Best Buy Shares Tank On Weak Holiday Season

(RTTNews) - Shares of Best Buy Co. Inc. (BBY) Thursday plunged 27 percent after the consumer electronics retailer reported weak holiday season sales, hurt largely by higher promotional and discount costs that failed to woo more customers.

The Minneapolis, Minnesota-based retailer also expects higher-than-expected decline in operating margins for the holiday quarter, the industry's largest selling season.

Best Buy's revenue for the nine weeks ended January 4, 2014 dropped to $11.45 billion from $11.75 billion last year. Comparable store sales, or sales from stores opened for at least 14 months, declined 0.8 percent for the period.

Best Buy's U.S.-based revenues declined to $9.75 billion from $9.91 billion last year, while international revenues slipped to $1.70 billion from $1.85 billion.

Domestic comparable store sales declined 0.9 percent during the period, while international comps were down 0.9 percent.

Best Buy blamed several factors for the weak performance during the holiday season, including aggressive promotional offers in industry during the holiday period, supply problems for key products, "significant store traffic declines between "Power Week" and Christmas," and a "disappointing mobile phone market."

"When we entered the holiday season, we said that price competitiveness was table stakes and an intensely promotional holiday season is what unfolded," said Hubert Joly, Best Buy president and CEO.

Meanwhile, the only positive news during the holiday season was the improved online sales, with comparable online sales increasing 23.5 percent.

Best Buy said the competitive discounting, however, resulted in improved market share gain , linked to NPD Group's data.

With the increased investment for discounts during the holiday period, the company now estimates fourth-quarter adjusted operating income margin to be 175 to 185 basis points lower than last year.

BBY is currently trading at $27.23, down $10.34 or 27.54%, on the NYSE.