Industry Roundup

Two-channel lives: Once the bread-and-butter of electronics retailers everywhere, the two-channel receiver has become all but extinct. Rotel America is making a valiant effort to save this endangered species with its new RX-1052, a remote-controllable 100Wpc unit claimed to offer "audiophile-grade sonics"—it includes a phono preamp, and a "massively overbuilt" power supply—with versatile four-area multiroom/multizone capabilities and basic video-switching features. Whole-house system integration is made easier via three IR links and 12V trigger outputs. An RS-232 interface connects to touchscreens and other media controllers, and provides an upgrade path for the unit's firmware. Available with either matte black or black-and-silver front panels, the RX-1052 goes on sale in October at a suggested price of $899.

Circuit City cuts losses: The nation's second-largest electronics retailer is still in a downward spiral, but has slowed its descent. Richmond, VA–based Circuit City reported a net loss of $11.9 million for its second fiscal quarter, ended August 31, a huge improvement over the $129.6 million net loss reported in the same period a year earlier. The improvement was attributed in part to improved sales of extended warranties and to an upsurge in the company's international business, along with a reduction in overall expenses and the shuttering of 19 stores. Second-quarter sales rose 8.8% to $2.3 billion, compared to $2.2 billion in same period the previous year, with comparable store sales up 2.9%.

For the first six months of the current fiscal year, Circuit City has cut net losses by almost 90%, reporting $17.9 million for this year compared to $176.3 million for the first half of last year. The company plans to open 30 new stores within the fiscal year, and to relocate the same number of existing stores.

Best Buy surges: For its second fiscal quarter, ended August 28, top electronics retailer Best Buy posted a 12% rise in revenue, reaching $5.5 billion. The company's Pacific Northwest chain Magnolia Audio Video reported a 6.9% increase in sales, with Best Buy–branded stores up 4.4%. The Minnesota-based chain opened 75 new stores during the past year.

Ultimate still lagging: Denver's Ultimate Electronics chain continues to seek solid footing, with sales for the second quarter, ended July 31, down 1% to $152.9 million, compared with last year's $154.2 million. Sales results for comparable stores in the second quarter were down 9%. The company posted a net loss of $16.2 million in the second period, a massive increase over the $1.8 million net loss reported for the same period a year earlier.

Growing losses were attributed to increased expenses, including ongoing costs from a disastrously glitchy overhaul of Ultimate's information systems. Sales for the first six months were off 2% to $305.3 million, from $309.9 million in the same period in 2003, with comparable-store results down a full 10%, for a net loss of $24.6 million compared to $3.2 million last year. Even so, Ultimate's CEO, Dave Workman, remains positive, projecting that his company could "achieve break-even results by the end of the year.€� A bright spot in Ultimate's portfolio is its aggressive custom installation partnership with homebuilders. Many builders are including home entertainment systems, media rooms, and dedicated home theaters in new projects.

CEA increases growth rate projections: Despite obstacles facing individual retailers, things are looking decidedly rosy for the electronics industry overall. On September 7, the Consumer Electronics Association (CEA) revised its projections for 2004, estimating that the industry would hit an all-time record of $108 billion in sales for 2004. That achievement would exceed the $100 billion reached in 2003 and mark a "fourfold increase over the 2002 growth rate," according to a trade group press release.

"Across the board, consumer electronics sales exceeded projections as consumers saw the right prices at the right time," said CEA president and CEO Gary Shapiro. "Even as we celebrate record sales in 2003, we expect that 2004 will be an even bigger year as our growth rate continues to climb." Demand for computers, digital televisions, mobile phones, and other digital gear is behind the swelling wave that forced CEA analysts to bump this year's forecast from $96.3 billion to $108 billion. MP3 players are also a significant market driver, according to the CEA's Sean Wargo.

China on the rise: Closing in on the US electronics industry, China's surging CE segment may reach $94 billon by 2007, according to a report issued in early September by Hong Kong–based Global Sources. Researchers estimate an annual 20% growth rate for Chinese electronics makers, with total sales projected to hit $49.6 billion this year, or almost half that of US competitors. Chinese companies are quickly moving toward more upscale products, including flat-panel televisions, home-theater products, portable music players with miniature hard-disk drives, and high-performance automotive sound systems, the report noted.

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