01—Abstract
Summary
Summary of the 10-K filed March 23, 2020. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. (NYSE: BBY) reported fiscal 2020 revenue of $43.64 billiona, up from $42.88 billion in fiscal 2019, with operating income of $2.01 billion (4.6% of revenue) and diluted EPS from continuing operations of $5.75, compared with $5.20 a year earlier.
Net earnings were $1.54 billionb. Comparable sales grew 2.1%, the sixth consecutive year of positive Enterprise comparable sales. Non-GAAP diluted EPS was $6.07.
The Domestic segment generated $40.11 billionc of revenue and $1.91 billion of operating income, while the International segment (Canada and Mexico) generated $3.52 billion of revenue and $102 million of operating income. Online revenue rose to $7.64 billion, 19.0% of Domestic segment revenue. The filing's most significant subsequent-period disclosure concerns COVID-19.
Stores were shifted to enhanced curbside service only, in-home installation and repair were suspended, and the company drew the full $1.25 billiond revolving credit facility on March 19, 2020, and temporarily suspended all share repurchases. The company states that the impact on revenues, profitability and financial position is uncertain. Management also said it expects a significant adverse effect on sales and profits from the pandemic.
Cash and cash equivalents were $2.23 billion at fiscal year-end, and operating cash flow was $2.57 billion. The company also raised its regular quarterly dividend 10%, from $0.50 to $0.55 per share, and set fiscal 2025 targets of $50 billion in revenue and a 5.0% non-GAAP operating income rate. Management's Building the New Blue strategy centers on health services, Total Tech Support memberships (almost 2.3 million members) and In-Home Advisors.
02—Key points
Key Highlights
- Revenue rose to $43.64 billion in fiscal 2020 from $42.88 billion, and comparable sales grew 2.1%, the company's sixth consecutive year of positive Enterprise comparable sales.
- GAAP diluted EPS increased to $5.75 from $5.20, and non-GAAP diluted EPS increased 14.1% to $6.07.
- Operating income was $2.01 billion (4.6% of revenue), with the Domestic segment contributing $1.91 billion and the International segment $102 million.
- Online revenue in the Domestic segment reached $7.64 billion, 19.0% of segment revenue, with comparable online sales growth of 17.0%.
- COVID-19 led to curbside-only service at U.S. stores, suspended in-home installation and repair, and a full $1.25 billion revolver draw on March 19, 2020; all share repurchases were temporarily suspended.
- The company returned $1.5 billion to shareholders through share repurchases and dividends and raised its quarterly dividend to $0.55 per share.
- Five suppliers (Apple, Samsung, Hewlett-Packard, Sony and LG) represented approximately 56% of total merchandise purchased, a concentration risk the filing highlights.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Best Buy kept $0.04.
- Revenue$43.64B100.0%
- Cost of revenue−$33.59B77.0%
- Gross profit$10.05B23.0%
- Operating costs−$8.04B18.4%
- Operating income$2.01B4.6%
- Interest, other & tax−$468.0M1.1%
- Net income$1.54B3.5%
Where FY2020 revenue went
$43.64B- Cost of revenue: $33.59B, 77% of revenue
- SG&A: $8.00B, 18% of revenue
- Net income: $1.54B, 3.5% of revenue
- Interest, other & tax: $468.0M, 1.1% of revenue
Kept 3.5% as net incomeNet income $1.54B · 3.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed March 23, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $43.64B$42.88B | +1.8% |
| Cost of Revenue | $33.59B$32.92B | +2.0% |
| Gross Profit | $10.05B$9.96B | +0.9% |
| SG&A Expenses | $8.00B$8.02B | −0.2% |
| Operating Income | $2.01B$1.90B | +5.7% |
| Interest Expense | $64.00M$73.00M | −12.3% |
| Net Income | $1.54B$1.46B | +5.3% |
| EPS (Basic) | $5.82$5.30 | +9.8% |
| EPS (Diluted) | $5.75$5.20 | +10.6% |
| Shares Outstanding (Basic) | 264.90M276.40M | −4.2% |
| Shares Outstanding (Diluted) | 268.10M281.40M | −4.7% |
05—Questions
Frequently Asked Questions
How did Best Buy perform financially in fiscal 2020?
Revenue grew to $43.64 billion from $42.88 billion. Gross profit rate was 23.0%, down from 23.2%, while SG&A fell to 18.3% of revenue from 18.7%, lifting operating income to $2.01 billion from $1.90 billion. Net earnings rose to $1.54 billion from $1.46 billion, and diluted EPS was $5.75 versus $5.20.
What is the impact of COVID-19 on Best Buy according to the filing?
The company shifted U.S. stores to enhanced curbside service only on March 22, 2020, suspended all in-home installation and repair, and moved in-home consultations to virtual. Management expects these measures to reduce customer visits and spending, likely resulting in lost sales and profits. The filing says the full extent of the impact is uncertain and depends on the duration and spread of the outbreak.
What is Best Buy's capital allocation and dividend policy?
The company repurchased 14.0 million shares for $1.0 billion in fiscal 2020 and paid $527 million in dividends. As of February 1, 2020, $2.0 billion remained under the $3.0 billion authorization from February 2019, but share repurchases have since been temporarily suspended. On February 27, 2020, the Board raised the regular quarterly dividend 10%, from $0.50 to $0.55 per share.
What are Best Buy's liquidity and debt positions?
Cash and cash equivalents were $2.23 billion at February 1, 2020. Total debt including the current portion was $1.27 billion. The company has a $1.25 billion five-year revolving credit facility that expires in April 2023, which it fully drew on March 19, 2020. Credit ratings are BBB (S&P, Stable) and Baa1 (Moody's, Stable).
What are Best Buy's strategic priorities and targets?
Best Buy is pursuing its Building the New Blue strategy, focused on combining tech and human touch, growing Total Tech Support memberships (almost 2.3 million members at year-end), expanding the In-Home Advisor program to approximately 720 advisors, and growing its Health business through acquisitions including GreatCall, CST and BioSensics. Its fiscal 2025 targets are $50 billion in revenue and a 5.0% non-GAAP operating income rate.
06—Continue