Best Buy, the largest U.S. consumer electronics chain, expects same-store sales growth to be flat to negative in the first two quarters of its fiscal year, citing low demand for computers and tablets. Wedbush Analyst Michael Pachter says Best Buy faces headwinds but its sales execution is flawless.

SHOWS: NEW YORK, USA (JANUARY 16, 2015) (REUTERS - ACCESS ALL)

1. WEDBUSH ANALYST MICHAEL PACHTER, SAYING:

JOURNALIST ASKING MICHAEL PACHTER: 'You just spoke to the company (Best Buy), tell us what they had to say?'

PACHTER: 'You know I think the category that is actually hurting them badly is tablets and that has been almost fully offset by better mobile phone sales. Mobile is up on ASP so more expensive phones. I think that is great and I think they should be complemented on their ability to capture that traffic. It does set them up for kind of a disappointment next year because even if tablets flatten out mobile phones are highly unlikely to be more expensive a year from now. So that was the weakness, the strength was televisions and both on a unit basis and on an average selling price basis. I think people are increasingly wandering into stores and looking at 55 and 65 inch screens instead of 40 and 46 inch screens. And Best Buy has been great at capitalising on the traffic. Big big TV's are something that most people probably want to look at before they buy and Best Buy is great at converting people once they come to the store. So, I have an underperformed rating because I think that as Amazon grows and more and more people join Prime they are just less likely to spend as much time in Best Buy stores and certainly less likely to spend as much money in Best Buy stores. I just think Best Buy faces headwinds but the company has confounded me with its flawless execution and this is the first quarter in four years that we have seen them grow gross margin and the first quarter in seven years that they have grown both margin and comp.'

JOURNALIST: 'So they've put a lot of money and effort into revamping their stores, becoming much more consumer friendly. Is that working for Best Buy and is it enough? Because at the end of the day the pie isn't really growing, the business is not expanding so much in that there is not really a hot new item that everybody has to have there is just kind of a shifting of market share. Is it enough when they are facing competitors like Amazon?'

PACHTER: 'Bobbi that is an excellent question. The answer is it is working but it is not enough. So yes they are doing an excellent job on converting the traffic that actually is in their store. They are not doing a good job of bringing new traffic in and they are not doing a good job of bringing back people who used to shop there. So when people join Amazon Prime they don't stop going to Best Buy they just shift their purchase behaviour maybe 80 percent Best Buy and 20 percent Amazon and that is the problem. That they don't go into the Best Buy as often, they are not going to spend money and Best Buy is flawlessly capturing as much wallet share as they can get from the people that come in but they are not doing enough to bring new people in and I think that is why they are actually destined to continue to decline.'