By Andria Cheng – MarketWatch
Best Buy Co., the No. 1 U.S. electronics chain, said Friday that its comparable-store sales rose 8.2% during December, topping Wall Street expectations, as holiday shoppers bought products from notebook computers to flat-panel televisions.

Analysts had expected, on average, an increase of 5.1%, according to Retail Metrics.

Shares of Best Buy take a hit after the electronics retailer said lower prices on notebook computers and flat-panel TVs would eat into gross margins. Analyst Brian Nagel of Oppenheimer & Co. discusses the results with MarketWatch’s Andria Cheng.

Still, investors were disappointed the company (BBY 40.30, -1.24, -2.99%) didn’t raise its profit forecast for the year, sending Best Buy shares 2.8% lower in early morning trading and leading the sector declines. See full story on retail stocks.

U.S. comparable sales, or those at stores, call centers and Web sites open at least 14 months, rose 9.3%. International same-store sales also rose, up 3.5%.

Analysts had expected that sales in the U.S. would rise an average of 7.9% but that overseas results would decline 3.3%, according to Pali Capital analyst Stacey Widlitz.

Total sales in the month ended Jan. 2 rose 13% to $8.5 billion. The Minneapolis-based company said it’s gaining market share. Total consumer technology sales, including note book computers and televisions, declined less than 1% to $10.8 billion in the five-week holiday period, research firm NPD Group said Friday.

Best Buy said it’s maintaining its annual sales and per-share profit forecast ranges based on the December results. The company in December had raised its forecast to a profit of $3 to $3.15 a share, excluding one-time items. Analysts, on average, estimated Best Buy would earn $3.08 a share, according to estimates compiled by FactSet Research.

Electronics continued to be one of consumers’ top purchases during the holidays, but Best Buy says strong sales of less-profitable laptop computers and lower-priced flat-panel TVs are expected to lead to lower-than-expected fourth-quarter gross margin. Best Buy’s sales gains come at a price.

“The question remains what’s happening with gross margin,” said Widlitz.

The deflationary trend in electronics products also made it more imperative for Best Buy to find new products to grow sales, analysts have said. The NPD report Friday showed laptop computers’ average price has declined 23% in the 2009 holiday season versus a year earlier while Blue-Ray DVD players dropped 34% and flat-panel television’s prices were down 25%.

Analysts have also said Best Buy continues to face increased competition.

Retailers including discount giant Wal-Mart Stores Inc. (WMT 53.28, -0.32, -0.60%) , online heavyweight Amazon.com Inc. (AMZN 131.13, +1.13, +0.87%) and wholesale-club bellwether Costco Wholesale Corp. (COST 59.26, -0.45, -0.75%) all are seeking deeper inroads in electronics, overshadowing Best Buy’s market-share gain from the demise of former rival Circuit City.

Based on her weekly survey of about 100 products, Best Buy’s and Wal-Mart’s prices have showed little difference, Widlitz said.

Best Buy’s home-office category in the U.S. saw a 28.5% jump in comparable sales in December, driven by laptops and mobile phones while flat-panel TVs drove the consumer electronics category’s 4.5% increase.

Appliance sales rose 16.2%, while the service business sales were flat. Entertainment software category sales fell 0.6%, hurt by declines in music and movies.

Outside of the U.S., gains were driven in Europe and China.

Andria Cheng is a MarketWatch reporter based in New York.

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