Shares in Harvey Norman and JB Hi Fi rose yesterday after David Jones raised its full-year profit forecast to between 10 and 12%. However consumer electronics retailers could be facing major stock shortages due to global manufacturing cutbacks.

During the past week several distributors have told ChannelNews that they are struggling to get stock after "massive global cutbacks" due to poor market conditions in the USA and Europe.

Geoff Mathews the Marketing Director at Convoy the distributor of brands like Monster Cable Harmon Kardon and JBL said "Stock supply is very tight. While the Australian market has remained buoyant overseas markets have crashed and manufacturers have significantly cut back on the amount of stock they manufacture as a result priority is being given to markets other than Australia".

A Melbourne based supplier of sound and iPod attach gear to both Harvey Norman and JB hi Fi as well as the specialist channels said "The issue of supply is becoming serious. Vendors have cut back so far in some cases up to 50% on what they were producing in early 2008 that we are now struggling to get any stock".

"The Australian market is looking good however if stock is not going into stores it will hurt both retailers and distributors" they said.

Earlier this year mass retailers lost millions in sales due to a lack of flat panel TV stock with several retailers only getting new stock in May. 
In Australia the overall growth in the consumer electronics has been strong according to GFK who said that the market grew by 12% in the first quarter. Insiders are tipping 16% for the second quarter due to improved TV supply, notebooks and demand for digital camera in particular SLR camera's that grew by 79% up to May 2009.

"Mass retailer in the consumer electronics market, are expecting good growth this year due to tax cuts and Federal Government incentives and a rise in consumer sentiment" said a Merrill Lynch analyst.

 David Jones now expects full-year profit after tax to rise by 8-12 percent for the year to June, up from 0-5 percent forecast previously, due to a strong trading performance in May and June.

"David Jones is a barometer for the discretionary spending sector so if David Jones is in itself experiencing some good conditions, I don't see why the others won't get some benefit too," said Lucinda Chan, division director at Macquarie Equities.

"The government stimulus is working quite well. People are going out and people are spending. Hopefully this would be a sign that markets are turning the corner," Chan said.

"Whilst we still have to trade through July to complete the fourth quarter and we are not planning to repeat the clearance of excess inventory undertaken in July 2008, our trading to date has been pleasing and well above our expectations," David Jones Chief Executive Mark McInnes said.