Best Buy Takes a Post-Holiday Plunge After Disappointing Sales Results

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Best Buy (NYSE:BBY) closed the trading week down more than 36 percent after the big-box electronics retailer revealed on Thursday that it had suffered an unexpected holiday season sales drop. During the nine-week period that ended on January 4, domestic comparable store sales fell 0.9 percent compared to the year-ago period, while international sales rose 0.1 percent. As noted by Barron’s, most analysts were anticipating a 2 percent gain. Best Buy finished the week at $24.43, nearly 40 percent down from its fifty-two-week high of $44.66.

Best Buy president and CEO Hubert Joly cited “aggressive promotional activity,” supply constraints, declining store traffic, and a disappointing mobile phone market as reasons for the sales decline. As noted by Barron’s, Best Buy slashed its prices during the holiday season in an effort to draw shoppers away from big-box retail rivals like Wal-Mart (NYSE:WMT), as well as online competitors like Amazon (NASDAQ:AMZN).

Joly noted that Best Buy’s promotional activity “resulted in a market share gain in an industry that NPD says declined 240 basis points during the holiday period.” On the other hand, the deep price cuts also failed to boost “industry demand and had a deflationary impact on our revenue.”

Despite the negative impact the aggressive promotional activity is having on the company’s revenue, Best Buy’s management says it will continue its pricing investments for now. The company is also increasing its focus on online sales.

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