Best Buy’s (NYSE:BBY) quarterly earnings earlier Thursday were a mixed bag. While the consumer electronics retailer squeezed out a profit that beat analysts’ estimates, same-store sales fell nearly 5%, and the company offered a fiscal 2012 earnings forecast below current expectations.
The stock was off nearly 5% to $30.33 in recent Thursday trading.
Best Buy’s mobile business was one of the bright points, with the continuing success of Google (NASDAQ:GOOG) Android and Apple (NASDAQ:AAPL) smartphones.
The growth of the tablet PC market also helped sales, but the success of Apple’s iPad is essentially replacing another product. The company’s note to investors highlighted the decrease in notebook and laptop PCs as a contributing factor in its disappointing fourth quarter sales.
Looking at the first quarter of 2011, Best Buy is in for more turbulent times. The iPad 2 is already a runaway hit, and Best Buy threw a great deal of weight behind marketing Motorola’s (NYSE:MMI) Xoom tablet for its February release. So far, the device has been a sales dud. The slight competitive landscape for tablet PCs is going to continue to be a problem for Best Buy as notebook PC sales continue to decline.
Unfortunately, the company has even bigger problems. The retailer’s traditional profit-makers have been televisions and entertainment media, particularly DVDs, and changes in audience viewing habits are proving to be problems Best Buy hasn’t yet solved. The company noted how “current consumer demand in new television technologies had not yet emerged” last year, referring to the emphasis on 3-D televisions from both Best Buy and manufacturers alike — and unfortunately for them, this isn’t going to turn around in 2011. A February Nielsen study found that around 30% of consumers are “not at all likely” to buy a 3-D television in the next year.
Best Buy’s home video woes are also only going to intensify over the coming months. Consumers are flocking toward streaming video rentals rather than full digital and disc purchases. Best Buy did start its own on-demand, web-based rental service last year, but it has been largely ignored in favor of competing subscription services like Netflix (NASDAQ:NFLX).
Best Buy said that it plans to focus on mobile services and products in the coming year. A wise decision, but unless it finds a way to revive its home entertainment business, the company is in for more trouble.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
