Jan. 9 (Bloomberg) -- Best Buy Co., the largest electronics chain, said December sales dropped after holiday discounts failed to draw shoppers.

Sales in stores open at least 14 months declined 6.5 percent. Total sales rose to $7.5 billion, the Richfield, Minnesota-based company said today in a statement.

The chain lopped $10 off Apple Inc.’s iPhone about a week before Wal-Mart Stores Inc. started selling the device. Last month, Best Buy said it would open fewer stores in the U.S., Canada and China to cut 2009 capital spending in half. It also offered voluntary buyouts to most corporate employees, and the Minneapolis Star Tribune reported yesterday that about 500 at headquarters had accepted.

Consumers, facing rising job losses and shrinking home values, have curtailed purchases, causing retailers to slash prices to attract shoppers. Yesterday, Wal-Mart, Gap Inc. and Macy’s Inc. cut profit forecasts as markdowns and the U.S. recession squeezed margins.

Circuit City, the second-largest U.S. electronics retailer, sought bankruptcy protection in November after suppliers concerned about declining sales cut off credit and demanded cash up front. The retailer held liquidation sales at 155 of the 721 U.S. stores it closed at the end of the year.

Best Buy probably benefited from shoppers wary of buying from a retailer in bankruptcy, David Schick, an analyst with Stifel Nicolaus & Co., wrote in a research note Jan. 6. Schick, who is based in Baltimore, estimated December same-store sales would decline 6.5 percent, including a 7 percent drop in the U.S. He advises holding on to the shares.

To contact the reporters on this story: Courtney Dentch in New York at cdentch1@bloomberg.net; Mark Clothier in Atlanta at mclothier@bloomberg.net

Last Updated: January 9, 2009 08:05 EST