Product and Service

Companies included in video& music store sector in video &audio goods and service industry primarily operate specialty stores and websites of eCommerce selling entertainment products, including trend, video, music, electronics and related products in the United States.

 

Demand for Product and Service

As indicated by the typical company data, the demand for physical media of video and music content has been weak and declining due probably to changes in consumers’ way to access them.

The Sector

Sector’s Current, Trend, Causes behind trend, and Future

Current and Trend
  1. Generally, the demand for physical media of video &music content has been very weak and continuously declining since 2016.
  2. The decreased demand results in largely declining merchandise margin because of markdown of price of products.
  3. Companies have been widely closing stores of poor performance in order to lower operating expenses.
Causes behind the trend
  1. Changes (from physical media to digital) in consumers’ way to gain and access content of video and music behind the increasing accessibility to internet may be the major reason for changes in video and music retail industry.
  2. The slowing down traffic of mall may contribute the situation due to declining random purchasing.
Industry Future
  1. As downward trend in this industry continues, we may see continuing decrease in profits of stores and in number of stores closed.

Numbers

General Financial Performance of Companies In the Sector

It seems that demand for in-store video and music products has been significantly declining in the past several years as indicated by the largely decrease in same store sales of some typical store in this sector (about 9% annual declining). But in store demand for lifestyle products seems to be still strong, which may imply that slowing down mall traffic may not be the only reason for store sales declining in the past several years and the type of media and sales channel may be.
The large decrease in price (markdown) has significantly hurt profitability of those stores while impact of deleveraging as a result of decreased sales has been offset by stores closure. The typical company in this sector has an about 32% gross margin in 2018 with a SG&A as percentage of sales of about 38% and operating margin of -6%.
The typical enterprise price/sales ratio is 0.1 (12 months trailing).

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