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Stagnant consumer electronics sales sting Sears, Best Buy

By Associated Press

LAST UPDATED: 02:12 a.m. HST, May 23, 2014

NEW YORK » Is America's love affair with gadgets fading?

Best Buy and Sears on Thursday both blamed their weak quarterly results on the fact that shoppers aren't shelling out for consumer electronics.

Already squeezed by tough competition from online retailers like Amazon.com and discount stores like Walmart and Target, retailers like Best Buy and Sears have been cutting costs and revamping merchandise and store formats to attract customers.

But the consumer electronics segment remains stagnant. Sales haven't budged from about $145 billion in three of the past four years, according to research firm NPD Group.

Part of the problem is consumers are holding out for smartphone and tablet computer launches this fall. Apple and Samsung are expected to debut new products, and an Amazon smartphone is rumored to be in the pipeline. Meanwhile, experts say things like the ultrahigh-definition 4K TVs have not been compelling enough for TV owners to upgrade.

"The category was weak. There's no ‘wow'-type product to get people in stores or even online," said Brian Sozzi of Belus Capital Advisors.

One exception: trendy products like wearable fitness devices. Sozzi said they're "in demand, but not as in demand as you think."

The result is weak sales. Best Buy said revenue fell 3 percent to $9.04 billion during the quarter that ended May 4. And revenue in stores open at least 14 months, a key retail metric, declined 1.9 percent. The company expects the metric to decline in the next two quarters as well.

"As we look forward to the second and third quarters, we are expecting to see ongoing industrywide sales decline in many of the consumer electronics categories in which we compete," said Best Buy CFO Sharon McCollam. "We are also expecting ongoing softness in the mobile phone category as consumers eagerly await highly anticipated new product launches."

Sears, meanwhile, said TV sales were especially weak during the quarter, particularly at its Kmart stores. Revenue in stores open at least one year edged up 0.2 percent at Sears stores but fell 2.2 percent at Kmart, and weak consumer electronic sales contributed to more than 1 percentage point of that drop.

"The biggest negative contributor to sales has been from our consumer electronics business at both Sears and Kmart," said billionaire hedge fund investor Eddie Lampert, who is Sears' chairman and CEO, in a prerecorded call. "To address this decline, we are moving this business from a focus on selling televisions to a company empowering ‘connected living,' which will bring together our capabilities in fitness equipment, electronics, appliances, home services and auto services."

Stephen Baker, an NPD consumer technology analyst, says unless a new game-changing product like the iPad is introduced, consumer electronics sales are unlikely to budge much.

"It's a pretty mature category, and for every great opportunity like 4k TVs or touch notebooks, there are continued declines in cameras, small-screen TVs or desktop computers," he said. "Right now there isn't anything that can provide $5, $6 or $7 billion in incremental sales for the industry, and when you're a $145 billion industry, that's what you need to move the battleship."

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awahana wrote:
The NPD Group, much like Nielson ratings for TV viewing, is outmoded at best.
Sales are booming, just not at the retailers that NPD surveys.
Many now get their gadget fixes from Amazon, Costco, and direct from the manufacturers web sites.
Free shipping and NO sales taxes drive a lot of this.
Only old folks still go to the store...thus the exit of stores like JCP, Sears, Borders, etc.
on May 23,2014 | 06:10AM
HD36 wrote:
HP laying off 16,000 workers because of lower earnings.
on May 23,2014 | 07:01AM
HD36 wrote:
For a total of 50,000 in a year.
on May 23,2014 | 07:21PM
mrrdgreen wrote:
Sears & Kmart...relics of a past business model. I seriously think Lampert bought this for the real estate.
on May 23,2014 | 07:08AM
HD36 wrote:
I agree because the private debt bubble was exploding at that time.
on May 23,2014 | 09:13AM
HD36 wrote:
Consumer discretionary spending is plummeting as the real rate of inflation rises, real income falls, and private debt reaches upper limits. The student loan debt bubble is already over $1.2 trillion.
on May 23,2014 | 09:10AM
KaneoheSJ wrote:
Best Buy calls themselves "The Ultimate Showroom" for a reason. Many like myself shop there to get my hands on the new products available. I may not necessarily purchase them from Best Buy but most times I will shell out the money to avoid the wait from shopping on online catalogs like Amazon. Yes, some companies do not charge for shipping but Amazon does unless you shell out a lot of money. Yes, many online retailers do not charge a sales tax but there are perils to shopping online. One big reason I opt to shop at the store is that if you have to return and item, you have to oftentimes have to shell out for shipping. And that means insuring the item which can add much to the ultimate cost of the item. Then there are the shady sellers on Amazon who list items in the wrong place or send you "new" items that are actually opened or worse, damaged. I purchased a bluetooth from a seller on Amazon that sold me a non-working item. Of course, you can seek a refund but there's red tape to be trudge through in order to get your money back. Then there are the crooked sellers that claim that they sent you the item but you have no proof that it was never shipped. It is sometimes easier to just go to Best Buy and get what you need and done. I think that Best Buy has too many workers that "appear" to be very busy when they are just taking a "break". I can't imagine how Best Buy makes any money from having so many workers. Of course, it's great for the economy to employ a lot of workers. But bad for the business. What I do like about Best Buy is that they do take back items with no hassle. Sometimes the person you buy a gift for received the very same thing from another. That does happen. What also draws me in to Best Buy are the door buster sales. But I don't see anything compelling enough for me to drive all the way there anymore. The sales are now fairly conservative. Nothing door busting to draw us consumers. But then the economy makes it more difficult for stores like Best Buy to offer those.
on May 23,2014 | 11:09AM
HD36 wrote:
I've bought a lot of electronics and parts directly from the source in China for a fraction of the cost on E-Bay. I wasn't sure if it would be shady or junk but the price was so cheap I figured I'd take a chance. Electronics aren't made in America anyway. To my surprise the quality was excellent.
on May 23,2014 | 04:57PM
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