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Best Buy manages a profit despite ongoing sales decline

Best Buy Second Quarter Profit Drops 91 PercentBest Buy Second Quarter Profit Drops 91 Percent
People walk by a Best Buy store in New York City. Photograph by Spencer Platt—Getty Images

Best Buy reported a steeper-than-expected quarterly sales drop for the second straight quarter this year, as the electronics-retailer said consumers again held off on new mobile phone purchases as they await the debut of newer gadgets.

“Industry-wide sales are continuing to decline in many of the consumer electronics categories in which we compete,” said Chief Financial Officer Sharon McCollam. She said consumers were waiting for highly anticipated new mobile phones, denting recent sales.

The retailer could get a lift if Apple (AAPL) were to debut a new iPhone in September, a time of the year the electronics manufacturer typically introduces its newest gadgets. The company is expected to introduce a new, bigger iPhone on Sept. 9.

But until that occurs, Best Buy (BBY) has continued to struggle. Revenue dropped 4% to $8.9 billion for the quarter ended Aug. 2, worse than the $8.98 billion projected by analysts surveyed by Bloomberg. Domestic same-store sales dropped 2%, while they fell 6.7% in international markets. Both declines were worse than what Best Buy reported in the year-ago period.

Best Buy has faced a tough challenge from online retailers, which have reported higher sales growth than brick-and-mortar stores. Online purveyors like (AMZN) also provide customers greater clarity about where to get the best deals for the latest gadgets. Best Buy has responded by aiming to improve the competitiveness of its prices, but executives on Tuesday hinted challenges from online retailers remained problematic.

“Consumers are increasingly researching and buying online,” said President and Chief Executive Hubert Joly. As a result, he said traffic at the company’s physical stores continued to decline. Best Buy isn’t alone in suffering from weaker traffic–many physical retailers have reported quarterly declines in traffic, a troubling trend as more customers shop online or are holding back on making some discretionary purchases.

There were a few bright spots in Best Buy’s report. Adjusted profit grew to 44 cents a share from 32 cents last year, and exceeded Wall Street’s expectation of 31 cents. Comparable online sales leapt 22%, accelerating growth from last year. Meanwhile, the same-store sales drop Best Buy reported for its U.S. stores wasn’t as severe as the industrywide decline for the NPD-tracked consumer electronics categories.