Forecasting 101: Creating a Holiday Forecast

1
Forecasting 101Creating a Holiday Forecast

• Sean Wargo, Director, IA
• Shawn DuBravac, CFA, Economist

2
The Docket

• Orientation
• Economic Factors
• Industry Performance
• Sentiment and Plans
• Contributing Categories
• Questions

3
Survey Methods

• CEAs 13th Annual Holiday Survey
• Random national telephone survey to 1,019 U.S.
  Adults
• Fielded in late September, 2006
• Focus CE gift intent during the 2006 holiday
  season

• CEAs 3rd Annual Youth Holiday Survey
• Random national telephone survey to 550 U.S.
  Teens aged 12-17
• Fielded in late September, 2006
• Focus CE gift intent during the 2006 holiday
  season

4
The Economic Outlook

• Arguments Presented By
• Shawn DuBravac, CFA

5
Economic Outlook
35
18
(Base Total U.S. Households)
6
What are the Pressing Issues?

• Is the real estate slow-down hitting consumer
  spending?
• What about gasoline prices?
• Is debt the stopgap? Can it last?
• How about wages? Are consumers falling behind
  inflation?

7
Real Estate is Slipping
-12
Source NAR
8
Gnawing at the Economy
Source US Department of Commerce
9
Equity Continues to Grows
Source Federal Reserve
10
But it Wont Hurt the Shopper
11
But it Wont Hurt the Shopper
12
Gas Prices are Falling
25
Source US Department of Energy
13
Even though Demand is High
Source US Department of Energy
14
Creating a Positive Wealth Effect
Source US Department of Commerce
15
Household Debt Hasnt Changed
Source US Department of Commerce
16
Delinquency Rates Remain Low
Source Federal Reserve
17
Income is Outpacing Inflation
Source US Department of Commerce
18
Growing Net Worth
Source Federal Reserve
19
Leading to strong spending
Source US Census Department
20
Drilling Into the CE Holiday

• Arguments Presented By
• Sean Wargo

21
CE Industry Growth
6.7
9.2
10.2
Source CEA Sales and Forecasts, 7/06
22
AV Quarterly Trends
13
YTD Trend
Units -1.6 Dollars 20.9
23
A/V Wholesale Price Trends
23
Source CEA Shipment Data Reports
24
Gift Spending Plans
28
22
(Base Total U.S. Households)
25
Holiday Spending Composition
(Base Total U.S. Households)
26
CE Gifts Account For

• 24 of overall gifts (vs. 21 last year)
• 195 per household (vs. 154, up 27)
• 21.7 billion in holiday spending
• Approximately 50 of Q4 CE volume

27
What do Consumers Want?
The Kids
Mom and Dad

• Toys (2)
• Video games (1)
• Money (3)
• Clothes (4)
• MP3 Player (6)

• Clothes (2)
• Peace/Happiness (1)
• Money (5)
• Computer (4)
• Digital Camera (14)

(Base Total U.S. Households)
28
Or Do They?
The Kids
Mom and Dad

• Toys (2)
• Video games (1)
• Money (3)
• Clothes (4)
• MP3 Player (6)

(Base U.S. Teens)
29
The Adult CE Wishlist
30
The Teen CE Wishlist
31
Consistent CE Gift Buyers
(Base Total U.S. Households)
32
Consistent Breadth of Interest
(Base U.S. Households Buying CE Gifts)
33
More CE Gifts
Avg. Number of CE Categories Per Buyer 2002
6.3 2003 7.2 2004 6.8 2005 7.6 2006 8.8
(Base Total U.S. Households)
34
The Top 10 CE Gifts
2005
2006

• Digital Camera
• Cellular Phone
• Portable MP3 Player
• Video Game System
• Portable CD Player
• Carrying Case
• Cordless Phone
• Addl Memory for Camera
• Notebook/ Laptop PC
• Clock/ Table-top Radio

• Portable MP3 Player
• Digital Camera
• Video Game System
• Cordless Phone
• Home DVD Player
• Portable CD Player
• Game Peripherals
• DVD Recorder
• Cellular Phone
• Notebook/ Laptop PC

(Base U.S. Households Buying CE Gifts)
35
The Hot Gift Corner
53 Among Teens
Revenues 48 Contribution 6
(Base U.S. Households Buying CE Gifts)
36
The Hot Gift Corner
47 Among Teens
Revenues 26 Contribution 12
(Base U.S. Households Buying CE Gifts)
37
The Hot Gift Corner
49/59 Among Teens
Revenues -62 (CD), 45 (MP3) Contribution 4
(Base U.S. Households Buying CE Gifts)
38
The Hot Gift Corner
52 Among Teens
Revenues 14 Contribution 9
(Base U.S. Households Buying CE Gifts)
39
The Hot Gift Corner
Revenues 8 Contribution 3
37 Among Teens
(Base U.S. Households Buying CE Gifts)
40
The Hot Gift Corner
Revenues 16 Contribution 16
(Base U.S. Households Buying CE Gifts)
41
Constructing the Estimate

• A Group Effort

42
Group Forecast Growth
Source CEA Sales and Forecasts, 7/06
43
Factors Summary

• Confidence On the Rebound
• YTD CE Result Revenues up 21
• Overall Gift Plans Up 9
• Planned Spending on CE Up 27
• Number of Products/People Higher

44
Holiday Shipment Growthb
45
?Why?
Growing Demand For Current Innovation Tremendou
s Industry Growth But for how long?
46
Questions?

• Sean Wargo
• seanw_at_ce.org
• 703-907-7083

Shawn DuBravac, CFA sdubravac_at_ce.org 703-907-4305
47
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48
Thank You to Our Sponsors
49
The Hot Gift Corner
Revenues -15 Contribution 1.5
(Base U.S. Households Buying CE Gifts)
50
Headline GDP Suggests a Slowdown
Source Department of Commerce