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Reports Show CE Sector Still Strong

6/13/2008 02:22:00 PM Eastern

New York — Sales of consumer electronics remain robust at retail, defying the soft macroeconomic environment.

That was the conclusion of Lehman Brothers hard-lines analyst Michael Lasser, based on a series of industry indicators including Census Bureau sales data, flat-panel shipment reports and his company’s own research on gaming and notebook PCs.

His findings, released today in a research note previewing Best Buy’s first quarter earnings announcement on Tuesday, also support anecdotal accounts of solid May sales gleaned from dealers and vendors by TWICE.

According to Lasser, recent data from the United States Census Bureau indicates that retail sales in the consumer electronics and appliances category increased about 3 percent year over year for the period of March through May 2008, an acceleration from the December through February period when total CE sales were up 1.5 percent year over year.

Lasser also cited data from market research firm DisplaySearch showing a 4 percent increase in total North American TV shipments during the first quarter of the calendar year, driven by a 110 percent increase in LCD shipments and a 51 percent increase in plasma TV shipments.

Another indication that the TV category has remained strong is Wal-Mart’s sales results, Lasser said, which include triple-digit comp increases in flat-panel TVs over the last few months. He cautioned however that the gains could be the result of a market share shift to mass merchants amid the weak economy, and don’t reflect the move by consumers to smaller screen sizes, as seen in the DisplaySearch data and his own store checks.

Elsewhere, video game sales have remained solid over the last few months due in part to the introduction of popular new titles for latest-generation platforms. According to Lehman Brothers research based on reports from Microsoft, Nintendo and Sony, total video game software revenue increased by 41 percent during the first quarter, driven by a 19 percent spike in unit growth and an 18 percent increase in average selling price.

April was even more robust: Video game revenue was up 47 percent year-over year, with software up 68 percent and hardware ahead 26 percent, led by PlaySation3 (up 126 percent) and Wii (up 98 percent).

Lasser also reported a 19 percent increase in U.S. sales of notebook computers during the first quarter, comprised of a 19 percent gain in unit volume amid flat average selling prices (up 0.4 percent).

The analyst believes that the growth trends for CE were likely supported by the tax rebate that was distributed over the past few weeks.

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