01—Abstract
Summary
Summary of the 10-Q filed June 2, 2023. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. (BBY) reported first-quarter fiscal 2024 results for the three months ended April 29, 2023, with revenue of $9.47 billiona, down 11.1% from $10.65 billion a year earlier.
Comparable sales declined 10.1%, and the company attributed the drop to macroeconomic pressures, including high inflation and rising interest rates, that led to more cautious customer behavior and softer demand in the consumer electronics industry. Net earnings fell to $244 millionb from $341 million, and diluted earnings per share were $1.11 compared with $1.49. Operating income was $311 million, or 3.3% of revenue, versus $462 million, or 4.3%, in the prior-year quarter.
The Domestic segment drove most of the change in revenue and operating income, while the International segment's revenue declined 11.6%, with a 610 basis point negative impact from unfavorable foreign currency exchange rates. Cash flow improved sharply. Cash used in operating activities was $331 millionc compared with $1.38 billion a year earlier, which the company primarily attributed to the timing and volume of inventory purchases and payments and lower incentive compensation payments.
Cash and cash equivalents were $1.03 billiond at April 29, 2023. Shareholder returns were lower, with share repurchases of $81 million compared with $442 million, and regular quarterly dividends of $0.92 per share, up from $0.88. As of April 29, 2023, $4.0 billion remained under the $5.0 billion repurchase authorization, and the company said it currently expects additional repurchases in fiscal 2024.
The company stated that it is on track to deliver its fiscal 2024 store plans, which include closing 20 to 30 large format stores and opening approximately 10 Outlet stores, and it expects capital expenditures of approximately $850 million in fiscal 2024. Management said it expects sales in the consumer electronics industry to decline again this year.
During the quarter, Best Buy entered into a $1.25 billion five-year senior unsecured revolving credit facility expiring in April 2028, with no borrowings outstanding. Credit ratings were BBB+ (S&P) and A3 (Moody's), both with stable outlooks.
02—Key points
Key Highlights
- Revenue of $9.47 billion declined 11.1% from $10.65 billion, with comparable sales down 10.1%.
- Net earnings were $244 million, versus $341 million, and diluted EPS was $1.11, versus $1.49.
- Operating income was $311 million (3.3% of revenue), versus $462 million (4.3% of revenue); gross profit rate rose to 22.7% from 22.1%.
- Non-GAAP diluted EPS was $1.15, compared with $1.57 in the prior-year quarter.
- Cash used in operating activities narrowed to $331 million from $1.38 billion, mainly due to inventory timing and lower incentive compensation payments.
- Share repurchases totaled $81 million, with $4.0 billion remaining under the $5.0 billion authorization; the quarterly dividend was raised to $0.92 per share from $0.88.
- A new $1.25 billion five-year revolving credit facility, expiring April 2028, replaced the previous facility, with no borrowings outstanding; ratings are BBB+ (S&P) and A3 (Moody's), both stable.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Best Buy kept $0.03.
- Revenue$9.47B100.0%
- Cost of revenue−$7.32B77.3%
- Gross profit$2.15B22.7%
- Operating costs−$1.84B19.4%
- Operating income$311.0M3.3%
- Interest, other & tax−$67.0M0.7%
- Net income$244.0M2.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed June 2, 2023Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $9.47B$10.65B | −11.1% |
| Cost of Revenue | $7.32B$8.29B | −11.8% |
| Gross Profit | $2.15B$2.35B | −8.6% |
| SG&A Expenses | $1.85B$1.89B | −2.2% |
| Operating Income | $311.00M$462.00M | −32.7% |
| Interest Expense | $12.00M$6.00M | +100.0% |
| Net Income | $244.00M$341.00M | −28.4% |
| EPS (Basic) | $1.11$1.50 | −26.0% |
| EPS (Diluted) | $1.11$1.49 | −25.5% |
| Shares Outstanding (Basic) | 218.90M226.80M | −3.5% |
| Shares Outstanding (Diluted) | 219.90M228.40M | −3.7% |
05—Questions
Frequently Asked Questions
What drove the decline in Best Buy's first-quarter fiscal 2024 revenue?
The filing attributes the decline to comparable sales declines across most Domestic product categories, particularly computing, appliances, home theater and mobile phones. Management cited high inflation, rising interest rates, and more cautious customer behavior and softer consumer electronics demand. Foreign currency translation also reduced International revenue, by an estimated $46 million for the company as a whole.
How did profitability change compared with the prior year?
Gross profit was $2.15 billion, compared with $2.35 billion, and the gross profit rate increased to 22.7% from 22.1%. SG&A rose to 19.5% of revenue from 17.8%, and operating income fell to $311 million from $462 million. The company said the operating income rate decline reflected lower sales volume on fixed expenses and higher incentive compensation expense. The effective tax rate decreased to 23.3% from 24.4%.
What are Best Buy's capital return and liquidity plans?
The company repurchased $81 million of stock in the quarter and expects additional repurchases in fiscal 2024, with $4.0 billion of the $5.0 billion authorization remaining as of April 29, 2023. Quarterly dividends were $0.92 per share. Cash and cash equivalents were $1.03 billion, and the new $1.25 billion revolving credit facility was undrawn. The company expects fiscal 2024 capital expenditures of approximately $850 million.
What store and strategic actions is Best Buy planning for fiscal 2024?
Best Buy plans to close 20 to 30 large format Best Buy stores and open approximately 10 Outlet Centers, and to implement eight Experience store remodels. The company also changed its membership programs, effective the second quarter of fiscal 2024, and continues expansion into categories such as wellness technology, personal electric transportation, outdoor living and electric car charging.
06—Continue