01—Abstract
Summary
Summary of the 10-K filed March 28, 2014. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. reported fiscal 2014 (12 months ended February 1, 2014) revenue of $42.41 billiona, up from $39.83 billion in the 11-month fiscal 2013 transition period.
The filing attributes the increase mainly to an extra month of revenue, partly offset by store closures, a comparable store sales decline of 0.8%, and foreign currency effects. Operating income was $1.14 billionb (2.7% of revenue) versus an operating loss of $119 million in fiscal 2013, which included an $819 million goodwill impairment in International. Net earnings from continuing operations were $689 million, or $1.98 per diluted share, compared with a loss from continuing operations of $467 million.
Net earnings attributable to Best Buy shareholders were $532 millionc, or $1.53 per diluted share, after a $166 million loss from discontinued operations, which mainly reflects the sale of its 50% interest in Best Buy Europe and mindSHIFT. Management is pursuing its Renew Blue transformation, which has five pillars and an eight-priority 24-month road map. Fiscal 2014 restructuring charges were $159 million from continuing operations, and the company says it exceeded its original Renew Blue cost reduction target and raised the target to $1 billion.
Cash flow from operations was $1.09 billiond, and year-end cash and cash equivalents were $2.68 billion. The company held $4.0 billion of its $5.0 billion share repurchase authorization available and repurchased no shares in fiscal 2014. Management expects fiscal 2015 revenue from its credit card agreement to fall by $150 million to $200 million, and it projects a lower annual effective tax rate after a planned European legal entity reorganization.
The company's credit ratings at filing were Baa2 (Moody's, negative outlook), BB (S&P, stable), and BB- (Fitch, stable). Its balance sheet carried $1.66 billion of total debt, and its adjusted debt to EBITDAR ratio was 3.3, up from 2.9. Investors should weigh the improved earnings against declining comparable store sales in the Domestic and International segments, continued price investment, and the reduced revenue expected from the new credit card arrangement.
02—Key points
Key Highlights
- Revenue of $42.41 billion in fiscal 2014 (12 months), up from $39.83 billion in the 11-month fiscal 2013; the filing attributes the increase largely to an extra month of revenue, with a comparable store sales decline of 0.8%.
- Operating income of $1.14 billion (2.7% of revenue) versus an operating loss of $119 million in fiscal 2013, which included an $819 million International goodwill impairment.
- Diluted earnings per share from continuing operations of $1.98 versus a loss of $1.38 in fiscal 2013; diluted EPS including discontinued operations was $1.53.
- Restructuring charges of $159 million in fiscal 2014 under the Renew Blue program; cost savings reached $765 million, exceeding the original $725 million target, and the target was raised to $1 billion.
- Operating cash flow of $1.09 billion and cash and cash equivalents of $2.68 billion at year-end; no share repurchases in fiscal 2014, with $4.0 billion of authorization remaining.
- Credit ratings at filing: Moody's Baa2 (negative outlook), S&P BB (stable), Fitch BB- (stable); adjusted debt to EBITDAR ratio rose to 3.3 from 2.9.
- Fiscal 2015 outlook: credit card revenue expected to be $150 million to $200 million lower than in fiscal 2014, and a lower annual effective tax rate expected after a European legal entity reorganization.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Best Buy kept $0.01.
- Revenue$40.61B100.0%
- Cost of revenue−$31.21B76.9%
- Gross profit$9.40B23.1%
- Operating costs−$8.26B20.3%
- Operating income$1.14B2.8%
- Interest, other & tax−$612.0M1.5%
- Net income$532.0M1.3%
Where FY2014 revenue went
$40.61B- Cost of revenue: $31.21B, 77% of revenue
- SG&A: $8.11B, 20% of revenue
- Net income: $532.0M, 1.3% of revenue
- Interest, other & tax: $612.0M, 1.5% of revenue
Kept 1.3% as net incomeNet income $532.0M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed March 28, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $40.61B$38.25B | +6.2% |
| Cost of Revenue | $31.21B$29.23B | +6.8% |
| Gross Profit | $9.40B$9.02B | +4.2% |
| SG&A Expenses | $8.11B$7.91B | +2.5% |
| Operating Income | $1.14B$90.00M | +1171.1% |
| Interest Expense | $100.00M$99.00M | +1.0% |
| Net Income | $532.00M-$441.00M | +220.6% |
| EPS (Basic) | $1.56$-1.30 | +220.0% |
| EPS (Diluted) | $1.53$-1.30 | +217.7% |
| Shares Outstanding (Basic) | 342.10M338.60M | +1.0% |
| Shares Outstanding (Diluted) | 347.60M338.60M | +2.7% |
05—Questions
Frequently Asked Questions
Why did revenue rise in fiscal 2014 if comparable store sales declined?
The filing attributes the 6.5% revenue increase primarily to an extra month of revenue (8.0 percentage points), partly offset by net store changes (-0.6%), a comparable store sales impact (-0.5%), and foreign currency fluctuations (-0.4%). Fiscal 2014 covered 52 weeks, while fiscal 2013 covered 48 weeks in its 11-month transition period.
What drove the swing from an operating loss to operating income?
The filing says the increase was due to a decrease in goodwill impairments ($822 million in fiscal 2013 versus none in fiscal 2014) and restructuring charges ($159 million versus $415 million), plus additional operating income from the extra month of activity.
What are the main risks to future performance cited in the filing?
The filing cites strong competition with price pressure, changing consumer preferences, economic pressure on discretionary spending, reliance on key vendors (the 20 largest suppliers represented about 70% of merchandise purchased), dependence on the fourth quarter holiday season, the new credit card arrangement's profitability, and potential credit rating downgrades.
What did the company say about its capital allocation and liquidity?
Best Buy ended fiscal 2014 with $2.7 billion in cash and cash equivalents and $3.0 billion of working capital. It had no borrowings under its $2.0 billion of revolving credit agreements, capital expenditures were $547 million, and dividends totaled $233 million ($0.68 per share). It did not repurchase shares in fiscal 2014.
06—Continue