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CE Signals Mixed On Holiday Sales

12/20/2010 12:01:00 AM Eastern
NEW YORK – Sales reports and accounts by CE merchants and manufacturers provided a mixed picture of holiday demand in the final days before Christmas.

Much of the news was dour: Best Buy pointed to “larger- than-expected industry declines” in key CE categories during the run-up to the holiday season to help explain a 5 percent decline in U.S. same-store sales for the quarter ending the day after Black Friday.

In a conference call, Best Buy CEO Brian Dunn cited “weaker overall demand for TV,” slow adoption of 3D and IPTV, and “a weaker-than-expected notebook market” — due in part to competition from tablet computers and smart phones.

As chief financial officer Jim Muehlbauer noted, “Consumers are out spending in new categories and are making trade-offs in CE,” rather than purchasing multiple devices as in past years.

Best Buy’s disappointing results – which also stemmed from a decision to limit promotions on low-end TVs and laptops – were reflected in the U.S. Commerce Department’s monthly retail sales tally for November. Sales at CE and appliance stores edged up just 0.9 percent for the month and slipped 0.6 percent from October, trailing every specialty sector except home furnishings despite the benefit of Black Friday.

But according to The NPD Group, Black Friday promotions were of little help, with CE sales dollars down approximately 3.5 versus 2009 during Thanksgiving week. In a blog, NPD industry analysis VP Steve Baker said notebook sales fell 7 percent in units and 4 percent in dollars (albeit against last year’s 40 percent unit increase), while GPS systems and point-and-shoot cameras both posted lackluster results.

But contrary to Best Buy’s experience, NPD found that TV rebounded during Thanksgiving week with an overall unit increase of 5 percent and flat dollar sales, representing its best performance nearly all year long, Baker said.

Others echoed NPD’s point-of-sale and consumer-survey findings. Jim Ristow, executive VP of Home Entertainment Source (HES), the specialty A/V division of the $14 billion Brand Source buying group, told a TWICE Black Friday Webinar audience that member dealers were successful at generating traffic with weekend promotions, and then trading up customers to better LED TVs.

Mike Fasulo, Sony’s executive VP and chief marketing officer, said his company similarly enjoyed “a nice increase in 3D TV” over Black Friday weekend, with 3D sales actually picking up after the early-bird doorbuster crowd had gone.

Like Best Buy, Sony opted to refrain from aggressive door-buster TV promotions that would pit it against the lower-tier brands. “We can’t compete with them on price,” Fasulo said, “and despite some anxiety going into Black Friday, we did well in TV.”

But Best Buy said the decision to pursue profitability over entry-level volume cost it traffic, sales and market share. “There was an awful lot of activity in opening price-point tier-three home theater at the discounters, but that was an area we chose not to lead with,” Dunn said.

Best Buy Americas president Mike Vitelli said the company intentionally held back its 32-inch TV promotions until December, and that LED is selling “quite well” despite broadened distribution, while plasma and plus-42-inch LCD are seeing the greatest growth in flat panel.

Looking ahead, the mixed signals continue. Amex said 84 percent of consumers had not completed their holiday shopping by mid- December, due perhaps to a later Christmas on the calendar. But severe wintry weather throughout much of the country may limit trips to the store, while a Consumer Reports survey suggests that sales will likely wane amid increasing financial pressure on shoppers. The National Retail Federation came to the opposite conclusion, raising its holiday sales forecast from 2.3 percent to 3.3 percent due to improving economic indicators.

Perhaps the most accurate projection came from Best Buy’s Muehlbauer. “There remains a significant amount of business still ahead of us in the holiday selling season,” he said, “and we don’t have complete visibility to how customers will behave over the next several weeks.”
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