In Depth
Rising Tide Lifts HDTV Sales at Best Buy, Circuit City
For Best Buy’s most recent quarter, sales of flat-panel televisions were a bright spot. For Circuit City, it was the bright spot.
The two largest U.S. electronics retailers, which reported fiscal-first-quarter earnings this week, both said flat-screen TV sales increased for the quarter ended May 30 on more demand for digital television sets in advance of the U.S. switchover to digital broadcasts next February.
For Best Buy, the largest U.S. electronics retailer, TV sales helped boost overall revenue 13% from a year earlier to $8.99 billion, beating the $8.57 billion average analyst estimate in a Thomson Financial survey.
Circuit City also had more HDTV demand, reporting that same-store sales for flat-panel TVs increased almost 10%.
The boost in television revenue reflected the trend of U.S. consumers buying new TVs to take advantage of more high-definition programming while preparing for the digital switchover, which will render TV sets solely dependent on over-the-air analog broadcast signals dark. Worldwide TV sales for the calendar first quarter increased 8% from a year earlier to $24.8 billion as customers bought more liquid-crystal display televisions, NPD Group unit DisplaySearch said earlier this month.
The increase in TV sales also prevented the companies from suffering further earnings declines.
Best Buy profit fell 6.8% as sales of lower-margin video-game consoles jumped on demand for game titles such as the record-setting “Grand Theft Auto IV.”
Circuit City’s results were far bleaker, with its loss tripling as same-store sales dropped of 11% on lower foot traffic.
With Circuit City continuing to implement a turnaround strategy while Best Buy’s margins may be further narrowed by the video-game boom, both companies expect HDTV sales to be a bright spot for the rest of the fiscal year. Best Buy will further prime TV sales with financing promotions, while at least one analyst expected pricing to remain steady.
Meanwhile, John Kelly, a senior VP at Circuit City, said on a conference call with analysts this week that he was “bullish” that flat-panel TV suppliers would match demand triggered by the Summer Olympics and holiday season later in the year.
“We do not expect to see massive price declines and gross margin erosion in flat-panel TVs similar to Q3 and Q4 of fiscal 2007,” Piper Jaffray analyst Mitchell Kaiser wrote in a note to clients this week. “Our supplier checks indicate continued tight supply of TV panels, and we believe retailers such as Best Buy are now buying TV product more prudently compared to two years ago, which should limit markdowns.”
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