01—Abstract
Summary
Summary of the 10-K filed March 24, 2017. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. (BBY) reported fiscal 2017 (52 weeks ended January 28, 2017) revenue of $39.4 billiona, down 0.3% from $39.5 billion in fiscal 2016, with comparable sales up 0.3%.
Operating income rose to $1.85 billionb, or 4.7% of revenue, from $1.38 billion (3.5%) a year earlier, driven by a higher gross profit rate (24.0% vs. 23.3%), lower restructuring charges ($39 million vs. $198 million), and $161 million of CRT/LCD litigation settlements. Net earnings attributable to shareholders were $1.23 billion, or $3.81 per diluted share, versus $897 million ($2.56) in fiscal 2016. The company generated $2.5 billion in operating cash flow and ended the year with $3.9 billion in cash, cash equivalents and short-term investments.
The Domestic segment drove results, with revenue of $36.2 billionc, operating income of $1.76 billion (4.9% of revenue), and online revenue of $4.8 billion growing 20.8% on a comparable basis. The International segment (Canada and Mexico) returned to operating income of $90 million after a $210 million loss in fiscal 2016, reflecting the completion of the Canadian brand consolidation. Management reports that Renew Blue cost savings reached $350 million of a $400 million target.
Capital allocation was shareholder-focused: the company repurchased 21.1 million shares for $751 milliond, paid $505 million in dividends, and on March 1, 2017 announced a 21% increase in its regular quarterly dividend to $0.34 per share and a $5.0 billion share repurchase authorization, with intent to repurchase $3 billion over two years. Standard & Poor's upgraded the company's long-term rating to BBB- in fiscal 2017, and the company launched its Best Buy 2020: Building the New Blue strategy.
02—Key points
Key Highlights
- Revenue of $39.4 billion, down 0.3% year over year; comparable sales rose 0.3%.
- Operating income of $1.85 billion, or 4.7% of revenue, up from $1.38 billion (3.5%) in fiscal 2016.
- Diluted EPS of $3.81, up from $2.56; diluted EPS from continuing operations was $3.74 versus $2.30.
- Domestic segment online revenue of $4.8 billion grew 20.8% on a comparable basis and represented 13.4% of Domestic revenue.
- International segment operating income recovered to $90 million from a $210 million loss, following the Canadian brand consolidation.
- Returned capital through $751 million of share repurchases and $505 million of dividends; announced a new $5.0 billion repurchase authorization and a 21% dividend increase to $0.34 per quarter.
- Year-end cash, cash equivalents and short-term investments of $3.9 billion, with $1.365 billion of total debt including current portion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Best Buy kept $0.03.
- Revenue$39.40B100.0%
- Cost of revenue−$29.96B76.0%
- Gross profit$9.44B24.0%
- Operating costs−$7.59B19.3%
- Operating income$1.85B4.7%
- Interest, other & tax−$626.0M1.6%
- Net income$1.23B3.1%
Where FY2017 revenue went
$39.40B- Cost of revenue: $29.96B, 76% of revenue
- SG&A: $7.55B, 19% of revenue
- Net income: $1.23B, 3.1% of revenue
- Interest, other & tax: $626.0M, 1.6% of revenue
Kept 3.1% as net incomeNet income $1.23B · 3.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 24, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $39.40B$39.53B | −0.3% |
| Cost of Revenue | $29.96B$30.33B | −1.2% |
| Gross Profit | $9.44B$9.19B | +2.7% |
| SG&A Expenses | $7.55B$7.62B | −0.9% |
| Operating Income | $1.85B$1.38B | +34.8% |
| Interest Expense | $72.00M$80.00M | −10.0% |
| Net Income | $1.23B$897.00M | +36.9% |
| EPS (Basic) | $3.86$2.59 | +49.0% |
| EPS (Diluted) | $3.81$2.56 | +48.8% |
| Shares Outstanding (Basic) | 318.50M346.50M | −8.1% |
| Shares Outstanding (Diluted) | 322.60M350.70M | −8.0% |
05—Questions
Frequently Asked Questions
What drove the improvement in operating income in fiscal 2017?
Operating income rose $479 million to $1.85 billion. The filing attributes this mainly to a higher gross profit rate (24.0% of revenue versus 23.3%) and lower restructuring charges ($39 million versus $198 million). Net CRT/LCD litigation settlements of $161 million also contributed and are excluded from non-GAAP operating income.
How did the Domestic and International segments perform?
Domestic revenue was $36.2 billion, down 0.3%, with operating income of $1.76 billion (4.9% of revenue, up from 4.4%). International revenue was $3.2 billion, down 0.3%, with operating income of $90 million compared with a $210 million loss in fiscal 2016, as the Canadian brand consolidation work ended.
What is the company's capital return plan?
In fiscal 2017 the company repurchased 21.1 million shares for $751 million and paid $505 million in dividends. On March 1, 2017, it announced its intent to repurchase $3 billion of shares over the next two years under a new $5.0 billion authorization approved in February 2017, and raised its regular quarterly dividend 21% to $0.34 per share.
How strong is the company's balance sheet and credit profile?
Cash, cash equivalents and short-term investments totaled $3.9 billion at year-end. Total debt including current portion was $1.365 billion, and the company had no borrowings under its $1.25 billion revolving credit facility. Credit ratings at March 20, 2017 were BBB- (S&P, Stable), Baa1 (Moody's, Stable) and BBB- (Fitch, Stable). The company reported a non-GAAP debt to EBITDAR ratio of 1.6.
What risks does the filing highlight for investors?
The filing highlights intense competition and price transparency, reliance on a small number of key vendors (the 20 largest suppliers accounted for about 77% of merchandise purchased, and five suppliers for about 53%) and mobile carriers, and exposure to the fourth fiscal quarter, which generated about one-third of revenue and more than one-half of net earnings. It also cites reliance on information technology systems, cybersecurity and data privacy, and the pending IBEW securities class action, whose outcome cannot be estimated.
06—Continue