Best Buy holiday sales disappoint; trouble looms?

The big-box retailer posts lower-than-expected sales for December. Declines in same-store sales were driven by softness in entertainment software and televisions.

Best Buy posted disappointing sales during the critical holiday season.

The retailer reported today that it generated $8.4 billion in revenue during the five-week period ended January 1, representing a 1.6 percent decline year over year. Same-store sales--a key barometer of how the company is operating--were down 4 percent globally. In the U.S., same-store sales were down 5 percent.

In comparison, December 2009 same-store sales were up 8.2 percent globally and 9.3 percent in the U.S.

Domestically, Best Buy's declines were "driven by softness in entertainment software and televisions," the company reported. It saw entertainment software sales, which include video games, music, and movies, decline 15.4 percent in December. Its consumer electronics business was down 7.9 percent in comparable store revenue due to "a low double-digit decline in [sales of] televisions."

There was a bit of a silver lining to Best Buy's December performance. The company said that domestic online revenue was actually up 13 percent year over year. It also said that its international segment's $1.9 billion revenue in December was up 4.5 percent compared to the prior year, thanks to "favorable fluctuations in foreign currency exchange rates." The company also added new stores, which helped bolster revenue. However, same-store sales internationally were down 0.1 percent on the month.

Best Buy's December performance is even worse than Wedbush analyst Michael Pachter expected.

Earlier this week, Pachter wrote a note to investors , saying that he expected Best Buy's overall same-store sales to be down 3 percent. He also expected a 3 percent decline domestically. He estimated international same-store sales would be up by 0.5 percent. Pachter based those figures on his concern that Best Buy's bricks-and-mortar business is having increasing trouble keeping up with online retailers offering the same products at discounted prices.

"We expect continued market share losses in consumer electronics to online retailers and lower-priced big-box competitors, and entertainment software to GameStop, Amazon, and Wal-Mart," Pachter wrote.

For his part, Best Buy CEO Brian Dunn kept a brave face on his company's earnings, saying in a statement that "December sales results were within our expected range of outcomes for the month."

But they are sobering for Best Buy. And as the company has seen before with competitors failing in the face of online competition , being a bricks-and-mortar retailer, and trying to keep up with the likes of Amazon, can be extremely difficult.

 

Join the discussion

Conversation powered by Livefyre

Show Comments Hide Comments