Wedbush finds no shortage of in-store inventory for consumer electronics. And it says Roku products are in strong demand.
This was supposed to be the holiday season where supply-chain woes hurt sales.
For some product categories, inventory might indeed be in short supply, but not in consumer electronics, according to a new commentary from Wedbush.
Analysts from the investment firm found that inventory at big-box retailers was “much stronger heading into Black Friday than we anticipated, given rampant supply-chain constraints and component shortages.”
Best Buy (BBY) – Get Best Buy Co. Inc. Report staff told the Wedbush analysts that they had enough inventory to replenish their store shelves with gaming and PC peripherals as needed.
The employees of the Minneapolis electronics retailer were surprised, however, that those items were not selling as well as they had expected they would.
“We think this was driven by a few factors,” the Wedbush analysts said.
“First and foremost, people are buying more consumer electronics online than in the past; second, without the console hardware refresh or compelling new games, we think there is less interest in upgrading headsets this year; and third, chip shortages have limited new gaming PC sales, and we think fewer committed gamers will upgrade their peripherals before they are able to build or update their PCs.”
At last check Best Buy shares were trading off 1.8% at $112.68.
Roku Device Demand Strong
Heading into the holiday season there were some concerns that Roku (ROKU) – Get Roku Inc. Report would not be able to meet demand for its streaming devices. That did not appear to be the case, according to Wedbush.
“Connected-TV inventory was lighter than in prior years, but much higher than we had anticipated, and sell-through appeared strong for CTVs and for Roku Players,” the analyst note says.
“In the stores we checked, Roku players were in high demand, particularly the lower-end models and particularly the discounted 4K streaming stick.”
Roku, it should be noted, sells its devices at low (or no) margins in order to drive customer acquisition. In its most-recent quarter, Roku made a $378.5 million profit on its platform while losing $14.6 million selling devices.
At last check Roku shares were off 2% at $112.50.
Direct-to-Consumer May Threaten Retailers
A number of consumer electronics companies have become better at selling directly to consumers.
That’s a trend that has happened in other areas of retail, with Nike (NKE) – Get Nike Inc. Report being a leader in pulling its brand from second-tier retailers while investing heavily in increasing its ability to sell directly.
Wedbush’s analysts say the pandemic has accelerated this trend in the consumer electronics space.
“Our covered companies are all in the early stages of this, but may benefit as the gross margin upside from direct sales offsets some of the pressure from higher shipping costs this year,” they wrote.
“GoPro (GPRO) – Get GoPro Inc. Report is chief among our companies benefitting from this strong push toward direct sales.
“Its Black Friday period sales were more compelling on its direct site, and it appears to have invested less this year in its retail presence with less shelf space in some cases and generally lower inventory levels across the stores we checked.
“We think Logitech, (LOGI) – Get Logitech International S.A. Report Corsair (CRSR) – Get Corsair Gaming Inc. Report and Turtle Beach (HEAR) – Get Turtle Beach Corporation Report are making inroads with their direct sales, but more slowly.”
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