Flat Panel TV Sales Strong, Gap Grows Between Wholesale/Retail Pricing

The market for televisions grew 24% year-over-year in September, according to a report today by Morgan Stanley retailing analyst Gregory Melich. Flat panel U.S. retail sales growth was 74% versus last year, accelerating from 70% growth in August. However, he says that “anecdotal evidence suggests October was at a weaker growth pace” than September, but still still on track for Q3 estimates.

Melich says a widening gap between wholesale and retail TV pricing suggests healthy margins for the consumers electronics retailers. This month’s data should be good news for Best Buy (BBY) and Circuit City (CC) shares, he says, both of which have rallied strongly since August. A further advance, he says, “is likely to require sales and earnings surprises,” with the two companies “at a premium of 15%-30% to other hardline retailers.”

Melich notes that retail ASPs on plasma TVs fell 21% year-over-year; for LCD sets, ASPs increased 5% year-over-year and 2% sequentially, in part reflecting the introduction of sets with larger screens.