BBY
$101.91
Best Buy
$1.40
1.39%
Earnings Details
1st Quarter April 2020
Thursday, May 21, 2020 7:00:00 AM
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Summary

Best Buy Beats

Best Buy (BBY) reported 1st Quarter April 2020 earnings of $0.67 per share on revenue of $8.6 billion. The consensus earnings estimate was $0.41 per share on revenue of $8.3 billion. The Earnings Whisper number was $0.48 per share. Revenue fell 6.3% compared to the same quarter a year ago.

Best Buy Co Inc Best Buy Co Inc is a retailer of technology products, including tablets and computers, televisions, mobile phones, large and small appliances, entertainment products, digital imaging and related accessories.

Results
Reported Earnings
$0.67
Earnings Whisper
$0.48
Consensus Estimate
$0.41
Reported Revenue
$8.56 Bil
Revenue Estimate
$8.34 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Best Buy Reports First Quarter Results

Enterprise Revenue Decreased 6.3%

Domestic Comparable Online Sales Increased 155.4%

GAAP Diluted EPS of $0.61

Non-GAAP Diluted EPS of $0.67

MINNEAPOLIS--(BUSINESS WIRE)--Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week first quarter ended May 2, 2020 (“Q1 FY21”), as compared to the 13-week first quarter ended May 4, 2019 (“Q1 FY20”).

 

Q1 FY21

Q1 FY20

Revenue ($ in millions)

 

 

 

 

 

 

Enterprise

$

8,562

 

$

9,142

 

Domestic segment

$

7,915

 

$

8,481

 

International segment

$

647

 

$

661

 

Enterprise comparable sales % change1

 

(5.3)

%

 

1.1

%

Domestic comparable sales % change1

 

(5.7)

%

 

1.3

%

Domestic comparable online sales % change1

 

155.4

%

 

14.5

%

International comparable sales % change1

 

0.2

%

 

(1.2)

%

Operating Income

 

 

 

 

 

 

GAAP operating income as a % of revenue

 

2.7

%

 

3.7

%

Non-GAAP operating income as a % of revenue

 

2.9

%

 

3.8

%

Diluted Earnings per Share ("EPS")

 

 

 

 

 

 

GAAP diluted EPS

$

0.61

 

$

0.98

 

Non-GAAP diluted EPS

$

0.67

 

$

1.02

 

For GAAP to non-GAAP reconciliations of the measures referred to in the above table, please refer to the attached supporting schedule.

“On behalf of all of us at Best Buy, I want to extend our sincere appreciation and gratitude to all those who are on the front lines working to keep us safe or maintain essential services, and we offer our heartfelt sympathy to all those who have lost someone to this virus or who are sick with COVID-19,” said Corie Barry, Best Buy CEO. “Our leadership team has been responding to the evolving situation with a focus on keeping our customers and our employees safe while we meet our customers’ needs.”

“In the middle of Q1, we shifted all our stores to a curbside-only operating model and were able to retain approximately 81% of last year’s sales2 during the last six weeks of the quarter, even though not a single customer set foot in our stores,” Barry continued. “The strong sales retention is a testament to the strength of our multi-channel capabilities and the strategic investments we have been making over the past several years.”

Barry continued, “The COVID-19 pandemic has changed the way we work, learn, care for ourselves and, importantly, connect with each other. Against that backdrop, our purpose has never been more relevant: to enrich lives through technology. It is because of that purpose that we were, in virtually every jurisdiction with a stay-at-home order in place, designated an essential retailer because of the products and services we offer.”

“As challenging as the current situation is, I am certain Best Buy will remain a strong, vibrant company that is well positioned to deliver on our purpose and thrive in a new and different environment. In fact, we have taken the opportunity to accelerate aspects of our strategy as this environment has quickly shifted the ways in which customers interact with retailers,” said Barry.

Barry concluded, “I want to take this moment to thank our employees, who have faced immense change with grit, determination and compassion and have helped us shape our approach to safe retailing. Many are working with customers every day, many of whom are also scared, frustrated and, occasionally, hostile in this COVID environment, to ensure they have access to the products and services they need. Others are working tirelessly to maintain a supply chain that delivers with speed and keeps our customers at home, and so many employees are making technical and operational changes every hour from their home offices. None of this is possible without their dedication, and I am truly grateful and feel lucky to be on the team with them.”

Best Buy CFO Matt Bilunas commented, “As a result of the ongoing uncertainty related to COVID-19, we suspended all FY21 financial guidance on March 21 and are not providing guidance today. Our priority has been and will continue to be the safety of our employees and customers while providing essential products and services during this time. We remain thoughtful about managing our profitability and liquidity, balancing our short-term decisions to navigate this unprecedented situation while preserving the elements of our strategy that will ensure we remain a vibrant company in the future.”

Summary of Domestic Operational Changes

Except where otherwise directed by state and local authorities, starting March 22, the company proactively shifted to a contactless curbside-only operating model for all its Domestic stores on an interim basis. This allowed the company to continue to serve customers who purchased online or via the Best Buy app and requested pickup at their local store. Additionally, on March 22, large products such as appliances were delivered where permitted and under strict safety guidelines. All in-home installations and repairs were temporarily suspended and all in-home consultations started to be conducted virtually. During this time, there were no changes in customers’ ability to transact online and have their products shipped directly to their homes.

On April 27, after implementing new safety guidelines, the company resumed valuable services like large product delivery, in-home installations and repairs in approximately 80% of U.S. ZIP codes for new orders.

At the beginning of Q2 FY21, on May 4, the company started welcoming customers back into its stores in innovative ways that follow strict social distancing practices and use proper protective equipment. Specifically, the company began offering a new consultation service to customers in store, by appointment only. The company currently has nearly 700 stores, or approximately 70%, operating this way. In addition, the company is evaluating additional changes, including expanding store hours and opening some stores beyond our current appointment-only model.

Domestic Segment Q1 FY21 Results

Domestic Revenue

Domestic revenue of $7.92 billion decreased 6.7% versus last year. The decrease was driven by a comparable sales1 decline of 5.7% and the loss of revenue from 24 permanent store closures in the past year.

The largest comparable sales growth drivers were computing and gaming. These growth drivers were more than offset by declines in home theater, mobile phones, digital imaging and services.

Domestic online revenue of $3.34 billion increased 155.4% on a comparable basis1 due to higher conversion rates and increased traffic. As a percentage of total Domestic revenue, online revenue increased to approximately 42.2% versus 15.4% last year.

Domestic Gross Profit Rate

Domestic gross profit rate was 23.0% versus 23.7% last year. The gross profit rate decrease of approximately 70 basis points was primarily driven by higher supply chain costs as a result of the increased mix of online revenue.

Domestic Selling, General and Administrative Expenses (“SG&A”)

Domestic GAAP SG&A was $1.58 billion, or 19.9% of revenue, versus $1.68 billion, or 19.8% of revenue, last year. On a non-GAAP basis, SG&A was $1.56 billion, or 19.7% of revenue, versus $1.66 billion, or 19.6% of revenue, last year. Both GAAP and non-GAAP SG&A decreased primarily due to reduced incentive compensation expense, as the company did not pay or accrue short-term incentive expense for first quarter performance. Store payroll expense was lower compared to last year when including an employee retention credit of $69 million as a result of the Federal CARES ACT. This employee retention credit is a payroll tax credit, which represented approximately 50% of qualified wages and health benefits paid to retained employees not working as a result of COVID-19.

International Segment Q1 FY21 Results

International Revenue

International revenue of $647 million decreased 2.1% versus last year. This decrease was primarily driven by the impact of approximately 320 basis points of negative foreign currency exchange rates, which was partially offset by revenue from new stores opened in Mexico in the past year.

International Gross Profit Rate

International gross profit rate was 22.3% versus 24.2% last year. The gross profit rate decrease of approximately 190 basis points was primarily due to Canada, which was largely driven by a lower mix of higher-margin services revenue and higher supply chain costs as a result of the increased mix of online revenue.

International SG&A

International SG&A was $156 million, or 24.1% of revenue, versus $158 million, or 23.9% of revenue, last year. SG&A decreased primarily due to the favorable impact of foreign exchange rates.

Income Taxes

The Q1 FY21 effective tax rate was 27.4% versus 19.8% last year. On a non-GAAP basis, the effective tax rate was 27.2% versus 20.1% last year. The higher GAAP and non-GAAP effective tax rates were primarily due to a decrease in the tax benefit from stock-based compensation.

Dividends and Share Repurchases

In Q1 FY21, the company returned a total of $203 million to shareholders through dividends of $141 million and share repurchases of $62 million.

Today, the company announced its board of directors has authorized the payment of a regular quarterly cash dividend of $0.55 per common share. The quarterly dividend is payable on July 2, 2020, to shareholders of record as of the close of business on June 11, 2020.

As previously communicated, the company suspended all share repurchases as of March 21, 2020.

Conference Call

Best Buy is scheduled to conduct an earnings conference call at 8:00 a.m. Eastern Time (7:00 a.m. Central Time) on May 21, 2020. A webcast of the call is expected to be available at www.investors.bestbuy.com, both live and after the call.

Notes:

(1) Comparable sales include revenue from all stores that were temporarily closed or operating an enhanced curbside-only operating model in Q1 FY21 as a result of COVID-19. The method of calculating comparable sales varies across the retail industry, including the treatment of store closures as a result of COVID-19. As a result, our method of calculating comparable sales may not be the same as other retailers’ methods. For additional information on comparable sales, please see our most recent Annual Report on Form 10-K, and any subsequent Quarterly Reports on Form 10-Q, filed with the Securities and Exchange Commission, and available at www.investors.bestbuy.com.

(2) The 81% sales retention is based on the company’s interim period data, which the company uses to monitor revenue performance on a daily or weekly interval. The sales retention estimate represents the year-over-year change compared to the same period in the prior fiscal year. Retention is based on absolute sales dollar changes and is not presented in accordance with the company’s comparable sales definition. The company’s interim sales data is unaudited and excludes quarter-end revenue accounting adjustments. Other companies may track interim period sales data using different methods and systems, and therefore, the estimated data presented here may not be comparable to any data released by other companies.

Forward-Looking and Cautionary Statements:

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that reflect management’s current views and estimates regarding future market conditions, company performance and financial results, operational investments, business prospects, new strategies, the competitive environment and other events. You can identify these statements by the fact that they use words such as “anticipate,” “believe,” “assume,” “estimate,” “expect,” “intend,” “foresee,” “project,” “guidance,” “plan,” “outlook,” and other words and terms of similar meaning. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: the duration and scope of the COVID-19 pandemic and the impact on demand for our products and services, levels of consumer confidence and our supply chain; the effects and duration of steps we take in response to the pandemic, including the implementation of our interim and evolving operating model; actions governments, businesses and individuals take in response to the pandemic and their impact on economic activity and consumer spending; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers), our expansion strategies, our focus on services as a strategic priority, our reliance on key vendors and mobile network carriers, our ability to attract and retain qualified employees, changes in market compensation rates, risks arising from statutory, regulatory and legal developments, macroeconomic pressures in the markets in which we operate, failure to effectively manage our costs, our reliance on our information technology systems, our ability to prevent or effectively respond to a privacy or security breach, our ability to effectively manage strategic ventures, alliances or acquisitions, our dependence on cash flows and net earnings generated during the fourth fiscal quarter, susceptibility of our products to technological advancements, product life cycle preferences and changes in consumer preferences, economic or regulatory developments that might affect our ability to provide attractive promotional financing, interruptions and other supply chain issues, catastrophic events, health crises, pandemics, our ability to maintain positive brand perception and recognition, product safety and quality concerns, changes to labor or employment laws or regulations, our ability to effectively manage our real estate portfolio, constraints in the capital markets or our vendor credit terms, changes in our credit ratings, any material disruption in our relationship with or the services of third-party vendors, risks related to our exclusive brand products and risks associated with vendors that source products outside of the U.S., including trade restrictions or changes in the costs of imports (including existing or new tariffs or duties and changes in the amount of any such tariffs or duties) and risks arising from our international activities.

A further list and description of these risks, uncertainties and other matters can be found in the company’s annual report and other reports filed from time to time with the Securities and Exchange Commission (“SEC”), including, but not limited to, Best Buy’s Annual Report on Form 10-K filed with the SEC on March 23, 2020. Best Buy cautions that the foregoing list of important factors is not complete, and any forward-looking statements speak only as of the date they are made, and Best Buy assumes no obligation to update any forward-looking statement that it may make.

BEST BUY CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

($ and shares in millions, except per share amounts)

(Unaudited and subject to reclassification)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

May 2, 2020

 

May 4, 2019

Revenue

$

8,562

 

 

$

9,142

 

Cost of sales

 

6,597

 

 

 

6,973

 

Gross profit

 

1,965

 

 

 

2,169

 

Gross profit %

 

23.0

%

 

 

23.7

%

Selling, general and administrative expenses

1,735

 

 

 

1,835

 

SG&A %

 

20.3

%

 

 

20.1

%

Restructuring charges

 

1

 

 

 

-

 

Operating income

 

229

 

 

 

334

 

Operating income %

 

2.7

%

 

 

3.7

%

Other income (expense)

 

 

 

 

 

 

 

Investment income and other

 

6

 

 

 

14

 

Interest expense

 

(17)

 

 

 

(18)

 

Earnings before income tax expense

 

218

 

 

 

330

 

Income tax expense

 

59

 

 

 

65

 

Effective tax rate

 

27.4

%

 

 

19.8

%

Net earnings

$

159

 

 

$

265

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.61

 

 

$

0.99

 

Diluted earnings per share

$

0.61

 

 

$

0.98

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

 

 

 

Basic

 

258.3

 

 

 

267.6

 

Diluted

 

260.4

 

 

 

271.5

 

BEST BUY CO., INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

(Unaudited and subject to reclassification)

 

 

 

 

 

 

 

 

 

May 2, 2020

 

May 4, 2019

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

3,919

 

 

$

1,561

 

Receivables, net

 

749

 

 

 

833

 

Merchandise inventories

 

3,993

 

 

 

5,195

 

Other current assets

 

335

 

 

 

425

 

Total current assets

 

8,996

 

 

 

8,014

 

Property and equipment, net

 

2,291

 

 

 

2,334

 

Operating lease assets

 

2,631

 

 

 

2,708

 

Goodwill

 

986

 

 

 

915

 

Other assets

 

701

 

 

 

579

 

Total assets

$

15,605

 

 

$

14,550

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

$

4,428

 

 

$

4,718

 

Unredeemed gift card liabilities

 

257

 

 

 

265

 

Deferred revenue

 

531

 

 

 

409

 

Accrued compensation and related expenses

 

213

 

 

 

275

 

Accrued liabilities

 

769

 

 

 

851

 

Short-term debt

 

1,250

 

 

 

-

 

Current portion of operating lease liabilities

 

683

 

 

 

639

 

Current portion of long-term debt

 

673

 

 

 

14

 

Total current liabilities

 

8,804

 

 

 

7,171

 

Long-term operating lease liabilities

 

2,076

 

 

 

2,173

 

Long-term liabilities

 

694

 

 

 

659

 

Long-term debt

 

621

 

 

 

1,193

 

Equity

 

3,410

 

 

 

3,354

 

Total liabilities and equity

$

15,605

 

 

$

14,550

 

BEST BUY CO., INC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

(Unaudited and subject to reclassification)

 

 

 

 

 

 

 

 

 

Three Months Ended

 

May 2, 2020

 

May 4, 2019

Operating activities

 

 

 

 

 

 

 

Net earnings

$

159

 

 

$

265

 

Adjustments to reconcile net earnings to total cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

207

 

 

 

200

 

Stock-based compensation

 

15

 

 

 

36

 

Deferred income taxes

 

15

 

 

 

13

 

Other, net

 

6

 

 

 

1

 

Changes in operating assets and liabilities:

 

 

 

 

 

Receivables

 

383

 

 

 

182

 

Merchandise inventories

 

1,136

 

 

 

207

 

Other assets

 

(12)

 

 

 

(14)

 

Accounts payable

 

(816)

 

 

 

(519)

 

Income taxes

 

31

 

 

 

10

 

Other liabilities

 

(297)

 

 

 

(379)

 

Total cash provided by operating activities

 

827

 

 

 

2

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Additions to property and equipment

 

(178)

 

 

 

(193)

 

Other, net

 

(1)

 

 

 

1

 

Total cash used in investing activities

 

(179)

 

 

 

(192)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Repurchase of common stock

 

(62)

 

 

 

(98)

 

Dividends paid

 

(141)

 

 

 

(134)

 

Borrowings of debt

 

1,250

 

 

 

-

 

Other, net

 

2

 

 

 

6

 

Total cash provided by (used in) financing activities

 

1,049

 

 

 

(226)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(18)

 

 

 

(1)

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

1,679

 

 

 

(417)

 

Cash, cash equivalents and restricted cash at beginning of period

 

2,355

 

 

 

2,184

 

Cash, cash equivalents and restricted cash at end of period

$

4,034

 

 

$

1,767

 

BEST BUY CO., INC.

SEGMENT INFORMATION

($ in millions)

(Unaudited and subject to reclassification)

 

 

 

 

 

 

 

 

 

Three Months Ended

Domestic Segment Results

May 2, 2020

 

May 4, 2019

Revenue

$

7,915

 

 

$

8,481

 

Comparable sales % change

 

(5.7)

%

 

 

1.3

%

Comparable online sales % change

 

155.4

%

 

 

14.5

%

Gross profit

$

1,821

 

 

$

2,009

 

Gross profit as a % of revenue

 

23.0

%

 

 

23.7

%

SG&A

$

1,579

 

 

$

1,677

 

SG&A as a % of revenue

 

19.9

%

 

 

19.8

%

Operating income

$

241

 

 

$

332

 

Operating income as a % of revenue

 

3.0

%

 

 

3.9

%

 

 

 

 

 

 

 

 

Domestic Segment Non-GAAP Results1

 

 

 

 

 

 

 

Gross profit

$

1,821

 

 

$

2,009

 

Gross profit as a % of revenue

 

23.0

%

 

 

23.7

%

SG&A

$

1,559

 

 

$

1,660

 

SG&A as a % of revenue

 

19.7

%

 

 

19.6

%

Operating income

$

262

 

 

$

349

 

Operating income as a % of revenue

 

3.3

%

 

 

4.1

%

 

 

 

 

 

 

 

 

 

Three Months Ended

International Segment Results

May 2, 2020

 

May 4, 2019

Revenue

$

647

 

 

$

661

 

Comparable sales % change

 

0.2

%

 

 

(1.2)

%

Gross profit

$

144

 

 

$

160

 

Gross profit as a % of revenue

 

22.3

%

 

 

24.2

%

SG&A

$

156

 

 

$

158

 

SG&A as a % of revenue

 

24.1

%

 

 

23.9

%

Operating income (loss)

$

(12)

 

 

$

2

 

Operating income (loss) as a % of revenue

 

(1.9)

%

 

 

0.3

%

 

 

 

 

 

 

 

 

International Segment Non-GAAP Results1

 

 

 

 

 

Gross profit

$

144

 

 

$

160

 

Gross profit as a % of revenue

 

22.3

%

 

 

24.2

%

SG&A

$

156

 

 

$

158

 

SG&A as a % of revenue

 

24.1

%

 

 

23.9

%

Operating income (loss)

$

(12)

 

 

$

2

 

Operating income (loss) as a % of revenue

 

(1.9)

%

 

 

0.3

%

(1)

For GAAP to non-GAAP reconciliations, please refer to the attached supporting schedule titled Reconciliation of Non-GAAP Financial Measures.

BEST BUY CO., INC.

REVENUE CATEGORY SUMMARY

(Unaudited and subject to reclassification)

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue Mix

 

Comparable Sales

 

Three Months Ended

 

Three Months Ended

Domestic Segment

May 2, 2020

 

May 4, 2019

 

May 2, 2020

 

May 4, 2019

Computing and Mobile Phones

48

%

 

46

%

 

0.0

%

 

1.0

%

Consumer Electronics

28

%

 

31

%

 

(15.7)

%

 

0.9

%

Appliances

12

%

 

11

%

 

(2.0)

%

 

10.5

%

Entertainment

7

%

 

6

%

 

9.5

%

 

(12.7)

%

Services

5

%

 

6

%

 

(16.1)

%

 

6.8

%

Other

-

%

 

-

%

 

N/A

 

 

N/A

 

Total

100

%

 

100

%

 

(5.7)

%

 

1.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue Mix

 

Comparable Sales

 

Three Months Ended

 

Three Months Ended

International Segment

May 2, 2020

 

May 4, 2019

 

May 2, 2020

 

May 4, 2019

Computing and Mobile Phones

48

%

 

46

%

 

4.6

%

 

(4.0)

%

Consumer Electronics

27

%

 

31

%

 

(12.7)

%

 

2.5

%

Appliances

9

%

 

9

%

 

0.1

%

 

(2.0)

%

Entertainment

9

%

 

5

%

 

58.0

%

 

(14.0)

%

Services

5

%

 

7

%

 

(19.5)

%

 

13.4

%

Other

2

%

 

2

%

 

1.1

%

 

15.3

%

Total

100

%

 

100

%

 

0.2

%

 

(1.2)

%

BEST BUY CO., INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
($ in millions, except per share amounts)
(Unaudited and subject to reclassification)

The following information provides reconciliations of the most comparable financial measures presented in accordance with accounting principles generally accepted in the U.S. (GAAP financial measures) to presented non-GAAP financial measures. The company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP financial measures. Generally, presented non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill impairments, gains and losses on investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when the company believes this provides greater clarity to management and investors. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, the GAAP financial measures presented in this earnings release and the company’s financial statements and other publicly filed reports. Non-GAAP financial measures as presented herein may not be comparable to similarly titled measures used by other companies.

 

Three Months Ended

 

Three Months Ended

 

May 2, 2020

 

May 4, 2019

 

Domestic

 

International

 

Consolidated

 

Domestic

 

International

 

Consolidated

SG&A

$

1,579

 

 

$

156

 

 

$

1,735

 

 

$

1,677

 

 

$

158

 

 

$

1,835

 

% of revenue

 

19.9

%

 

 

24.1

%

 

 

20.3

%

 

 

19.8

%

 

 

23.9

%

 

 

20.1

%

Intangible asset amortization1

 

(20)

 

 

 

-

 

 

 

(20)

 

 

 

(17)

 

 

 

-

 

 

 

(17)

 

Non-GAAP SG&A

$

1,559

 

 

$

156

 

 

$

1,715

 

 

$

1,660

 

 

$

158

 

 

$

1,818

 

% of revenue

 

19.7

%

 

 

24.1

%

 

 

20.0

%

 

 

19.6

%

 

 

23.9

%

 

 

19.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

$

241

 

 

$

(12)

 

 

$

229

 

 

$

332

 

 

$

2

 

 

$

334

 

% of revenue

 

3.0

%

 

 

(1.9)

%

 

 

2.7

%

 

 

3.9

%

 

 

0.3

%

 

 

3.7

%

Intangible asset amortization1

 

20

 

 

 

-

 

 

 

20

 

 

 

17

 

 

 

-

 

 

 

17

 

Restructuring charges2

 

1

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

Non-GAAP operating income (loss)

$

262

 

 

$

(12)

 

 

$

250

 

 

$

349

 

 

$

2

 

 

$

351

 

% of revenue

 

3.3

%

 

 

(1.9)

%

 

 

2.9

%

 

 

4.1

%

 

 

0.3

%

 

 

3.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

 

 

 

 

 

 

 

 

27.4

%

 

 

 

 

 

 

 

 

 

 

19.8

%

Intangible asset amortization

 

 

 

 

 

 

 

 

 

(0.2)

%

 

 

 

 

 

 

 

 

 

 

0.3

%

Non-GAAP effective tax rate

 

 

 

 

 

 

 

 

 

27.2

%

 

 

 

 

 

 

 

 

 

 

20.1

%

 
 

Three Months Ended

 

Three Months Ended

May 2, 2020

 

May 4, 2019

Pretax Earnings

 

Net of Tax3

 

Per Share

 

Pretax
Earnings

 

Net of Tax3

 

Per Share

GAAP diluted EPS

 

 

 

 

 

 

 

 

 

$

0.61

 

 

 

 

 

 

 

 

 

 

$

0.98

 

Intangible asset amortization 1

$

20

$

15

0.06

 

$

17

$

13

0.04

Restructuring charges 2

 

1

1

-

 

-

-

 

-

Non-GAAP diluted EPS

 

 

 

 

 

 

 

 

$

0.67

 

 

 

 

 

 

 

 

 

 

$

1.02

(1)

Represents the non-cash amortization of definite-lived intangible assets associated with acquisitions, including customer relationships, tradenames and developed technology.

(2)

Represents adjustments associated with U.S. retail operating model changes.

(3)

The non-GAAP adjustments relate primarily to adjustments in the U.S. As such, the income tax charge is calculated using the statutory tax rate of 24.5% for all periods presented.

Return on Assets and Non-GAAP Return on Investment

The tables below provide calculations of return on assets ("ROA") (GAAP financial measure) and non-GAAP return on investment (“ROI”) (non-GAAP financial measure) for the periods presented. The company believes ROA is the most directly comparable financial measure to ROI. Non-GAAP ROI is defined as non-GAAP adjusted operating income after tax divided by average invested operating assets. All periods presented below apply this methodology consistently. The company believes non-GAAP ROI is a meaningful metric for investors to evaluate capital efficiency because it measures how key assets are deployed by adjusting operating income and total assets for the items noted below. This method of determining non-GAAP ROI may differ from other companies' methods and therefore may not be comparable to those used by other companies.

Return on Assets ("ROA")

May 2, 20201

 

May 4, 20191

Net earnings

$

1,435

 

 

$

1,521

 

Total assets

 

16,125

 

 

 

13,881

 

ROA

 

8.9

%

 

 

11.0

%

 

 

 

 

 

 

 

 

Non-GAAP Return on Investment ("ROI")

May 2, 20201

 

May 4, 20191

Numerator

 

 

 

 

 

 

 

Operating income - total operations

$

1,904

 

 

$

1,969

 

Add: Non-GAAP operating income adjustments2

 

120

 

 

 

68

 

Add: Operating lease interest3

 

112

 

 

 

113

 

Less: Income taxes4

 

(523)

 

 

 

(527)

 

Add: Depreciation

 

744

 

 

 

755

 

Add: Operating lease amortization5

 

667

 

 

 

649

 

Adjusted operating income after tax

$

3,024

 

 

$

3,027

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

Total assets

$

16,125

 

 

$

13,881

 

Less: Excess cash6

 

(1,171)

 

 

 

(1,153)

 

Add: Capitalized operating lease assets7

 

-

 

 

 

2,268

 

Add: Accumulated depreciation and amortization8

 

6,852

 

 

 

6,518

 

Less: Adjusted current liabilities9

 

(7,942)

 

 

 

(8,028)

 

Average invested operating assets

$

13,864

 

 

$

13,486

 

 

 

 

 

 

 

 

 

Non-GAAP ROI

 

21.8

%

 

 

22.4

%

(1)

Income statement accounts represent the activity for the trailing 12 months ended as of each of the balance sheet dates. Balance sheet accounts represent the average account balances for the trailing 12 months ended as of each of the balance sheet dates.

(2)

Non-GAAP operating income adjustments include continuing operations adjustments for intangible asset amortization, acquisition-related transaction costs and restructuring charges. Additional details regarding these adjustments are included in the Reconciliation of Non-GAAP Financial Measures schedule within the company's quarterly earnings releases.

(3)

Operating lease interest represents the add-back to operating income to approximate the total interest expense that the company would incur if its operating leases were owned and financed by debt. For periods prior to FY20, the add-back is approximated by using a multiple of 15% of total rent expense. For periods beginning on or after FY20, the add-back is approximated by multiplying average operating lease assets by 4%, which approximates the interest rate on the company’s operating lease liabilities.

(4)

Income taxes are approximated by using a blended statutory rate at the Enterprise level based on statutory rates from the countries in which the company does business, which primarily consists of the U.S. with a statutory rate of 24.5% for the periods presented.

(5)

Operating lease amortization represents operating lease cost less operating lease interest. Operating lease cost includes short-term leases, which are immaterial, and excludes variable lease costs as these costs are not included in the operating lease asset balance.

(6)

Excess cash represents the amount of cash, cash equivalents and short-term investments greater than $1 billion, which approximates the amount of cash the company believes is necessary to run the business and may fluctuate over time.

(7)

Capitalized operating lease assets represent the estimated net assets that the company would record if the company's operating leases were owned. For periods prior to FY20, the asset is approximated by using a multiple of four times total rent expense. For periods beginning on or after FY20, capitalized operating lease assets are included within Total assets and therefore no adjustment is necessary.

(8)

Accumulated depreciation and amortization represents accumulated depreciation related to property and equipment and accumulated amortization related to definite-lived intangible assets.

(9)

Adjusted current liabilities represent total current liabilities less short-term debt and the current portions of operating lease liabilities and long-term debt.

Investor Contact:
Mollie O'Brien
mollie.obrien@bestbuy.com

Media Contact:
Carly Charlson
carly.charlson@bestbuy.com

Source: Best Buy Co., Inc.