Comparable Sales Declined 9.3%
GAAP Diluted EPS of $2.23
Non-GAAP Diluted EPS of $2.61
Increased Quarterly Dividend 5% to $0.92 per Share
Expects FY24 Non-GAAP Diluted EPS of $5.70 to $6.50
MINNEAPOLIS, March 2, 2023 — Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week fourth quarter ended January 28, 2023 (“Q4 FY23”), as compared to the 13-week fourth quarter ended January 29, 2022 (“Q4 FY22”).
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|Q4 FY23||Q4 FY22||FY23||FY22|
|Revenue ($ in millions)|
|Enterprise comparable sales % change1||(9.3)%||(2.3)%||(9.9)%||10.4%|
|Domestic comparable sales % change1||(9.6)%||(2.1)%||(10.3)%||11.0%|
|Domestic comparable online sales % change1||(13.0)%||(11.2)%||(13.5)%||(12.0)%|
|International comparable sales % change1||(5.7)%||(3.8)%||(5.4)%||3.3%|
|GAAP operating income as a % of revenue||4.1%||4.9%||3.9%||5.9%|
|Non-GAAP operating income as a % of revenue||4.8%||5.1%||4.4%||6.0%|
|Diluted Earnings per Share (“EPS”)|
|GAAP diluted EPS||$2.23||$2.62||$6.29||$9.84|
|Non-GAAP diluted EPS||$2.61||$2.73||$7.08||$10.01|
For GAAP to non-GAAP reconciliations of the measures referred to in the above table, please refer to the attached supporting schedule.
“Today we are reporting Q4 sales that were in line with our expectations and profitability that was better than expected,” said Corie Barry, Best Buy CEO. “Throughout Q4 and FY23, we remained committed to balancing our near-term response to current conditions and managing well what is in our control, while also advancing our strategic initiatives and investing in areas important for our long-term performance.”
“We believe the macro and industry backdrop will continue to be pressured in FY24 and we will continue to adjust,” Barry added. “At the same time, we remain incredibly excited about our industry and our future – there are more technology products than ever in peoples’ homes, technology is increasingly a necessity in our lives, and technology innovation will continue. Our initiatives to deliver our omnichannel retail model evolution, build customer relationships through membership, and remove cost and improve efficiency and effectiveness will allow us to deliver even more experiences no one else can and capitalize on the opportunities ahead of us.”
FY24 Financial Guidance
“As we enter FY24, the consumer electronics industry continues to feel the effects of the broader macro environment and its impact on consumers,” said Matt Bilunas, Best Buy CFO. “As a result, our outlook assumes comparable sales decline 3% to 6% for the year, with the most sales pressure in the first quarter, as year-over-year comparisons ease through the year.”
“During FY24, we expect to expand our gross profit rate approximately 40 to 70 basis points versus the past year as we evolve our membership program and realize benefits from our cost optimization efforts,” Bilunas continued. “Non-GAAP SG&A expense is expected to increase versus last year as our cost takeout initiatives and lower variable costs are offset by the addback of incentive compensation, the extra week and higher depreciation.”
Best Buy is providing the following financial guidance for FY24, which includes 53 weeks.
- Revenue of $43.8 billion to $45.2 billion
- Comparable sales decline of 3.0% to 6.0%
- Enterprise non-GAAP operating income rate2 of 3.7% to 4.1%
- Non-GAAP effective income tax rate2 of approximately 24.5%
- Non-GAAP diluted EPS2 of $5.70 to $6.50
- Capital expenditures of approximately $850 million
Note: Incorporated in the above guidance, the 53rd week is expected to add approximately $700 million of revenue to Q4 FY24 and provide a benefit of approximately 10 basis points to the company’s full year non-GAAP operating income rate.2
Domestic Segment Q4 FY23 Results
Domestic revenue of $13.53 billion decreased 9.8% versus last year primarily driven by a comparable sales decline of 9.6%.
From a merchandising perspective, the largest drivers of the comparable sales decline on a weighted basis were computing, home theater, appliances and mobile phones. These drivers were partially offset by growth in the gaming and tablet categories.
Domestic online revenue of $5.14 billion decreased 13.0% on a comparable basis, and as a percentage of total Domestic revenue, online revenue was 38.0% versus 39.4% last year.
Domestic gross profit rate was 19.8% versus 20.0% last year. The lower gross profit rate was primarily due to lower product margin rates, which were partially offset by favorable services margin rates and higher profit-sharing revenue from the company’s private label and co-branded credit card arrangement. The improved services margin rates were primarily driven by an approximately $30 million profit-sharing benefit from the company’s services plan portfolio.
Domestic GAAP SG&A was $2.07 billion, or 15.3% of revenue, versus $2.30 billion, or 15.3% of revenue, last year. On a non-GAAP basis, SG&A was $2.05 billion, or 15.1% of revenue, versus $2.27 billion, or 15.1% of revenue, last year. Both GAAP and non-GAAP SG&A decreased primarily due to reduced store payroll expense, incentive compensation and advertising expenses.
International Segment Q4 FY23 Results
International revenue of $1.20 billion decreased 12.2% versus last year. This decrease was primarily driven by a comparable sales decline of 5.7% and the negative impact of approximately 570 basis points from foreign currency exchange rates.
International Gross Profit Rate
International gross profit rate was 21.7% versus 22.9% last year. The lower gross profit rate was primarily driven by lower product margin rates, which included increased promotions, and a lower mix of revenue from the higher margin rate services category.
International SG&A was $189 million, or 15.7% of revenue, versus $206 million, or 15.0% of revenue, last year. SG&A decreased primarily due to the impact of foreign currency exchange rates and lower incentive compensation.
The company incurred $86 million of restructuring costs in Q4 FY23, primarily related to employee termination benefits associated with an enterprise-wide restructuring initiative that commenced in Q2 FY23 to better align its spending with critical strategies and operations, as well as to optimize its cost structure. Consistent with prior practice, restructuring costs are excluded from the company’s non-GAAP results.
Share Repurchases and Dividends
In Q4 FY23, the company returned a total of $743 million to shareholders through share repurchases of $549 million and dividends of $194 million. For the full year, the company returned a total of $1.8 billion to shareholders through share repurchases of $1.0 billion and dividends of $789 million.
Today, the company announced its board of directors approved a 5% increase in the regular quarterly dividend to $0.92 per share. The regular quarterly dividend will be payable on April 13, 2023, to shareholders of record as of the close of business on March 23, 2023.
Best Buy is scheduled to conduct an earnings conference call at 8:00 a.m. Eastern Time (7:00 a.m. Central Time) on March 2, 2023. A webcast of the call is expected to be available at www.investors.bestbuy.com, both live and after the call.
(1) The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as other retailers’ methods. For additional information on comparable sales, please see our most recent Annual Report on Form 10-K, and our subsequent Quarterly Reports on Form 10-Q, filed with the Securities and Exchange Commission (“SEC”), and available at www.investors.bestbuy.com.
(2) A reconciliation of the projected non-GAAP operating income rate, 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; price-fixing settlements; 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.
This 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. These statements 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,” “appear,” “approximate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “guidance,” “intend,” “may,” “might,” “outlook,” “plan,” “possible,” “project” “seek,” “should,” “would,” and other words and terms of similar meaning or the negatives thereof. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, our operating model, new strategies and growth initiatives, the competitive environment, consumer behavior and other events. These statements involve a number of judgments and are subject to certain risks and uncertainties, many of which are outside the control of the Company, that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our most recent Annual Report on Form 10-K, and any updated information in subsequent Quarterly Reports on Form 10-Q, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this release. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: macroeconomic pressures in the markets in which we operate (including but not limited to the effects of COVID-19, recession, inflation rates, fluctuations in foreign currency exchange rates, limitations on a government’s ability to borrow and/or spend capital, fluctuations in housing prices, energy markets, and jobless rates and effects related to the conflict in Ukraine or other geopolitical events); catastrophic events, health crises and pandemics (including the COVID-19 pandemic); susceptibility of the products we sell to technological advancements, product life cycle fluctuations and changes in consumer preferences; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers and in the provision of delivery speed and options); our ability to attract and retain qualified employees; changes in market compensation rates; our expansion into health and new products, services and technologies; our focus on services as a strategic priority; our reliance on key vendors and mobile network carriers (including product availability); our ability to maintain positive brand perception and recognition; our ability to effectively manage strategic ventures, alliances or acquisitions; our ability to effectively manage our real estate portfolio; inability of vendors or service providers to perform components our supply chain (impacting our stores or other aspects of our operations) and other various functions of our business; risks arising from and potentially unique to our exclusive brands products; our reliance on our information technology systems, internet and telecommunications access and capabilities; our ability to prevent or effectively respond to a cyber-attack, privacy or security breach; product safety and quality concerns; changes to labor or employment laws or regulations; risks arising from statutory, regulatory and legal developments (including statutes and/or regulations related to tax or privacy); evolving corporate governance and public disclosure regulations and expectations (including, but not limited to, cybersecurity and environmental, social and governance matters); risks arising from our international activities (including those related to the conflict in Ukraine or fluctuations in foreign currency exchange rates) and those of our vendors; failure to effectively manage our costs; our dependence on cash flows and net earnings generated during the fourth fiscal quarter; pricing investments and promotional activity; economic or regulatory developments that might affect our ability to provide attractive promotional financing; constraints in the capital markets; changes to our vendor credit terms; changes in our credit ratings; failure to meet financial-performance guidance or other forward-looking statements; and general economic uncertainty in key global markets and worsening of global economic conditions or low levels of economic growth. We caution that the foregoing list of important factors is not complete. Any forward-looking statements speak only as of the date they are made and we assume no obligation to update any forward-looking statement that we may make.
|Investor Contact:||Media Contact:|
|Mollie O’Brien||Carly Charlson|