Electronics Retailers Stick With Promotional Plans So Far

Sales of consumer electronics--a winning category for retailers over the Black Friday weekend--have been strong enough that retailers seem to be sticking with their promotional plans.

As Black Friday weekend wore on, shopper traffic held up better than a year ago, and retailers added new deals but didn't seem to depart drastically from their plans, according to industry analysts and consultants. By Monday, when some retailers offered a new round of promotions in honor of "Cyber Monday," the number of discounted items were smaller and deals generally weren't as compelling as Friday.

That could be good news for both sales and profitability at specialty electronics dealers like Best Buy Co. (BBY), Hhgregg Inc. (HGG) and RadioShack Corp. (RSH).

Still, it remains to be seen whether shoppers will continue to buy electronics without significant discounts, UBS analysts said in a note to clients.

For the most part, shoppers throughout the weekend ignored full-priced consumer electronics completely, so those items remain full on the racks, said research firm Retail Eye Partners.

Added Wendy Liebmann, chief executive of retail consulting firm WSL Strategic Retail, "Everybody was sticking to plan--retailers and shoppers."

Shares of Best Buy, which rose in early trading, recently fell 0.4% to $42.67. RadioShack shares were 1.6% higher at $18.68, and Hhgregg shares rose 1.3% to $19.14. Representatives of those companies either declined to comment or couldn't be reached immediately for comment on weekend trends.

The Consumer Electronics Association said consumer-technology sales during the weekend appeared consistent with the group's October forecast for a 6% increase in unit volume and with its survey that showed 80% of people want to receive technology products this holiday season.

The group's October forecast of a 7.5% total decline in technology spending for the fourth quarter appeared on track given pricing and product-mix trends.

"We're still computing some final Saturday and Sunday data, but it does look like from what we can tell that traffic continued some of that momentum" from Black Friday, said CEA chief economist Shawn DuBravac. The overall drop in technology sales forecast by the group reflects year-over-year declines in product prices, as well as a shift in popularity for some smaller-ticket items, such as netbooks versus laptops.

RBC Capital analyst Scott Ciccarelli raised his fiscal third-quarter estimate for Best Buy Monday, citing further upside to earnings possible due to strong margin performance.

"We believe the company has focused on preserving margins this quarter and even Black Friday promotions appeared to be fairly benign," he said.

FBR analyst Stephen Chick said RadioShack had a strong start to the holiday season after opening a half-hour earlier than last year and offering competitive doorbuster deals.

"The Radio Shack we visited in the New England area, as an example, achieved [two times] last year's sales by 6:50 a.m. versus what the store had done by 8:00 a.m. last year," Chick said. "The early start to holiday doorbuster traffic gives us confidence that RSH is likely to exceed sales expectations [as well as EPS] for 4Q09E, which will be reported in February, 2010."

But Barclays Capital analyst Michael Lasser said it's too early to determine how the holiday shopping season will shape up for electronics retailers and other so-called "hardlines" retailers.

"In our view, consumers remain cautious with their discretionary expenditures, which will lead to volatile spending patterns," he said. "At the same time, we believe that most of the hardline retailers have aggressively managed their inventory and will end up taking fewer markdowns, which will provide some margin support."

-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; [e-mail]