01—Abstract
Summary
Summary of the 10-Q filed December 1, 2023. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. reported lower sales and earnings for the third quarter of fiscal 2024, ended October 28, 2023.
Revenue was $9.76 billiona, down 7.8% from $10.59 billion a year earlier, and comparable sales declined 6.9%. The filing attributes the decline to high inflation and interest rates, the pull-forward of demand in prior years, and increased spending outside the home. Net earnings were $263 million versus $277 million, and diluted EPS was $1.21 versus $1.22.
Gross profit rate improved to 22.9% of revenue from 22.0%, but SG&A rose to 19.2% of revenue from 18.3%, and operating income fell to $354 millionb from $365 million. Non-GAAP diluted EPS was $1.29 versus $1.38. For the first nine months of fiscal 2024, revenue was $28.81 billion, down 8.7%, with comparable sales down 7.8%.
Net earnings were $781 millionc versus $924 million, and diluted EPS was $3.57 versus $4.07. Operating cash flow improved to $290 million from a use of $108 million, driven by lower incentive compensation payments and the timing of inventory purchases and payments. Merchandise inventories were $7.56 billion at quarter-end, up from $5.14 billion at January 28, 2023.
Cash and cash equivalents fell to $636 milliond from $1.87 billion at fiscal year-end. Management expects macroeconomic headwinds to cause consumer electronics industry sales to decline again in fiscal 2024. It expects capital expenditures of about $825 million and total share repurchases of about $350 million for the year.
The company ended the quarter with 6.6 million paid members and plans to close about 25 Best Buy stores in fiscal 2024. Its credit ratings remain BBB+ (S&P) and A3 (Moody's), both with stable outlooks.
02—Key points
Key Highlights
- Q3 revenue of $9.76 billion declined 7.8% from $10.59 billion; comparable sales fell 6.9%, with the Domestic segment down 7.3% and International down 1.9%.
- Q3 operating income was $354 million versus $365 million, and net earnings were $263 million versus $277 million; diluted EPS was $1.21 versus $1.22.
- Non-GAAP diluted EPS was $1.29 versus $1.38 in the prior-year quarter, primarily due to lower non-GAAP operating income.
- Gross profit rate rose to 22.9% of revenue from 22.0%, driven by improved membership-offering financial performance, while SG&A rose to 19.2% of revenue from 18.3%.
- Nine-month operating cash flow was $290 million, compared with a use of $108 million a year earlier; cash and cash equivalents were $636 million at quarter-end.
- Merchandise inventories were $7.56 billion at October 28, 2023, up from $5.14 billion at January 28, 2023.
- The company repurchased $128 million of stock in Q3, leaving $3.8 billion of its $5.0 billion authorization available; it expects about $350 million of repurchases in fiscal 2024.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Best Buy kept $0.03.
- Revenue$9.76B100.0%
- Cost of revenue−$7.52B77.1%
- Gross profit$2.23B22.9%
- Operating costs−$1.88B19.2%
- Operating income$354.0M3.6%
- Interest, other & tax−$91.0M0.9%
- Net income$263.0M2.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed December 1, 2023Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $9.76B$10.59B | −7.8% |
| Cost of Revenue | $7.52B$8.26B | −8.9% |
| Gross Profit | $2.23B$2.33B | −4.3% |
| SG&A Expenses | $1.88B$1.94B | −3.2% |
| Operating Income | $354.00M$365.00M | −3.0% |
| Interest Expense | $14.00M$10.00M | +40.0% |
| Net Income | $263.00M$277.00M | −5.1% |
| EPS (Basic) | $1.21$1.23 | −1.6% |
| EPS (Diluted) | $1.21$1.22 | −0.8% |
| Shares Outstanding (Basic) | 217.80M225.50M | −3.4% |
| Shares Outstanding (Diluted) | 218.30M226.20M | −3.5% |
05—Questions
Frequently Asked Questions
What drove the decline in Best Buy's sales this quarter?
The filing attributes the comparable sales decline to a consumer electronics industry challenged by high inflation and interest rates, the pull-forward of demand in prior years, and increased consumer spending outside the home, such as travel and entertainment. Domestic comparable sales declines were led by appliances, computing, home theater and mobile phones, partly offset by growth in gaming.
How did profitability change?
Gross profit rose to $2.23 billion, or 22.9% of revenue, from 22.0%, mainly due to improved membership-offering performance. However, SG&A rose to 19.2% of revenue from 18.3%, reflecting lower sales leverage on fixed expenses and higher incentive compensation. As a result, operating income fell to $354 million from $365 million, and diluted EPS was $1.21 versus $1.22.
What is management's outlook for the rest of fiscal 2024?
Management expects macroeconomic headwinds to cause consumer electronics industry sales to decline again in fiscal 2024. It expects capital expenditures of about $825 million, compared with $930 million in fiscal 2023, and total share repurchases of about $350 million. It also plans to close about 25 Best Buy stores and end the year with 23 Outlet Centers.
Is the company's liquidity and balance sheet under pressure?
Cash and cash equivalents were $636 million, down from $1.87 billion at January 28, 2023, largely due to inventory purchases, capital expenditures and dividends. Long-term debt was $1.13 billion, the company had $1.25 billion undrawn on its revolving credit facility, and its S&P (BBB+) and Moody's (A3) ratings were unchanged with stable outlooks.
06—Continue