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

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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 said.

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.”


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