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Bang & Olufsen announces preliminary financial results for the third quarter

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Jeff
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Jeff posted on Tue, Mar 26 2019 4:10 PM

Submitted without comment, for now:

B&O Report

“The results we have delivered in the third quarter are clearly not
satisfactory. We have overestimated the speed at which we have been able to
drive the change towards a more retail-led and demand driven sales and
distribution network. Combined with the unexpected decline in TV revenue in
the quarter, this has led us to reassess our outlook for the year,” says CEO Henrik Clausen.

Jeff

I'm afraid I'm recovering from the BeoVirus. Sad

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seethroughyou
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I completely agree with Jeff above. 

 

A B&O TV was perhaps 2-4 times the cost of a good Sony or Panasonic in the 80s and 90s. You paid the price because it was just in reach and the integration, reliability and functionality was worth it. B&O TVs now cost 10 times. By raising prices to Oligarch levels, they lost their working and middle income folk - what a disastrous strategy. 


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BeoFrederic
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My earlier question about the extent of Shape sales follows Jeff's question about the extent of Edge sales.

B&O is now a company that makes a) expensive television sets for a niche market; b) very expensive high-end speakers and speaker-systems; c) moderately expensive headphones, earphones, and single-point speaker systems.

'C' above seems to be doing well, and may be keeping the company in positive cash-flow status.  'A' above is well-debated in this thread and many others.  'B' above is, Imo, telling.

B&O always justified their reputation as vendor of luxury-priced, *high-end* speakers and systems with 1) unique aesthetics; 2) good-to-great sound; and 3) radically innovative design aimed at ease-of-use. This differentiation also justified their above-market pricing.  This magic formula worked to make the company successful for several decades.

Are the most recently introduced high-end speakers successful in the market?  If not, why?  What part of the magic formula is broken? 

moxxey
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BeoFrederic:

This magic formula worked to make the company successful for several decades.

For me, people are partly more 'savvy' than they used to be (in the old days, people didn't really understand tech and walked in to a B&O store and knew their dealer would do the entire setup for them) and they simply do not upgrade as frequently. There was a huge jump from SD 4:3 to widescreen and then again to HD. Early HD sets were poor and you could justify an upgrade.

Now, even an 'old' 11-55 produces a fantastic image. My 'old' BV12-65 is stunning, etc. I'd have to think long and hard about finding a spare £10K to justify an Eclipse to better my existing setup and I could find far better things to justify £10K in a tricky Brexit-imposed climate.

BEOVOX141
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BeoFrederic:
Are the most recently introduced high-end speakers successful in the market?

I was surprised to see a set of used BL 90 up for sale at two-thirds the original price, but now two months later, still no takers.

Put up a set of 10 years old BL5 at 40% of the original price, and it's gone in a flash.

Perhaps not the most scientific answer to your question, but it might be indicative RTFM

mawheele
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poodleboy:

mawheele:

Sandyb:

He is correct that BV's have always been some multiple and that this is not new.

Where he is entirely wrong is that things are going well.

25% sales increase for Eclipse on a year-for-year compare is exceptional in this market. @Sandby - what is good to you if that is not going well? FACTS please.

FACTS? 

After your earlier post I read the earnings warning again and saw different things than you. Revenue down but gross margin up. If your opinion is correct, and that sounds feasible, the discounting happened at the dealer level, which means their revenue went up while their gross margin went down.  Your 20% discount and free financing means dealers have less cash and no inclination to buy new inventory. That also might explain B&O EBITDA going up because their capacity cost went down, while discount were not taken at the factory level (but that is a guess). 

Bottom line is that only a sunshine pumper would call the earning warning and conference call good news. The institutional investors got a head up and acted accordingly. That is 2 quarters in succession. The CEO comment about third parties causing trouble in the market resulted from a self-inflicted wound; distribution strategy. They sacrificed the CFO and CTO. What's next?

The ACTUAL good news, unless you were a retail investor, is trading volume appears back to normal and the fall is hopefully stopped.   

As far as cars go, I think VW/Audi and BMW saved our coach-built business, and outside investment will hopefully help give Aston Martin and Morgan long future, too. 

You are correct about the dealers taking the burden. That was my point from earlier in this thread. My point was that that the thread was going off track by commenting on the TV pricing strategy and using it to blame to problems. You've come back to the route of their issues; the sales network is being starved of margin and life is too difficult as a B&O retailer. If there is anything the B&O leadership need to heed, change or even fire some people, it comes to the sales and distribution strategy - or lack of it. The product and product marketing teams - including those on TV - are doing a good job bearing in mind their limited R&D options. Sales and distribution on the other hand just plain messed up.

mawheele
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Sandyb:
They did report slightly higher TV sales yes.

 

 

Did they also not report a much lower than anticipated demand from dealers to restock?

 

 

Regardless, few would argue all is well, for reasons well rehearsed.

 

 

Keep pumping the doom and gloom.  On other threads you were making unsubstantiated claims they were going to exit the TV business. LOL

Like any business beholden to the stock market, they are having hard times and much of it plays out in public when you have to come clean when discussing under performance. 

My point all along has been about the remarks about 10K TVs that are not really 10k to the consumer, TV's being long in the tooth when there not, coming out of the TV business all together is unhelpful and just plain wrong.   Then my remarks get taken out of context and repositioned against the broader earnings warning. Not clever.

 

 

Sandyb
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Yes but a good deal of that chain of problems relating to TV sales is directly related to their pricing, within the context of the broader market.

But yes, the issues are broader - in summary, if forum members (admittedly not all by any means) are finding to harder to justify the price premium, then that says a lot.

Everyone will have their specific angles, as to why its. harder to justify the price premium, but it is what it is.

Can it remedied by a round of new products? Sure, but recent history has been mixed on that front.

And I really wouldn't try to put a positive spin on the recent two set of results, they're far from good.

 

BEOVOX141
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mawheele:
The product and product marketing teams - including those on TV - are doing a good job bearing in mind their limited R&D options

So you are eluding to the fact that the limited R/D resources perhaps are not enough?  If so I totally agree. You cannot axe the entire video wing and expect to end up with anything else than an Eclipse, which despite having stellar video and sound is a complete disaster in the technical architecture.

Sandyb
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Who is responsible for the doom and gloom (and I woudltn cal it that anyway)....me or the company reporting its recent performance?

As for whether they exit the Tv business, I've always accepted they may change their mind, and to be fair many of us have been told as such, in addition to Roger's fairly well explained post last year.

Even if they remain in the TV segment, that has not served them especially well in recent years - again, not my fault. Theirs.

The issue some have with your response to the results is that you were leaning on the CEO's effective take - that low demand from dealers is at fault, not the product offering. Of course the truth will be somewhere in between, but I don't think its a stretch to conclude that 10K TV's is a tougher sell than they used to be.

None of these challenges suddenly disappear if they release a new model.

Jeff
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Jeff replied on Mon, Apr 1 2019 8:06 PM

Re: Gloom And Doom

Some people, after the Titanic hit the iceberg, were concerned about sinking. Some pooh poohed that, saying nonsense, now we have plenty of ice for the champagne!

Jeff

I'm afraid I'm recovering from the BeoVirus. Sad

mawheele
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BEOVOX141:

So you are eluding to the fact that the limited R/D resources perhaps are not enough? If so I totally agree. You cannot axe the entire video wing and expect to end up with anything else than an Eclipse, which despite having stellar video and sound is a complete disaster in the technical architecture.

Why do you say that? Do you own one?

The Eclipse is the most reliable and performant B&O Tv I’ve owned in the past 20 year and I’d include the CRTs in that list. And it’s managing the most complex configuration I’ve attached to it. B&O walking from chassis and OS design is likely to have dramatically improved customer satisfaction. Anyone heard of a firmware issue recently?

Have you had a different experience?
vikinger
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beocool:

vikinger:

Apparently Aston Martin Lagonda shares are down 40% since their Oct 2018 launch. Does this indicate that the luxury markets have peaked and that B&O had better refocus again?

Graham

Not necessarily. It's quite dangerous to look at the share price of one company and turn it into an indicator for a certain line of business or in this case the luxury market. If you look at LVMH stock price for instance it closed at € 258,20 at the end of last year. Last Friday it said € 324,10 on the boards. If you take that as an indicator you would imagine the luxury market about to explode.

I would try and look for indicators like the S&P global luxury index, which is based on 80 of the largest publicly traded companies. At the time of writing, this index shows a decline of 2.6% over the last year. 

Agree, it's just one indicator. Just like the sudden top end property selling price drops of certain cities like London and SF. Some indicators may give you a view of the likely market trends before those trends are actually confirmed by S&P indices. 

B&O were once the masters of disguising CRT TVs and somehow making them elegant when no other manufacturer could stand comparison. Now all TVs are relatively elegant, so B&O no longer have a USP in that area, other than elegant motorised stands and wall mounts.

With music streaming B&O should have been way ahead of the game with it's early adoption of active speakers..... so what, if anything,  went wrong in this area?

Graham

poodleboy
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An interesting take on Loewe's strategy to survive in the luxury space, assuming that they will, long term. Here is one quote but the article is worth a look. 

“Hisense is a partner with Loewe only in a small way, and only in the bild 1. However the bild 1 is 80% made by Loewe and Loewe only. We only use their panel, while the engine, power supply, chassis and circuitry is all Loewe proprietary, the software utilises the Loewe OS software which provides seamless connectivity to all Loewe products. Loewe had many offers — including Apple — however Loewe had to be owned 100% under German influence. The heritage and the history must be kept the same for it to be successful and to remain true to its word. We are very proud of this. And our partner in Australia, Indi Imports, is already moving with the passion and drive that we have here in Kronach, Germany.”

https://www.avhub.com.au/news/sound-image/loewes-new-tokyo-connection-522929

It seems to speak of Loewe staying with its values while it tries to survive in the current space. As much as I loathe the manipulation of their stock via Apple rumours years ago, I appreciate they are able to describe their market precisely. They may not make it, either, as the business they (and B&O) are in is an extremely difficult one. 

If your product experience is competent, not necessarily perfect, some people will buy for reasons other than price. I wish our kids and their kids cared enough to buy from the Meridian, Linn, B&W, Loewe, and B&O, etc. of this world. 

 

Millemissen
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Loewe was the darling of Beoworld a year ago or so.........seems to have faded now - or not!?

MM

There is a tv - and there is a BV.

seethroughyou
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They seem to get some things very right:

 

"The bild 7 is an outstanding OLED debut from Loewe, with the 55-incher we reviewed featuring the highest peak brightness we've extracted from any OLED TV to date. Together with remarkable tone mapping, this delivered some of the most impressive HDR images from an OLED we've ever laid eyes on."

HDTVtest.co.uk - May 2017

Brigantinus
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I think Loewe was really clever. They build more or less one TV with different equipment variants.

Take their OLED 55: one display, one software, different lines and different price ranges.


bild3 OLED 55: Stereo 2x40W ----> ~2500 - 3000€

bild5 OLED 55: Stereo 2x80W, but optional 5.1-decoder, HDD inbuild ---> ~3500 - 4000€

bild7 OLED 55: 120 W Soundbar incl. 5.1 Audio-Decoder, HDD inbuild ---> ~5000€

 

Special stand solutions cost extra (but the standard table stand comes with the tv)

 

I think a product like the BV Eclipse is a wonderful top of the range product, but if it's the only tv in the B&O range with a normal size and Display technology, then I'm not surprised that sales collapse and potential customers are looking for alternatives.

 

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