The Dog Days Are Hot Time For CE Stores

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New York -- CE specialty retailers managed to sidestep the summer malaise affecting broad-line merchants and posted largely positive sales figures for the season.

Indeed, soaring gasoline prices, higher interest rates and unseasonable summer weather didn't stop consumers from stocking up on big-screen TVs and all manner of digital devices, dealers said.

Circuit City said net sales for its fiscal second quarter ended Aug. 31 rose 4 percent to $2.5 billion, constrained only by a plummeting appliance business. The chain, which announced its exit from the category last month, also blamed majaps for flat same-store sales. Excluding white goods, comp-store revenue rose 6 percent, the company said.

Also crimping Circuit City's comps was a first-quarter store remodeling effort in Florida, its first test of a majap-free format. Excluding stores in that market, same-store store sales rose 1 percent in the second quarter.

According to president/CEO Alan McCollough, comp-store sales for majaps fell 23 percent for the period. But buoying the overall business, he said, was the home office category, particularly digital imaging technology; video, especially DVD and big-screen TVs; digital wireless communications; and accessories.

Home office represented nearly a third of Circuit City's sales mix for the quarter, up to 31 percent from 28 percent during the year-ago period, while TVs and VCRs/camcorders remained flat at 17 percent and 12 percent of total volume, respectively. Major appliances, by contrast, fell to 14 percent of the mix from 18 percent last summer.

McCollough noted that sharp majap markdowns associated with its departure from the category will likely impact second-quarter earnings, which are expected to be 2 cents per share lower than the company's July estimates. He added that 54 stores have removed their appliance departments to date.

By contrast, RadioShack posted a 14 percent spike in same-store sales last month, while total sales soared 17 percent to $379.5 million on top of last year's 10 percent gain.

The August tally, which includes sales at company-owned and dealer/franchise stores, represents the chain's third consecutive double-digit month.

Chairman/president/CEO Len Roberts credited sales of back-to-school computers, A/V gear and wireless communication products for the hefty sales spurt, as well as RadioShack's repositioning as a destination for digital devices.

"Clearly, RadioShack is differentiating itself as a pure play in today's hot digital product cycle," said Roberts. "Our business is squarely focused on the latest digital electronic products, further distancing us from the vulnerability of economic cycles facing many retailers today."

PaineWebber retail analyst Aram Rubinson said the company's comp-store gain exceeded expectations of 10 percent, and that RadioShack has raised its general guidance for September comps from about 7 percent to double digit territory. "The company is hitting its stride," he noted in a client brief.

Year to date, total sales are up 14 percent to $2.7 billion while same-store sales climbed 11 percent. Looking ahead, RadioShack will begin to roll out its Microsoft ISP centers later this month, which Roberts said will provide a "seamless one-stop shopping retail experience, making sign-up and in-home installation easy and convenient."

Harvey Electronics, the New York area high-end A/V specialist, said high levels of advertising and promotion, plus continued customer interest in new digital technologies, propelled August sales 80.1 percent to $2.5 million and sent comp-store sales soaring 80.8 percent. President Franklin Karp said he was "delighted" with the record gains, which came during what is historically Harvey's slowest month.

Among full line stores, Sears said that "exceptionally strong sales" of appliances and electronics -- which lead its hardlines increases -- contributed to a 6.9 percent hike in August revenue to $2.22 billion, while same-store sales spiked 5.6 percent. For the trailing six months, sales rose 4.6 percent to $16.2 billion, while same-store sales gained 3.1 percent.

Kmart similarly cited CE as a "merchandise category showing particular strength," said newly installed chairman/CEO Chuck Conaway. The sector helped nudge August sales ahead 4.6 percent to $2.6 billion, while same-store sales, excluding the impact of closing 70 stores and related inventory liquidation, were flat.

By contrast, sales at discount rival Target grew 9.5 percent in August to $2.2 billion and comp-store sales increased 3.2 percent, while Wal-Mart's net grew 11.6 percent last month to $14.5 billion and comp-store sales rose 5.8 percent.

Among the warehouse clubs, sales at Wal-Mart subsidiary Sam's Club rose 8.1 percent in August to $2.0 billion as same-store net rose 5.1 percent. Costco reported a 12 percent sales hike to $2.2 billion and comp-store gains of 8 percent. And BJ's said "strong demand" for computers and air conditioners pushed its net ahead 17.8 percent to $353 million, while same-store sales rose 7.3 percent.

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