LG Set To Suffer In OZ As Market Softens

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Only days after Sony forecast a 57% profit downturn in profits Samsung and LG are now forecasting a bleak 2009. With the Australian market tipped to do better than other global markets there is concern among major retailers that conditions could deteriorate quickly in the New Year.

David Ackery the General Manager of Electrical at Harvey Norman said “No one knows what is going to happen in 2009. We anticipate that the rise in unemployment will take its toll on sales of consumer electronics goods”   

According to AAP Harvey Norman Holdings Ltd sales for the 28 days to November 2 from its franchised stores fell 0.6 per cent, from the same period in 2007. “Retail margins continue to be under pressure,” the company said in a statement. Last week it said like-for-like written sales for the 28 days ended October 26 had fallen by 3.6 per cent.

Harvey Norman will release further monthly sales figures next week. “By doing this, the company hopes to give guidance as to what is really happening out in the retail market,” it added.

Among the 4 major brands Sony, Panasonic LG and Samsung, LG Australia is set to be hit the hardest say retail analysts, following a disastrous Scarlet TV launch earlier this year  which saw the Company have to take stock back from retailers like Harvey Norman following a $100M dollar global advertising campaign that flopped.

“Scarlet was a disaster not only here in Australia but globally” said Ackery. A senior executive from a major retail group said. “Scarlet was the worst product launch for many years. We are seriously considering whether we need to stock the LG range of TV’s as brands alternate brands like Toshiba are of an excellent quality. They have a good DVD offering and their brand is well known because of their notebooks”.

LG is also facing weak appliance sales in Australia with several retailers telling ChannelNews that they are reluctant to stock the Companies new TV range which includes a new plasma TV with built in PVR.


During the past two weeks senior LG executives have been out on the road meeting retailers to present their new range of products. 

Overseas the Korean Times reports “Samsung faces the biggest-ever challenge in the global electronics industry,” Lee Yoon-woo, CEO of Samsung Electronics said recently. He also said that Samsungs 2009 roadmap hasn’t been decided yet.


However he did say that “Samsung needs to strengthen its global infrastructure and spur growth potential,” in markets like Australia.

 

The world’s No. 1 memory chip and liquid flat-screen maker plans to maintain its current leadership by cutting costs and solidifying supply chain management networks.


“Nurturing new markets and grabbing more business chances are other issues,” Lee said.

Such remarks come after Samsung suffered disappointing third quarter results. On Oct 24, the electronics giant said its net profit for the latest quarter was down 44 percent from a year earlier, as its two cash-cows ? memory chips and LCDs ? were massively hit by the industries’ supply glut and weaker demand.

 The Company has said that they will Samsung scale down its investment in chips next year from seven trillion won this year because there is no immediate sign that the global memory chip market will turnaround.
Meanwhile, Samsung has been cutting its LCD panel production by as much as 5 percent since August to tackle rising inventories and declining demand for pricey TV sets.

LG Group Chairman Koo Bon-moo is set to meet with senior management this week to determine the Companies strategy going forward.

LG reported its first drop in profit in six quarters after a weak won drove up the cost of its foreign-currency debt. Its third quarter net income plunged 93 percent to 24.9 billion.

In order to find a breakthrough to offset falling profits, LG has decided to move to the low-end mobile phone market despite weaker distribution and sales channels unlike Nokia and Samsung Electronics. Its display unit LG Display also reported a 44 percent drop in third quarter net profit as the sluggish economy hit demand for flat panel TVs.

“The recent decision to change handsets policy to low-tier phones is somewhat risky because there is no guarantee of success without selling channels and a stronger brand image. But there isn’t an option for the time being,” said an LG insider.


 

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