CE Retail Confidence Rebounds on Back of Strong Big Box Performance
The Dealerscope CE Retail Confidence Index (DS Index) shot up nearly 14 points heading into March, ending a sharp two-month skid that saw the survey reach its lowest total on record. Consumer electronics retailers checked in with a confidence score of 175.3 for the month of March, an increase that was driven mostly by a strong performance from the Big Box segment of the industry.
Every individual store type segment saw their overall confidence score rise heading into March—a solid sign for the spring months—but Big Box stores in particular had a notable month. The national chain segment saw its confidence score rise nearly 40 points month-over-month to 227.45, less than 4 points shy of the record high that this segment set in December. The increase comes on the heels of Best Buy’s way-stronger-than-expected Q4 financial report, which sent the company’s stock skyrocketing.
All things considered, though, this hasn’t been a great start to 2019 for the retail industry. The DS Index has been tracking down all year, and the March score is no different, coming in more than 10 points shy of the three-year average for the month. This report also comes shortly after the National Retail Federation reported weaker than expected sales performance during the 2018 holiday shopping season—that, despite the fact the association found consumers remained confident about the state of the economy.
The blame for the sluggish performance can be credited to a lot of the same factors that have been mentioned in our recaps over the past several month: political and economic uncertainty, the reverberating effects of the longest U.S. government shutdown in history, and (less in retailer’s direct control) a rather crappy winter.
“The last couple years have been hard to compete with online sales,” one retailer said. “We have still been able to make our sales goals about eight out of 12 times per year for the last three years.”
Products Get Pounded Again
No matter which way you slice it, product categories took it on the chin once again this month. The only glimmer of positivity here is that seven of the 13 categories were up on a month-over-month basis—but that’s about it.
All 13 product categories checked in well below their lifetime average. And, in fact, 2019 averages so far are well below the lifetime average across the board. Not a single category has seen their confidence rating improve this year.
Looking at March in a vacuum, the collective bunch of products had an average confidence rating of 5.91, a slight improvement over the 5.79 in February, but still well shy of the 6.67 lifetime average.
One interesting thing of note with the product segments is the sharp improvement in rankings for the Wearables category. With the various pluses and minuses experienced this month, Wearables (up .24 points MoM) ended up as the highest-rated product in March—just the third time in the history of the DS Index that that has happened. Wearables are coming off of a couple of strong months in terms of sales as well, and they were cited by Best Buy as one of the company’s largest drivers of growth during their most recent quarter.
Interestingly, the increase in overall confidence for the DS Index came in the same month that retailers reported some of the weakest sales goal performance in the survey’s history.
We’ve seen the split between sales made and missed sales goals come close in the past, but January sales sunk to a 50-50 split for the first time ever. This also marked the third month in a row that the percentage of retailers who missed their sales goal increased.
While the industry as a whole has struggled, this was a great month from the Big Box perspective, with not a single national chain reporting a missed sales goal for the month of January.
Looking ahead, we anticipate that the early year struggles will continue to see a rebound as we move into spring. The improving weather alone should give retailers and installers the ability to get on top of their projects. From a political and economical standpoint, tax returns should start coming in at a quicker clip in the coming weeks, which opens up some disposable income for consumers; and there’s some hope on the tariff negotiation from with the Trump Administration delaying any further increases indefinitely as trade talks with the Chinese appear to be progressing just fine.