Holiday 2015 Not All It Was Cracked Up To Be For CE Retailers

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“Life’s but a walking shadow, a poor player that struts and frets his hour upon the stage and then is heard no more. It is a tale told by an idiot, full of sound and fury, signifying nothing.”
— Macbeth

Not to cheapen Shakespeare, but his Scottish king’s dour perspective on life could readily double as an assessment of the CE selling season just past.

Despite the month-long slings and arrows of outrageous Black Friday promotions — or perhaps because of them — tech retailers reported just a fair to middling holiday cycle after all the Christmas receipts were counted.

Tom Hickman, executive VP, electronics/distribution for the Nationwide Marketing Group, spoke for thousands of independent dealers when he reported results that were “right smack dab in the middle. It wasn’t great, but it wasn’t bad by any means. We are probably going to end up about flat from last year, and we were looking for a bigger number.”

Successes for Nationwide members included OLED and SUHD TV and distributed audio, although those categories were offset by inventory constraints, falling ASPs [average selling prices], an elongated holiday season, and the biggest shift yet to online and mobile shopping, he told attendees this month at TWICE’s annual Executive Retail Roundtable at CES.

But according to fellow Roundtabler Stephen Baker, industry analysis VP at The NPD Group, flat was the new up this holiday, and Nationwide actually outperformed the greater CE industry. Indeed, tech sales excluding mobile for the five holiday weeks (Thanksgiving Week through December) were down some 5.7 percent, to just under $15 billion, and were off nearly 12 percent from the six-year high of $17 billion in 2011.

Matthew Shay, president/CEO of the National Retail Federation (NRF), an industry trade group, acknowledged the difficult retail environment. “Make no mistake about it, this was a tough holiday season for the [retail] industry. Weather, inventory challenges, advances in consumer technology and the deep discounts that started earlier in the season and that have carried into January presented stiff headwinds as retailers competed with one another and their own bottom line.”

Best Buy, like Nationwide, also had a flattish season, albeit owing to “significant declines” in mobile phones, tablets and digital imaging, and its shares fell as much as 12 percent with the announcement of its humdrum holiday.

Domestic revenue slipped 0.8 percent to $10.1 billion for the nine weeks ended Jan. 2, compared with a 4 percent increase the prior year, and comp store sales declined 1.4 percent, excluding a 0.2 percent benefit from mobile carriers’ new phone leasing plans and the loss of revenue from closed stores. The November/December numbers were also impacted by an ongoing decline in Geek Squad revenue, reflecting reduced pricing for services, declining warranty attach rates, and fewer and more minor product repairs.

Best Buy’s mobile business may have been hurt by a combination of smartphone saturation, a dearth of “must-have” models (iPhone 6s was an off-year update of the 6), and by a plethora of affordable, fully featured unlocked phones available direct from vendors.

But apart from handsets, domestic revenue actually rose on strength in health and wearables, home theater, and major appliances, chairman/CEO Hubert Joly said. What’s more, the gains far exceeded the greater-than-expected industrywide declines reported by NPD, suggesting market share gains for Best Buy.

Online remained another bright spot, with dot-com comps up 12.6 percent on higher conversion rates, albeit down from last year’s 13.4 percent gain.

Still, Best Buy fared better than the next-largest CE and appliance specialty chain, hhgregg, which operates 227 stores across 20 states.

According to Dennis May, president/CEO of the Indianapolis-based retailer, net and comp sales fell 11 percent during the company’s fiscal third quarter, ended Dec. 31, due to “the competitive pressures in the market.

Those pressures included a month-long Black Friday promotional period that seemingly began just moments after Halloween, and aggressive discounting by Samsung and other vendors and retailers looking to fortify their 4K and appliance market share.

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