Best Buy (NYSE: BBY) reported bleak holiday sales Thursday, sending shares plunging in early trading. The retailer said winter holiday sales in the U.S. slipped 1.5 percent to $9.75 billion during the nine-week period ended Jan. 4, while total revenue slipped 3 percent to $11.45 billion. Same-store sales dipped 0.9 percent, well below Wall Street's projections of a 0.7 percent gain.
Investors reacted strongly to the news, sending Best Buy shares plummeting as much as 31 percent in early trading Thursday.
The electronics retailer blamed aggressive sales from competitors, supply constraints for tablets and iPhones and fewer customers during the key week leading up to Christmas for the sales slump. CEO Hubert Joly instituted a policy of matching Internet competitors' prices during his first holiday season at the helm, and that decision also hurt Best Buy's bottom line.
Despite the overall sales slide, Best Buy said that online sales increased by 23.5 percent, more than doubling the 10 percent increase a year earlier. It was not enough, however, to make up for the total loss as e-commerce represents only a fraction of the company's sales.
Best Buy previously cautioned that it expected tough competition during the holidays. The season is critical because it can account for up to 40 percent of a retailer's annual revenue. Prior to the holidays, the company had been working on cutting costs, adding employee training and matching online prices to lure shoppers into stores.
Looking ahead, the retailer says it plans to "deeply lower" its cost structure, a tactic that seems to be top of mind for several retailers, including J.C. Penney (NYSE: JCP) and Sears Canada, which both announced store closures and job cuts this week. Best Buy also said that it will focus on growing its online business and developing stronger omnichannel strategies going into fiscal 2015.
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