Best Buy (NYS: BBY) shares could be a bargain, but only the retailer's best years still lie ahead. Alas, recent financial results suggest that Best Buy's in a serious and dangerous decline, even as it faces a formidable opponent.

Investors found little to like about Best Buy's fiscal second-quarter results. Its operating income dropped 30% to $287 million, and earnings fell 22% to $0.47 per share. Best Buy's sales were flat at $11.3 billion, while same-store sales declined 2.8%.

Management blamed macroeconomic challenges for the disappointing quarter. Sluggish consumer spending in a worsening economy probably didn't help, either. Although Best Buy's much-watched online sales channel generated a 13% increase in domestic revenue, that success was offset by weakness in television, gaming, digital imaging, and physical media comps.

And while Best Buy's bullish on its building Best Buy Mobile concept, which focuses solely on smaller stores that peddle smartphones, its mobile phone comps fell 5%. The company blamed that slump on a lack of new phone launches in the quarter.

Last quarter, I thought Best Buy might deserve more respect despite investors' increasing pessimism. I've always liked its customer-centric angle, and its single-digit price-to-earnings ratio seemed tantalizing at the time. But since then, I've since found myself questioning that premise. As Best Buy gets trampled in the marketplace, its forward price-to-earnings ratio of 6 starts looking more like a value trap than an actual value.

Granted, I wouldn't stock up on rival electronics retailers like RadioShack (NYS: RSH) , hhgregg (NYS: HGG) , or Conn's (NAS: CONN) these days, either. To find the sector's real competitive powerhouse, look no further than Amazon.com (NAS: AMZN) . Best Buy's recent move to copy the e-tailing giant with its online Best Buy Marketplace shows who it's really afraid of, and with good reason.

As much as I'd like to believe the future's brighter for Best Buy than current sentiment indicates, don't forget that plenty of value investors once thought shares of now-bankrupt Borders looked like a great deal. And if you need evidence that a major electronics chain can vanish in a flash, remember how Circuit City completely short-circuited, either.

As Amazon.com becomes retailers' worst nightmare, Best Buy could prove its latest victim. Buyers should beware until Best Buy can restore itself to full power.

At the time this article was published

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