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Holiday sales were mostly ho-ho-hum for the nation's CE retailers last month, after a promising start that began with a blistering Black Friday weekend.
The sales momentum stalled in December as merchants were beset by snow storms, flat-panel shortages, a blackout in San Francisco, a terror alert and general consumer constraint.
"The season started with some enthusiasm," noted MARTA Cooperative executive director Warren Mann. "Then consumers started losing the holiday spirit."
"They came out early," agreed Michael Perlman, president/CEO of BrandsMart USA, who saw sales level off from double-digit gains throughout November to a more modest 4 percent to 5 percent increase in December.
Many shoppers, well trained by retailers in the game of chicken, also waited for last-minute panic promotions before hitting the stores, giving retailers hope for another sales surge on the season's back end. "The customer shopping frenzy has compressed closer to Christmas," observed Bernie's senior VP John Wilkerson, days before the holiday. "Two years ago it started 15 days out, last year it started 10 days out and this year it's seven days out."
Indeed, ShopperTrak, a Chicago research house that gauges retail traffic and sales, said shoppers spent a season-best $7.3 billion on the Saturday before Christmas, representing a 4.9 percent hike over the comparable day last year, and edging out Black Friday's $7.2 billion bounty.
"Once again, the [data] confirmed that the Saturday before Christmas is the biggest sales day of the holiday season," said lead consultant Michael Niemira. "The shift in importance from the early stages to the later days of the holiday season has continued this year, with many consumers waiting until the final days before Christmas to do their shopping."
But even the 11th-hour turnout may have been too little too late. According to the biggest retail barometer of them all, Wal-Mart, sales for the last full week before Christmas tracked near the low-end of the discounter's projected sales growth of 3 percent to 5 percent for December. Traffic was also down for the week, compared with the prior-year period, although average ticket was up. CE products, including 27-inch flat screen tube TVs and home theater systems, were among its strongest categories, the company said.
But even if the holiday selling season didn't live up to its early promise, most dealers were still making their December numbers, with sales up an average of 5 percent year-over-year based on an informal survey of CE stores by TWICE just days before Christmas.
The figure doesn't include gift card sales, which are redeemed and recorded at a later date, and which played a larger role for retailers this season. According to the Weekly Chain Store Sales Snapshot, a joint report by the International Council of Shopping Centers and UBS Warburg, gift certificates represented between 8 percent and 10 percent of all holiday sales, up from 5 percent in 2002.
Here's what some other CE retailers said of the season:
Abt Electronics Holiday business is up from last year and "much better than [industry] trend" reported Mike Abt, president. As usual, the weekend before Christmas proved to be the biggest for the Chicago-area brown and white goods megastore, which doesn't participate in Black Friday promotions.
As with other retailers, the season's "biggest hassle" for Abt was the shortage of big-screen TVs. "At least we're all in the same boat," he said. "The manufacturers really don't have them. So with one or two exceptions, we're all crying the blues together."
Abt is looking forward to the first quarter when video vendors' supplies will begin to catch up with demand. "The first quarter is going to be very exciting," he said. "People really want these TVs."
Best Buy In a mid-December conference call with analysts, Best Buy president/COO Al Lenzmeier said he was "optimistic about the conclusion of the holiday season," although CFO Darren Jackson acknowledged that December sales were "down slightly" due to snowstorms over two consecutive weekends in the Northeast. The company is projecting fourth-quarter net sales of over 18 percent and comparable store sales of between 6 percent and 8 percent, Jackson said, led by strength in DTV, digital imaging and office products.
Ron Boire, executive VP/GMM, noted that the company had stocked up on computers, digital cameras and camcorders, MP3 players and music software to avoid the out-of-stocks it experienced the year prior. "We made a strategic decision to invest in categories we want to win, primarily digital products," he said.
Circuit City The No. 2 CE specialty chain didn't provided any fourth-quarter guidance during a mid-December conference call, except to say that "Folks showed a propensity to buy in the third quarter, and there's been no change in the mood of customers" in the fourth, according to chairman/CEO Alan McCollough. (CIBC analyst Dan Wewer conservatively projected Circuit City's fourth quarter comp sales at 3 percent.)
McCollough said marketing expenditures were diverted to the back half of the year to help stoke back-to-school and holiday sales, with an emphasis on traffic-driving price and item promotions vs. image advertising. Hot holiday categories included movie and music software; DTV, particularly LCD and plasma displays; satellite systems; and portable digital products, he said, and the company was seeing a "broader use of gift cards in the market."
Like Best Buy, Circuit City laid in inventories early in anticipation of brisk holiday demand. "We expected to have a better fourth quarter this year than last, and went in to make sure we would," McCollough told analysts. "You can't have a good season if you don't have the goods to sell." Nonetheless, the chain experienced spot shortages of DLP and LCD displays, and compensated by diverting consumers accordingly. "We have to move away from the focus on DLP only, because the customer isn't distinguishing," he said. "They're only interested in a thin, light, 50-inch TV."
Conn's In a conference call held during the second week of December, Conn's chairman/CFO Tom Frank reported a "very good start for the fourth quarter."
"We're very pleased. The top line is growing, and same-store sales are at or above where they were at the end of the third quarter. Maintaining that pace will be a challenge," he said.
Product-wise, volume has been up across the board, with especially strong showings in white goods, including laundry and refrigeration, and in big-screen TV, Frank said. "We're still struggling with price deterioration" for the latter, "but units are up. We're also excited about DLP vs. conventional rear projection, but are somewhat disappointed in availability. We got enough to sell, but not in a brand we'd like to have."
Frank projected that the DLP shortage cost Conn's between 5 percent and 10 percent in lost sales. That category aside, "We did a pretty good job of projecting our needs," he said.
Cowboy Maloney's The Mississippi-based dealer was enjoying a solid holiday season until the terror alert was raised on the Sunday before Christmas. "It was like somebody put a dam on the river, like we closed the doors," said CEO J. Con Maloney. "Will it have a major impact on Christmas? I don't know," he said, "but it's liable to put a real damper on things."
Prior to the orange alert, business was running hot and cold — "fantastically strong some days, and the next day it's not necessarily there," Maloney said. Over half his stores were, "way ahead of last year," with the balance flat or down, although total sales were up over the prior-year period heading into the final days before Christmas.
DVD players were the hottest item for the chain, which sold out its stock of mid-priced step-up models. By contrast, the company "loaded up" on inventory for the post-Christmas period, which it planned to promote with TV spots. "We're looking forward to some after-Christmas sales," Maloney said. "We're looking to have inventory at a time when basically all of our competitors are out of inventory in the marketplace."
Sears The mass merchant made no bones about its take-no-prisoners approach to holiday promotions. Despite early analyst speculation that holiday pricing would be more rational than the during the 2002 season, the chain declared by the second week of December that "the promotions are on and Sears is in the game — aggressively."
Sears noted that CE was among the top-selling categories of the season, having depleted its inventory of $27.99 DVD players. Higher up the price point scale, the company cited its Disney/ Memorex portable DVD player — a Sears exclusive — as another "hot-selling" CE product, whose $249.99 retail was subject to waves of storewide discounts.
— Additional reporting by Greg Tarr
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.