Retailers gear for another price war
Published 7:16 pm Friday, October 5, 2007
CHARLOTTE, N.C. — Christmas will come for consumer electronics retailers. The question is: At what price?
After last year’s price wars on flat-panel TVs, U.S. retailers and investors fear that competition this year will heat up again, destroying profit margins on one of the few big-ticket, discretionary items many consumers may still consider buying.
Wal-Mart Stores Inc. added to those concerns when it threw down the pricing gauntlet 12 weeks before Christmas. The retailing giant cut prices 10 percent to 50 percent on its “Top 12 Toys of Christmas” and said it will announce new price cuts every week in what it called an “aggressive move to lead the market on holiday savings.”
Wal-Mart’s price cuts last year put a jolt into promotions for TVs, which make up the biggest product category for the likes of Richfield, Minn.-based Best Buy Co. and Richmond, Va.-based Circuit City Stores Inc.
On the one hand, flat-panel manufacturers don’t seem to be repeating last year’s pattern of sending too many TV sets to the market, said Bear Stearns analyst Christopher Horvers. He said the average selling price on like-for-like TV models fell by about 2 percent between July and September at both Best Buy and Circuit City, a smaller decline than the 6 percent to 8 percent declines between June and July.
On the other hand, uncertainties about consumer demand and how retailers will react as the season wears on are feeding more Grinch-like sentiment.
“We think that there is a good chance the holiday season this year will be as challenging as the last,” said CIBC World Markets analyst Vivian Ma in a recent note to clients.
