As other companies power out of the recession, Best Buy Co. Inc. still faces formidable economic headwinds.

At least three times Thursday in discussions with Wall Street analysts, company executives used that phrase to describe a challenged retail environment as they reported a 16 percent decline in fourth-quarter profits that nonetheless beat expectations.

"We are fully aware that consumers are still relatively constrained, and some of our major categories are coming off challenging years," said CEO Brian Dunn. "We are still assuming that some of these headwinds continue."

In a conference call with analysts, Dunn called the current sales environment "sluggish" and noted that TV sales, particularly the new 3-D line of models, were down "significantly."

However, he stressed that the Richfield-based retailer sees considerable growth opportunities in its mobile phone business, with appliances and in electronic gaming. He said Best Buy is also beefing up its online sales capabilities to compete with rivals such as

"There are real opportunities to improve in the online channel," Dunn told analysts. "We're hearing that many customers want to use multiple channels" in their shopping experience.

Dunn and other Best Buy executives said the continued weak housing market and the rising price of energy will affect consumer spending in the coming year.

This was not the news that Wall Street wanted to hear.

Shares of Best Buy took a beating as traders drove the stock to a 52-week low and made it the second-largest decliner for the day on the New York Stock Exchange. After opening slightly up, Best Buy closed Thursday at $30.13, down $1.72 for the day. Eleven months ago Best Buy was trading at its 52-week high of $48.58.

"I think people want to see some semblance of what their strategy is," said David Heupel, a portfolio manager at Thrivent Financial. "There's a desire to see them admit to themselves that they are no longer a growth company, and they shouldn't be opening new stores. There's no sense of urgency that they need to take a hard and fast look at themselves and make changes."

"I don't take a look at Best Buy and pin my hopes on what appliances are going to do," Heupel added.

Edward Jones & Co. analyst Matt Arnold said he was "perplexed" by the stock pounding but attributed it to a bearish attitude that has grown around Best Buy in recent months.

"We think the business can be stabilized and grow with the smartphone wave and the tablet wave," said Arnold, who has a buy rating on the stock. "Even if you believe Best Buy will remain under pressure for some time, it's still a cash machine."

Counting on mobile sales

Strong sales of smartphones were credited for limiting the decline in earnings reported Thursday. The retailer posted a $651 million profit for the three months ended Feb. 26, or $1.62 per share, compared with earnings of $779 million a year ago, or $1.82 per share.

Best Buy recorded pretax restructuring charges of $222 million during the fourth quarter, in line with earlier plans to close nine Best Buy stores in China and two in Turkey. Excluding those costs, earnings would have been $1.98 per share -- well above analyst expectations of $1.84, according to a Bloomberg survey.

Sales fell 2 percent to $16.3 billion during the quarter. Comparable same-store sales were down 4.6 percent.

For the full year, revenue grew 1 percent to $50.3 billion, including a 14 percent gain in online sales to $2.5 billion. Earnings per share were $3.08 compared with $3.10 the previous year.

Earnings for fiscal 2012 are expected to range from $3.30 to $3.55 a share, the company said. Analysts expected $3.55.

The company said it is in the midst of reorganizing stores and training employees to help boost in-store sales.

Dunn said Best Buy's new buyback program, which allows customers to get credit for older technology when they upgrade to the next generation, "is showing encouraging trends" in its first two months.

Dunn said the company is slowing growth of its big-box stores in favor of smaller Best Buy Mobile stores. It plans to open 150 mobile stores in the coming year, bringing the total to 325.

"I'm looking forward to this year ... all the while being realistic about the headwinds we all see," Dunn said.

Despite competitors such as Amazon, Wal-Mart and Costco with their deep discounts, Best Buy still has loyal customers.

On a snowy day earlier this week, Michelle Gierwatoski was in the Eden Prairie store set to buy an iPad 2.

"I love Best Buy. I love their products," said the Colorado resident who was in the Twin Cities to visit relatives. "Best Buy has just been out there for a long time. Their history stands for itself. I've seen others come and go."

At the nearby Geek Squad station, Chanhassen resident Mary Knudten was seeking help in detecting a possible virus in her laptop computer.

"I'm not [computer-] literate. I function barely. I want somebody there when you need them," she said of Best Buy's service offering.

David Phelps • 612-673-7269