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Happy Holidays For CE Retailers

1/08/2002 02:00:00 AM Eastern

CE was the salvation of an otherwise dismal holiday season for retailers.

While most broad line merchants were reeling from what the National Retail Federation painted as the worst shopping season in a decade, CE specialists said the category provided a solid, if less than spectacular, fourth quarter.

According to dealers and analysts, brown goods, led by DVDs and big screen TVs, benefited from the season's stay-at-home sensibility. Spooked by rising unemployment, deluged with debt, and still dazed by Sept. 11, consumers were "sleepwalking through Christmas," observed Britt Beemer, chairman/ founder of America's Research Group (ARG).

"Our surveys show that [consumers'] real priorities are spending time with their families rather than spending time at the mall."

Indeed, sales at shopping malls slipped 3 percent during the critical Nov. 23 through Dec. 16 selling period according to the International Council of Shopping Centers (ICSC). But when consumers did venture out to line the nest, they sought home-enhancing products like consumer electronics. Despite the falloff in total mall revenue, sales within the music, video and home entertainment category rose 2.3 percent, the ISCS study showed, as shoppers redirected their travel budgets to fortify their bunkers.

[At press time, ISCS's final sales tallies through Dec. 24 showed a 2.1 percent gain in total holiday sales and an 11 percent hike in music, video and home entertainment products.]

"The products that are selling well are those that are fulfilling immediate needs for entertainment and information," noted Tom Edwards, a senior analyst for NPDTechworld. Edwards based his observations on Black Friday sales data that showed striking year-over-year dollar volume gains for some CE sectors. Top earners included digital set-top boxes (up 235 percent), home theater in a box (up 173 percent), DVD players (up 53 percent), TV combo units and digital cameras (each up 38 percent) and color TVs (ahead 23 percent).

Even the promotional furor that marked Thanksgiving weekend — when Kmart shoppers snapped up a half-million $69 DVDs within a matter of hours — would later be tempered by brisk sales of big screen TVs.

"We've been at the low end of DVD all along," reported Michael Perlman, president of BrandsMart U.S.A. in Hollywood, Fla., "and it's been unbelievable. They're flying out the door as people come in for their second and third units. We're waiting for them to clamshell DVD."

But balancing the DVD blowout were steady sales of plasma TVs. "We sell two or three pieces a day, $25,000 to $30,000 a day. That's $750,000 in retail on 60 TVs."

Despite the video bonanza, Perlman said same store sales were running flat to negative 1 percent, which, all things considered, isn't all that bad considering the record-breaking performance of the prior-year period.

Also awed by DVD was Mike Abt, president of Abt Electronics & Appliance in Morton Grove, Ill. "It's the Christmas of DVD," he declared, citing stellar sales of better players, including portables and combination DVD/VCRs. Nevertheless, even DVD has its limits. "The real upscale business, $1,000 to $1,500 models, has slowed," he reported. "It's just too high-priced."

Also "doing real well" for Abt were big screen TVs, with sales of 16:9 sets exceeding those of the 4:3s. As a result, some models became "a little hard to get" after factory shipments tapered off around Dec. 10. "There was a lot more business out there than people expected," said Abt, who described his holiday season as "good" compared to 2000 and "excellent" overall.

"Home is where people want to be," he theorized. "Everyone's staying home watching great movies on DVD."

For the most part, business was also excellent for Salt Lake City's R.C. Willey. According to director Steve Child, who last week retired from his post as executive VP/electronics and appliances merchandising, shining holiday stars included projection TV, DVD, video games and digital cameras.

"Unlike years past, were not seeing everything migrate to the low end," Child said. "Eighty percent of our projection TV sales are in HD-ready, which is the most vibrant part of my business. We're doing a lot of step up business in DVD, and interest in plasma TV has been dramatic. We're not doing a ton of volume in plasma, but we're selling as many as we can get. We're also selling a lot of small LCD sets. They're pricey, but there's been great consumer interest. And even majaps has held up."

Willey — which like Abt and BrandsMart is a member of the NATM Buying Corp. — had its share of clunkers as well. Under-performers included car audio, computers, VCRs (down a dramatic 30 percent) and, surprisingly, camcorders.

Smaller independents also had plenty to cheer about. "Business was very good across the board," reported Bob Lawrence, executive director of Brand Source/AVB, who had to readjust his pre-planning sales projections of flat to negative 5 percent to positive 2 percent. Not surprisingly, big screen TV led the charge, although the buying group, like others, found itself "scrambling for product." Brand Source members also enjoyed solid sales of step-up DVD players, while Lawrence described their white goods business as "smoking."

At press time, the final chapter had yet to be written for Good Guys' holiday story. While president/CEO Ken Weller reported that the first two weeks of December were slightly below expectations, recently promoted executive VP/merchandising and advertising Cathy Stauffer noted that the second two weeks are traditionally "huge" for the San Francisco-based chain.

"The week after Christmas has become very big," she noted. "People are home, they have cash, and they're returning gifts for good goods. It's no longer leftover week."

Like the rest of CE retaildom, big screen TVs were the top earners for Good Guys, as HD, plasma and LCD models raised average selling prices and helped offset lower tickets in DVD. The company also did a bang up business in higher-end personal electronics like MP3 players and network mini-disk units, Stauffer said.

Wary of the S.E.C.'s full disclosure rules, national chains like Circuit City and Best Buy were more reticent to discuss their holiday business in advance of their December sales statements, due out today and tomorrow respectively. But by mid-month, Best Buy senior VP/finance and CFO Darren Jackson allowed that "December sales are off to a good start and meeting our expectations. Comparable store sales are expected to be flat to up 2 percent in the fourth quarter. The promotional activity has picked up, yet we still expect earnings to grow at least 40 percent in the fourth quarter."

But if Best Buy's sales were good, e-tail activity was great. According to BizRate.com, online sales leaped 73 percent during the weekend before Christmas to $345 million compared to the same period last year, while purchases made through Yahoo!'s shopping portal between Nov. 23 and Dec. 24 increased 86 percent, led by video game consoles, digital cameras and laptops.

"We experienced very high traffic and order levels," echoed Frank Sadowski, the recently named VP/CE merchandising at Amazon.com. "Unit sales in CE doubled during the holiday period, and across all Amazon stores we sold 700,000 more items during the Thanksgiving weekend than the year before."

At the same time, he added, the e-tailer managed to maintain "a pretty healthy mix" of entry-level products and higher-tech, better-branded goods. The fatter average CE tickets weren't lost on Wall Street, whose post-Christmas praise helped push Amazon shares up 13 percent on Dec. 26.