Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now


TV Pricing Pinches Chain Store Profits


CE price erosion, particularly in TVs,
proved a drag on sales and earnings for national retail
chains in the fourth quarter.

The trend, compounded by severe winter weather,
continued in February, with sales at CE and appliance
stores falling 4.1 percent, according to a Spending-
Pulse report by MasterCard Advisors.

No. 1 retailer


said CE price compression
was the main culprit behind a nearly 2 percent decline
in same-store sales during its fiscal fourth quarter, and
is looking to tablets to help boost category revenue.

Comp sales declined 1.8 percent at the company’s
U.S. flagship stores for the three months, ended Jan. 31, while net sales slipped 0.5 percent to
$71.1 billion. Total company sales rose
2.5 percent to $115.6 billion for the quarter,
while earnings increased 4.3 percent
to $5 billion.

Despite price pressure, the discount
chain increased its TV unit volume and
gained market share during the period,
said Bill Simon, president/CEO of
Walmart U.S., while sales of prepaid wireless
products and services were “very
strong.” Simon said average CE selling
prices will continue to fall, particularly
in TV, gaming and
hardware, although
sales declines in
those categories are
expected to begin
abating through the
second and third
quarters. He added
that Walmart will increase
its focus on
iPads and other tablets,
which offer greater growth opportunities
and can help mitigate some of the
pricing pressure on CE.

Meanwhile, lower CE sales and slimmer
margins led

Sears Holdings’

fourth-quarter earnings down 13 percent
to $374 million. Results were also pressured
by store closing, severance and
pension plan costs, the company said.
Net sales slipped 0.8 percent to $13.1
billion for the three months, ended Jan.
29, which reflected a 1.2 percent decrease
in comp-store sales and 34 fewer
Sears and Kmart stores year over year.

At Sears, net sales declined nearly 3
percent to $6.7 billion while comps fell
4.5 percent. More than half of the comp
decrease was in consumer electronics,
the company said. Net sales at Kmart
declined 2 percent to $4.9 billion while
comps increased 2.5 percent, driven by
gains across most product categories.

In an open letter to shareholders,
chairman Edward Lampert called Sears’
results “completely unacceptable,” and
said steep price declines in CE, particularly
TVs, must be offset “by adding new
innovative products and bundling them
with services and solutions that meet
customers’ evolving needs.” The company’s
performance in appliances was
similarly unacceptable, he said, given
Sears’ market share dominance and
broader brand selection. But the macroeconomic
challenges facing the majap
industry were compounded by “our own
missteps,” including delays in transitioning
to its newly redesigned Kenmore line.

In contrast,


overcame acknowledged
challenges within its CE departments
to post a 10.5 percent increase
in fourth-quarter earnings to $1 billion
on soaring credit card profits and strong
retail operating margins. Net sales rose
2.8 percent to $20.3 billion for the three
months, ended Jan. 29, and comp-store
sales increased 2.4 percent.

February sales rose 2.4 percent to
$4.8 billion and comps edged up 1.8
percent, weighed down by a weak showing
from CE and movies.

In an earnings call, merchandising executive
VP Kathee Tesija said Target’s
CE, entertainment and home product
businesses are “more difficult” than
other merchandise sectors. However,
CE departments will be boosted by the
addition of 600 RadioShack-operated
mobile kiosks by June, for a total of 1,450
installations, and by this month’s launch
of Nintendo’s 3DS handheld gaming
system. Target is
“over-indexed with
Nintendo” as a familyfocused
retailer, she
noted, and the chain’s
5 percent cashback
program, through its
private-label credit
card, will provide a
price advantage with
the device’s controlled
$249 retail. Despite challenges
within certain CE categories, the department
remains “a very productive part of
the store,” and Target has no plans to
significantly reduce its packaged media
assortment, Tesija said.

Among warehouse clubs, channel


reported a 16.4 percent
rise in fourth-quarter profits, to $348
million. Net sales for the three months,
ended Feb. 13, increased 11 percent to
$20.5 billion, and U.S. same-store sales
rose 3 percent excluding gasoline.

For the full month of February, net
sales rose 14 percent to $6.4 billion and
U.S. same-store sales climbed 4 percent
excluding gasoline. CE posted negative
February comps due to falling prices
and unit sales of computers and audio
equipment. TV prices also declined, but
were offset by a 9 percent spike in unit
volume that delivered flat dollar sales for
the month.


Sam’s Club

division posted
a 2.5 percent gain in fourth-quarter
net sales to $11.9 billion and a 2.7 percent
hike in comp sales, both excluding
gasoline, for the three months ending
Jan. 31. Sam’s Club president/CEO
Brian Cornell said that despite continued
TV price erosion, the division was
“very pleased” with its CE and IT sales
relative to the industry, and grew market
share over the fiscal year. “Members responded
well to our strong brand offering
including LG, and the Apple iPhone
and iPad,” he said. “We continue to experience
price pressure in electronics,
especially in televisions, but had positive
unit sales growth of TVs for the quarter.”



, store-closure costs and other
charges sent fourth-quarter profits
plummeting 81 percent to $10.2 million.
Excluding the $41.1 million post-tax expense
for closures, restructuring activities
and asset impairment charges, earnings
declined 5.9 percent for the three months, ended Jan. 29. Net sales rose
7.4 percent to $2.9 billion year over year,
and same-store sales edged up 1.7 percent
for the period, excluding revenue
from gasoline. Video gaming was among
BJ’s strongest-performing categories in
the fourth-quarter, while TVs and prerecorded
video were among its weakest.

February net sales increased 9.3 percent
to $814.1 million, and same-store
sales rose 3.1 percent excluding gasoline.
TVs and prerecorded video continued
to underperform last month, as did
computer hardware and software. In addition,
comps were negatively impacted
1 percent to 1.5 percent by severe winter
weather, BJ’s said.



said fourthquarter
profits fell 25 percent to $57
million for the three months, ended Dec.
31, on weakness in its T-Mobile business,
a higher mix of lower-margin wireless
handsets, and seasonal markdowns
and product transitions in non-wireless
categories. Net sales rose 3.8 percent
to $1.4 billion, and comp sales at company-
owned stores and kiosks rose 1.3
percent, led by the rollout of wireless
departments for Target, and higher postpaid
sales of smartphones and prepaid
sales of handsets, laptops and accessories.



, fourth-quarter profits rose
17 percent to $275 million and net sales
were essentially flat at $6.4 billion for the
three months, ended Jan. 29. Retail sales
in North America were flat at $2.6 billion
while same-store sales slipped 2 percent
due to winter storms and softness
in computers and peripherals. Staples
chairman/CEO Ron Sargent said sales
recovered in the first quarter of 2011 and
described business as “healthy.”

Within the home-improvement channel,
operational upgrades and the recovering
economy sent fourth-quarter profits soaring
for leaders Lowe’s and

Home Depot

The latter’s fourth-quarter earnings
skyrocketed 72 percent to $587 million
on sales of $15.1 billion, a 3.8 percent increase
year-over-year. Comp-store sales
rose 4.8 percent in the U.S. for the three
months ended Jan. 30, with about a quarter
of the increase attributable to major
appliances, the company said.


reported a 39-percent spike in
fourth-quarter earnings, to $285 million,
while net sales rose 3.1 percent to $10.5
billion. Comp sales for the three months
ended Jan. 28 edged up 1.1 percent in
North America.

On the e-commerce front, February
storms may have helped online sales,
which rose 13 percent last month, according
to MasterCard Advisors’ SpendingPulse
report. Online sales of CE
increased 5.4 percent in February, the
sixth consecutive month of growth.