01—Abstract
Summary
Summary of the 10-K filed March 19, 2021. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. (BBY) reported fiscal 2021 revenue of $47.26 billiona, up 8.3% from $43.64 billion in fiscal 2020, with comparable sales growth of 9.7%.
Operating income rose to $2.39 billionb (5.1% of revenue) from $2.01 billion, and net earnings increased to $1.80 billion, or $6.84 per diluted share, from $5.75. The growth was driven by strong demand for products that help customers work, learn, cook, entertain and connect from home during the COVID-19 pandemic. Domestic online revenue reached $18.67 billion, up 144.4% on a comparable basis, though the gross profit rate fell to 22.4% from 23.0% due to higher supply chain costs from the shift to online sales.
The company made the decision in the third quarter of fiscal 2021 to exit its Mexico operations, recording $144 millionc of International segment charges, and $133 million of Domestic restructuring charges tied to organizational changes. Cash and cash equivalents rose to $5.49 billion from $2.23 billion, and operating cash flow was $4.93 billion versus $2.57 billion. Management resumed share repurchases in the fourth quarter, announced a 27% increase in the quarterly dividend to $0.70 per share, and planned to spend at least $2 billion on repurchases in fiscal 2022.
The company also replaced a $650 milliond 2021 note with a $650 million 2030 note at 1.95%, and Moody's upgraded its rating to A3. Management stated that the pandemic has permanently changed customer shopping behavior toward more digital channels, which the company views as a structural shift. Risks highlighted in the filing include dependence on a few large vendors (five suppliers accounted for about 57% of merchandise purchased), the lower margin profile of online sales, continued COVID-19 uncertainty, and possible future restructuring costs that management cannot yet forecast.
02—Key points
Key Highlights
- Revenue of $47.26 billion, up 8.3%, with comparable sales growth of 9.7%
- Operating income of $2.39 billion, a 5.1% operating income rate, versus 4.6% in fiscal 2020
- Diluted EPS of $6.84 versus $5.75 in fiscal 2020; non-GAAP diluted EPS of $7.91 versus $6.07
- Domestic online revenue of $18.67 billion, up 144.4% on a comparable basis
- Gross profit rate declined to 22.4% from 23.0%, driven by higher supply chain costs from the online mix
- Exit from Mexico operations announced in Q3 fiscal 2021, with $144 million of International segment charges
- Cash and cash equivalents of $5.49 billion; quarterly dividend raised 27% to $0.70; at least $2 billion of share repurchases planned for fiscal 2022
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Best Buy kept $0.04.
- Revenue$47.26B100.0%
- Cost of revenue−$36.69B77.6%
- Gross profit$10.57B22.4%
- Operating costs−$8.18B17.3%
- Operating income$2.39B5.1%
- Interest, other & tax−$593.0M1.3%
- Net income$1.80B3.8%
Where FY2021 revenue went
$47.26B- Cost of revenue: $36.69B, 78% of revenue
- SG&A: $7.93B, 17% of revenue
- Net income: $1.80B, 3.8% of revenue
- Other operating costs: $254.0M, 0.5% of revenue
- Interest, other & tax: $593.0M, 1.3% of revenue
Kept 3.8% as net incomeNet income $1.80B · 3.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed March 19, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $47.26B$43.64B | +8.3% |
| Cost of Revenue | $36.69B$33.59B | +9.2% |
| Gross Profit | $10.57B$10.05B | +5.2% |
| SG&A Expenses | $7.93B$8.00B | −0.9% |
| Operating Income | $2.39B$2.01B | +19.0% |
| Interest Expense | $52.00M$64.00M | −18.7% |
| Net Income | $1.80B$1.54B | +16.7% |
| EPS (Basic) | $6.93$5.82 | +19.1% |
| EPS (Diluted) | $6.84$5.75 | +19.0% |
| Shares Outstanding (Basic) | 259.60M264.90M | −2.0% |
| Shares Outstanding (Diluted) | 263.00M268.10M | −1.9% |
05—Questions
Frequently Asked Questions
What drove Best Buy's revenue growth in fiscal 2021?
Revenue rose to $47.26 billion from $43.64 billion, driven by comparable sales growth across most product categories. The filing attributes this to strong customer demand for products that help people work, learn, cook, entertain and connect from home during COVID-19. Domestic Computing and Mobile Phones and Appliances were notable contributors, with comparable sales growth of 13.0% and 23.2%, respectively.
Why did gross profit margin decline?
The gross profit rate fell to 22.4% from 23.0%. The filing says the Domestic decline was due to higher supply chain costs from the increased mix of online revenue and lower profit-sharing revenue from the private label and co-branded credit card arrangement, partially offset by a more favorable promotional environment.
What is the status of the Mexico exit?
In the third quarter of fiscal 2021 Best Buy decided to exit its Mexico operations, recording $144 million of International segment charges, including $23 million of inventory markdowns. As of January 30, 2021, the exit was substantially complete, and the company does not expect material future restructuring charges related to it in fiscal 2022.
What are Best Buy's capital return plans?
The Board approved a new $5.0 billion share repurchase program on February 16, 2021. The company repurchased 3.1 million shares for $318 million in fiscal 2021, plans to spend at least $2 billion on repurchases in fiscal 2022, and raised its regular quarterly dividend from $0.55 to $0.70 per share.
What risks does the filing highlight for investors?
Key risks include dependence on vendors (20 largest suppliers accounted for about 80% of merchandise purchased, and five suppliers about 57%), lower profitability of online sales, possible COVID-19 resurgence that could force store closures, competition from multi-channel and e-commerce retailers, and the possibility of material future restructuring costs that management cannot yet forecast.
06—Continue