By Richa Naidu
(Reuters) - Best Buy Co Inc (N:BBY) on Wednesday reported an unexpected drop in same-store sales for the holiday quarter, the latest example of an electronics retailer struggling with waning demand and fierce competition from online stores.
The retailer said sales at stores open for more than a year fell 0.7 percent in the fourth quarter. Analysts were expecting an increase of 0.5 percent, according to research firm Consensus Metrix.
Best Buy blamed weak demand for tablets, gaming consoles, wearable devices and mobile phones and said it expects sales at its established stores to drop 1-2 percent in the current quarter.
However, a tight lid on costs helped the company's net income increase 27 percent and its adjusted earnings beat Wall Street estimates.
Best Buy's share were down about 4 percent in premarket trading, easing from a drop of more than 9 percent when it released its report.
U.S. brick-and-mortar retailers are under pressure from slow economic growth and competition from the likes of Amazon (O:AMZN). A fast maturing wearable and mobile device markets has also contributed to waning demand.
Appliances and electronics retailer hhgregg Inc (PK:HGGG) is expected to file for bankruptcy this month, reports have said.
GameStop Corp (N:GME), the world's largest video games retailer, said its holiday-quarter results were hit by players downloading games instead of buying them in stores.
Consumer Edge Research retail analyst David Schick believes Best Buy's results are reflective of the industry and not the company.
"We think lackluster mobile, some product outages, and worse gaming (in a quarter that matters) are the forces at work -- not a sudden shift to a less relevant BBY," Schick said.
Best Buy's revenue fell 1 percent to $13.48 billion in the quarter ended Jan. 28, missing analysts' estimate of $13.62 billion, according to Thomson Reuters I/B/E/S.
Its adjusted profit of $1.95 per share beat estimates of $1.67.
But, with fewer planned cost cuts and innovative new electronics on the horizon, analysts have voiced concerns that 2018 could be a tough year for Best Buy, which has relied on buybacks to drive earnings per share growth.
Best Buy on Wednesday accelerated its share buyback plan to $3 billion over two years from $1 billion over two, and also hiked its quarterly dividend.
The company's online business has been a boost, with U.S. same-store online sales jumping 17.5 percent.
"We continue to believe that Best Buy is one of the brick-and-mortar 'leaders' in the push online," Moody's retail analyst Charlie O'Shea said.