Discounters Rule

ChangeWave tells us that consumer electronics is one of the weakest spending categories in the US in the run up to the Thanksgiving holiday period. This will be no surprise to most of us, but the dramatic change from previous years just might be.

One of the charts used by ChangeWave is based on answers to a simple question: 'Will you be spending more or less money on consumer electronics over the next 90 days?'.

- In November 2006, the answer was 52% said 'spending more', while 24% said 'spending less';

- In November 2007, the answer was 39% said 'spending more', while 23% said 'spending less';

- In November 2008, the answer was 19% said 'spending more', while 43% said 'spending less'.

And for those who are going to spend their hard earned cash, "people are favouring stores such as Wal-Mart and Costco for electronics ", says a Bloomerg article, and not the likes of Best Buy or Circuit City.

DSGi's Death Spiral

An article in the UK broadsheet, The Guardian, notes that DSGi's current share price makes its market capitalisation equal to just 10 day's sales - that's about £275mn, or roughly €330mn, or $425mn. The title of The Guardian's article says it all: Bloodbath on the High Street.

In a similarly downbeat article in The Times, Neil Saunders, a Director at specialist retail consultancy, Verdict, said that: "Electricals is one of the sectors that bears the brunt of the slowdown when it gets serious because most people can defer purchases". As far as DSGi is concerned, Saunders said that the retailer: "...isn't optimally positioned, with store standards quite low and service not as good as it could be".

And in The Independent, DSGi's house broker Citigroup is reported as saying that as one of the most operationally and financially leveraged business under its coverage, DSGi: "...is very materially impacted by the current cyclical slowdown/recession. In addition, the business continues to suffer from the structural over-capacity and deflationary trends that have crushed [margins on earnings before interest and tax] over the past ten years."

DSGi will doubtless update the market next Thursday when it announces its half-yearly Interim Statement.

Seismic Changes

Just two days after Circuit City accepted the inevitable - seeking protection via Chapter 11 - Best Buy now tells us that it's all going pear shaped. Earlier today, Brad Anderson, Best Buy's CEO, said that: "Since mid-September, rapid, seismic changes in consumer behaviour have created the most difficult climate we've ever seen. Best Buy simply can't adjust fast enough to maintain earnings momentum for this year."

COO Brad Dunn said that: "In 42 years of retailing, we've never seen such difficult times for the consumer. People are making dramatic changes in how much they spend, and we're not immune from those forces."

CFO Jim Muehlbauer said that: "We now plan to finish the fiscal third quarter with inventory levels, short-term borrowings and accounts payable higher than previously projected. These increases are the result of the rapid downturn in consumer spending. However, we expect year-over-year domestic inventory to be flat by the fiscal year end."

Chapter 11

The largest retail casualty this year [says the Financial Times - registration required] is Circuit City which filed a voluntary petition for reorganisation relief under Chapter 11 of the US Bankruptcy Code earlier today.

Local Insight

The national and international press reports on most of the big news stories from the major channels players in the high technology market, especially if they are quoted firms. But the local press - that is, local to the head office of these same channel players - often has a unique insight into the 'story behind the story'.

Circuit City is almost sixty years old, and its head office is still to be found in its home town - Richmond, Virginia. As such, the Richmond Times-Dispatch is able to cover the latest upheavals at Circuit City with a very local perspective that stretches back through time. So, for a dispiriting and downbeat analysis of Circuit City's plight, see this article.

Dell Cuts

The New York Times reports that Dell has instituted a global hiring freeze and is also asking staff to take unpaid leave. We should expect similar announcements from HP and others over the coming weeks. This is going to get ugly.

Blue Label

Best Buy has just announced the launch of a line of 'exclusives' that it is co-developing [or specifying] with major OEMs. It first two products in this new line are laptops - one from HP and the other from Toshiba.

Fanciful

According to an article in The Independent, a recent report from HSBC described speculation that Best Buy is interested in bidding for either DSGi or Kesa as 'fanciful', and that the recent gains in the share price of both UK companies looked like 'madness'.

Comet Cuts

An article in today's edition of The Independent says that 100 store staff - mostly, Store Deputy Managers - will lose their jobs at Kesa's UK chain, Comet.

DSGi Med End?

An article in The Sunday Telegraph says that DSGi has instructed Citigroup to undertake a strategic review of its Italian and Spanish outlets. Now that's not much of a surprise...