Winnipeg Free Press - PRINT EDITION

Sales of electronic gear weaker

Best Buy, Sears are feeling the chill

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Ultra-high-definition TVs, such as Sony's Bravia, haven't caught on.

KOJI SASAHARA / THE ASSOCIATED PRESS FILES Enlarge Image

Ultra-high-definition TVs, such as Sony's Bravia, haven't caught on.

NEW YORK -- Is North America's love affair with gadgets fading?

Best Buy and Sears on Thursday both blamed their weak quarterly results on the fact shoppers aren't shelling out for consumer electronics.

Already squeezed by tough competition from online retailers such as Amazon.com and discount stores such as Walmart and Target, retailers such as Best Buy and Sears have been cutting costs and reworking merchandise and store formats to attract customers.

But the consumer-electronics sector remains stagnant. Sales haven't budged from about $145 billion in three of the last four years, according to research firm NPD Group.

Part of the problem is consumers are holding out for smartphone and tablet computer launches this fall. Apple and Samsung are expected to debut new products, and an Amazon smartphone is rumoured to be in the pipeline. Meanwhile, experts say products such as ultra-high-definition 4K TVs have not been compelling enough for TV owners to upgrade.

"The category was weak. There's no 'wow'-type product to get people in stores or even online," said Brian Sozzi of Belus Capital Advisors.

One exception: trendy products such as wearable fitness devices. Sozzi said they're "in demand, but not as in-demand as you think."

The result is weak sales. Best Buy said revenue fell three per cent to $9.04 billion in the quarter ending May 4. Revenue in stores open at least 14 months, a key retail metric, declined 1.9 per cent. The company expects the metric to decline in the next two quarters as well.

"As we look forward to the second and third quarters, we are expecting to see ongoing industry-wide sales decline in many of the consumer-electronics categories in which we compete," said Best Buy CFO Sharon McCollam. "We are also expecting ongoing softness in the mobile-phone category as consumers eagerly await highly anticipated new product launches."

Sears said TV sales were especially weak in the quarter, particularly at its Kmart division. Revenue in Sears stores open at least one year edged up 0.2 per cent but fell 2.2 per cent at Kmart, and weak consumer-electronic sales contributed to more than one percentage point of that drop.

"The biggest negative contributor to sales has been from our consumer-electronics business at both Sears and Kmart," said billionaire hedge-fund investor Eddie Lampert, who is Sears' chairman and CEO, in a pre-recorded call. "To address this decline, we are moving this business from a focus on selling televisions to a company empowering connected living, which will bring together our capabilities in fitness equipment, electronics, appliances, home services and auto services."

Stephen Baker, an NPD consumer-technology analyst, said unless a new game-changing product such as iPad is introduced, consumer-electronics sales are unlikely to budge much.

"It's a pretty mature category, and for every great opportunity like 4K TVs or touch notebooks, there are continued declines in cameras, small-screen TVs or desktop computers," he said. "Right now, there isn't anything that can provide $5 billion, $6 billion or $7 billion in incremental sales for the industry, and when you're a $145-billion industry, that's what you need to move the battleship."

-- The Associated Press

Republished from the Winnipeg Free Press print edition May 23, 2014 B4

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