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What’s Hot, What’s Not: Best Buy Breaks It Down

Best Buy shed some light on where the sales action is within its aisles during a fiscal third-quarter conference call last month that covered the start of the holiday selling season.

Best Buy’s revenue mix for the period running through Thanksgiving Day weekend reflected continued growth in its CE products group, which represented 44 percent of third quarter revenue, up from 39 percent year-over-year. The CE products group recorded a 14 percent comp-store sales gain, compared with a year-ago increase of 5.8 percent.

Within the CE group, flat-panel TVs posted a triple-digit comp-store sales hike, as unit-volume growth and increased screen size more than offset the impact of average selling price declines. Total television comp-store sales grew in the high teens as flat-panel TV growth was partially offset by declines in CRT and projection units.

Elsewhere, MP3 products generated triple-digit comp-store sales gains as customers responded to an increased assortment of players and accessories, Best Buy said.

The major appliances product group, which represented 6 percent of total revenue — the same as last year — reported a comp-store sales gain of 7.3 percent, down from 8.4 percent during the year-ago quarter. This product group benefited from an expanded assortment, increased labor on the selling floor and increased sales of higher-ticket items such as custom orders.

The home office product category saw its share of third-quarter revenue drop from 34 percent in 2004 to 33 percent this year. The group registered slightly negative comp-store results in the current third quarter, compared with a 1.5 percent rise last year. A low double-digit comp-store sales increase for notebook computers was more than offset by comp-store sales declines from desktop computers, printers and phones. Best Buy said this group also benefited from comp-store sales gains in Geek Squad services and cellular phones.

Entertainment software, which accounted for 17 percent of third-quarter revenue, down from the prior year’s 21 percent, saw comp-store sales drop to a negative 12.2 percent from nearly a 1 percent gain last year. The chain noted strong consumer response to the launch of the Xbox 360 console, offset by sales softness in older platforms leading up to the product launch, resulting in a gaming comp-store sales decline in the low double digits.

New movie and music releases also registered low double-digit comp-store sales slides.

Executive VP/general merchandise manager Ron Boire said the slowdown in video gaming was not unexpected as the category transitions between old and new hardware platforms. “Sales and profits dive at the end of the old cycle,” he said, noting that there was insufficient availability of, and margins on, Xbox 360 to impact the category.

He added that “some refreshment” for gaming and prerecorded movies will be coming in this year in the guise of PlayStation 3 and high-definition DVD.