Consumers and CE retailers feeling the pinch

The waning influence of the Federal Government’s stimulus package and price deflation, particularly in the flat panel TV category, has put a large dent in the fortunes of major consumer electronics retailers.

Harvey Norman, Woolworths-owned Dick Smith Electronics and  Big W and Wesfarmers-owned Kmart and Target have all reported declines in dollar value sales of electrical and CE products.

The Australian operations of Harvey Norman, which accounts for about two-thirds of the group’s revenue, reported a 2.2% in sales for the 2009-10 financial year but a 4% decline in revenue for the fourth quarter to June 30.

Harvey Norman’s like-for-like sales for the full year were up 2.3%. The company said lead retail indicators are showed a sharp decline in household disposable income and consumer sentiment in the last quarter.

Executive chairman Gerry Harvey said price deflation in consumer electronics had also slashed revenue, despite an increase in transaction volumes."It's not units that have been affected as much as it's the deflationary effect," he said.

"The biggest problem would be flat-panel TVs, which might have a 30% increase in sales by number but a decrease in dollar terms, and it's a similar story with computers and even refrigerators and washers to a limited extent."

Excluding the impact of new store openings, Australian sales for the Harvey Norman group (including Domayne and Joyce Mayne) were down 3.4% in the fourth quarter.Harvey told The Australian that the arrival of 3D television had offered some hope for higher-priced sales, but lack of supply meant they had little effect.

Woolworths CEO Michael Luscombe last week attributed part of Big W's sales slowdown to price deflation in home entertainment. 

Target suffered a similar fate, reporting a 6.2% fall in comparable store sales for the fourth quarter as sales of toys, leisure and electrical products deteriorated.Kmart was less affected by the slump in home entertainment sales having made the decision earlier this year to scrap sales of flat panel TVs.

Big W reported a 9.3% slump in sales for the June quarter.

Luscombe blamed the result on the impact of last year's fiscal stimulus payments, which drove a 12.9% leap in sales during the June quarter of 2009.

"Last year in home entertainment we sold a squillion big-screen TVs in Big W, and we're still selling them," he said.

"On many items we're way up on volume, but there might be a 10% to 15% gap between sales growth by dollar and sales growth by volume," he told reporters.

"We bought stuff at an average of US66c to the dollar in the second half of 2008-09, and about US84c on the dollar this time around."

More collapses like Clive Peeters says Luscombe

Luscombe said retailers were under enormous pressure to cut prices, and predicted more businesses would go under following the collapse of Clive Peeters.

Australian and New Zealand sales at Dick Smith for the full year were $1.5 billion, down 0.5% on the previous year. The 416 store network reported a drop of 1.5% in fourth quarter sales, with margins under pressure due to increasing price competition.