Retailing: Up, Down, Sideways

The terrorist attack of September 11 will likely worsen an already dark period for American retailers. The Dow Jones Industrial Average declined by more than 14% in the week after the attack, the largest slide since the week of July 21, 1933. In the present circumstances, Americans are generally reticent to spend money, according to many reports, a situation that will affect manufacturers and retailers for months or years to come.

Financial reports from big electronics retailers, released prior to the attack, indicate that some were already mired in what many analysts are already calling "a recession." Richmond, VA–based Circuit City reported that sales for its second quarter, ended August 31, were down 9% from the same period the previous year; total sales were $2.89 billion compared to $3.18 billion in 2000. Circuit City blamed slowing demand for personal computers, and its recent departure from the major appliance business, for the lowered results. Computer and peripheral sales were off by 20–30% at the national chain, according to some analysts.

RadioShack has also seen a sharp decline in demand for computers, with PC sales off by 50% in August. Comparable-store sales, including company-owned and franchise stores, slipped 0.2% for the month, from $379.8 million in July to $379.1 million. Sales totals for company-owned stores in August were off by 2%, according to figures released in mid-September. Second quarter totals for the Fort Worth, TX–based retailer were down approximately 19% compared to the same period last year, from a total of $2.51 billion to $2.04 billion this year.

Not all was gloomy, however, at least prior to September 11. Best Buy reported an upswing, with sales for its second quarter, ended September 1, up a phenomenal 31%, with total sales at $4.17 billion. The huge increase is attributed to the addition of 66 new electronics stores. The Eden Prairie, MN–based chain also acquired 1300 Musicland stores last January. Even without the expansion, Best Buy reported that stores open at least 14 months enjoyed increased sales of 2.8%, a result company officials attributed to a move away from PCs. Earlier this year, Best Buy began to emphasize upscale digital entertainment products, especially DVD players, high-definition television sets, and camcorders.

On September 20, New York's Harvey Electronics chain announced a 10.4% increase in sales for the ten-month period ended August 25, 2001, with net sales totaling approximately $31.8 million. Net sales for the month of August 2001 were approximately $2.28 million, a 5% decline from the same month the previous year. August 2000 was a record month, according to a Harvey's press release, with total sales exceeding $2.4 million. Harvey's comparable-store sales for the period ended August 25, 2001 rose 3.9% from the same period last year, but comparable-store figures for the month of August declined 17.7% from August last year.

"August is historically the slowest month for the company," said Harvey president Franklin Karp, in a statement that could be applied to the electronics industry as a whole. Harvey also expanded this year, opening a new store in Eatontown, NJ and undertaking a major renovation of its midtown Manhattan store. The "grand re-opening" celebration of the store at 2 West 45th Street will kick off a chain-wide promotion in October, Karp stated.

Two bright spots for the electronics industry in the aftermath of the terrorists' attacks—if sales resulting from a national calamity can ever be so construed—involve television sets and cell phones, sales of both of which surged in the days following September 11. Cellular telephone services have seen a fourfold jump in new subscribers, according to a September 19 report in the Wall Street Journal. Cell phones figured prominently in the drama of the attacks, including the thwarting of hijackers' plans on at least one of the doomed airliners. Cell phone sales are up nationwide, but are particularly brisk in the Northeast, the report stated. A September 18 report in the same publication stated that Walmart saw a 70% increase in sales of television sets the day after the attack, and a 400% increase in sales of antennas. The discount chain also reported increases of almost 900% in sales of gasoline cans, 70% in sales of firearms, and 140% in ammunition. Other items in big demand were American flags, batteries, canned food and bottled water. With 2600 stores nationwide, Wal-Mart serves approximately 100 million customers per week.

Final note: through September 30, California's Good Guys electronics chain is donating 5% of all sales to charities aiding attack victims and their families.