Enterprise Comparable Sales Increased 3.2%
GAAP Diluted EPS Increased 6% to $2.84
Non-GAAP Diluted EPS Increased 7% to $2.90
Announces FY21 Non-GAAP Diluted EPS Guidance of $6.10 to $6.30
Increases Quarterly Dividend 10% to $0.55 per Share
MINNEAPOLIS, February 27, 2020 — Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week fourth quarter ended February 1, 2020 (“Q4 FY20”), as compared to the 13-week fourth quarter ended February 2, 2019 (“Q4 FY19”).
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| Q4 FY20 | Q4 FY19 | FY20 | FY19 | |
| Revenue ($ in millions) | ||||
| Enterprise | $15,196 | $14,801 | $43,638 | $42,879 |
| Domestic segment | $13,848 | $13,497 | $40,114 | $39,304 |
| International segment | $1,348 | $1,304 | $3,524 | $3,575 |
| Enterprise comparable sales % change1 | 3.2% | 3.0% | 2.1% | 4.8% |
| Domestic comparable sales % change1 | 3.4% | 3.0% | 2.3% | 4.8% |
| Domestic comparable online sales % change1 | 18.7% | 9.3% | 17.0% | 10.5% |
| International comparable sales % change1 | 1.6% | 2.5% | (0.5)% | 4.6% |
| Operating Income | ||||
| GAAP operating income as a % of revenue | 6.4% | 6.6% | 4.6% | 4.4% |
| Non-GAAP operating income as a % of revenue | 6.5% | 6.7% | 4.9% | 4.6% |
| Diluted Earnings per Share (“EPS”) | ||||
| GAAP diluted EPS | $2.84 | $2.69 | $5.75 | $5.20 |
| Non-GAAP diluted EPS | $2.90 | $2.72 | $6.07 | $5.32 |
For GAAP to non-GAAP reconciliations of the measures referred to in the above table, please refer to the attached supporting schedule Reconciliation of Non-GAAP Financial Measures.
“We are posting our 12th straight quarter of comparable sales growth and showing our strength as a successful multi-channel retailer who can meet customers when and where they want,” said Corie Barry, Best Buy CEO. “We offered compelling holiday deals that resonated with customers and provided a seamless shopping experience, great inventory availability and fast and free delivery. Across online, home and stores, we are fulfilling our purpose to help enrich people’s lives through technology while also helping technology companies commercialize their product innovations.”
Best Buy CFO Matt Bilunas commented, “As we enter FY21, we are closely monitoring the developments related to the coronavirus outbreak. This is a very fluid situation, which makes it difficult to determine exact financial impacts from disruptions in supply chain. Based on what we know today, we have assumed the majority of the impacts occur in the first half of the year. Therefore, we view this as a relatively short-term disruption that does not impact our long-term strategy and initiatives. Our guidance ranges for both Q1 and the full year reflect our best estimates of the impacts at this time.”
Bilunas continued, “For FY21, we expect to deliver full-year comparable sales growth in the range of flat to 2% while continuing to invest in those areas necessary to make strategic progress and deliver enhanced employee and customer experiences, as well as continuing to drive cost savings and efficiencies. We expect our gross profit rate to be approximately flat and our SG&A rate to be up slightly compared to FY20, resulting in a full-year non-GAAP operating income rate of approximately 4.8%. We are confident that our FY21 plan moves us along the path to achieve our FY25 targets, specifically the financial targets of $50 billion in revenue and a 5% non-GAAP operating income rate.”
FY21 Financial Guidance
Best Buy is providing the following full-year FY21 financial outlook:
- Enterprise revenue of $43.3 billion to $44.3 billion
- Enterprise comparable sales growth of flat to 2.0%
- Enterprise non-GAAP operating income rate of approximately 4.8%2
- Non-GAAP effective income tax rate of approximately 23.0%2
- Non-GAAP diluted EPS of $6.10 to $6.302
Best Buy is providing the following Q1 FY21 financial outlook:
- Enterprise revenue of $9.1 billion to $9.2 billion
- Enterprise comparable sales growth of flat to 1.0%
- Non-GAAP effective income tax rate of approximately 22.5%2
- Diluted weighted average share count of approximately 260 million
- Non-GAAP diluted EPS of $1.00 to $1.052
Domestic Segment Q4 FY20 Results
Domestic Revenue
Domestic revenue of $13.85 billion increased 2.6% versus last year. The increase was driven by comparable sales growth of 3.4%, partially offset by the loss of revenue from store closures in the past year.
The largest comparable sales growth drivers were headphones, computing, appliances, mobile phones and tablets. These drivers were partially offset by declines in the gaming category.
Domestic online revenue of $3.52 billion increased 18.7% on a comparable basis due to higher average order values, increased traffic and higher conversion rates. As a percentage of total Domestic revenue, online revenue increased approximately 350 basis points to 25.4% versus 21.9% last year.
Domestic Gross Profit Rate
Domestic gross profit rate was 21.2% versus 22.1% last year. The gross profit rate decrease of approximately 90 basis points was primarily driven by mix into lower-margin products, a lower gross profit rate in the services category and the impacts associated with tariffs on goods imported from China.
Domestic Selling, General and Administrative Expenses (“SG&A”)
Domestic GAAP SG&A was $2.05 billion, or 14.8% of revenue, versus $2.10 billion, or 15.6% of revenue, last year. On a non-GAAP basis, SG&A was $2.03 billion, or 14.7% of revenue, versus $2.08 billion, or 15.4% of revenue, last year. Both GAAP and non-GAAP SG&A decreased primarily due to lower incentive compensation expense, which was partially offset primarily by higher variable costs due to increased revenue and higher advertising expense.
International Segment Q4 FY20 Results
International Revenue
International revenue of $1.35 billion increased 3.4% versus last year. This increase was primarily driven by the impact of approximately 160 basis points of favorable foreign currency exchange rates and comparable sales growth of 1.6%, which was driven by Canada.
International Gross Profit Rate
International gross profit rate was 22.6% versus 22.9% last year. The gross profit rate decrease of approximately 30 basis points was primarily due to Canada, which was largely driven by a by mix into lower-margin products.
International SG&A
International SG&A was $215 million, or 15.9% of revenue, versus $207 million, or 15.9% of revenue, last year. SG&A increased primarily due to the negative impact of foreign exchange rates and expense associated with new stores in Mexico opened in the past year.
Dividends and Share Repurchases
In Q4 FY20, the company returned a total of $436 million to shareholders through share repurchases of $307 million and dividends of $129 million. For the full year, the company returned a total of $1.53 billion to shareholders through share repurchases of $1.0 billion and dividends of $527 million.
Today, the company announced its board of directors approved a 10% increase in the regular quarterly dividend to $0.55 per share, effective immediately. The regular quarterly dividend will be payable on April 9, 2020, to shareholders of record as of the close of business on March 19, 2020.
The company plans to spend between $750 million and $1.0 billion on share repurchases in FY21.
Conference Call
Best Buy is scheduled to conduct an earnings conference call at 8:00 a.m. Eastern Time (7:00 a.m. Central Time) on February 27, 2020. A webcast of the call is expected to be available at www.investors.bestbuy.com, both live and after the call.
Notes:
(1) In Q1 FY20, the company refined its methodology for calculating comparable sales. It now reflects certain revenue streams previously excluded from the comparable sales calculation, such as credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable. The impact of adopting these changes is immaterial to all periods presented, and therefore prior-period comparable sales disclosures have not been restated.
(2) A reconciliation of the projected non-GAAP operating income, non-GAAP effective income tax rate and non-GAAP diluted EPS, which are forward-looking non-GAAP financial measures, to the most directly comparable GAAP financial measures, is not provided because the company is unable to provide such reconciliation without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. These GAAP measures may include the impact of such items as restructuring charges; goodwill impairments; gains and losses on investments; intangible asset amortization; certain acquisition-related costs; and the tax effect of all such items. Historically, the company has excluded these items from non-GAAP financial measures. The company currently expects to continue to exclude these items in future disclosures of non-GAAP financial measures and may also exclude other items that may arise (collectively, “non-GAAP adjustments”). The decisions and events that typically lead to the recognition of non-GAAP adjustments, such as a decision to exit part of the business or reaching settlement of a legal dispute, are inherently unpredictable as to if or when they may occur. For the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to future results.
Forward-Looking and Cautionary Statements:
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that reflect management’s current views and estimates regarding future market conditions, company performance and financial results, operational investments, business prospects, new strategies, the competitive environment and other events. You can identify these statements by the fact that they use words such as “anticipate,” “believe,” “assume,” “estimate,” “expect,” “intend,” “foresee,” “project,” “guidance,” “plan,” “outlook,” and other words and terms of similar meaning. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers), our expansion strategies, our focus on services as a strategic priority, our reliance on key vendors and mobile network carriers, our ability to attract and retain qualified employees, changes in market compensation rates, risks arising from statutory, regulatory and legal developments, macroeconomic pressures in the markets in which we operate, failure to effectively manage our costs, our reliance on our information technology systems, our ability to prevent or effectively respond to a privacy or security breach, our ability to effectively manage strategic ventures, alliances or acquisitions, our dependence on cash flows and net earnings generated during the fourth fiscal quarter, susceptibility of our products to technological advancements, product life cycle preferences and changes in consumer preferences, economic or regulatory developments that might affect our ability to provide attractive promotional financing, interruptions and other supply chain issues, catastrophic events, health crises, pandemics, our ability to maintain positive brand perception and recognition, product safety and quality concerns, changes to labor or employment laws or regulations, our ability to effectively manage our real estate portfolio, constraints in the capital markets or our vendor credit terms, changes in our credit ratings, any material disruption in our relationship with or the services of third-party vendors, risks related to our exclusive brand products and risks associated with vendors that source products outside of the U.S., including trade restrictions or changes in the costs of imports (including existing or new tariffs or duties and changes in the amount of any such tariffs or duties) and risks arising from our international activities.
A further list and description of these risks, uncertainties and other matters can be found in the company’s annual report and other reports filed from time to time with the Securities and Exchange Commission (“SEC”), including, but not limited to, Best Buy’s Annual Report on Form 10-K filed with the SEC on March 28, 2019. Best Buy cautions that the foregoing list of important factors is not complete, and any forward-looking statements speak only as of the date they are made, and Best Buy assumes no obligation to update any forward-looking statement that it may make.
| Investor Contact: | Media Contact: |
| Mollie O’Brien | Jeff Shelman |
| (612) 291-7735 or mollie.obrien@bestbuy.com | (612) 291-6114 or jeffrey.shelman@bestbuy.com |