Appliance Sales Are Actually a Retail Industry Bright Spot

Despite some high-profile stumbles, appliances outperform

Author: Andria Cheng

March 9, 2017

The headlines surrounding appliance sales were bleak this week, with hhgregg filing for bankruptcy protection and Sears, once the appliance king, reporting dismal sales overall and in the appliance category specifically.

In fact, though, appliance sales have been one of the industry’s bright spots, helped by an improved housing market and consumers’ growing interest in both energy-saving and internet-connected smart home appliances. Euromonitor data showed US consumer appliance sales last year rose 5.6% to $69 billion.

“We continue to see categories like appliances gain traction in the market,” said No. 1 U.S. home-improvement retailer Home Depot CEO Craig Menear in a recent earnings call.

Home Depot and other retailers including Lowe’s, Best Buy and JC Penney have all called out appliances as a sales outperformer in recent earnings calls. All of them promised to make more strategic investment there.

Sears, on the other hand, on Thursday reported a 12.3% decline in fourth-quarter same-store sales at its namesake US locations, leading to a 9.3% drop for the year, with the company blaming appliances as a key culprit.

Other retailers are looking to poach Sears’s shoppers.

“Customers are spending a disproportionate amount of their wallet on beautifying their home,” said J.C. Penney CEO Marvin Ellison recently. “We share over 400 malls with a struggling retailer that was once dominant in this category and we have some in-house talent that understands this space really well.”

Penney plans to open 100 new appliance showrooms early this year after seeing strong sales performance in over 500 of them, Ellison said. Stores with features like the showrooms have outperformed other locations, he said.

For brick-and-mortar retailers seeking to drive traffic to stores, appliance displays are a strong attraction. A September PricewaterhouseCoopers survey showed that the majority of internet users would still prefer to buy appliances in store vs. online.

Sears, once the largest U.S. seller of appliances and known for its Kenmore line, has lost ground. The company for years has been criticized for not investing more to spruce up its stores at a time when shoppers have more choices than ever and are increasingly less brand loyal.

“Weakness at Sears in the home appliances and tools categories provides JCP an opportunity to gain share as the retailer continues to refresh its home initiatives,” said Cowen & Co. analyst Oliver Chen in a note on Thursday. “Poor trends at Sears could be gains at JCP.” 

Sears gave up its No. 1 spot to Lowe’s three years earlier, while Home Depot overtook Sears last year to take the No. 2 position, according to a June report from Twice magazine, citing data from The Stevenson Company. Best Buy holds the No. 4 spot.

Lowe’s said its fourth-quarter comparable appliance sales rose in the high-single digits. It’s pushing appliance sales both in store and online, with such initiatives as allowing customers to have 360-degree views of appliances online. In stores, it’s putting related appliances next to kitchen cabinets and counterparts to help increase sales.

Sears isn’t the only one that’s ceding share. Appliance and electronics retailer hhgregg, which counted on appliances for 53% of its sales in fiscal 2016, filed for bankruptcy protection this week. Best Buy, the largest U.S. electronics retailer, is expected to gain some share there.

“We continue to gain share” in appliances and other categories, said Best Buy CEO Hubert Joly on a call recently. “We will pursue growth around key product categories, including emerging product categories like connected home and appliances where we believe we can continue to grow share and revenue.”