By John Kell
May 22, 2014

FORTUNE — Best Buy Co. (BBY) reported a steeper-than-expected drop in fiscal first-quarter sales as the electronics retailer reported weaker same-store sales in the U.S. and abroad, while also signaling challenges will continue.

“As we look forward to the second and third quarters, we are expecting to see ongoing industry-wide sales declines in many of the consumer electronic categories in which we compete,” said Best Buy Chief Financial Officer Sharon McCollam.

Best Buy warned there would be ongoing softness in the mobile category as consumers await highly anticipated new products. Best Buy on Thursday reported same-store sales, a key metric for retailers, dipped 1.3% in the U.S. and 5.8% internationally in the first quarter. Both declines were steeper than what the retailer reported a year ago.

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Best Buy has faced a tough challenge from online retailers, which have reported higher sales growth than brick-and-mortar stores. Online purveyors like Inc. (AMZN) also provide customers greater clarity about where to get the best deals for the latest gadgets. Best Buy has sought to compete by improving the competitiveness of its prices. Online sales have also been a bright spot for the retailer, rising 29% in the latest period.

For the quarter ended May 3, Best Buy reported a profit of $461 million, or $1.31 a share, compared to a prior-year loss of $81 million, or 24 cents a share. Excluding a tax-related gain in the latest period and other items, the adjusted profit climbed to 33 cents a share from 32 cents. Revenue dropped 3.3% to $9.04 billion.

Analysts surveyed by Bloomberg had predicted adjusted earnings of 19 cents a share on $9.22 billion in revenue.

Gross margin narrowed to 22.4% from 23.1%.


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