Housing slump pulls down electronics sales

Flat-screen TVs buck trend as Q4 revenue surges

By Danny King -- Video Business, 4/4/2008

APRIL 3 | The U.S. housing slump pulled down fourth-quarter sales of consumer-electronics products in all but one metropolitan area, cutting earnings at retailers such as Best Buy, NPD Group said in a report this week. U.S. flat-panel TV sales bucked the trend, however, by jumping 24%.

Sacramento, Calif., electronics sales fell 14% from a year earlier while Tampa, Phoenix and Detroit all had revenue drops of more than 10%, NPD said. U.S. consumer-electronics sales fell 4.3% as customers bought fewer MP3 players, digital cameras and desktop computers. U.S. housing prices fell 5.8%.

“In many years, electronics moved away from being discretionary and instead became part of core spending,” said Stephen Baker, VP of industry analysis at NPD. “These numbers pull you back into reality.”

Best Buy, the largest U.S. electronics retailer, said yesterday that profit for the quarter ended March 1 fell 3.4% to $737 million as same-store sales fell 0.2%.

While customers in established markets such as Detroit cut back electronics spending because of the disconcerting effect of watching their home values fall, reduced spending in newer markets was more a result of a pullback in new housing developments, Baker said.

“In Phoenix, for example, it’s probably less about housing values than housing starts,” Baker said. “There, a TV is more like a piece of furniture.”

Still, while sales of most electronics categories fell, customers bought more flat-panel TVs as prices fell and people prepared for the switchover to digital broadcasting from analog next February. Flat-panel TV sales rose in every metropolitan market, with Miami, at 0.9%, having the lowest growth rate, according to NPD. Washington D.C., Seattle, Orlando and Tampa also had flat-panel growth rates of less than 10%.

Baker expects sales of both flat-panel TVs and DVD players, whose revenue figures weren’t disclosed, to rise this year, especially given Sony’s Blu-ray Disc emerging as the winner in the next-generation DVD war over Toshiba’s competing HD DVD format.

“Flat-panels have grown pretty dramatically, and the recession’s not going to stop that,” said Baker, who added that, as far as high-definition DVD players go, “we’re way down on the bell curve in that category.”