Even with concerns about consumer spending plaguing the retail sector, digital TVs are gold.
on Wednesday became the second major consumer electronics retailer to post solid second-quarter results, powered by the massive product cycle that is taking place in TVs as consumers replace their old-school boob tubes with giant flat screens with high-definition capabilities.
Its larger rival,
, kicked things off
last week, posting a 22% increase in second-quarter earnings that topped Wall Street's estimates.
Circuit City's earnings surged to $10 million, or 6 cents a share, from $1.3 million, or 1 cent a share, last year.
Excluding a $1.3 million loss from discontinued operations in the latest quarter, earnings were 7 cents a share.
Analysts, on average, had expected earnings of 5 cents a share, according to Thomson First Call.
Shares of Circuit City recently were up 39 cents, or 1.5%, to $26.68.
The retailer's sales in the quarter rose to $2.84 billion from $2.56 billion a year earlier, while same-store sales surged 8.3%. Same-store sales at Best Buy were up 3.7%.
Circuit City now forecasts 2007 sales growth of 9% to 11%, compared with its previous range calling for a 7% to 11% rise.
The company also raised its domestic segment same-store sales growth projection to 7% to 9% from a prior view of 5% to 7%.
On a conference call with analysts, Circuit City CEO Philip Schoonover said the same-store sales increase resulted from a higher average ticket of sales, which resulted primarily from sales of flat-panel televisions.
"We did all this against the backdrop of an increasingly volatile consumer situation" and an intensely competitive atmosphere, said Schoonover.
He said the quarter started off strong, with sales coming in far higher than the company expected, but as the quarter progressed, growth moderated and competitors ratcheted up promotional pricing and advertising.
While TV sales remain the company's main sales driver, the category posted only double-digit comp increases for the quarter, a slowdown after Circuit City posted six consecutive quarters of triple-digit growth.
"We're up against very big increases from the same time last year," he said. "We are prepared to come back with an aggressive strategy to compete" in the back half of the year.
The product cycle for digital TVs remains vibrant on the consumer electronics retail front, but with the housing market showing a major dropoff, some investors are wondering how long the trend can continue.
As people stop buying new houses, logic holds and they would also stop decking their walls with new flat-screen TVs.
But with prices dropping for the new generation of TVs, analysts say the steady flow of customers looking for an upgrade is still flooding the market.
"The data on
the digital TV product cycle remains very compelling," says Colin McGranahan, analyst with Sanford C. Bernstein & Co.
He sees growth in the TV business as being largely impervious to the macroeconomic concerns surrounding consumers.
The Consumer Electronics Association forecasts that 36% more digital TVs will be sold in the U.S. in 2007 compared with 2006.
The trade group predicts that total sales of the new generation TVs will increase 6.5%, with the average price for each set declining 21% to $819.
"When prices come down for these items, demand increases as more people decide they can afford them, and that is good for retailers," Schoonover said.