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Lack of new smartphones leads to drop in Best Buy sales, profits

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Poor sales of smartphones, tablets and cameras sent Best Buy to a worse-than-expected performance over the Holiday season.

The Richfield-based retailer reported sales at its established stores fell 1.7 percent during the 4th Quarter, with NBC reporting analysts had been expecting a fall of 1.3 percent.

Its revenue declined 1.5 percent to $12.5 billion, and net profits dropped 7.7 percent to $479 million in the three months to Jan. 30.

The company had warned the Christmas period would be a challenging one compared to the year before amid a general downturn in sales in electronic retail, partly because cellphone makers such as Apple haven't released a new model for a while.

This proved crucial for Best Buy, with sales of computing and mobile devices falling 6.8 percent in the U.S., with these products accounting for 43 percent of the company's domestic revenue.

But there was growth in sales of wearable technology, home theater goods and major appliances, and CEO Hubert Joly pointed out that Best Buy had done well compared to its competitors.

According to USA Today, he noted that electronics sales across the country were down 5.1 percent during the 4th Quarter compared to last year, so a 1.7 percent drop in sales compares well.

Cost-cutting to continue

The company did beat expectations in other areas: Its earnings per share hit $1.53, ahead of the $1.39 predicted by analysts.

The Star Tribune reports this came after efforts to control or cut costs, as well as discounting fewer items during the Holiday period.

Revenue declined to $13.62 billion from last year's $14.21 billion, which Reuters reports is slightly more than the $13.61 billion analysts had expected.

Going forward, Best Buy says trading is likely to be flat this year, with declines in the first half followed by increases in the second buoyed by a growth in sales of appliances, TVs and connected home devices, Chief Financial Officer Sharon McCollam said in a conference call.

The Star Tribune reports the retailer will continue to cut costs, noting earlier this week the company recently laid off "a few dozen" employees at its corporate headquarters in the Twin Cities.

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