CE Chains Look To Ultra HD, Majaps To Bring Holiday Cheer

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NEW YORK – Two of the country’s largest CE and appliance chains, Best Buy and hhgregg, are pinning their hopes for Holiday 2014 on just a handful of product categories.

In separate conference calls following their quarterly earnings reports, the retailers’ top brass cited advanced TVs, major appliances and gaming as key fourth-quarter drivers.

In the interim, Best Buy foresees continued CE softness for itself and the industry in the second and third quarters as consumers wait out the next big product launch – ostensibly iPhone 6 – although both companies see longer-term opportunities in wearables and home automation.

Asked to share his best bets for the near term, Best Buy president/CEO Hubert Joly said, “I would list probably a small handful of them.”

Topping the short list is Ultra HD. “From the customer standpoint it’s materially different,” he said, and will be supported in-store by hundreds of Samsung and Sony home-theater shops.

Dennis May, president/CEO of hhgregg, was similarly high on TV. “We have been very muted on consumer electronics, specifically the video business, for the last couple of years,” he told analysts. “But we do see an improving innovation cycle that’s coming at us right now. … We’re seeing growth in 60-inch and larger screen sizes — you have 4K technology, curved-screen technology and OLED. So it allows you to really take advantage of that video wall and bring it to life with some new technology.”

May said hhgregg will offer an “expansive selection” of Ultra HD models in an effort to stabilize CE sales, although he still anticipates negative video comps for the current fiscal year.

Both executives were also long on majaps, with Joly citing the housing recovery and the expansion of Best Buy’s Pacific Home & Kitchen premium appliance departments as twin engines of growth.

Similarly, May forecast continued industry expansion and market share gains for hhgregg. The latter, he said, is being fueled by a focus on majaps in its branding and advertising; offering complete kitchen solutions and differentiated product assortments based on geography and demographics; and plans to enhance its special order capabilities and more than double its five Fine Lines premium boutiques.

Also holding holiday promise is gaming, which still enjoys the halo of last year’s Xbox One and Play- Station 4 launches. Noted Joly, “As the install base grows, and as game developers and publishers will have had more time to bring new products to market, we will see the cycle gaining momentum.”

Until then, warned Best Buy chief financial officer Sharon McCollam, expect continued declines throughout CE and mobile “as consumers eagerly await highly anticipated new product launches.”

“We have to address this consumer electronics softness, which we believe is being greatly driven by a lack of innovation,” she said on the earnings call. “We need some new excitement in those categories.”

But help is just around the corner, suggested Joly and May, in the guise of wearables and whole-home control. “The industry as a whole is focused on new categories around health and fitness and the connected home,” Joly said. “There is a ton of innovation going on there; it just may take longer to materialize and produce a big impact. But looking at the next two or three years, these are areas of intense focus.”

For its part, hhgregg “will continue to utilize our computing category to not only drive traffic to our stores, but to showcase new technologies in computers, tablets, and introduce wearable technology,” May said. “We think it’s going to be an exciting new business that we’re investing in.”

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