Best Buy, the largest U.S. electronics retailer, said today that fiscal first-quarter profit fell 6.8% as more flat-screen television revenue couldn’t make up for higher sales of lower-margin video-game consoles. The shares fell after the company reported lower gross margins.

Net income for the quarter ended May 31 fell to $179 million, or 43 cents a share, from $192 million, or 39 cents, a year earlier, as U.S. same-store sales of entertainment software, which includes video-games, increased 8.2%. Revenue jumped 13% as flat-screen TV sales increased on higher demand and more financing promotions from the company.

Best Buy revenue benefited from both a surge in video-game related sales, driven largely from the record-setting April release of Grand Theft Auto IV, and more demand for digital televisions in advance of the U.S. switchover to digital broadcasts next February. First-quarter sales of $8.99 billion beat the $8.57 billion average analyst estimate in a Thomson Financial survey.

Worldwide TV sales for the calendar first quarter increased 8% from a year earlier to $24.8 billion as customers bought more liquid-crystal display televisions, NPD Group unit DisplaySearch said earlier this month.

Gross margins fell 0.2% from a year earlier to 23.7%, causing Best Buy shares to drop about 4% this morning.