August was yet another healthy month for retail sales of electronics and appliances, according to the sales figures issued by an unusually limited number of retailers as of our Thursday-evening deadline. The issue date was apparently too early to be met by many dealers, and some key reports, including those from Circuit City and Tandy, were not available.
But while industry product sales were good, a depressed earnings forecast issued by Sears, plus the omission by Best Buy of its usual advance estimate for quarterly earnings, apparently upset the investment community. Near the close of the day's trading sales of such major retailers as Best Buy, Circuit City, Sears and Tandy were down in the 6%-to-13% range.
As for sales reports:
Best Buy, which reports sales quarterly, said revenue for the three months to August 31 rose 23% to a record $2.69 billion. Same-store volume was up 11.1%.
CFO Allen Lenzmeier said "sales of digital products, such as DVD, satellite systems, cameras and camcorders, as well as music and movies, led to Best Buy's seventh consecutive quarter of double-digit comparable-store sales gains." Additionally, he stated, "the launch of an Internet service provider subsidy offer in early July resulted in strong unit sales of personal computers, particularly entry-level models."
Harvey Electronics, the upscale metro New York retailer does not issue monthly results, but said volume for the three months to July 31 was up 15.2% to $4.85 million, though same-store sales decreased 5.6%. Harvey credited the overall increase to the results from two newer Harvey outlets, its new Manhattan Bang & Olufsen specialty store, and revenue from Internet sales. When it issues full financial results, Harvey expects to report a loss for the quarter.
Among broad-line merchants:
Ames Department Stores said home entertainment sales got off to a strong start in August, helping it achieve a 43.8% gain for the month to $236.9 million, including revenue from the recently acquired Hills chain. Same-store sales were up 4.2%.
Kmart said home electronics was among "categories showing particular strength for August," as it recorded a 5.6% increase in the month's total sales to $2.55 billion and a 3.4% same-store sales increase.
Sears reported a modest 1.8% rise in sales at ongoing domestic stores to $2.15 billion and a 0.1% same-store sales decline. CEO Arthur Martinez said that though Sears had "strong increases" in such categories as appliances, PCs and big-tube and projection TVs," the overall performance "was not up to our expectations."
Based on results to date, he indicated Sears expects to report earnings from comparable operations in the quarter to October 31 in the $240 million to $260 million range, down from the year-earlier $292 million, and that such earnings for the year will be up "at a low-single digit percentage rate."
Martinez added that Sears expects to take a second-half charge to cover the cost of expense reduction, sales-improving initiatives and management changes, and announced several immediate changes.