Best Buy: "Less bad" news?

On the heels of a disappointing third-quarter, Richfield-based Best Buy said this morning that sales during the crucial December holidays fell 4 percent worldwide. In the U.S., where the bulk of its stores are located, the company saw a drop of 5 percent, compared with a strong 9.3 percent gain last year. Internationally sales declined 0.1 percent after last year's 3.5 percent increase. Electronics in general lagged during the holiday season, even at stores like Target. That's because there wasn't a gotta-have item this year and consumers are still putting off buying if they can make do another year with their TV, mobile phone or laptop. And while 3D is cool, it hasn't quite arrived in a big way yet. Best Buy's stock is flat this morning, an indication that Wall Street had low expectations. In mid-December, Best Buy announced that sales and profit in the third quarter dropped far below what the company and analysts had expected, and lowered profit guidance in response. Back then, Best Buy CEO Brian Dunn told me, "The tale of Christmas 2010 is far from over. The 10 days before and the 10 days after are critically important to our business. I think they'll be fast and furious." Turns out not so much. The retailer still faces competitive pressure from online retailers as well as mass merchandisers such as Target, Wal-Mart and Costco. Televisions and videogames, still among its best selling items, simply aren't as profitable. And consumers can go to a number of places to buy e-Readers, a hot seller. Thrivent Financial portfolio manager David Heupel said Best Buy has a long history of ups and downs, depending on new technology and hot gadgets. Mobile sales remain strong, and Geek Squad continues to give it the edge over competitors. "Santa didn't have a lot of new and exciting gadgets that people would die for," he said.