Circuit City Stores Inc. (CC), the No. 2 U.S. electronics retailer, on Wednesday posted a 5.8 percent drop in December sales at stores open at least a year as customer traffic fell below year-ago levels.

The company, which is struggling to reverse years of losing market share to bigger rival Best Buy Co. Inc. (BBY), said the sales were below its expectations and its share tumbled 5.08 percent to $14.20 in New York Stock Exchange (search) trade.

"We recognize that we must find more effective ways to drive store traffic so more consumers can see the improvements we had made in the Circuit City shopping experience," Chief Executive Alan McCollough said.

Total sales in the critical shopping month to Dec. 31 rose 1.8 percent from a year earlier to $1.75 billion, with sales growth in newer technology products such a portable digital audio products and LCD and plasma displays.

But sales in personal computers fell amid "unexpectedly aggressive" price-cutting by some competitors while DVD hardware, video game hardware and software, and wireless sales were also lower.

Analysts said Circuit City's sales were disappointing and again highlighted the need for the retailer to reposition about 200 of its 630 U.S. stores to complete directly with Best Buy.

Since the Richmond, Va.-based retailer embarked on a program to revamp its stores in 2001, it has relocated over 60 stores and plans to relocate another 20 or so this year.

"But good A-rated real estate has been difficult to get and that may limit the company's progress in the next year," said FTN Midwest Research analyst Daryl Boehringer, who rates Circuit City 'neutral' and does not own any of its stock.

"The next couple of quarters will be choppy but most people in the stock are positioned for the longer term and can see the benefits ahead."

Sales at its domestic stores fell 3.7 percent in December to $1.65 billion while sales in its international division, which consists of the operations of InterTAN Inc. acquired in May this year, were $94 million.

In a separate announcement, Circuit City said Stephen Canon, senior vice president, general counsel and secretary, was leaving the company as of Feb. 1 to join New York-based law firm Constantine & Partners.