Best Buy Co Inc (BBY.N) on Wednesday reported an unexpected drop in same-store sales for the holiday quarter, the latest example of an electronics retailer struggling with waning demand and fierce competition from online stores.

The retailer said sales at stores open for more than a year fell 0.7 per cent in the fourth quarter. Analysts were expecting an increase of 0.5 per cent, according to research firm Consensus Metrix.

Best Buy blamed weak demand for tablets, gaming consoles, wearable devices and mobile phones and said it expects sales at its established stores to drop one-to-two per cent in the current quarter.

However, a tight lid on costs helped the company's net income increase 27 per cent and its adjusted earnings beat Wall Street estimates.

Best Buy's share were down about four per cent in premarket trading, easing from a drop of more than nine per cent when it released its report.

U.S. brick-and-mortar retailers are under pressure from slow economic growth and competition from the likes of Amazon (AMZN.O). A fast maturing wearable and mobile device markets has also contributed to waning demand.

Appliances and electronics retailer hhgregg Inc is expected to file for bankruptcy this month, reports have said.

GameStop Corp, the world's largest video games retailer, said its holiday-quarter results were hit by players downloading games instead of buying them in stores.

Consumer Edge Research retail analyst David Schick believes Best Buy's results are reflective of the industry and not the company.

"We think lackluster mobile, some product outages, and worse gaming (in a quarter that matters) are the forces at work -- not a sudden shift to a less relevant BBY," Schick said.

Best Buy's revenue fell one per cent to US$13.48 billion in the quarter ended Jan. 28, missing analysts' estimate of US$13.62 billion, according to Thomson Reuters I/B/E/S.

Its adjusted profit of US$1.95 per share beat estimates of US$1.67.

But, with fewer planned cost cuts and innovative new electronics on the horizon, analysts have voiced concerns that 2018 could be a tough year for Best Buy, which has relied on buybacks to drive earnings per share growth.

Best Buy on Wednesday accelerated its share buyback plan to US$3 billion over two years from US$1 billion over two, and also hiked its quarterly dividend.

The company's online business has been a boost, with U.S. same-store online sales jumping 17.5 per cent.

"We continue to believe that Best Buy is one of the brick-and-mortar 'leaders' in the push online," Moody's retail analyst Charlie O'Shea said.