Unit Increases Expected

TV ASPs Could Stabilize This Year With 3D’s Arrival of 3D, Executives Say

April 29, 2010 by Mark Seavy|Top News

The emergence of 3D TVs and increased sales of LED-backlit LCD models will help stabilize average selling prices (ASPs) this year as unit sales rise 6-8 percent, retail executives said Wednesday at the Barclays conference in New York.

A 15-20 percent ASP drop expected for standard LCD TVs will be offset by the higher retails for 3D and LED-backlit models, hhGregg CEO Dennis May said. About half the 36 million LCD TVs sold in the U.S. this year will have LED backlights, and with 3D models priced at $2,000 and up, ASPs could be flat with 2009, May said. Forecasts for U.S. 3D TV sales were increased to 3 million units from 1.2 million units, and retailers and manufacturers will promote the technology to stir consumer interest, May said.

Warehouse clubs aren’t as upbeat about 3D TV’s prospects this year, especially since most consumers are still recovering from the DTV transition, Costco Chief Financial Officer Richard Galanti told us. Costco is expected to carry a version of Mitsubishi’s 638 series of 3D 60-, 65- and 73-inch DLP rear projection TVs. And while Costco will have 3D TVs available and manufacturers will “push” the technology, “my guess is that it will be there in about three years,” Galanti said.

Warehouse clubs typically lag behind specialty CE retailers in introducing new technology and it’s “going to be at least a year” before 3D TVs hit prices attractive to their customers, Chief Financial Officer Frank Forward of BJ’s Wholesale Club told us. “It’s probably not going to have a big impact for us this because you are still going to have to wear the glasses and warehouse clubs tend to be followers” in introducing new technology, Forward said.

Like hhGregg, Costco sees ASPs flattening this year, Galanti said. Costco posted fiscal 2009 TV sales of $2.2 billion, with unit sales rising 45 percent but dollar sales increasing just 5 percent, Galanti said. In 2010, dollar sales will be flat with 2009, despite a 6-8 percent jump in units, Galanti said. Costco was up 7 percent in TV units for the first three months of this year, but down 2 percent in dollars, Galanti said. A tighter supply of LCD TV panels could also lead to higher prices, Galanti said. With prices of 32- and 37-inch panels increasing $100 in recent months, Costco is less able to offer the $300 “savings” promotions online and in mailings to club members, Galanti said. TV panel prices are expected to rise $3-$5 a month in Q2 before stabilizing, Corning Chief Financial Officer James Flaws said Wednesday in an earnings conference call.

Barclays Conference Notes

Costco’s Manhattan store has been operating at 85-90 percent of plan since opening in November and is on pace for $100 million in annual revenue, Galanti said. The store, spread up and down five floors on 116th Street, will surpass $200 million in annual sales within “a couple years,” Galanti said. Costco, which has 414 stores in the U.S., has one store generating more than $300 million in annual sales and nine at $250-$300 million, Galanti said. Costco will open 14 stores in the next fiscal year, including locations in New Brunswick, Canada, and Atlanta. It will add a Costco business-center location in San Diego, Galanti said. After slowing expansion during the global economic crisis, Costco will move to open 20-25 stores annually next several years with some emphasis on Asia, Galanti said. Costco has stores in Japan (9), South Korea (7) and Taiwan (6). Costco has 31.1 million member “households” with 56.7 million cards and an 87.4 percent annual renewal rate, Galanti said. It charges a $50 annual fee for standard members, $100 for executive, he said.

While hhGregg accelerated expansion this year to add 40-45 stores to take advantage of real estate prices, it probably will slow annual store growth to 20 percent in the future, May said. The chain expanded at a 35 percent clip this year, said Chief Financial Officer Jeremy Aguilar. It will open in the Baltimore area next week and the Philadelphia market by late May, he said.