(Reuters) - Best Buy Co (BBY.N) reported weaker-than-expected sales for the key holiday quarter, prompting the world's largest electronics chain to close 50 U.S. stores and cut 400 jobs in corporate and support areas.

Despite offering bigger discounts and free shipping to lure shoppers from its rivals including Wal-Mart Stores Inc (WMT.N) and Amazon.com Inc (AMZN.O), Best Buy's same-store sales fell 2.4 percent in the quarter, including a 2.2 percent decline at its U.S. stores open at least 14 months.

Wedbush analyst Michael Pachter was looking for a 1.8 percent same-store sales decline in the quarter, including a 1.4 percent decline at its domestic stores.

Its sales rose to $16.63 billion, but fell far short of the analysts' average estimate of $17.23 billion, according to Thomson Reuters I/B/E/S.

Best Buy's shares fell 6.1 percent to $24.98 in early trading.

Unlike the 2010 holiday season, when Best Buy held the line on discounts and promoted only expensive goods, this time around it offered deep discounts on everything from flat-screen TVs to digital cameras. It also promised to match any lower prices that its brick-and-mortar competitors advertised during the season's peak and offered free online shipping.

Still, industry watchers contend that Best Buy stores increasingly serve as physical showrooms for online retailers.

Amazon enjoys its largest pricing advantage versus brick-and-mortar rivals in the consumer electronics segment, with prices 17 percent lower on average, BB&T Capital Markets analyst Anthony Chukumba has estimated.

We remain concerned about the sustainability of Best Buy's big-box model. The company is gradually becoming a physical showroom for online retailers, and the prevalence of smartphones makes comparison shopping increasingly easy, Pachter said.

Best Buy lost $1.7 billion, or $4.89 a share, in the fourth quarter that ended March 3, compared with net income of $651 million, or $1.62 a share, a year earlier. Excluding charges, it earned $2.47 a share.

Best Buy is now trying to focus on its smaller format stores. It will close 50 U.S. big-box stores and open 100 Best Buy small-format, stand-alone stores in the current fiscal 2013.

The retailer said it expects its restructuring to save about $800 million by fiscal 2015, including about $250 million this year.

The changes should help lower the retailer's overall cost structure, Chief Executive Brian Dunn said in a statement.

Best Buy plans to invest some of the savings into improving customer service, including expanding its Reward Zone Silver loyalty program, and giving store employees more training before the next holiday season.

It will also offer competitive prices as part of its push to drive revenue, and over time, some of the savings should fall to the bottom line, Dunn said.