Flat-Screen Slump Means Trouble Ahead For Best Buy, Circuit City

It'll take more than NFL kickoffs and the season premiere of "Grey's Anatomy" to goose sales of flat-panel TV sets this quarter. A report from Deutsche Bank's Equity Focus Group says that sales for the flat-screen sets continue to be sluggish, with consumers a little too strapped to go shopping for pricey electronics.

"Flat-panel shipment dollars have decelerated in the second quarter," the company says. "In turn, we believe inventories are creeping up and price declines have picked up steam," possibly impacting second-quarter results at both Circuit City and Best Buy.

Circuit City is especially vulnerable, the analysis says. "Circuit City is losing share in a weak environment, and we are forecasting a decline of 4% domestically in comparable-store sales. Company-specific risks include market share losses on the service business, weak real estate and low employee morale."

Deutsche Bank says it continues to rate Best Buy as a "buy," because it continues to gain market share, despite the risks of increased focus on consumer electronics from mass merchants such as Wal-Mart, which has made a big push into higher-end electronics.

Separately, Best Buy announced the opening of eight stores in Pueblo, Colo.; Las Vegas; York, Pa.; Chesterfield, Mich.; Buffalo, N.Y.; Lexington, S.C.; Meridian, Miss., and Perrysburg, Ohio.



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