Better buys, slower sales for Best Buyby Martin Moylan, Minnesota Public Radio
Best Buy sells a lot of expensive electronic toys. Huge flat-panel TVs, cameras, stereo systems and more. Nice, tempting, but not essential. As a result, analysts expect Best Buy to report a steep drop in sales and earnings tomorrow. However, the consumer electronics giant appears to be on track to become even more dominant in the consumer electronics business.
Bloomington, Minn. — As a dad and daughter make their way pass a great wall of big-screen TVs, the daughter remarks how one is a good size for the top of her dresser.
"Yeah, look at the money ... $600," he says.
Sticker shock. That's the reaction of many people to the stunning but still pricey big-screen, flat-panel TVs, at the Best Buy store in the Mall of America.
In normal times, more people might be eager to snap them up.
Jack Wiebke was eyeing some 72-inch models with images so stunningly life-like that you feel like you're snooping on the real world, not just watching TV.
"The ones we're looking at right now are all excellent," he said. "Better than anything I've got at home, of course."
But there's a problem.
"They're still way out of my range," Wiebke said. "I know it's kind of foolish to even be thinking of something that expensive."
Most consumers, it seems, are reluctant to spend their money on big-ticket items now. Best Buy knows that all too well.
The company recently said this is the worst retail environment it's ever seen. Officials expect sales to drop as much as 5 to 15 percent from November through February at stores open at least a year.
And, Standard & Poors equity analyst Michael Souers said Best Buy is looking at slack sales well into 2009
"Consumers are fairly reluctant to spend on big-ticket items like appliances or [a] flat panel screen unless they are getting tremendous bargains," Souers said. "So, there are a lot of negative factors working against Best Buy for the next several quarters."
The sales crunch spans the retailer's critical fourth quarter, which generally accounts for about 40 percent of Best Buy's sales and 60 percent of its profits.
Wall Street won't be pleased with the sales and earnings slide, but Best Buy will still be profitable for the quarter and year. And, Souers said Best Buy is in a lot better shape than its struggling rivals. For Best Buy, Souers said this is a time of opportunity.
"That's $11 or $12 billion in sales that are potentially out there for Best Buy and other consumer electronics firms to seize and gain," he said. "Longer term we certainly think that is a net positive for them."
For now, Best But is doing what it can to kick up sales by cutting prices and offering sweet financing deals. Notably offers of 18 months of no-interest financing on purchases of $499 or more.
Enticing prices got the attention of Lizzy Rosenshine of New York , and her partner. They picked up a big-screen TV to give as a gift to family.
"Prices are not what they would or should be, I would say," Rosenshine said. "Even though we're not buying the highest brand of TV here, they're still less than what you would normally pay for a 42-inch TV."
But the prices aren't low enough for people really worried about the economy.
Laura Lilyquist is tempted, but not seduced by, the new generation of TV sets. She's going to spend more conservatively because of the economy. She may pop for a Blue Ray disc player or a video game system, but not a TV that sets her back a grand or more.
"Well, I'm really tempted by the prices because it's incredible what [you] can get now, versus two years ago, for a big screen TV in terms of the pricing," Lilyquist said. "But I'm not really planning on any big-ticket purchases for Christmas this year. I'm looking forward to the economy turning up, that's when I'm going to come back and do some shopping."
Best Buy surely hopes it won't be until next Christmas that shoppers like Lilyquist get over their worries about the economy and open their wallets wider.
- All Things Considered, 12/15/2008, 5:50 p.m.