Net income $138 million on $7.34 billion sales.

Best Buy reported net income of $138 million, or 28 cents per diluted share, on sales of $7.34 billion for the three month period ended Nov. 26. While sales were up 10.4% from the $6.65 billion it generated in its fiscal third quarter in 2004, profits dropped $10 million from the $148 million it generated then.

The company, which reported its earnings before trading opened yesterday, attributed the decline in revenue to rising expenses. For the quarter selling, general and administrative expenses grew 150 basis points to 21.8%. Of that 80 basis points was attributed to the company’s roll-out of its “customer centricity” strategy; 30 basis points were attributed to hurricane Katrina and Rita, and 30 basis points were attributed to new store growth in Canada.

During the quarter the company posted a same-store sales increase of 3.3%, but the entertainment software category, which consists of music, video and video games, dropped 12.2%.

With profits falling short of Wall Street’s expectations, share price fell $4.90, closing at $43.94 yesterday. The stock’s 52-week range is $31.93-$53.47.