Tax refunds, Earth Day promotions and appliance-rebate programs
funded by the U.S. government are converging this week in several
states to boost sales for retailers.
The big-ticket nature of appliances, which are typically five to
10-times the average sales receipt at Home Depot Inc. (HD), Lowe's
Cos. (LOW) and Best Buy Co. (BBY), and the category's importance to
overall sales mean the retailers could benefit meaningfully as
shoppers look to take advantage of specials, according to
analysts.
Several state programs doling out $300 million in federal
stimulus funds for consumers to buy energy-efficient appliances
have tapped out their rebates within hours. About 30,000 people
exhausted Arizona's $6.2 million program in three and half hours
Monday, and another 30,000 people were put on a waiting list, said
state Department of Commerce spokesman David Drennon.
Some stores even saw shoppers who were unable to secure rebates
buying anyway. Pacific Sales Kitchen & Bath, a unit of Best
Buy, opened its Chandler, Ariz., store on Monday, when it's usually
closed, because of strong customer interest.
"It was just an exciting day to sell appliances," said store
manager Krystyn Moroz. "It's not just people coming to check out
appliances. People were serious and were saying, 'We're ready to
go.'"
Last month Best Buy reported a 6.5% increase in fourth-quarter
U.S. comparable-store sales of appliances, which represented about
4% of total U.S. sales across its brands.
Texas, with one of the largest programs across the U.S., gave
out all of its reservations in one day for $23.3 million in
rebates, which must be used on purchases between April 16 and April
25.
Conn's Inc. (CONN) holds about 5% to 7% of the state's market
share in appliances, so it could add as much as a couple of
percentage points to its same-store sales in the first quarter,
Jefferies analyst Dan Binder said in a recent note.
Other state programs look for similar scenes.
"Our expectation is that the demand will be greater than the
supply," said Judd Slivka, a spokesman for the Missouri Department
of Natural Resources. Missouri's program begins offering rebates
through retailers April 19, but the state is also exempting
qualified purchases from the state's 4.225% sales tax for a week.
Some local governments, too, are waiving taxes on certain
appliances.
Florida's $17.5 million lottery-like program, which provides 20%
rebates on certain appliances, is expected to start and end on
Friday.
Retailers declined to comment specifically on how much business
they've gained or hope to gain, but many are running their own
discounts or promotions, such as free delivery, on top of the
state-administered rebates. The timing of some programs coincides
with people getting tax refunds, which the IRS has said are
averaging about 10% above last year's refunds.
Home Depot plans to unveil some special promotions around Earth
Day on April 22 as it looks to leverage what the states are doing,
said Ron Jarvis, vice president of environmental innovation. The
world's largest home-improvement retailer is the third-largest U.S.
appliance dealer after Sears Holdings Corp. (SHLD) and Lowe's,
generating about 6% of sales from appliances.
So far, Home Depot has "seen some very positive movement" in its
appliance business when the various state programs have begun, and
the retailer expects it will get its fair share of sales, Jarvis
said.
Similarly, Lowe's is "seeing some success" in markets where the
state programs have begun, said Craig Weber, vice president of
merchandising. "We're certainly seeing some positive momentum," he
said.
Appliances represent about 10% of Lowe's sales and are the
home-improvement center's largest product category.
J.P. Morgan estimates Home Depot's earnings per share this year
could see a 2.5% lift from sales tied to the U.S. subsidy, with a
5% lift for Lowe's earnings and a 3% increase for Best Buy.
Sears, which generated about 15% of fiscal 2009 revenue from its
home-appliance business, has been opening stores early and keeping
some open late in concert with the launch of various states'
programs.
"In general the customer interest is directly tied to how strong
the offer is in a given state," said Sears spokesman Larry
Costello. "It varies by state but we have had stores where we've
had lines."
U.S. appliance sales, while still weaker than a year ago, have
been slowly showing signs of a turnaround in recent months as the
housing market improves a little and as consumers get a little more
confident in their own outlook, NPD Group analyst Mark Delaney
said.
Unit and dollar sales of dishwashers rose about 6% in the 12
months ending in February, the most recent month for which data was
available, compared with a year earlier, according to the
consumer-research firm. And other appliance categories are posting
smaller year-over-year declines than they were last year.
Overall, appliance sales decreased 2.6% in dollars and fell 3.2%
in units in the 12 months ending in February.
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145;
maryellen.lloyd@dowjones.com
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