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Best Buy holiday sales fall, shares skid

Best Buy holiday sales fall, shares skid
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MINNEAPOLIS (AP) - Shares of Best Buy sank 27 percent after the company said sales declined during the holiday shopping season, which was marked by weak consumer spending and heavy sales promotions by retailers.

The drastic stock decline comes as investors grow increasingly worried about Best Buy's future. There's concern that Best Buy's strategy of price matching to compete with Amazon and other competitors won't be enough to keep the company afloat.

Best Buy's latest sales decline came during November and December, a crucial period for retailers because it can account for up to 40 percent of a retailer's annual revenue.

Still, the 0.8 percent decline in revenue at stores open at least one year for the nine weeks ended Jan. 4 was better than the 1.4 percent decline in the prior-year period. That figure excludes Best Buy's Carphone Warehouse operations which the company sold off in April 2013.

CEO Hubert Joly said the decline was due partly to an overall decline in the consumer electronics market that no one was expecting. The company had instituted an aggressive price matching policy and has said that competitive prices were "table stakes" during the holiday season. But that led to margin declines.

Joly said there were no specific plans to close stores, but added that "we have always said on an ongoing basis that we are looking at the store footprint and we continue to review it."

Joly said in a statement that there was a lot of competition on price during the holidays and an "intensely promotional" environment. He added that Best Buy's business was also hurt by supply constraints for key products, a drop in customer traffic and a disappointing mobile phone market.

Sales at stores open at least a year fell 0.9 percent in the U.S. compared with flat results a year ago. One bright spot was online sales, which climbed 23.5 percent. This was better than the 10 percent increase a year earlier.

Best Buy has been working on a turnaround. Before the holiday season started the company had already been cutting costs, adding employee training and matching online prices to get customers into stores.

Total revenue for the nine-week period slipped 3 percent to $11.45 billion from $11.75 billion. Domestic revenue declined to $9.75 billion from $9.91 billion, while international revenue fell to $1.7 billion from $1.85 billion.

Joly said that Best Buy's holiday performance renews the sense of urgency around the company's transformation. He said that key priorities heading into fiscal 2015 will include: lowering costs faster and more deeply; growing its online business at a quicker pace; continuing to improve the customer experience; improving marketing efforts and growing its Geek Squad services business.

Shares of the Minneapolis company declined $10.68, or 28.4 percent, to $26.89 in premarket trading after sinking more than 30 percent earlier.
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