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CE Sales Expectations Low

3/12/2008 11:06:00 AM Eastern

New York — Expectations for consumer electronics sales are soft for the foreseeable future, based on analyst reports and recent research.

A report released this month from the ChangeWave Alliance, which regularly surveys its 15,000 business, technology and medical professional members on the choices they make as consumers, found “consumer electronics spending appears set to take a huge hit going forward.”

The report said 33 percent of respondents said they plan on spending less on consumer electronics over the next 90 days while only 19 percent said they’ll spend more. The group said these numbers represent a 10-point decline since January and “the weakest outlook for electronics spending ever recorded in an Alliance survey.”

On a similar note, data released in February by market research firm BIGresearch indicated “consumers aren’t as likely to be considering purchasing high-dollar durables in the next six months.”

“Compared to last month and last year, purchase intentions are down for computers, furniture, home appliances, housing, jewelry, DVD/VCR and digital cameras,” said the report.

It also said TV demand remains flat from January and rises from February 2007.

In a recent research note in which he downgraded his recommendation for Best Buy, analyst David Strasser of Banc of America Securities said he expects TV sales to be “flat to negative” this year.

“From an industry standpoint, many factors that drove [Best Buy’s] ’07 out-performance will reverse in 2008,” he said.

Strasser said he anticipates oversupply in the TV market in the second half of 2008, similar to the situation that existed in 2006, “driven by lackluster demand as slowing big ticket purchases will be exacerbated by an overly optimistic production schedule from the manufacturers.”

He explained, “Last year, we were bullish on TV demand as 1080p and a mix shift to larger screen sizes drove ASPs higher. This year, we do not see a new TV technology to catalyze sales.”

Strasser also introduced the possibility that the struggling Circuit City’s “need for relevance could cause a turbulent promotional environment this year.”

Analyst Vivian Ma of Oppenheimer & Co. echoed Strasser in her own recent research note, which she released in response to the BIGresearch report. She said, “With a lack of must-have new products on the horizon for this year, commoditization and price competition are going to be key themes for the CE sector.”

As for how these lowered expectations might affect retailers, Ma said warehouse clubs are in a position to gain share due to their “lenient return policy, expanding selection in tier-one brands and consistently competitive pricing.”

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