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Tough Holiday Retail Sales For CE

1/09/2003 02:00:00 AM Eastern

Despite their best merchandising efforts, consumer electronics dealers large and small generally posted flat to negative comps for the holiday selling season, which analysts described as the worst in 30 years.

CE dealers employed every traffic-building trick in the book, from magazine-size circulars and splashy ad campaigns, to $39 DVD door busters and 24-month interest-free financing.

But aside from a sharp spike in Thanksgiving volume, dealers could not shake the sales anemia that has beset all of retail since last summer as joblessness, economic uncertainty, the threat of war and a dearth of new hit products all took their toll.

"Consumer electronics has been largely immune to the retail downturns of the last several seasons," observed Frank Sadowski, VP/CE at Amazon.com. "Now, the general retail economy is catching up with the sector."

Jeff Stone, president/CEO of Tweeter Home Entertainment Group, remarked, "I've been in the business for 20 years and Sandy [chairman/founder Bloomberg] has been in the business for 30 years. And we never saw anything like it. I was amazed at how few people were out just a few days before Christmas."

Still, all was not gloom and doom. Despite a brisk business in loss leaders like DVD players and combo units, dealers said dramatic price reductions also drove big-ticket purchases of plasma and LCD displays, and HD tube and rear- and front-projection TVs and monitors.

Moreover, some merchants — mainly smaller independents, high-end custom installers and their distributors — reported a banner month for their businesses. "We don't have many people complaining," said Warren Mann, executive director of the MARTA Cooperative of America. "Some of our guys had a terrific year, and a few said it was their best ever."

Echoed Jeff Stevenson, CE director for D&H Distributing, "It's been a bullet train since Thanksgiving and I wish it could go on forever."

Those less fortunate can take solace in the fact that they were up against record prior-year sales when consumers lined their homes with high-tech diversions in the wake of 9/11.

Retailers can also be thankful for the relatively lean inventory positions they took going into the season, and for this month's Super Bowl, which should help find homes for any leftover TVs.

Here's how a host of CE dealers fared over the holidays:

AVB/BrandSource: "Business was O.K., but not great," said executive director Bob Lawrence. "It wasn't a barn-burner, but we'll come in flat against the prior year's good numbers." While group members enjoyed "excellent" sales of LCD and plasma displays as well as integrated HD projection TVs, many were compelled to participate in $39 DVD promotions to remain competitive.

Almo Corp.: November and December were "pretty good CE months," said Warren Chaiken, senior VP of this Philadelphia-based white and brown goods distributor. "Although we couldn't keep plasma and widescreen DTV in stock, you keep hearing horror stories in CE because the business is still volume driven, and there's not enough volume in DTV to compensate for the downturn in consumer spending."

Amazon.com: "Our mix of product sold pretty much as predicted, so there were no real shocking surprises," said CE VP Frank Sadowski. Wireless was the company's fastest-growing category, he said, while wireless home networking "was just on fire for us." Other areas of strength included digital cameras, PDAs and Amazon's small but growing HDTV business. One of the biggest categories was DVD, although the dramatic drop in player price points made it "difficult to show dollar growth."

Best Buy: The No. 1 CE retailer said that comp sales would be flat for December, compared to a year-ago gain of 6 percent. Executive VP/general merchandise manager Mike London described the environment as promotional, with "low-ticket items driving traffic."

Although demand was also strong for more margin-rich fare such as DTV and plasma displays, "There are definitely people out there taking rifle shots at specific products," he said.

Circuit City: Chairman/CEO Alan McCollough said sales slowed and margins declined in the fourth quarter, but withheld comment on December comps — which face a tough, 10 percent comparison — until this week. Gross margins are expected to "remain under pressure" due to rampant promotions.

"You've got to decide, will you compete or not?" he said during a December conference call. "There was a time when we weren't stepping up and competing [in the entry level price arena], and folks chose to go elsewhere. So we decided we can't afford not to play. In most cases you didn't see us lead the market down; it was a response to what we saw going on elsewhere."

Good Guys: The chain enjoyed a strong Thanksgiving weekend and upticks during the last two weekends before Christmas. Executive VP Cathy Stauffer said hot sellers included 15-inch and 20-inch LCD displays and premium projection sets, digital cameras, PVR-integrated satellite receivers, DVD/VCR combos and HTiB, while audio separates remained soft.

NATM Buying Corp.: Overall comp store growth for December was "flat to slim," said executive director Bill Trawick, although some members will show declines. "But we're comparing that to the record month we had the year before."

Sales of white goods remained "fairly strong" for member dealers, he said, although CE was soft, pulled down by audio components and analog camcorders despite "some growth" in large tube and projection TVs.

Tweeter: Comp sales through Dec. 21 were off 10 percent for the quarter and down 15 percent for December, with weakness consistent across the country. President/CEO Jeff Stone commented, "Consumers are showing less interest in consumer electronics than they have in the past."

Bright spots included flat-panel displays, whose pricing fell 25 percent last year, and home installation, while audio electronics and tube TVs each declined 3 percent in share of total sales. "We've put the brakes on open-to-buy," said Stone.

Ultimate Electronics: Comp sales through Dec. 22 were off 10 percent for the fourth quarter and down 15 percent for December, the company reported. "We are not seeing the large ticket holiday purchases as we experienced last year," said CEO Ed McEntire.