Best Buy (NYSE: BBY) reported better-than-expected earnings today and helped boost the larger retail sector. The electronics retailer announced its 10th consecutive year of double-digit revenue growth with an 11 percent despite a 3.4% decline in profits. The numbers beat analyst estimates, sending BBY shares higher, and boosted confidence in consumer spending going forward.

Best Buy accomplished its revenue growth by opening 137 new stores last year while increasing annual comparable store sales by 2.9 percent. Profit margins were boosted by a 25 percent growth in online revenue along with more efficient promotional costs, but these gains were more than offset by higher revenue growth from lower-margin products. These products include notebook computers, gaming consoles and international stores.

Many investors were concerned that consumer spending would slowdown given the lack of credit and decline in the housing markets. However, Best Buy's results a shift to low-margin "staple electronics" rather than a larger slowdown. This trend towards in-line revenues on tighter profit margins is a clear theme within the retail sector but has many bullish on the retail sector since it's not so much a slowdown than a temporary shift.

Best Buy also took action to unlock shareholder value by buying back approximately 16 percent of its outstanding shares in an accelerated share repurchase program. The electronics retailer has a remaining authorization of $2.5 billion for the repurchase of its stock with no stated expiration date. Best Buy also paid a dividend of $0.30 per share, which was a 30 percent increase compared to the prior year's fourth quarter.

The current economic decline has many investors clamoring for these types of actions. This is especially true given the cheap multiples in sectors like retail. Share repurchasing helps reduce the number of outstanding shares, which increases earnings-per-share and tends to make price corrections more rapid. This is good news for shareholders as it could help the stock price recover much more quickly when the economy turns.

Interestingly, Best Buy also announced that it holds troubled auction-rate securities. These are AAA/Aaa-rated bonds collateralized by student loans guaranteed 95 percent to 100 percent by the U.S. government. Unfortunately, the market for these securities collapsed in recent times, which made them virtually impossible to sell on the open market without taking a substantial loss.

Normally, companies are required to write-down the value of these securities to this new value, but Best Buy reclassified the investments as non-core, which allowed them to forego that requirement. The reality is that these auction-rate securities haven't really declined in value, but Best Buy may be required to hold onto them for longer than initially expected since they can't sell in an illiquid market.

In the end, this is good news for Best Buy as well as the retail sector and economy. Consumer spending is not slowing as much as many expected and things should begin to improve this coming year. Combined, these factors make BBY a stock worth watching closely over the next few months.

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