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The first full trading week of 2014 was a disaster for retailers specializing in consumer electronics. Niche leader Best Buy (NYSE: BBY ) surrendered 7% of its value last week, and it was the lucky one. Conn's (NASDAQ: CONN ) slipped 9%, with RadioShack (NYSE: RSHCQ ) and hhgregg (NYSE: HGG ) plunging 20% and 22%, respectively, on the week.
It was the biggest loser of the week -- hhgregg -- that triggered the industrywide sell-off. The 228-store chain offered up a shocking preliminary read of its holiday quarter. It sees revenue for the fiscal third quarter plunging 11.6% to $707.1 million, fueled primarily by an 11.2% slide in comps.
It's actually even uglier than that on the consumer electronics side, since hhgregg experienced positive results with its appliances and home products. Comps for its consumer electronics plunged 19.7%, with computing and wireless falling by an even crueler 24.5%.
Consumer electronics and wireless happen to be the bulk of RadioShack's business, so it's easy to see why those investors bolted on hhgregg's news. Conn's and Best Buy toil in the same areas where hhgregg experienced strength, but if the housing boom wasn't enough to save hhgregg, it's not likely to bail out Conn's or Best Buy.
The sell-off comes after a highly rewarding year for investors who took a chance on these retailers. Best Buy's stock more than tripled last year. Conn's more than doubled, and hhgregg nearly doubled. RadioShack was the relative laggard of the bunch with its mere 23% ascent -- and the bad news there is that it's now exactly where it was at the end of 2012.
Last year's rally was clearly too ambitious. Best Buy has made great strides in its turnaround efforts, but analysts still see sales and earnings per share declining in the fiscal year that ends later this month. Why the heck did the stock climb 237% in 2013?
Conn's is the only retailer of the four that's growing. The other three are all eyeing declines on both ends of the income statement for the fiscal year that either ended last month or will be ending this month.
In retrospect, RadioShack had no business moving higher last year. Sales continue to plunge, and losses continue to widen. Even closing out last week's dive at $2.12 -- rubbing out its 2013 gains to the penny -- is too generous.
Conn's, and to a lesser extent hhgregg and Best Buy, will hold up with their strong appliance and home products, but there's a problem that needs to be addressed as folks buy wireless products directly from carriers and PCs, TVs, and other consumer electronic staples continue to lose their appeal for brick-and-mortar shoppers.
Last year was a great time to invest in these chains. It's not likely to be a repeat performance in 2014.
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