News

Electronics retailers typically depend on the winter holiday shopping season to boost their year-end bottom lines. The hoped-for buying surge apparently hasn't happened in 2002, since Best Buy and Circuit City are both projecting slow sales.

North America's #1 and #2 electronics chains, respectively, both companies have seen profits hampered by competition from discounters. A December 18 report from Bloomberg News noted that both companies have slashed prices on upscale products and have begun offering free financing to compete with discounters such as Target and Wal-Mart Stores, Inc., which have expanded their electronics departments from the entry-level offerings they have traditionally carried. This past summer, Wal-Mart made an experimental foray into digital television and home-theater products which proved so successful it will be expanded to most of the company's locations.

Best Buy has been hamstrung by slow sales at Sam Goody, its mall-based music stores, and Circuit City has suffered from declining sales of satellite-television equipment. "Sales at Best Buy stores open at least 14 months fell 0.4% in the third quarter ended November 30, led by a 12% decline at Sam Goody and other mall-based stores," Bloomberg reported. Best Buy's picture wasn't totally gloomy, however, with third-quarter sales up 16% to $5.5 billion, thanks to new store openings, contributing to a net income of $85 million. The company's fourth-quarter forecast specifies an $80 million operating loss for its Musicland stores, which include Sam Goody stores and the Suncoast video chain.

Circuit City posted a net loss of $17.8 million for the third quarter, compared with a profit of $27.7 million for the same period a year earlier. Circuit City stores open at least a year reported a third-quarter average sales increase of 6% from the same period in 2001. Overall sales increased 7% to $2.42 billion, attributed to new store openings.

Slow growth in the retail sector has affected manufacturers. On December 20, Electronic Engineering Times reported that Japanese electronics makers are facing the second year of declining sales. The Japan Electronics and Information Technology Industries Association (JEITA) stated that last year's 17.5% decline in total production will be followed by an 8.5% decline this year. JEITA's total production value of $160 billion is "the lowest annual figure since 1990," according to Yoshiko Hara.

The largest declines are in computers, office equipment, and scientific instruments, which are off 84% from last year. Overall sales of electronic components will be off this year by as much as 8.5%, but the continuing popularity of automotive GPS gear, digital cameras, and television equipment will sustain the association's consumer electronics divisions, according to JEITA spokesmen.