Analyst: Solid Traffic for Consumer Electronics

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The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.

We conducted channel checks throughout the weekend and noted solid traffic for consumer electronics, although industry trade groups reported that basket sizes were down because of promotional pricing. Traffic at Best Buy appeared to be driven by a high level of promotion, with several gift card offerings resulting in strong traffic. We observed solid traffic at GameStop (NYSE:GME) stores, as many consumers sought consoles that were difficult to find. PS4s were in limited supply at Best Buy, and both PS4s and Xbox Ones were sold out at the several GameStop stores that we visited.

We saw some discounting for recent releases, most notably EA’s (NASDAQ:EA) Battlefield 4. The level of discounting suggests that the price cuts were sponsored by EA; this means to us that sales of Battlefield 4 may be tracking below sales levels for the prior version two years ago, although we observed discounting for the prior version during Black Friday weekend 2011. We believe EA’s Q3 revenue guidance is appropriately low and reflects lower sales.

The Wedbush Video Game Index, our market cap-weighted index of video game companies, was down 13 percent for the month of November due to difficult months for Electronic Arts (down 16 percent), GameStop (down 12 percent), and Take-Two (NASDAQ:TTWO) (down 9 percent). EA was hurt by weaker-than-expected sell-through in October for new release Battlefield 4, according to NPD, and poor reviews for NBA Live 14.

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