Best Buy forecasts Q1 sales, profit below estimates

Best Buy forecast current-quarter sales and profit below analysts' estimates as the biggest U.S. consumer electronics retailer by store count struggles with falling sales of mobile devices.

Best Buy also said it would buy back up to $1 billion in shares over the next two years and it announced a special dividend of 45 cents per share.

The retailer's stock was up slightly Thursday afternoon. (Get the latest quote here.)

Best Buy forecast revenue of $8.25 billion to $8.35 billion and a profit of 31 cents to 35 cents per share for the first quarter. Analysts on average were expecting revenue of $8.45 billion and a profit of 39 cents per share, according to Thomson Reuters I/B/E/S.

Best Buy expects revenue declines in the first half of the year, followed by growth in the second half, Chief Financial Officer Sharon McCollam said. "In this context, we are targeting flat domestic revenue for the full year ... but recognize that it will be challenging without a strong mobile cycle."

Sales at established stores fell 1.7 percent in the fourth quarter. Analysts on average had expected a 1.3 percent fall, according to research firm Consensus Metrix.

Sales of computing and mobile devices fell 6.8 percent in the United States. The category accounts for 43 percent of the company's total U.S. revenue.

Best Buy's net income fell 7.7 percent to $479 million, or $1.40 per share, in the quarter ended Jan. 30.

Excluding items, the company earned $1.53 per share from continuing operations, beating the average analyst estimate of $1.39.

Revenue fell 4.1 percent to $13.62 billion, but came slightly above the average estimate of $13.61 billion.

In January, Best Buy reported holiday sales that missed Wall Street's estimates and lowered guidance for fourth quarter revenue. Weak computing and mobile phone sales contributed to the disappointing report. Excluding the 7.2 percent decline in this category, Best Buy's domestic revenue actually increased.

Traditional retailers like Best Buy have continued to see pressure as Amazon and online-only retailers price more competitively and gain favor with consumers.

Despite this pressure, Best Buy has performed relatively well in comparison to its peers against Amazon, Chris Horvers, JPMorgan retail analyst, said Thursday on CNBC's "Squawk Alley."

The company announced in its earnings report that domestic online revenue for the fourth quarter increased 13.7 percent on a comparable basis primarily due to higher conversion rates.

"If you look at on average online sales across all the categories in retail, [they] are growing in the low to mid teens. So for Best Buy that's pretty good. They're growing in line with the market," said Horvers.

In terms of Best Buy's overall online penetration, approximately 11 percent of Best Buy's sales come from e-commerce, which does represent some "traction" in the industry, Horvers said.

"Best Buy has done a great job. They have a very good management team over the past couple years really establishing a beachhead online in competing against Amazon. So they're slowly and gradually getting to where they should be at this point today," he said.

CORRECTION: This story was updated to show that Best Buy issued a special dividend of 45 cents a share.

— CNBC's Krystina Gustafson, Krysia Lenzo and Christine Wang, and Reuters contributed to this report.