Not to talk to our economy’s proverbial pitcher in the middle of a no hitter, but it looks like investors can breathe easy as we head into the holiday season. Consumers are, against all odds, spending. Retail sales in the U.S. were up 7.2% year-over-year in October, according to a Tuesday report from the Department of Commerce. Electronics retail saw a particularly impressive bump at the start of fall, with sales up 3.5% from September and 3.7% year-over-year.
Clearly, consumers like their gadgets. More specifically — at least in this case — people like Apple‘s (NASDAQ:AAPL) iPhone 4S.
The latest model of the Cupertino, Calif.-based company’s famous smartphone has proven a hit with consumers since its Oct. 14 release. When the device was announced at the beginning of the month, there was some concern that it would be seen as too incremental an upgrade over 2010′s model, but sales have shown those fears were unfounded. Apple sold 4 million iPhone 4Ses during the phone’s first weekend on shelves. That the iPhone 4S was successful enough on its own to spur a boost in overall electronics sales is hardly surprising, though. Apple’s mobile devices have been incredible drivers for electronics over the past two years.
Take April 2010 as a prime example. Electronics sales saw a 6.9% year-over-year decline in April 2009 that spring, but electronics retail saw a huge boost come 2010 — a YOY jump of 9.7%, according to MasterCard Advisors’ SpendingPulse report. Investors with long memories will of course recall that April 2010 was the month Apple released its first iPad tablet computer. The high-priced device moved more than a million units in its first month on shelves.
Total retail sales dipped over May and June that year, but electronics sales did see a modest uptick in June 2010 with an increase of 1.3% — which Capital Economics analyst Paul Dales attributed to the iPhone 4 at the time. Of course, the iPhone 4 released on June 24, meaning that just a few days of sales were enough to give the entire segment a jolt.
The iPad repeated its performance in March 2011 when the iPad 2 released, racking up 1 million in sales during its first week alone, giving electronics retail a 2.7% YOY bump.
According to Sterne Agee analyst Shaw Wu, October’s huge iPhone 4S sales haven’t slowed thanks to the popularity of the phone’s voice-recognizing virtual assistant, Siri. Wu expects Apple to sell 26 million iPhones in full before the year is out.
However, the iPhone won’t be the only big gun driving electronics retail through the end of 2011. The iPhone 4S is getting backed up by a number of heavy hitters. Activision Blizzard‘s (NASDAQ:ATVI) indomitable video game series Call of Duty saw its latest entry, Call of Duty: Modern Warfare 3, release last week. The game sold 6.5 million copies in its first day on shelves, racking up $400 million in sales in the process. Amazon‘s (NASDAQ:AMZN) Kindle Fire, a low-priced iPad competitor, released on Monday, and analysts are predicting that Amazon will sell 5 million tablets over the next two months. Add in new BlackBerry entries by Research In Motion (NASDAQ:RIMM), as well as another tablet market entry from Barnes & Noble (NYSE:BKS), and the sector should be plenty armed through the holiday season.
What about the post-holiday slump? Will electronics retail sag once the gift giving season is over and the major, post-iPhone 4S releases have tapered off? Maybe. But expect the segment to be in full growth swing again in March.
That’s when Apple is expected to deliver the iPad 3.