Durable firms brace for rough ride ahead

The road ahead for consumer durable companies appears tough with New Year sales not ringing the cash registers as expected.

Barring LG and Samsung (the number one and two players respectively) who say they saw brisk sales in categories such as refrigerators, washing machines, microwaves and flat panel TVs, most other players had nothing positive to indicate about the last week of the year, when consumers step out to make purchases.

Traditionally, the Christmas and New Year periods are big down-country, with most consumer durable players looking forward to it for incremental sales.

Thanks to the momentum it saw, LG executives say the overall sales growth in the month of December was 44 per cent in home appliances and over 20-25 per cent in flat panel TVs.

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A Samsung spokesperson says the growth in home appliances, flat panel TVs, smartphones and tablets was in double-digits in the month of December. She did not indicate the precise numbers.

While LG and Samsung had reason to cheer, the mood was sombre at companies such as Videocon and Godrej Appliances. Executives at both companies said sales momentum was weak last month.

"It was nothing great," says Pradeep Dhoot, president, Videocon Industries. Kamal Nandi, vice-president (sales & marketing), Godrej Appliances says the excitement preceding Christmas and New Year was missing.

"The momentum simply wasn't there. If this is any indication, I don't expect the new year to be very great," he adds.

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With the rupee touching the 53-mark against US dollar following a brief pause when it hovered at the 51-52 levels, consumer durable companies are once again preparing to take up prices.

LG has already taken the lead by increasing prices by 3-8 per cent in both home appliances (includes products such as refrigerators, washing machines and microwaves) and home entertainment (LCD/LED TVs, home theatre systems etc).

This price hike is effective January 1, and will be LG's fourth in four months.

While most other players have taken up prices only twice in four months, LG's latest round is likely to see a reaction from rivals. The expectation is that Samsung, Videocon and Godrej will increase prices in the next one month or so to deal with rupee depreciation.

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Cumulatively the price hikes taken by most consumer durable companies in the last four months has been to the tune of about 7-8 per cent.

The rupee, in contrast, has depreciated by 20 per cent at the same time. Companies say that they are wary of taking up prices too much lest they drive away consumers.

In calendar year 2011, the growth in consumer durables as a whole was just nine per cent as opposed to about 14-15 per cent in 2010.

Categories such as air conditioners degrew thanks to adverse weather conditions.