Best Buy Reports Better-than-Expected Fourth Quarter Results

Best Buy Co., Inc. (NYSE: BBY) today announced results for the 14-week fourth quarter (“Q4 FY18”) and 53-week year ended February 3, 2018 (“FY18”), as compared to the 13-week fourth quarter (“Q4 FY17”) and 52-week year ended January 28, 2017 (“FY17”). The company reported Q4 FY18 GAAP diluted earnings per share from continuing operations of $1.23, which included the negative impact from items related to the Tax Cuts and Jobs Act of 2017 (“tax reform”) of approximately $1.17 in diluted earnings per share. Non-GAAP diluted earnings per share from continuing operations for Q4 FY18 were $2.42, an increase of 25% from $1.93 in Q4 FY17.

“We are excited to report strong results for the fourth quarter and the year,” said Hubert Joly, Best Buy chairman and CEO. “We are especially proud of our 9.0% comparable sales growth in the quarter, which brings our annual comparable sales growth to 5.6% for the year. Customers are responding very positively to our Best Buy 2020 strategy, and I want to enthusiastically thank all our associates for their great work in delivering these results. The level of energy and dedication to serving customers that I see across the company is truly inspiring.”

Best Buy’s CFO, Corie Barry, commented, “The comparable sales growth of 9.0% in the quarter is the result of the strong execution of our strategy combined with better product availability, a continued healthy consumer confidence and positive macro conditions, strength in the gaming category, and a favorable competitive environment, as we benefitted from the exit or decline of certain competitors.”

Barry continued, “From a profitability standpoint, in the Domestic segment, which makes up over 90% of the Enterprise operating income in Q4 FY18, the operating income rate declined. We delivered a flat gross profit rate while our SG&A expenses, excluding tax reform-related expenses, grew slightly more than the revenue growth rate. This is due to the increase in the incentive compensation expense for more than 85,000 store and corporate employees as a result of the very strong performance throughout the year, and to the investments we’ve made in the business. These expenses were partially offset by efficiencies and cost savings. As it relates to tax rate impacts in the quarter, the GAAP tax rate was higher than we expected primarily due to tax reform-related items. The non-GAAP tax rate was lower than we expected due to both the change in the effective annual tax rate as a result of tax reform and other discrete items.”

Barry continued, “For the full year FY19, we are expecting comparable sales to be flat to growth of 2% on top of the 5.6% growth we delivered in FY18. As we continue to invest in our Best Buy 2020 strategy, we are expecting the operating income rate to be approximately 4.5%, which is flat to FY18 on a comparable 52-week basis. Our non-GAAP diluted EPS is expected to increase in the range of 9% to 13% due to a lower tax rate as a result of tax reform and a lower share count as we continue to return capital to shareholders through share repurchases.”

Barry continued, “In Q1 FY19, we are expecting comparable sales growth of 1.5% to 2.5% and non-GAAP diluted EPS growth in the range of 13% to 22%. I would like to call out the following factors impacting our Q1 guidance. First, we estimate that the negative impacts from calendar shifts total approximately $100 million in Domestic revenue, with the biggest driver being the timing of the Super Bowl, as related sales were pulled forward into Q4 FY18 versus Q1 FY19. Second, increased investments in supply chain, as well as higher transportation costs, are expected to add approximately 25 basis points of Domestic gross profit pressure. Third, last year’s first quarter included approximately $8 million of Domestic gross profit due to a legal settlement that will not recur. Fourth, we expect the International gross profit rate pressure we saw in Q4 FY18 to continue into the first quarter.”
more detail at:  http://investors.bestbuy.com/investor-relations/news-and-events/financial-releases/news-details/2018/Best-Buy-Reports-Better-than-Expected-Fourth-Quarter-Results/default.aspx

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