Ever wonder whether Signify can continue pricing its Hue home smart lamps notably higher than the competition? The question needled financial analysts last week, as they quizzed the firm’s CEO on whether the disparity contributed to a second-quarter plunge in the consumer sector.
For a quick review, Signify boss Eric Rondolat on Friday singled out the consumer division — called “Digital Products” — as the one that took the brunt of an overall sales and earnings plunge. Digital Products is the Dutch company’s second-largest business operation after the professionally oriented Digital Solutions division.
Whereas Digital Solutions, Digital Products, and the third group, Conventional (non-LED), all reported a sales decline, Digital Products was the only one of the three in which cost cutting could not salvage profit growth. For the quarter ending June 30, Digital Products sales fell to €505 million ($555.7 million) from €598 million in the same quarter a year ago, and income from operations (EBIT) took a 47.5% dive, to €33 million ($36.3 million) from €63 million.
“While our Digital Solutions and Conventional Products divisions demonstrated resilience in their bottom line, our Digital Products division was more exposed,” CEO Eric Rondolat said in announcing the results last week.
In a call with financial analysts to discuss the numbers, he pointed out that most of the downturn in Digital Products came from “connected” products, which are the smart lamps, panels, strips, luminaires, and connectivity gear that Signify sells under two brands — Philips Hue and the less expensive WiZ. Hue and WiZ include a broad palette of colors, brightness, and color temperature, controllable from afar and by voice. They also feature an array of singing and dancing capabilities such as synchronizing with television, video, and music.
“Our connected consumer business — Philips Hue and WiZ — that business was very, very impacted, more so than the non-connected part of the [consumer] business, and more Hue than WiZ,” Rondolat said. “WiZ, which is operating from a lower base, still had a decent level of performance. But not on the Hue side.”
One current problem for Hue is that consumers who bought with verve during the stay-at-home COVID days are now spending their money on other things.
“The connected part of the business had a fabulous performance over a few years,” Rondolat said. “Consumers today are putting less of their money in home equipment goods. They are probably spending more of their money on travel, on holidays, which they could not do for two years in a row.”
However, it has not escaped the attention of analysts that the COVID business bonanza ended a year ago. On Friday’s call, they wondered aloud whether the significant price premium that Signify charges for Hue products is prompting more buyers to chose lower-priced brands.
One analyst asked if consumers are now “downtrading.”
“Not massively,” Rondolat replied. “On the connected part of the market, we see some offers come at a lower price, but that’s not specifically circumstantially linked to the situation we see today. That has been happening for many, many years. When a market is attractive and developing, there are all sorts of actors coming. But there’s not specific massive downtrading there.”
Another analyst didn’t settle for that answer and asked for more insight on consumers who might be voting with their wallets.
Rondolat allowed that inflationary pressures, combined with consumers’ renewed, post-COVID proclivity for getting out of the house, could be a factor.
“There’s a little bit of downtrading on the connected part of the market, where we see customers going for lower-cost offers and less to premium brand offers,” the Signify boss said.
Rondolat was clear, though, that Signify would take measures soon to revitalize Hue.
“We need to reinforce the position of our offer,” he said. That will include messaging that highlights the advantages of Hue over other brands.
It will also include the introduction of a home security feature in which Hue lights will flash red when intruders enter a house. The feature will be similar to one that Signify introduced for WiZ in the second quarter. Signify calls it home monitoring.
“The idea is to be able to use security for lighting and lighting for security,” Rondolat said. “If there’s an intruder, then all your lights are going to turn flashing red. That’s interesting, because sound alarms cannot be heard from a distance and they are really kept inside the house. But the lights can be seen from a long distance.
“The new smart home monitoring WiZ indoor camera is the first of many home monitoring products to come. We are also planning to extend home monitoring into Philips Hue this year and we’ll make more announcements after the summer,” he added.
Rondolat did not say whether Eindhoven-based Signify is also contemplating cutting Hue prices.
Like-for-like price comparisons can be complicated, but in general, consumers can buy other, often lesser known brands of smart color lamps for a lot less than Signify’s Philips Hue products. Even if the more affordable brands provide less functionality than the Philips Hue goods, they might sway buyers away from Signify.
In a quick spot-check today on Amazon in the U.K., for example, Hue lamps listed for £64.99 for a pack of two, whereas a pack of two Lepro lamps listed for £15.99, a pack of two Avatar lamps listed for £16.99, a pack of two Govee lamps listed for £18.99, and a pack of six Aigostar lamps listed for £29.99.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).
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