01—Abstract
Summary
Summary of the 10-K filed March 23, 2016. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. (BBY) reported fiscal 2016 (ended January 30, 2016) revenue of $39.53 billiona, down from $40.34 billion in fiscal 2015, with net earnings from continuing operations of $807 million ($2.30 diluted EPS) compared to $1.246 billion ($3.53) a year earlier.
The decline was driven by the International segment, where revenue fell 26.2% to $3.16 billionb after the Canadian brand consolidation, which included closing 66 Future Shop stores and converting 65 others to Best Buy. Operating income was $1.375 billion, or 3.5% of revenue, reflecting $201 million of restructuring charges. Domestic segment revenue rose 0.9% to $36.37 billion, with operating income of $1.585 billion and a 4.4% operating margin, helped by a periodic profit-sharing benefit on extended service plans and $75 million in net CRT/LCD litigation settlement proceeds in the Domestic segment.
Cash generation was $1.322 billionc from operations, and year-end cash and short-term investments were $3.281 billion. The company returned $1.5 billion to shareholders in fiscal 2016, including $1.0 billion in share repurchases and $499 million in dividends. For fiscal 2017, management guided to flat Domestic segment revenue and approximately flat operating income, expects cash capital expenditures of $650 million to $700 million, and announced a 22% increase in the regular quarterly dividend to $0.28 per share, a $0.45 special dividend (about $145 million), and an intent to repurchase $1.0 billion of shares over two years.
The company's credit ratings were upgraded during fiscal 2016 to BB+ (S&P), Baa1 (Moody's) and BBB- (Fitch), all with Stable outlooks. The Renew Blue Phase 2 cost program delivered $150 milliond of annualized savings toward a $400 million goal, with $250 million remaining.
02—Key points
Key Highlights
- Revenue of $39.53 billion in fiscal 2016, down $811 million from $40.34 billion in fiscal 2015, mainly due to the International segment.
- Diluted EPS from continuing operations of $2.30, versus $3.53 in fiscal 2015; net earnings from continuing operations were $807 million versus $1.246 billion.
- International segment operating loss of $210 million, driven by $196 million of restructuring charges tied to the Canadian brand consolidation; International revenue fell 26.2%.
- Domestic segment revenue rose 0.9% to $36.37 billion, with operating income up to $1.585 billion and operating margin of 4.4%, aided by a $148 million profit-share revenue benefit and CRT/LCD settlement proceeds.
- Cash flow from operations was $1.322 billion, and year-end cash plus short-term investments were $3.281 billion.
- Capital returns of $1.5 billion in fiscal 2016, including $1.0 billion of share repurchases and $499 million of dividends; fiscal 2017 plan adds a 22% dividend increase to $0.28 per quarter and a $0.45 special dividend.
- Credit ratings upgraded in fiscal 2016 to BB+ (S&P), Baa1 (Moody's) and BBB- (Fitch), all Stable.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Best Buy kept $0.02.
- Revenue$39.53B100.0%
- Cost of revenue−$30.34B76.7%
- Gross profit$9.19B23.3%
- Operating costs−$7.82B19.8%
- Operating income$1.38B3.5%
- Interest, other & tax−$478.0M1.2%
- Net income$897.0M2.3%
Where FY2016 revenue went
$39.53B- Cost of revenue: $30.33B, 77% of revenue
- SG&A: $7.62B, 19% of revenue
- Net income: $897.0M, 2.3% of revenue
- Other operating costs: $201.0M, 0.5% of revenue
- Interest, other & tax: $478.0M, 1.2% of revenue
Kept 2.3% as net incomeNet income $897.0M · 2.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed March 23, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $39.53B$40.34B | −2.0% |
| Cost of Revenue | $30.33B$31.29B | −3.1% |
| Gross Profit | $9.19B$9.05B | +1.6% |
| SG&A Expenses | $7.62B$7.59B | +0.3% |
| Operating Income | $1.38B$1.45B | −5.2% |
| Interest Expense | $80.00M$90.00M | −11.1% |
| Net Income | $897.00M$1.23B | −27.3% |
| EPS (Basic) | $2.59$3.53 | −26.6% |
| EPS (Diluted) | $2.56$3.49 | −26.6% |
| Shares Outstanding (Basic) | 346.50M349.50M | −0.9% |
| Shares Outstanding (Diluted) | 350.70M353.60M | −0.8% |
05—Questions
Frequently Asked Questions
How did Best Buy perform financially in fiscal 2016?
Revenue declined 2.0% to $39.53 billion and diluted EPS from continuing operations fell to $2.30 from $3.53. Operating income was $1.375 billion, or 3.5% of revenue, compared with $1.450 billion in fiscal 2015. Results were weighed down by $201 million of restructuring charges, mostly from the Canadian brand consolidation.
What caused the decline in the International segment?
International revenue fell 26.2% to $3.16 billion, due to the loss of revenue from closed stores in the Canadian brand consolidation, a 12.5% negative impact from foreign currency fluctuations, and softness in the Canadian economy and consumer electronics industry. The segment recorded an operating loss of $210 million.
What is Best Buy's capital return plan for fiscal 2017?
The company plans a regular quarterly dividend of $0.28 per share, a 22% increase, plus a special dividend of $0.45 per share (about $145 million). It also intends to repurchase $1.0 billion of shares over the next two years and targets a 35% to 45% non-GAAP dividend payout ratio.
What is the outlook for fiscal 2017?
Management expects Domestic segment revenue to be flat for the full year, with declines in the first half and growth in the second half. It targets approximately flat operating income, including lapping the significant periodic profit-sharing benefits recorded in fiscal 2016, and expects cash capital expenditures of $650 million to $700 million.
06—Continue