Best Buy: Slower FPD TV Growth Expected

Reuters reported on April 2, 2008 that Best Buy commented on a slower growth expectation for the FPD TV industry in 2008 due to a softer US economy during its conference call. Mike Vitelli, Best Buy‘s Senior Vice President for Home Solutions, stated that FPD TV demand is continuing to grow but that the tube (CRT TV) business is almost gone.

FPD TV demand is growing but I expect growth is much slower. With less disposable income in the hands of the average consumer in the US, TV purchases will tend toward more affordable sizes and models. This does not bode well for brands known for higher prices such as Samsung and Sony. On the other hand, it might be a golden opportunity for second tier brands such as Vizio and Olevia to capture more share of the LCD TV market as they are known to provide decent quality at rock-bottom prices.

On StreetInsider.com, Best Buy is quoted as saying that there are significant upside potential in the long term due to a strong 2H and the gradual stabilization of the US economy. I certainly hope 2H turns out as strong as previous years, but I have my doubts. My expectations are that consumers will purchase the same type of computing and electronic goods but focus on more affordable ones.

BusinessWeek reported on April 2, 2008 that Best Buy’s Q4 earnings were down 3% Y/Y to US$737 million from US$763 million. The company cited the reason as a slowdown in customer traffic after the holidays. Revenue increased 4% Y/Y to US$13.42 billion from US$12.9 billion. Per store sales (locations opened for at least 14 months) experienced a 0.2% decline while overall international sales increased. The per store sales in the US brought the overall growth down by declining 0.9%. Interim CFO Jim Muehlbauer stated that the company is planning for a “soft consumer environment in the near-term.” He also expects 2H’08 to even out the slight decline in 1H’08. From March 2007 to March 2008, Best Buy’s FY2008, the company earned US$1.41 billion, up from US$1.38 billion, while revenue increased to US$40 billion from US$35.9 billion in FY2007. Best Buy is expecting revenues of US$43 to $44 billion in FY2009.

Source: Reuters, StreetInsider.com, BusinessWeek

[tags]Best Buy, FPD TV, Flat Panel Display TV, LCD TV, Olevia, Samsung, Sony, Vizio[/tags]

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