Mid-Year Reports: Electronics Makers, Retailers Thriving

The consumer-electronics industry is riding the wave of a still-booming economy, according to most mid-year reports. Although the generally rosy picture is marred by a few glitches, both equipment makers and retailers say that sales continue to soar.

Major manufacturers have posted some big gains. Matsushita's first-quarter operating profits are up 48% over the same period a year before, due to efforts to reduce costs. Sales for the Matsushita group of companies rose 1% overall, to $16.72 billion, divided almost equally between domestic (Japanese) sales and overseas sales. Matsushita's electronic-component sales rose 7% during the first quarter, to $3.77 billion. The Matsushita group includes heavy industrial enterprises as well as electronics; a company spokesman attributed much of the increase to "economic recovery in Southeast Asia and continued growth in North America and Europe."

Pioneer Corporation also did well, with a $25.8 million net profit in the April-June quarter, attributed to "brisk sales" of DVD players and plasma displays, including a "strong demand" for its digital television sets in the US. The company had recorded a net loss of ¥2.2 billion in the same period last year, but expects to post a net profit of ¥5.5 billion on sales of ¥300 billion for the first six months of its fiscal year, ending September.

Sony Corporation bucked the positive trend among major electronics companies with its posted loss of $841 million for the first quarter (ended June 30). The loss was due mostly to write-offs incurred from a string of poorly performing movies, including massive advertising costs. Sony electronics, however, followed the industry trend, with sales increasing 25% and operating income up by an incredible 702%. Sony reported increases in sales in all geographic regions. Hot tickets for the company include computers, digital still cameras, color TVs, DVD players, and home audio equipment. Sony's film unit continues to hamper the company's overall performance, and the film industry's new, stricter accounting methods will further depress the profit picture in the near future.

Mass-market retailers are enjoying one of their best seasons ever. RadioShack's earnings for the second quarter rose 22%, to $75.4 million, with total sales for the period ended June 30 up 15%, at $1 billion. Hot sellers for the ubiquitous retailer include computers, audio and video components and accessories, home satellite systems, and digital wireless. "July's 12% double-digit comparable store sales gain was the second double-digit month in a row and comes on top of last year's 17% gain," said RadioShack CEO Leonard Roberts in a company press release. "Digital products remained hot, with wireless communications, computers, and audio video products showing the strongest increases," he added. RadioShack's year-to-date total sales were $2335.2 million this year, compared to $2049.0 million last year.

Ultimate Electronics, a 33-store electronics chain in the western and upper-midwestern states, also had happy news. The company reported a 15% comparable store sales increase for the second quarter, ending July 31. Total sales for the quarter were $101,800,000, a 21% increase from sales of $83,960,000 for the same period in the previous year. Sales for the six-month period ending July 31 were $196,900,000, a 21% increase from sales of $162,363,000 for the same period in the previous year. "We are very pleased to report our sixth consecutive quarter of double-digit comparable-store sales growth of 15% on top of the 20% increase reported last year," said company president Dave Workman. "The company continues to benefit from strong sales in all new digital technology products, including digital televisions, digital camcorders, digital cameras, and DVD." Workman noted that DVD sales were up 62% over the previous year, accounting for 5% of Ultimate Electronics' total sales.

The year so far has been fabulous for video sales as a whole. The Consumer Electronics Association reports that direct-view color TV sales posted a respectable 8.9% increase (to 10.7 million units) for the half, including a 22% increase (to 2.46 million units) for the month of June. The figures are especially significant considering that summer is typically a slow season for consumer-electronics retailers. Specialty audio retailers are also doing well, especially those riding the home-theater boom.