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Best Buy's Disappointing December

By Jeff Hwang
January 7, 2005

On Wednesday, Circuit City (NYSE: CC) shares were hammered, falling 8.4% to $13.71 each after the company reported poor December sales (see Santa Skips Circuit City). While sales rose 1.8% for the month, same-store sales dropped 5.8%.

On Thursday, it was Best Buy's (NYSE: BBY) turn.

Best Buy, the leading consumer electronics retailer and a Motley Fool Stock Advisor selection, posted revenue growth of 10% to $5.1 billion in December. However, same-store sales at locations open for at least 14 months increased a mere 2.5% -- short of the company's guidance for gains of 3% to 5%. As a result, Best Buy shares traded down 4.4% to $55.50 yesterday.

The company noted triple-digit percent sales gains on MP3 players, as well as solid growth from digital TVs, digital cameras, DVD movies, and notebook computers. In addition, gift card sales increased by "strong double digits" to $350 million. Conspicuously absent from that list are the triple-digit gains in satellite radio sales that Circuit City reported, sparked by interest in XM Satellite Radio (Nadsaq: XMSR) and Sirius Satellite Radio (Nasdaq: SIRI).

On the downside, Best Buy also saw backtracking sales in things such as analog TVs, video gaming, desktop computers, and cell phones. The decline in sales from desktop computers can at least be partially attributed to the aggressive discounting this past holiday season from Dell Computer (Nasdaq: DELL).

Best Buy did claim market share gains, citing its own same-store sales growth against Circuit City's loss. And despite the slower-than-expected sales, Best Buy also noted increased productivity in reiterating its quarterly earnings guidance. For the fourth quarter ending February 26, the company expects to earn $1.56 to $1.66 per share, bringing full-year earnings to $2.80 to $2.90 per share.

Most people would consider Best Buy to be the clear Rule Maker in this area, and December looks like a mere hiccup. If you're like me, you can only hope that the company has another month or two like this one to present an opportunity to snap up Best Buy shares on the cheap.

For more on Best Buy, check out:

Both Best Buy and Dell are Motley Fool Stock Advisor recommendations. Learn more by subscribing today with a six-month money-back guarantee.

Fool contributor Jeff Hwang owns none of the companies mentioned above.