Best Buy alerted customers Friday in an email blast of availability of Toshiba Fire TVs with Alexa built in. Models are available in 43- ($329), 50- ($399) and 55-inch ($479) screen sizes and are sold exclusively by Best Buy under a multiyear arrangement with Amazon to sell Insignia- and Toshiba-branded Fire TV Edition smart TVs. Bestbuy.com showed Roku TVs, meanwhile, from its house Insignia brand (49-inch, $229), Hisense (50-inch, $257) and Sharp (50-inch, $299) on clearance Friday. Best Buy also listed itself as exclusive retailer for a selection of Sharp Roku TVs.
May retail sales at electronics and appliance stores increased 2.8 percent year over year and 0.2 percent from April, said the National Retail Federation Thursday. Online and other non-store sales in May were up 9.1 percent year over year and up 0.1 percent over April, said NRF. Overall May retail sales, excluding automobiles, gas stations and restaurants, increased 0.7 percent from April and 5.6 percent year over year “as a growing economy prompted consumers to continue to spend,” it said. “The economy is looking strong and households have a solid financial foundation on which to base their spending,” it said. Inflation and rising oil prices “are complicating the picture,” while new tariffs on Chinese imports or a trade war with China “would certainly be negatives that would increase prices and reduce both consumer purchasing power and consumer confidence,” it said.
Conn’s, in a new consumer electronics offering, began rolling out new videogaming “bundles” across its “store base” in Q1 that feature PlayStation, Xbox and Nintendo consoles, said CEO Norm Miller on a Thursday earnings call. “Gaming offers customers a compelling product group to add as an attached purchase and helps us capitalize on our credit utilization strategies.” The “sophisticated credit platform” and “enhanced underwriting team” that Conn’s put in place the past two years “makes us confident in our capabilities to manage loss rates that have been historically associated with gaming products,” he said. Customers also “can choose to finance gaming bundles through our third-party financing options,” he said. Initial results are “encouraging” from both a “retail and credit perspective,” he said. Some Conn’s stores also are “testing” robotic vacuums and smart home products as part of an expanded consumer tech offering, said Miller. “If successful, we will expand these products across our store base throughout the current fiscal year.”
Target is in “the middle of an unprecedented” store-remodeling plan, with the goal of being sure “we continue to provide a differentiated in-store experience,” said Chief Operating Officer John Mulligan on a Wednesday earnings call. Target completed 56 “remodels” in its Q1 ended May 5, “and we’ve already launched well over 100 more” that will be ready in Q2, he said. “The new environment invites guests to visit more often,” he said: “When guests visit, they find a team that’s better-trained and better-equipped than ever before. Because we’ve rolled out training and ongoing product education, our guests are greeted by product experts in key areas,” including electronics, he said. Target is “happy with what we’re seeing” in the early results, he said. “We’ve seen better attachment rates and warranty sales in electronics, as guests respond to the higher level of service and expertise they’re finding there.” The “pilot” project of “modernizing” its “store-operating model” is now installed in 26 “districts” of stores, said Mulligan in Q&A. “The idea here is to get experts in the areas where they know the business,” including electronics, he said. “They’re accountable for the totality of that business,” he said. “They own everything that goes on in that business.” The stock closed down 5.7 percent to $71.17 after operating income margin fell 0.9 points to 6.2 percent from the year-ago quarter. The retailer's differentiation strategy of selling certain products with higher margins that are growing faster, comprising about a third of sales, "is coming under pressure as consumers shift more to online, where Target significantly lags its peers, generating just under $4 billion of sales annually through that channel, versus $23-plus billion at Walmart and $60-plus billion for Amazon in North America," Morningstar analyst John Brick wrote investors previously, reprised in a Wednesday report. That day, he wrote he doesn't see much change to expecting 5.9 percent margins over the next decade, less than in recent years: Target may "see higher variable costs associated with e-commerce and delivery, particularly as we expect continued growth of 20% a year through this channel toward 10% of sales by fiscal 2021 (from near 6% today)."
Wedbush Securities has been “wrong on Best Buy,” and the company “may have the right formula for long-term growth,” said analyst Michael Pachter in a Monday investor note, but it held to its underperform rating for the retailer before its Thursday fiscal Q1 earnings report, citing competitive pressure from Amazon. Wedbush is forecasting Q1 revenue of $8.65 billion vs. consensus of $8.73 billion, assuming domestic comparable sales growth of 1.5 percent vs. the retailer’s guidance of 1.5-2.5 percent. “We do not expect Best Buy’s stellar performance in FY:18 to continue in FY:19,” said Pachter, citing the benefit of an extra shopping week in the year-ago quarter, “the bankruptcy of a competitor, from troubles at other retailers, and from the mercy of competitor Amazon.” Best Buy’s partnership with Amazon (see 1804180027), in which Best Buy will be exclusive brick-and-mortar retailer of Amazon Fire TVs, could benefit Best Buy short term, “but we view it as an existential threat over the long-term,” said the analyst. Wedbush expects “the online juggernaut to ultimately revert to price competition at holiday,” which could compress Best Buy’s gross margins, Pachter said. The partnership also allows Best Buy to operate as a third-party seller on Amazon.com, which Wedbush sees as an Amazon strategy to convert Best Buy customers who don’t currently shop online. “We think any non-Prime members who purchase a Fire Edition smart TV at Best Buy are likely to sign up for Amazon Prime in the future in order to receive all of the benefits their Fire TV and built-in Alexa provide," he said. "Those customers will then increasingly shop at Amazon.com, at Best Buy’s loss." Wedbush is maintaining its FY 2020 estimates for Best Buy of $41.2 billion in revenue and earnings per share of $5.32, with growth expected to come mostly from “sharply lower federal income taxes and from aggressive share repurchases.”
A 33 percent bump in e-commerce revenue helped drive overall Q1 growth at Walmart, executives said in the company’s Thursday Q1 management summary. Sales were $122.7 billion, up 4.4 percent from the year-ago quarter. It expects to grow e-commerce sales by 40 percent for the year. “Slightly positive” general merchandise sales were driven by “solid comp sales growth” in home, automotive and wireless, said the company. Walmart’s online food business is driving volume and helping grow the number of omnichannel customers that shop in store and online, said CEO Doug McMillon, saying omnichannel customers “spend almost twice as much with us,” and also spend more in stores after becoming omnichannel customers. In addition to grocery pickup, Walmart has nearly 200 automated pick-up towers in stores, on the way to an expected 700 stores by year-end, he said. Walmart’s Sam’s Club business had low single-digit growth in the technology, office and entertainment category, where strong results in office and tablets offset slower sales in TVs, imaging and mobile, it said. Sam’s Club net sales dropped 2.7 percent to $13.6 billion, due to 63 store closures during the year, said Chief Financial Officer Brett Biggs. Sam’s Club recently announced free shipping from Samsclub.com for Plus members, driving upgrades to premium membership, said Biggs. Overall Sam’s Club e-commerce sales grew 25 percent, he said. Walmart shares closed down 1.9 percent Thursday to close at $84.35.
Sears, which began as a mail-order business out of Chicago before branching out into brick-and-mortar stores, will shutter its department store there in July, reported the Chicago Tribune Friday. The retailer closed nearly 20 percent of its U.S. stores and shed more than 50,000 jobs in 2017, said the article. As of Feb. 3, Sears Holdings operated 1,002 full-line and specialty retail stores in the U.S. and Puerto Rico, including 547 Sears stores, according to its March 23 annual report. “The retail industry is changing rapidly,” said the company. “The progression of the Internet, mobile technology, social networking and social media is fundamentally reshaping the way we interact with our core customers and members,” driving a transition to a “member-centric company” focused on core customers that are part of its Integrated Retail and Shop Your Way programs. “We have invested significantly in our membership program, our online ecommerce platforms and the technology needed to support these initiatives,” continuing to pursue a “transformation strategy and to explore potential initiatives to enhance our financial flexibility and liquidity,” the retailer said. The company incurred “significant losses and experienced negative operating cash flows for the past several years,” it said. Sears didn't comment.
The TV category, “without any newness the last two years, is significantly under pressure nationally,” Conn’s CEO Norm Miller said on a Thursday earnings call. “We’re feeling that same impact.” Miller blames the sluggishness of the TV category at Conn's partly for the retail chain's 8 percent same-store sales decline in the year ended Jan. 31 and its forecast for a 3-5 percent decline in FY 2019. Miller estimates TV sales in Conn’s Q4 ended Jan. 31 were down by about 300 basis points from a year earlier. Conn’s expects an additional decline of about 200 basis points in the category for its Q1 ending April 30, he said. The company is especially vulnerable to “softness” in the TV category because unlike other consumer electronics retailers, it draws its CE sales “almost exclusively” from TVs, Miller said. Conn's carries an assortment of mainly LG and Samsung TVs at price points starting a little under $450, its e-commerce site shows. CTA forecasts that overall TV factory shipments will rise 2 percent this year to 44.2 million sets. For the first time, CTA says, Ultra HD sets this year are expected to account for roughly half of all TVs shipped, rising 27 percent to 22 million units.
Q4 sales in Trans World Entertainment’s FYE retail segment fell 16.4 percent to $92.4 million due to “declining mall traffic” and the “general accelerated decline in the physical media business,” said Trans World CEO Mike Feurer on a Thursday earnings call. FYE’s packaged video content business also suffered from “the lack of strong franchises resulting from the holdover of the lowest summer box office in 25 years,” he said. Efforts to change FYE’s merchandise mix “as part of the ongoing reinvention of the FYE brand” will continue throughout 2018 “as we work through the assortment changes need to stabilize the FYE business,” he said. The reinvention will include the January “relaunch” of the fye.com store with “expanded platform capability and merchandise selection” and an “improved shopping experience,” he said.
With interest and awareness of artificial intelligence at a “fever pitch,” IDC is forecasting worldwide spending on cognitive and AI spending to grow to $52.2 billion by 2021, from $19.1 billion this year, it reported Thursday. Industries and organizations should be evaluating how AI will affect their business processes, said analyst David Schubmehl, citing forecasts that by next year, 40 percent of digital transformation initiatives will use AI services, and by 2021, 75 percent of enterprise applications will use the technology. AI is "changing the face of how we interact with computer systems,” he said, referencing predictions, recommendations, advice, automated customer service agents and intelligent process automation. Retail will overtake banking in 2018 to become the industry leader in cognitive/AI spending, with retail firms expected to invest $3.4 billion this year on AI processes including automated customer service agents, expert shopping advisors and product recommendations, along with merchandising for omni channel operations, he said.