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Best Buy: Consumer May Splurge On New Techn In 2nd Half

MINNEAPOLIS — The spotty
traffic and stop-and-start spending
that beset Best Buy and the consumer
electronics industry during the spring
season could abate during the second
half as new products and technologies
arrive at retail, the company’s executives

In a conference call last week discussing
Best Buy’s modest first-quarter
results (see story, p. 10), CEO
Brian Dunn echoed reports from
dealers and buying groups describing
volatile traffic patterns that varied
from month to month and even
week to week.

While spending levels have rallied
from the lows of 2009, and unprecedented
demand for products like
HTC’s Evo 4G smartphone for Sprint
show a willingness to splurge, the expenditures
have been spotty.

“The consumer comes out to spend,
and spend well, but takes time out to
pause,” Dunn told analysts and investors.

Chief financial officer Jim Muehlbauer
similarly described “choppiness
and lower spending by consumers”
during the March to May period that
jibed with lower CE industry growth,
and reminded shareholders that the
first quarter has historically been a
poor barometer of second-half performance.

Indeed, new technologies l ike
IPTV and 3D TV, which are still being
rolled out by manufacturers, and
a host of forthcoming innovations in
gaming and computing, are expected
to unleash pent-up demand during the
back-to-school and holiday selling seasons,
the executives said.

Introductions in gaming will include
gesture-based motion control and 3D
firmware upgrades for PS3, while
computing will benefi t from a slew of
forthcoming tablet PCs that should
capitalize on the success of iPad.

“The consumer comes out when new
things spark their interest,” Dunn said,
citing Evo, Best Buy’s best-selling preorder
ever, and the June 24 launch of
iPhone 4, both of which support the
company’s “connected world” strategy.

Indeed, the newfound focus on
connected products and services will
manifest in stores later this month with the rollout of new “connectivity
centers,” and will also be promoted
within the PC and home theater
departments through the sale of air
cards, IP-based content delivery and
other broadband solutions.

Further spurring sales will be increased
marketing expenditures by manufacturers and Best Buy around
key product launches and “drive
times,” Dunn said. “As the year unfolds
you will [hear] our voice get very
loud and will see us more frequently
on TV.”

The chain is also hoping to rev up
traffic by implementing a game-exchange
program in all stores beginning
this summer designed to supplant
sagging sales within the CD and
DVD departments.

Elsewhere during the call, Americas
co-president Mike Vitelli said the advent
of LED, IPTV and 3D TV, and
the trend toward larger screen sizes,
has helped slow declines in the average
selling price of panels to their lowest
rate in eight quarters.

Responding to a question about
product shortages, Vitelli acknowledged,
“We get our unfair positive
share of inventory due to extensive collaborative
planning with vendors.”