Results: UK Electrical Retails

Clear Guidance on Sector Trends

Kesa Electricals plc interim management statement for the period 1 February 2007 to 18 July 2007 (Published 26th July 2007): Total Group revenue increased by 7.1 per cent in local currency, up 4.2 per cent on a like for like basis. This good performance was driven by stronger than anticipated sales in the second quarter with continued demand for digital products, against the high comparatives of last year, and improved sales of white goods.

Jessops plc Interims and Strategic Review - Interim Results for the 26 Weeks to 1 April 2007 (Published 21st June 2007): The Strategic Review addresses the fundamental issues that face Jessops in this challenging market. Interim results in line with guidance given on 28 March 2007; Total sales of £178.9m ( 2006: £177.8m); Like for like sales down 2.8% (2006: increase 2.3%);

The last twelve months have been strong for UK electricals retailers, and flat panel TV sales have ensured that electricals revenue growth was anything but flat. Indeed, a YouGovExecution (YGX) survey undertaken in August 2006 found that UK ownership of HDTVs was expected to double in the following six months. The market leaders are of divided opinion, however, on the prospects for the current financial year, and it remains unclear whether sales of consumer electricals – especially flat screen TVs – will be as buoyant in 2007.

In April 2007, YouGovExecution (YGX) conducted a nationally representative survey of 2,700 UK consumers - using both on-line and CATI (telephone) polling methods - to gain insight into purchasing intentions and attitudes towards the market's leading electricals retailers. The research also provides insights into the implications of increased channel competition – primarily from supermarkets and on-line retailers – on traditional specialist electronics retailers. Although general and specialist household names such as Currys, Comet and Argos have traditionally dominated the market, supermarkets and on-line retailers have started to nibble at the incumbents' market share.

This research tackles the following issues:

• What is the general outlook for the consumer electricals sector in 2007? Which categories are likely to do well? Which products are likely to see strong growth and how strong is consumer purchase intent?
• What are the principal considerations for consumers when selecting a retailer for their electricals purchases? Are consumers loyal to particular retailers, do they always look for the best price, is customer service important?
• How important is “specialist” advice in the decision to purchase electricals? Are consumers reliant on in-store/salesperson advice, or independent reviewers?
• What is the penetration and growth of the on-line channel? Which online retailers have the strongest brand equity? Why do/don't consumers purchase electricals on-line? Is on-line ‘pure-play' a stronger proposition than a multi-channel offering?
• Are customers more comfortable buying certain items on-line and others in-store?
• What is the current penetration for flat screen TV panels? Do those consumers that have not bought flat screen TVs intend to do so within the next twelve months?

Example Chart

YouGovExecution (YGX) concluded that there were healthy signs for the total electrical sales – driven largely by product innovation and falling prices among brown goods. White goods were seen to be a largely stable category, with no real recent technical innovation and relatively consistent year on year pricing. Despite this, the report identified this category as one in which Comet was set to experience improved rates of sale.

Falling prices and the improved capabilities of the current range of digital cameras did not appear to be having a large impact in persuading consumers to upgrade their old cameras. Consequently YouGovExecution (YGX) saw clear signs of a decline in sales volumes and sales value of digital cameras and predicted a tough trading environment for Jessops – which became evident in Jessops interim results.