Best Buy shares sink on weak sales report

Shoppers in a Best Buy in Manhattan on Shoppers in a Best Buy in Manhattan on Nov. 23, 2013. Photo Credit: AP

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Shares of Best Buy fell 28.59 percent Thursday after the company said sales declined during the holiday shopping season, which was marked by weak consumer spending and heavy sales promotions by retailers.

The drastic stock decline came as investors have grown increasingly worried about Minneapolis-based Best Buy's future. There's concern that Best Buy's strategy of price matching to compete with Amazon and other competitors won't be enough to keep the company afloat.

Best Buy's latest sales decline came during November and December, a crucial period for retailers because it can account for up to 40 percent of a retailer's annual revenue.

Still, the 0.8 percent decline in revenue at stores open at least one year for the nine weeks ended Jan. 4 was better than the 1.4 percent decline in the prior-year period. That figure excludes Best Buy's Carphone Warehouse operations which the company sold off in April 2013.

Chief executive Hubert Joly said the decline was due partly to an overall decline in the consumer electronics market that no one was expecting. The company had instituted an aggressive price matching policy and has said that competitive prices were "table stakes" during the holiday season. But that led to margin declines.

Joly said there were no specific plans to close stores, but added that "we have always said on an ongoing basis that we are looking at the store footprint and we continue to review it."

Joly added that Best Buy's business was also hurt by supply constraints for key products, a drop in customer traffic and a disappointing mobile phone market.

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Sales at stores open at least a year fell 0.9 percent in the United States compared with flat results a year ago. One bright spot was online sales, which climbed 23.5 percent. This was better than the 10 percent increase a year earlier.

Total revenue for the nine-week period slipped 3 percent to $11.45 billion from $11.75 billion. Domestic revenue declined to $9.75 billion from $9.91 billion, while international revenue fell to $1.7 billion from $1.85 billion.

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