BBY Best Buy Company

By Drew FitzGerald 

Best Buy Co.'s holiday sales declined as the retailer sold fewer smartphones than expected, another sign of soft demand for the latest models from Apple Inc. and Samsung Electronics Co.

The electronics chain on Thursday said domestic sales over the nine weeks through Jan. 2 fell 1.2%, excluding newly opened or closed stores. Shoppers picked up fewer mobile devices and shunned the cases and headphones that come with them, executives said.

For all its spending on brighter stores and a sharper website, Best Buy remains at the mercy of big-name manufacturers. Apple hasn't reported its holiday results, but Chinese parts suppliers have recently warned of slower iPhone production. Samsung executives this month said they were adjusting their strategy to adapt to pressure on smartphone sales.

"Our categories are driven in part by product cycles," Chief Executive Hubert Joly said in an interview. "In that context, we were able to really perform well."

On Wednesday, camera maker GoPro Inc. said it would slash jobs after posting weak holiday retail sales for its latest wearable camera, despite two rounds of price cuts. Mr. Joly said the result should come as no surprise because GoPro didn't release a new product for the holidays.

Mr. Joly noted that one of every two ultrahigh-definition 4K television sets sold in the U.S. came from Best Buy. The chain also said its operating margins wouldn't narrow as much as expected in the fourth quarter, which ends Jan. 30.

Shares of the company fell 11% to $26.15 early Thursday. The last time Best Buy reported lower holiday sales, in early 2014, the stock lost roughly a third of its value.

The shortfall shed light on a familiar predicament for Best Buy: Despite massive revenue gains for Silicon Valley software developers, there is relatively little growth among retailers selling the gadgets that make much of that technology possible.

Best Buy's overall revenue slipped 3.6% to $10.96 billion over the holidays, partly because the chain closed 66 Future Shop stores in Canada earlier in the year. Mr. Joly on Thursday said the company had no plans to cut its store count further.

Domestic sales of computers, tablets and mobile phones fell 7.2% from a year ago, while appliance sales rose 13%. The sales excluded the impact of wireless installment billing plans, which bring more upfront revenue to retailers' top lines.

The results follow dismal reports from Hhregg Inc., a regional competitor, and from videogame chain GameStop Corp., which managed a 1.8% sales gain over the holidays only because it sold more game consoles and collectibles.

Personal computer sales in the fourth quarter of 2015 sank to their lowest levels since 2007, according to market researcher International Data Corp.

Mr. Joly suggested the next wave of demand could be around the corner, noting the number of new devices, from drones to apparel, on display at last week's Consumer Electronics Show in Las Vegas.

"There will always be ups and downs," he said. "We continue to be excited about the rate of technology innovation."

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

January 14, 2016 10:46 ET (15:46 GMT)

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