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Power Retailers Laud ’05 Sales, CE’s Future

Four of the industry’s most influential merchants lauded the successful holiday season, decried the now-inevitable high-definition media format war and forecast a sizzling future for CE during a Retail Power Panel held earlier this month during International CES.

The frank and far-reaching discussion, moderated by Consumer Electronics Association president/CEO Gary Shapiro, featured Brad Anderson, vice chairman/CEO of Best Buy; Dave Edmondson, president/CEO of RadioShack; Alan McCollough, outgoing chairman/CEO of Circuit City; and Larry Mondry, CEO of CompUSA.

Led by blistering sales of flat-panel TVs, satellite radio receivers and, as Edmondson noted, “anything portable and digital,” the national chains enjoyed a brisk December after an iffy start to the holiday selling season. “October was the worst month of the year,” said McCollough, which he attributed to the psychic fallout from the Gulf Coast hurricanes and sky-high gasoline prices. But Circuit City went on to enjoy a record December and a record third quarter, he continued, as consumers made it a “flat-panel holiday.”

Edmondson said the industry’s strong finish was a “testament to the resiliency of the consumer electronics business.” RadioShack, which grappled with a major wireless transition during the fourth quarter, nevertheless hit big with its private-label toys and Sirius-configured radios. “As we told Sirius, radio is our first name,” he said.

For CompUSA, “anything that said iPod or accessory to iPod” flew off the shelves, Mondry recounted. Notebook computers were also big in both unit and dollar volume during a period that began with a “really spectacular Black Friday week” and ended with a “thrilling Christmas.”

Best Buy, which took its lumps from Wall Street for “spending too much in the third quarter,” came roaring back at the beginning of the fourth. “It was an exciting start,” Anderson said, although a booming business in gift cards pushed back the company’s pay day. “It’s the closest thing to a heart-attack item,” he noted, as people put off their purchases until the last possible moment, followed by a stampede of week-after redemptions.

“The week after Christmas is becoming what used to be the week before Christmas,” Anderson said.

More troubling for the panelists is the now inevitable prospect of dueling high-definition optical disc formats, which Anderson described as a “nightmarish scenario.”

“The industry does massive harm to itself,” Anderson exclaimed. “We pushed hard for the industry to choose one format but it didn’t happen, so now the consumer will have to.”

Circuit City’s McCollough concurred. “The consumer has an appetite for high-quality content, and it’s a shame that it will take longer than it had to.” While his chain will take an “agnostic” approach to the format wars — at least until the content providers help decide the outcome — his message to the industry remains “Let’s get a high-quality signal to the customers.”

Looking ahead, the chief executives predicted a rosy future for CE as the industry soars into the second half of the decade. Holding particular promise is the long-awaited transition to digital over-the-air broadcasts, which is expected to fuel “enormous growth of higher priced product,” Anderson said. “I’ve been in this business for 33 years and this is the most phenomenal opportunity for the industry. It’s like cable TV and color TV being launched at the same time.”

“The magnitude of this is great,” added McCollough, who was thanked by Shapiro for his tireless efforts on Capital Hill to push for the digital transition, which is set to take place between 2007 and 2009. “My hope now is that broadcasters will broadcast in a wide aspect ratio, which would be a strong incentive for consumers to buy multiple TVs.”

(Coverage of the CES Retail Power Panel will continue in the next issue.)