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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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