Every year, the holiday shopping season has its “category killers”: companies whose product lists include must-own items ranging from the hottest new technology device to the latest video game. Here are three to watch for 2012.
Every holiday shopping season kicks off on Black Friday – the day after Thanksgiving – in the United States, and every Black Friday brings with it some “must own” and “must gift” items that become the holiday season’s category killers. These products will drive sales – and boost profits – for the lucky companies that bring them to market. In the case of Activision Blizzard (ATVI.O), for instance, its top-selling video games have won the company record sales within the industry every holiday sales period (when new ‘must have’ video games are released) since 2008.
First, of course, is Apple’s (AAPL.O) latest tablet, the iPad mini. One of the worst-kept secrets in the universe (there have been rumblings for so long about a mini version of the iPad that the only questions left revolved around the details), it made its debut last month. Apple sold three million of them on the first weekend it was available, dwarfing analysts’ estimates of sales of two million. During the holiday season, analysts expect Apple to sell a total of 24 million iPads, 8 million of them being the new mini iPad, as tablets continue to take market share away from personal computers. (Shipments of personal computers were flat in the third quarter over the prior quarter, and down 11% on a year-over-year basis, analysts said.) Launching the mini iPad – a smaller version of an already sought-after item, with an attractive price point – appears to have been a smart move, based on sales to date and the trends that have become visible.
Apple’s share price may have come under pressure of late, but analysts remain bullish on the company’s fourth quarter earnings. The I/B/E/S mean estimate calls for the company to report earnings of $13.38 a share for its fiscal first quarter While that would be below the then-record profit of $13.87 a share that Apple announced in the year-earlier period, one highly-rated analyst has a Bold Estimate of $16.00. Such a forecast by an analyst with a track record of being timely and accurate may well signal that the company has been guiding analysts in the direction of being overly conservative.
If the mini iPad can be viewed as the perfect toy for adults on any gift list, the equivalent for children may be the LeapPad 2, recently introduced by LeapFrog Enterprises (LF.N). The device was unveiled in June, along with Leapster GS, a game system, and it is now being advertised by the likes of Target (TGT.N), Wal-Mart Stores (WMT.N) and Toys R Us as the season’s top toy. That, analysts believe, will continue to translate into a strong financial performance. In the third quarter, the company reported net sales jumped 28% to $193.1 million – an indication of continued strong demand for the LeapPad – and, according to the Thomson Reuters I/B/E/S estimates, will result in the company’s net sales hitting $217.6 million in the fourth quarter, a 13% gain. Meanwhile, analysts believe that the company’s guidance has been too conservative; earnings expectations, therefore, remain relatively moderate compared to the potential.
“Call of Duty” is currently the hottest title available on Microsoft’s Xbox, and analysts argue that it could be the biggest entertainment product launch of all time. That’s great news for its developer, Activision Blizzard Inc. Retailers catering to the gaming crowd, like GameStop Corp. (GME.N) have been holding special events at stores to preview the latest in the Call of Duty war simulation franchise, “Call of Duty: Black Ops II”. The release date just before Thanksgiving may help make this a hot seller, as will the fact that others in the “Call of Duty” series have been top-selling games during the same holiday season since 2008 and made up 14% of retail software sales during the 2011 holiday shopping season. Analysts already are bullish on Activision’s fourth quarter prospects: the consensus estimate calls for the company to earn 72 cents a share, up from 62 cents a share a year earlier, while one analyst has a Bold Estimate four cents higher.
Whether you spend Black Friday doing your own holiday shopping or watching the markets respond to news from the retailing front lines, these are three of the 2012 “category killers” to keep a close eye on.
For more insight into this season’s ‘category killers’, please turn to this video.
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