysts last month.

To Tim Coakley, vendor management and marketing VP for DBL Distributing, “This season seems a lot better than last year. It's not time for the mariachi band yet, but we're seeing an uptick in optimism from vendors and customers and we feel good about hitting plan for December.”

HES's Ristow agreed. “Compared to last year and where business could have been, I remain cautiously optimistic for Q1.”

“Fortunately for us,” added NATM's Trawick, “we're in the electronics business, compared to some other consumer sectors out there.”

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