Chains Report Soft Holiday Sales

By Alan Wolf On Jan 19 2004 - 8:00am




A last-minute rush of holiday shopping and a surge in post-Christmas sales were unable to salvage a disappointing season for many specialty CE retailers.

The exception was Best Buy , whose U.S. operations bucked the trend by posting a 17 percent sales gain for the five-week period ended Jan. 3 to $4.1 billion, while same-store sales spiked 9.6 percent, exceeding expectations. Broken out by business segment, the company's flagship stores saw December comps rise 9.6 percent, while Magnolia Audio Video enjoyed a 3.3 percent increase in same store sales.

"Sales accelerated in the last two weeks of the period, as customers redeemed gift cards and bought themselves the gifts they really wanted," said vice chairman/ CEO Brad Anderson.

The company also credited increased customer traffic and "exceptional in-store execution" at its flagship stores for the gains. Top-selling items included notebook and desktop computers and digital imaging products, all of which enjoyed "significant increases in revenue," while digital TV comps grew by the "strong double digits," Best Buy said.

Results at Circuit City were more reflective of the CE retail community. Total December sales slipped 1 percent to $1.71 billion and comparable store merchandise sales declined 2 percent. Chairman/president/CEO Alan McCollough said sales performance "varied significantly by category," with high-end TV, DSS, digital imaging, digital audio, satellite radio and DVD movies generating "exceptionally strong" comps. But those gains were more than offset by weakness in home audio, video game hardware and software, and other categories, leading to "excess inventory in some areas," he said in a conference call. "Clearly we were counting on December to be better than it was."

Sales also varied by week, with December beginning and ending strongly, but softening midway through the month.

McCollough said last month's performance underscored the company's need to increase the average ticket, drive more traffic and continue updating its store base. To that end, the chain will likely open 65 to 70 new stores during the fiscal year beginning March 1, with half representing relocations and the balance representing new markets.

For Tweeter Home Entertainment Group, total revenue for its first fiscal quarter ended Dec. 31 rose 2 percent to $255 million, while comp-store sales slipped 1 percent. President/CEO Jeff Stone echoed other merchants by noting, "The holiday selling season started very strong as we experienced a record-breaking Thanksgiving weekend, but results weakened as December progressed."

CFO Joe McGuire said excess flat-panel TV inventory, a category that Tweeter "bought aggressively" for the holiday season, would impact gross margins, although it expects to work some of the overhang off in January, the company's third strongest month of the year.

At Ultimate Electronics , total sales for the two months ended Dec. 31 were essentially flat at $183.1 million, and comp-store sales fell 11 percent, representing a 10 percent decline in November and a 12 percent decrease in December. Newly appointed CEO Dave Workman said, despite growth in digital and flat-panel TV, sales were hampered by disappointing results from a holiday advertising campaign and continuing problems with a new management information system.

The company is "in the process of analyzing every aspect of our business to determine ways to improve our operations," Workman said.

For Rex Stores, total sales for the fourth quarter ended Jan. 1 fell 9 percent to $98 million and comps declined 6 percent. The company also announced that president/COO Lawrence Tomchin will retire at month's end.

Among mass merchants, Sears said total sales for the five weeks ended Jan. 3 were essentially flat at $3.9 billion, as were comps. "A surge in last-minute shopping and post-holiday clearance activity" — and strong performances in CE — "were not enough to overcome soft comparable store sales in early December," said chairman/CEO Alan Lacy.

At Wal-Mart's flagship stores, net sales for the five weeks ended Jan. 2 grew 10.2 percent to $23.1 billion and comps climbed 3.9 percent. Net sales at Target's flagship stores for the five weeks ended Jan. 3 grew 12.1 percent to $6.7 billion and comps grew 5.6 percent.

Among wholesale clubs, Costco said net sales for the five weeks ended Jan. 4 grew 14 percent to $5.2 billion and comps grew 11 percent. Wal-Mart's Sam's Club division posted an 8.8 percent gain in net sales to $4.1 billion for the five weeks ended Jan. 2, while comps grew 6.1 percent, and BJ's saw December net sales grow 11.4 percent to $852.7 million, while comps climbed 6.6 percent.

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