The retail numbers for XM in July were the weakest since 2004. Part of this is driven by a deeper penetration in the OEM channel. If a consumer already has satellite radio capability in their car, they have no need to buy a device at retail. However, XM's retail presence has been weaker than Sirius' for two years now, and they have only been above 40% NPD share in 5 of the last 13 months.
What investors should be prepared for is a Q3 where XM could potentially report negative retail net additions. In Q2, XM netted a bit over 38,000 net additions from the retail channel.
Unless August and September carry a big boost from the July numbers, it is very likely that XM will go negative in this retail net addition metric.
In the overall scheme of things, what matters is that the company is adding subscribers, but sector watchers should prepare themselves for what is surely to be a weak retail reporting from XM. There is potential that the market will not react well to this news, and knowing it is coming gives an investor an advantage.
Does the potential that a negative retail number change my strategy on XM or the sector? No. I believe that the long term prognosis for satellite radio is good, and even better with a merger.
Just a heads up on something likely coming down the pike.