Xmas sales not in the bag

Consumers pushed double-digit growth after Thanksgiving, but analysts are skeptical that computer sales will keep up with Christmases past.

2 min read
Consumers armed with plastic charge cards pushed double-digit growth in electronics stores the weekend after Thanksgiving, but some analysts are skeptical that sales of computers and software will keep pace with Christmases past despite price cuts and promotions.

During the first two official holiday shopping days, November 29 and 30, electronics stores including Computer City and Best Buy brought in $133.6 million--nearly 16 percent more than the same weekend last year, according to Visa U.S.A., which tracks Visa credit card transactions. Most retailers expect to report their official quarterly results and November sales figures later this week.

Most retail analysts are forecasting that computers and computer-related products will continue to be popular gifts this holiday season, according to a survey from the International Council of Shopping Centers.

But some analysts doubt that sales of home PCs can keep up with the level of past years, simply because so many households have already bought computers. One analyst doubts that earlier sales growth in the consumer retail market can be maintained when nearly 40 percent of American households have already invested in a PC.

"Nearly everyone already has a computer, so instead of the 20 percent-plus gains we saw last year, we may see a 5 percent gain this year," said Terence McEvoy, retail analyst at New York-based Janney Montgomery Scott. "There's nothing exciting and new for people to buy this year."

If consumers aren't buying new boxes, however, they may still end up buying quite a bit of computer-related purchases in the form of upgrades, add-on devices, and software.

Kimball Brown, an analyst with market research firm Dataquest, cautioned that Thanksgiving should not be viewed as a barometer for the entire holiday season. "The home computer market will be slower than last year, but that's what we've been saying all along. What we've seen with Thanksgiving is that things are doing fine and things aren't falling apart," he said.

McEvoy and Brown are still waiting to see, however, how price cuts and promotions will affect retailers' bottom lines. Best Buy, for example, is hoping to drive sales with payment plans that call for no payments or interest charges until January 1998, while other retailers are knocking down computer prices, a move that will eat into their profit margins.

Manufacturers from Hewlett-Packard to Compaq Computer rolled out several rounds of price cuts even before the turkey settled on the platter this holiday season. Compaq, the top seller of home PCs, for example, cut prices on its Deskpro and ProLinea models by up to 39 percent, while HP sliced prices as much as 21 percent on its OmniBook 5500 notebook PC line.