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NATM Takes Flat 1st Qtr. In Stride, Sees 2nd-Half Industry Turnaround

3/12/2001 02:00:00 AM Eastern

LAKE BUENA VISTA, FLA. -With the economy seemingly in flux and first-quarter electronics/appliance sales flat at best, members of the NATM Buying Group are taking the news in stride, expecting 2001 to turn around and eventually be as good as last year.

That was the overall opinion from the members and suppliers who attended the group's annual meeting, held at Disney's Grand Floridian Resort, here, last week.

That was the overall opinion from the members and suppliers who attended the group's annual meeting, held at Disney's Grand Floridian Resort, here, last week.

Jerry Throgmartin, NATM president and president of group member H.H. Gregg, said that during January and February "business has been so-so. Some members are up a percent, others are down a percent. In general, video has been pretty good, but appliance sales have been soft."

He added that NATM expects 2001 to be "a decent year with a rebound in the second half. I don't think that business is that tough. It isn't a 'jump in the foxholes' situation, and it won't last for the whole year. Housing starts are growing again, which means that appliance sales will improve. And HDTV is driving video. While unit sales might be off, we are making more money because we are moving to 52-inch sets vs. 19-inch units. You don't have to sell dramatically more digital sets to make more money."

Throgmartin added that he is optimistic because "the Fed [Federal Reserve Bank] will not let the economy languish. It will probably keep interest rates down."

As for the buying group's performance last year, executive director Bill Trawick said sales were "just shy of $3 billion," which is lower than 1999's $3.1 billion. However, he was quick to point out that the 1999 figure included the four members who were dropped by the group in January 2000 and contributed only through the first quarter of that year (TWICE, p. 4, Jan. 17, 2000).

Also impacting the 2000 total was the demise of Roberds, and, Trawick added, "Some of our guys also sell housewares, vacuum cleaners and furniture, which as a group we don't track."

Concerning 2000, he pointed out that for NATM it was a good year even though "it slowed at the end. There were tougher market conditions, but all in all, it turned out OK."

Longtime NATM member Gordon Hartunian, president of ABC Warehouse, said sales have been slow or flat vs. last year, but he was philosophical about market conditions since last summer.

"A few things went against us," said Hartunian. "It was a cool summer, so air conditioners sales were slow. Then energy prices went up in the fall, which took money out of the market. And with stocks hurting, many less-experienced investors who have 401k accounts take a look and say, 'Oops.time to cut back on expenses.'

"At the same time we've done well and made money during the past couple of years. The fundamentals of the market are still fine. Circuit City dropped out of the appliance market, and the demise of Montgomery Ward helped us. Any time a major player leaves, it helps. All in all, we'll do fine [this year]."

Steve Child, executive VP of R.C. Willey, volunteered that in electronics, "color TV is a struggle, digital TV is OK, but overall business has been spotty." He called for broadcasters to "come up with the goods" and provide HDTV programming: "We need it to sell sets. After all, they got all of that digital spectrum from the federal government for nothing."

Even with the lack of HDTV programming, sales of those sets are among the most profitable areas for NATM, along with projection TV, audio in general and home theater packages, said Throgmartin. "We benefit when there is a lot of new technology because we want to solve [consumer] problems, answer questions and give advice."

Trawick, for instance, said that NATM members "show plasma TVs, LCD units, and they are profitable, but we won't sell a ton of them." The important thing about carrying such products is that NATM shows it's on the cutting edge and is "supporting the technological efforts of our suppliers."

When asked during a press briefing if the group plans to cut brands in electronics due to the slow first quarter, he said, "We are more successful in showing more product. We used to have a wall of VCRs and a wall of portable TVs." With those categories now becoming more commodity items than ever before, Trawick observed, "now we have a wall of big-screen TVs."

Over the years, two of NATM's biggest suppliers have been Thomson, with its RCA brand, and Zenith. When asked about RCA's deal with RadioShack and Zenith's upscale distribution plan, Throgmartin commented about how those developments affect NATM members.

"RCA is [at the meeting] and is still a strong partner of ours," he said. "We're of the opinion that [RCA] walks a fine line. Its RadioShack deal is good for RCA and RadioShack, and is not disruptive to the marketplace." However, noted Throgmartin, "if RCA is eventually identified as a RadioShack 'house brand' it will hurt RCA and us, because it would mean we would almost be referring consumers to RadioShack."

As for Zenith, he said, "We have been waiting for a strategy from [Zenith] and to see if it could be carried out. Zenith has been in a state of flux. At least we know where they are going now." Like RCA, Zenith executives had meetings with NATM members in Florida.

"If members come back to us and both sides say, 'Hey let's try to do a group deal,' we would entertain it," concluded Throgmartin.