Consumed Consumers: Does Best Buy Signal an End to the Consumption Boom?
Given the pile of carcasses left behind by other pundits who have attempted to call an end to the consumer’s willingness to keep spending, we have been reluctant to make such forecasts in the past. However, as the evidence mounts we increasingly believe that this holiday season will amount to something of a last hurrah - for now, anyway.
The latest news is Best Buy’s profitless prosperity. This shows that the consumer is still pulling out the pocketbook - but only when there is a good deal. With home theater equipment now being offered at low sale prices and with no-interest until 2010 credit offers, it is little wonder profits are getting tight. (Although the consumers should consider that with LCD prices falling 35% per year zero percent interest is still usurous in real terms!)
- As positive a spin as many try to put on it, job growth looks like it is weakening to us.
- Housing prices continue to decline.
- Gas prices are still higher than they were a year ago, and could be having a cumulative impact.
Granted, this is all still anecdotal. But the anecdotes are piling up.
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I dont mind LCD prices falling…I got a great deal on my new PC screen!!!
[…] There is one little problem with Gartner’s forecast, however. Best Buy (BBY) and Circuit City (CCS) have shown that end demand is even cooler than many industry watchers believe. With a slowdown in consumer spending on electronics looking increasingly likely for 2007, the orders will likely be pushed back further still. In other words, don’t hold your breath waiting for the industry’s “breather” to end. The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Nasdaq 100 (QQQQ) put options; FedEx (FDX - Annual Report) put options; Intuit (INTU) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA - Annual Report; Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Landstar (LSTR - Annual Report) put options; Ceradyne (CRDN) put options; Dell (DELL) put options; Plantronics (PLT) put options; […]
[…] We already heard from Best Buy (BBY) and Circuit City (CC) that price competition on flat-panel television sets was hurting profit margins. Holidaysales Blog - WSJ.com : ‘The Year of the LCD TV’ Consumers spent $8.75 billion on TVs, gadgets and other technology items from the week of Black Friday through the week ending Dec. 23, according to the NPD research group. “This was the year of the LCD TV,” NPD declared in a press release, reporting that $924 million of that total was spent on such TVs and that unit growth doubled from last year. The top-selling size of flat screen was 32-inch LCD and the average price of such models dropped to $796 from $1,354 during the 2005 season. The No. 2 spot went to 42-inch plasma. […]