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The Honolulu Advertiser
Posted on: Saturday, January 7, 2006

Lots of TVs ended up under trees

By Joshua Freed
Associated Press

MINNEAPOLIS Retailers who wondered where their customers went during a so-so holiday season might have tried looking in the TV aisles at Best Buy and Circuit City.

The nation's two largest consumer electronics retailers both reported strong holiday revenue yesterday driven by surging sales of high-end televisions and larger average purchases. December sales jumped 5.8 percent at Best Buy Co. Inc. stores open at least 14 months. The increase was 10.8 percent at Circuit City Stores Inc. locations open at least a year, a key industry barometer of a retailer's health.

Best Buy said fourth-quarter earnings would be near the top of its earlier guidance previously announced at $1.06 to $1.16 per share and its stock rose $3.55, or more than 8 percent, to close at $47.05 on the New York Stock Exchange.

Circuit City shares rose 15 cents to close at $22.94. Best Buy shares had been knocked down from around $50 a share in December by a disappointing outlook, while Circuit City shares have been climbing steadily from about $16 a share in September.

Both companies said sales of flat-panel TVs more than doubled at existing stores, and reported double-digit percentage increases in digital audio player sales. Both reported declines in sales of DVD players, whose prices have been falling.

Both said video game hardware sales rose during the first full month of Xbox 360 sales, though Best Buy said video game software declined as customers slowed purchases for existing platforms.

Analysts said the two retailers are benefiting from the gift-giving shift toward TVs and gadgets.

"For the first time, both industry leaders are posting numbers suggestive of a strong product cycle," Goldman Sachs analyst Matthew Fassler wrote in a note to clients.

Best Buy Vice Chairman and Chief Executive Brad Anderson said he was "pleased and encouraged by the fact that virtually all of our businesses met or exceeded our expectations for December. As usual, customers shopped later than ever and results strengthened as the month progressed."

Best Buy also saw appliance sales rise 7.7 percent, probably spurred by homeowners trying to offset higher energy prices with more efficient appliances, said Craig R. Johnson, president of retail consulting firm Customer Growth Partners.

Both companies said overall revenue rose 12 percent from December 2004, to $5.7 billion for Best Buy and $1.98 billion for Circuit City.

Johnson said the two companies posted the strong results despite tough competition from Wal-Mart Stores Inc. and other discounters jockeying for TV customers, and despite the wide availability of the iPod music player. Those kinds of products once belonged mostly to Best Buy and Circuit City, but they're getting easier to find in non-electronics stores and online.

Both reported strong gains in Web sales. Best Buy saw online revenue jump 40 percent as more customers shopped and redeemed gift cards online.

Circuit City reported strong growth in its "Web-originated sales," which rose 49 percent in December compared with the same month in 2004. W. Alan McCollough, Circuit City's chief executive, credited the company's express pickup service, which let customers order gifts online as late as Christmas Eve and then pick them up at stores.