Video Games Make Awesome Unemployment Gifts

xbox pillow guy

Citi Investment Research's Kate McShane battled the crowds Froday to get some on-the-ground Black Friday research in New York and New Jersey.

Apparently, Black Friday crowds were overall larger than last year.

She noticed particular strength at Best Buy, where video game consoles were shoppers' favorite large ticket purchase.

Overall Traffic Improvement Y/Y Could Drive Upside — Traffic was notably higher versus last year in most of the retail locations we visited and could drive upside to comps, margins and valuations, in our view. We observed the strongest traffic at Best Buy, with long lines at store opening and registers, and better than expected traffic at Office Depot. Home furnishings retailers had relatively lower traffic, likely due to significantly fewer promotions.

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[Best Buy] By the time doors opened at 5am, traffic was very strong with an estimated ~1,000 shoppers in store and despite a generally organized environment with plenty of salespeople on hand to help shoppers, there was some difficulty navigating shopping carts through the crowds. Police were also on hand to catch shoppers who were selling limited item product tickets for $40 (for items where they offer 5 or 10 per store, for example).

Main displays featured Dynex TVs, Nintendo Wii bundles, PlayStation3 gaming consoles, Bose Sounddock music system, and Sony and Samsung LCD TVs. There were approximately 150 shoppers already in line to check out by 5:30am (growing to about 250 by 6am), with an average of 3 large ticket items on hand or 15 small ticket items on hand (DVDs,music CDs etc.). The most popular purchases appeared to be led by the PlayStation3 120GB video gaming consoles for $299.99, followed by the Microsoft XBox 360, Nintendo Wii gaming console bundle with controller, Samsung 32” and 40” LCD TVs, Sony Bravia 32” LCD TV, Samsung Blu Ray player, music CDs and DVDs, and Dynex 32” TV for $299.99. About half of the Dynex inventory appeared to have sold through by 5:40am. Shoppers did not appear to be buying Rock Band 2 or Beatles Rockband. Gift cards were also displayed up near cash registers; however, no one appeared to be buying them.

While the above is just anecdotal evidence from New York and Jersey, it makes a lot of sense.

Today's Holly-Wood-beating video games offer a lot of entertainment bang for their buck. Especially if cash-strapped consumers choose to stay home more often and save money. Don't forget that they are also a great way to pass the time and keep your spirits up should you be unemployed.

Thus Citi's recent retail report was decent news for Best Buy (BBY), and also game producers Electronic Arts (ERTS) and Activision (ATVI). It was good news for console makers Sony and Microsoft as well, but given the subsantial size of their other businesses, console sales are less-likely to move their profit needle.

(Via Citi Investment Research, "Black Friday 2009", Kate McShane, 27 November 2009)

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