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Nationwide Realistic, Ready For 2ND Half

Lake Buena Vista, Fla. – Nationwide Marketing Group’s leadership is
realistic about the challenges it has faced, and will continue to deal with and
be optimistic about its performance when compared with the industry for the

That was the message from top management during a press
conference at the group’s annual summer meeting this morning, which is being
held at the Walt Disney World Swan & Dolphin Resort through Wednesday.

Nationwide still estimates its annual sales at $12 billion via around
3,000 members and 8,000 storefronts. While it usually adds 150 to 200 members
each year, it actually lost members during the early spring due to the economy,
only to begin to gain 40 to 50 members as of now, said Robert Weisner,
executive VP.

The loss was due to the economy, but “to gain that many members
in a recession is a testament to the programs and member support we have in
place,” he said.

As for its mix of products, Weisner said it has changed slightly
this year. Major appliances are approximately $6.5 billion, $3 billion in furniture,
$2 billion in consumer electronics, with the balance in the “other” category of
services – warranties, outdoor and furnishings.

“The furniture business is down some for our members,”
Weisner said, “and in [major] appliances some retailers are flat [compared with
last year], others are down 10 to 15 percent.” However in consumer electronics,
“a lot of our members are up in single digits” for the year.

He qualified Nationwide’s CE sales by saying it is now “35
percent of our sales,” up from around the usual one-third of its mix.

While Nationwide’s CE sales are up, the concern remains
lower prices in flat-panel TVs. Weisner said, “We never understand why
suppliers cut each other’s margins. Why does Best Buy take profit out of [TV] to chase share? We chase profits.”

He noted Nationwide’s membership relies on sales assisted
floors, “We have top-tier brands, and we will win that battle. We add surround
sound and accessories and sell an entire package.”

Weisner also praised those TV suppliers that have kept flat
panels with top features from being sold at national chains so far this year.

Mike Decker, electronics marketing senior VP, said
Nationwide has “strategic partnerships” with Samsung, Sharp and Toshiba to be
price competitive with national accounts. “Compared to last year wholesale
pricing [for flat-panel TVs] has dropped 6-7 percent. Our suppliers have given
us the backing to compete” with profitability in the category.

Weisner noted that as a group Nationwide “needs a blended
margin, but we like to work in the 25 to 28 [percent] margin area.” And, he
said, for “starter pieces” in flat-panel TVs, margins can be as low as 8
percent to 10 percent.

The advantage Nationwide claimed in CE is its Specialty
Electronics Nationwide division, which centers on custom installation, and, in
Weisner’s words, “can do what Best Buy, Costco and national chains can’t” by
providing add-on sales, service and installation.

While major appliances have been tough, Adam Thomas, appliance
marketing senior VP, said Nationwide carries “a better mix of products” than
national competitors, so “we can take share in the business.”

He said Nationwide members have the “best closers in the
business,” at a 70 percent to 72 percent rate, “which means we are doing better
than the industry.”

When asked if majaps have become a replacement business,
Thomas said, “Yes, but it is still a fashion business. Consumers still want
good stuff. Manufacturers have taken better products and brought pricing down,”
which has drawn in consumers.

Nationwide dealers can’t all duplicate “10 to 20 percent
off” deals like national chains, “but many have created their own promotions
around Energy Star, ‘cash for clunkers’ campaigns and have worked with us. You
just can’t put out newspaper ads anymore and say, ‘Please buy us.’ We are doing
more on the Web and more with direct marketing to get potential customers to
our stores,” Thomas said.

The major appliance industry is off 15 percent now, Thomas
said, “and will end up 11 to 12 percent off for the year,” but that at
Nationwide in the fourth quarter, “We will be 3 to 5 percent better.”

The group has “lots of promotions in place … it won’t be
easy and we’ll take share.”

Nationwide’s prime majaps target is Sears. “It’s not going
out of business. Sears, Home Depot and Lowe’s are all over retailed,” but with
changes in Sears’s management, changes with the Kenmore brand and its new
free-standing stores, “we can’t take our eye off of them,” he said.

Les Kirk, finance and operations executive VP, said one of
its members, Rosa’s of Buffalo, N.Y., which has been hit hard with
unemployment, started a lease-to-own program this weekend to attract consumers.

“Other members are figuring out ways to get financing for
consumers,” Kirk said, and that other pilot programs are in the works.

As for the fourth quarter, Weisner warned that “no product
category will go untouched,” in terms of lower prices or lower sales around
Black Friday. He said, “TV sales rebounded fastest, because if you can’t buy a
home or go on vacation, you need some form of entertainment for the home, and
that’s it.”

In appliances, Thomas said this year’s Black Friday will be
“just as wild as last year.”

Decker added, in CE, “Blu-ray will be aggressively priced at
$99; there will be deals on digital cameras and home theater,” and that
Nationwide members are prepared as well as they can be since “we know what the
Black Friday deals will be” in CE.