Up, Down Or Out? Tech Retailers Wrestle With Another Declining Month

United States retailers closed out January riding out a fourth consecutive month of declining numbers and hard-bitten earnings reports. According to the International Council of Shopping Centers, sales for the overall retail industry dropped 1.9 percent compared with January 2008, and another report, from Retail Metrics, put the number at 1.8 percent, adding that without retail behemoth Wal-Mart Stores, it would have been 5.6 percent. Most other industry reports also cited between 1.8 and 1.9 percent drops.





Big-box and fast-growth technology retailers are certainly not immune, and as the following slides illustrate, even Wal-Mart isn't against qualifying its continued good news.

Down. In its most recent earnings report on Dec. 16, Best Buy reported third-quarter earnings down 77 percent year-over-year. The company also announced it was offering voluntary buyouts to most of its 4,000 corporate employees, although on Jan. 27, a Best Buy spokesperson said only about 500 employees had accepted the offer.





That likely means layoffs are in the works at the No. 1 consumer electronics retailer, most analysts agree.



"The historic slowdown in the economy and its effect on our business over the past 90 days has been the most challenging consumer environment our company has ever faced," said Best Buy CEO Brad Anderson in a statement at the time. "We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace."



Anderson is set to retire on June 24, 2009, at which time Brian J. Dunn will take over the helm.

Out. The country's second-largest consumer electronics retailer went belly-up last month, announcing on Jan. 16 that it would liquidate and close all 567 of its retail outlets.





"The company had been in continuous negotiations regarding a going-concern transaction," said Circuit City CEO James Marcum in a statement at the time. "Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction in the limited time frame available, and so this is the only possible path for our company."

Down. The Naperville, Ill.-based office products and services retailer on Nov. 6 reported a loss -- $432.7 million -- for the third quarter of 2008, a 9.5 percent slide from the third quarter a year before. The company at the time had delayed reporting its results because of what it called a larger-than-expected charge ($735.8 million, pre-tax) tied to the bankruptcy of former financial heavyweight Lehman Brothers.







"In the third quarter, we operated in a weaker selling environment than in the third quarter of 2007 for both our Contract and Retail segments," said OfficeMax Chairman and CEO Sam Duncan in a statement at the time. "The challenging environment, along with our more disciplined approach to customer acquisition and retention in Contract as well as promotional strategies that are focused on preserving gross margin in Retail are reflected in our results."

OfficeMax announces its fourth-quarter 2008 earnings on Feb. 18.

Down. In its third-quarter earnings statement for 2008, Office Depot posted a 7 percent drop year-over-year -- its sixth straight quarter of profit decline. "Our performance was representative of the unprecedented time in which we live," said Chairman and Chief Executive Steve Odland at the time, on Office Depot's earning call.





The Florida-based office supplies and tech equipment company said on Dec. 10 it would close 112 stores (9 percent of their North American locations) and six distribution facilities over three months, and also seek to cut 2,200 jobs.





Office Depot announces its fourth-quarter 2008 earnings on Feb. 24.

Down. On Thursday, the Merrimack, N.H.-based retailer reported net sales for its fourth quarter, ended Dec. 31, were $439.1 million, down 10 percent year-over-year. For the full year, PC Connection was down 2 percent year-over-year, with net sales of about $1.75 billion.





Raymond James & Associates on Friday downgraded its rating of PC Connection to "underperform."

Down. In late October, Torrance, Calif.-based PC Mall for its third quarter of fiscal 2008 reported net income of $2.6 million, down from $3 million the year before. Sales were up, hitting $326 million, but were at the time still short of analyst estimates and couldn't quite obscure a 19 percent decrease in PC Mall's net sales in its consumer segment.





"Despite the economic headwinds during Q3, we achieved record consolidated revenues," said PC Mall Chairman, President and CEO Frank Khulusi. "These economic headwinds, accompanied by our continuing investments for growth, had an impact on our Q3 2008 bottom-line results. That said, we believe we are well-positioned with an excellent base of talented employees, solid customers and world-class vendor partners."



PC Mall reports its fourth quarter 2008 earnings on Feb. 23.

Down. In early January, Tom Livia and Gary Stern, the co-founders of PC Universe, said they would sell PC Universe to a group of investors for roughly $500,000 -- a sale expected to close this month. That half million is to go to IBM Credit LLC and other creditors, according to comments Livia made to Internet Retailer magazine. PC Universe's e-commerce business is still rolling, and Livia and Stern agreed in January to stay on as consultants for several months.





PC Universe had defaulted on payments to IBM Credit dating back to December 2007, and IBM Credit reduced its credit line. For the third quarter of 2008, ended Sept. 30, PC Universe reported Web sales decreasing by 8.3 percent from the previous year. Overall revenue for the first three quarters of PC Universe's fiscal year decreased 25.6 percent, to $19.2 million from $25.8 million.





PC Universe was also ranked No. 462 on the 2008 VARBusiness 500 list for its Internet services and solutions.

Up. Staples had good news for analysts and investors at the end of its third fiscal quarter (ended Nov. 1, 2008): Total company sales were up 34.5 percent, to $7 billion. But Staples got a big bump from its acquisition of Corporate Express in August 2008, and aside from the $2 billion in Corporate Express sales for the quarter, Staples net sales were actually down 3 percent.





"The economic environment remains challenging, and we saw particular weakness during October at the height of the financial crisis," said Staples Chairman and CEO Ronald L. Sargent during the company's Q3 earnings call. "We know from our experience during previous downturns that if we continue to take care of our customers, invest in the business and control expenses and capital spending,we'll come out on the other side even strong than before."



"In North American Retail, the most important thing we can do is to improve store productivity," Sargent added. "We're focusing on new merchandising initiatives, a new selling model and driving sales of copy and tech services. We're also driving better productivity with smaller, more efficient store formats."



Staples is scheduled to report its fourth quarter fiscal 2008 earnings on March 11.

Down. Target on Nov. 17 reported its third-quarter profit had taken a 24 percent hit, and it was the fifth consecutive quarter in which the Minneapolis-based retailer posted a decline in earnings. Target reported $369 million in profit for the quarter, and although sales were up 1.7 percent ($14.6 billion) from the previous year, diluted earnings per share were down 14 percent. Same-store sales for Target were also dropping.





The company warned on Thursday that same-store sales had slipped 3.3 percent in January and that its fourth-quarter earnings, which it is scheduled to report on Feb. 24, will miss analyst estimates. Target in January also announced 1,000 job cuts at its Minneapolis headquarters.



While technology sales are not generally seen as Target's biggest strength -- the retailer is usually hottest on clothes and housewares -- it continues to offer a sizable assortment of notebooks, notebook accessories, software, desktops, mobile devices, networking products, external hard drives and storage, printers and other peripherals, monitors and a range of other items.



Target reports its fourth quarter fiscal 2008 earnings on Feb. 24.

Up. There are retail behemoths, and then there is Wal-Mart, for whom electronics and technology are but part of a worldwide retailing empire.





And the news is still good: Wal-Mart last week reported a 2.1 percent increase in same-store sales for the month of January, and also said it would no longer be providing same-store forecasts every month.



"Our sales results were driven by a continuation of gains in consumer traffic," Eduardo Castro-Wright, vice chairman of Wal-Mart, told The New York Times.



The company's most recently reported quarterly earnings, in November for the third quarter of 2008, held that sales were up 7 percent and earnings 10 percent. At the time, it mentioned cautious optimism for the fourth quarter, of which the results are scheduled to be reported on Feb. 17.