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Best Buy (BBY) Q3 Earnings Beat, FY22 Comparable Sales View Up
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Best Buy Co., Inc. (BBY - Free Report) posted better-than-expected third-quarter fiscal 2022 results, wherein both the top and the bottom lines not only beat the Zacks Consensus Estimate but also improved year over year. The company’s omnichannel capabilities as well as investments in new membership program, technology, advertising and health strategy should continue to contribute to the overall performance. Management raised enterprise comparable sales growth view for fiscal 2022 and also issued guidance for the final quarter.
Despite third-quarter beat, shares of this consumer electronics retailer fell during the pre-market trading session on Nov 23. Best Buy’s soft enterprise comparable sales forecast for the fourth quarter spooked investors.
Over the past six months, this Zacks Rank #2 (Buy) stock has increased 21.8% compared with the industry’s rise of 25.4%.
Q3 Details
Best Buy delivered adjusted earnings of $2.08 per share that surpassed the Zacks Consensus Estimate of $1.95. Moreover, the bottom line increased a couple of cents from the year-ago period.
Enterprise revenues rose a marginal 0.5% year over year to $11,910 million and came ahead of the Zacks Consensus Estimate of $11,706 million. Enterprise comparable sales increased 1.6% versus 23% growth seen in the year-ago quarter.
Adjusted gross profit declined 1% to $2,802 million, while adjusted gross margin contracted 40 basis points to 23.5%. Adjusted operating income came in at $694 million, down 4.7% from the year-ago quarter. Again, adjusted operating margin shrunk 30 bps to 5.8%.
We note that adjusted SG&A expenses rose slightly 0.2% to $2,108 million, while as a percentage of revenues, it remained flat at 17.7%.
Best Buy Co., Inc. Price, Consensus and EPS Surprise
Domestic segment revenues jumped 1.2% to $10,985 million. This year-over-year growth was mainly driven by comparable sales increase of 2%, partly offset by the loss of revenues from permanent store closures in the prior year. The company registered comparable sales growth in categories such as appliances, home theater and mobile phones. These were partly offset by a decline in computing.
Domestic online revenues of $3.44 billion declined 10.1% year over year, on a comparable basis. As a percentage of total Domestic revenues, online revenues decreased to approximately 31.3% compared with 35.2% last year.
Segment gross profit rate decreased 60 basis points to 23.4% owing to lower product margin and service margin rates. These were partially offset by higher profit-sharing revenues from the company’s private label and co-branded credit card arrangement.
Moving on to the International segment, revenues fell 7.8% to $925 million owing to loss of revenues from exiting Mexico and a comparable sales decline of 3% in Canada. However, favorable foreign currency exchange rates benefited the metric to the tune of 450 basis points. The segment’s adjusted gross profit rate expanded 240 basis points to 25% driven by improved product margin rates in Canada and sales mixing out of Mexico, which had a lower gross profit rate than Canada.
Other Details
Best Buy ended the quarter with cash and cash equivalents of $3,465 million, long-term debt of $1,223 million and a total equity of $4,278 million. During the quarter, the company returned about $577 million to its shareholders via share repurchases of $405 million and dividends worth $172 million. For fiscal 2022, the company expects share repurchases of more than $2.5 billion.
Guidance
Management now envisions fiscal 2022 enterprise revenues between $51.8 billion and $52.3 billion compared with the prior view of $51 billion to $52 billion, and up from year-ago reported figure of $47.3 billion. Best Buy guided enterprise comparable sales growth of 10.5-11.5% versus the prior forecast of 9-11% increase. The metric compared favorably with 9.7% increase registered in the past fiscal year.
It continues to expect adjusted gross profit rate to be marginally higher than last year. Adjusted SG&A growth is anticipated at nearly 9.5% compared with the past projection of 9% rise.
For the fourth quarter, Best Buy estimates enterprise revenues in the band of $16.4-$16.9 billion, the mid-point $16.65 billion is below the prior-year’ quarter reported figure of $16.9 billion. The company expects enterprise comparable sales to be down 2% to up 1% versus 12.6% growth registered in the year-ago period.
It projected a decline of approximately 30 basis points in adjusted gross profit rate compared with year-ago period. Adjusted SG&A dollar growth is anticipated at nearly 8%.
Boot Barn Holdings, which is a lifestyle retailer of western and work-related footwear, apparel and accessories, sports a Zacks Rank #1 (Strong Buy). Shares of the company have jumped 76.2% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and earnings per share (EPS) suggests growth of 54.4% and 183.3%, respectively, from the year-ago period. BOOT has a trailing four-quarter earnings surprise of 35.3%, on average.
Tractor Supply Company, a rural lifestyle retailer in the United States, flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 22.8%, on average. Shares of the company have jumped 26.6% in the past six months.
The Zacks Consensus Estimate for Tractor Supply Company’s current financial year sales and EPS suggests growth of 19% and 23.9%, respectively, from the year-ago period. TSCO has an expected EPS growth rate of 9.6% for three-five years.
Costco, which operates membership warehouses, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 7.7%, on average. Shares of the company have surged 41.2% in the past six months.
The Zacks Consensus Estimate for Costco’s current financial year sales and EPS suggests growth of 9.6% and 9.7%, respectively, from the year-ago period. COST has an expected EPS growth rate of 8.6% for three-five years.
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Best Buy (BBY) Q3 Earnings Beat, FY22 Comparable Sales View Up
Best Buy Co., Inc. (BBY - Free Report) posted better-than-expected third-quarter fiscal 2022 results, wherein both the top and the bottom lines not only beat the Zacks Consensus Estimate but also improved year over year. The company’s omnichannel capabilities as well as investments in new membership program, technology, advertising and health strategy should continue to contribute to the overall performance. Management raised enterprise comparable sales growth view for fiscal 2022 and also issued guidance for the final quarter.
Despite third-quarter beat, shares of this consumer electronics retailer fell during the pre-market trading session on Nov 23. Best Buy’s soft enterprise comparable sales forecast for the fourth quarter spooked investors.
Over the past six months, this Zacks Rank #2 (Buy) stock has increased 21.8% compared with the industry’s rise of 25.4%.
Q3 Details
Best Buy delivered adjusted earnings of $2.08 per share that surpassed the Zacks Consensus Estimate of $1.95. Moreover, the bottom line increased a couple of cents from the year-ago period.
Enterprise revenues rose a marginal 0.5% year over year to $11,910 million and came ahead of the Zacks Consensus Estimate of $11,706 million. Enterprise comparable sales increased 1.6% versus 23% growth seen in the year-ago quarter.
Adjusted gross profit declined 1% to $2,802 million, while adjusted gross margin contracted 40 basis points to 23.5%. Adjusted operating income came in at $694 million, down 4.7% from the year-ago quarter. Again, adjusted operating margin shrunk 30 bps to 5.8%.
We note that adjusted SG&A expenses rose slightly 0.2% to $2,108 million, while as a percentage of revenues, it remained flat at 17.7%.
Best Buy Co., Inc. Price, Consensus and EPS Surprise
Best Buy Co., Inc. price-consensus-eps-surprise-chart | Best Buy Co., Inc. Quote
Segment Details
Domestic segment revenues jumped 1.2% to $10,985 million. This year-over-year growth was mainly driven by comparable sales increase of 2%, partly offset by the loss of revenues from permanent store closures in the prior year. The company registered comparable sales growth in categories such as appliances, home theater and mobile phones. These were partly offset by a decline in computing.
Domestic online revenues of $3.44 billion declined 10.1% year over year, on a comparable basis. As a percentage of total Domestic revenues, online revenues decreased to approximately 31.3% compared with 35.2% last year.
Segment gross profit rate decreased 60 basis points to 23.4% owing to lower product margin and service margin rates. These were partially offset by higher profit-sharing revenues from the company’s private label and co-branded credit card arrangement.
Moving on to the International segment, revenues fell 7.8% to $925 million owing to loss of revenues from exiting Mexico and a comparable sales decline of 3% in Canada. However, favorable foreign currency exchange rates benefited the metric to the tune of 450 basis points. The segment’s adjusted gross profit rate expanded 240 basis points to 25% driven by improved product margin rates in Canada and sales mixing out of Mexico, which had a lower gross profit rate than Canada.
Other Details
Best Buy ended the quarter with cash and cash equivalents of $3,465 million, long-term debt of $1,223 million and a total equity of $4,278 million. During the quarter, the company returned about $577 million to its shareholders via share repurchases of $405 million and dividends worth $172 million. For fiscal 2022, the company expects share repurchases of more than $2.5 billion.
Guidance
Management now envisions fiscal 2022 enterprise revenues between $51.8 billion and $52.3 billion compared with the prior view of $51 billion to $52 billion, and up from year-ago reported figure of $47.3 billion. Best Buy guided enterprise comparable sales growth of 10.5-11.5% versus the prior forecast of 9-11% increase. The metric compared favorably with 9.7% increase registered in the past fiscal year.
It continues to expect adjusted gross profit rate to be marginally higher than last year. Adjusted SG&A growth is anticipated at nearly 9.5% compared with the past projection of 9% rise.
For the fourth quarter, Best Buy estimates enterprise revenues in the band of $16.4-$16.9 billion, the mid-point $16.65 billion is below the prior-year’ quarter reported figure of $16.9 billion. The company expects enterprise comparable sales to be down 2% to up 1% versus 12.6% growth registered in the year-ago period.
It projected a decline of approximately 30 basis points in adjusted gross profit rate compared with year-ago period. Adjusted SG&A dollar growth is anticipated at nearly 8%.
3 More Stocks Stealing the Limelight
Some other top-ranked stocks include, Boot Barn Holdings (BOOT - Free Report) , Tractor Supply Company (TSCO - Free Report) and Costco (COST - Free Report) .
Boot Barn Holdings, which is a lifestyle retailer of western and work-related footwear, apparel and accessories, sports a Zacks Rank #1 (Strong Buy). Shares of the company have jumped 76.2% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn Holdings’ current financial year sales and earnings per share (EPS) suggests growth of 54.4% and 183.3%, respectively, from the year-ago period. BOOT has a trailing four-quarter earnings surprise of 35.3%, on average.
Tractor Supply Company, a rural lifestyle retailer in the United States, flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 22.8%, on average. Shares of the company have jumped 26.6% in the past six months.
The Zacks Consensus Estimate for Tractor Supply Company’s current financial year sales and EPS suggests growth of 19% and 23.9%, respectively, from the year-ago period. TSCO has an expected EPS growth rate of 9.6% for three-five years.
Costco, which operates membership warehouses, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 7.7%, on average. Shares of the company have surged 41.2% in the past six months.
The Zacks Consensus Estimate for Costco’s current financial year sales and EPS suggests growth of 9.6% and 9.7%, respectively, from the year-ago period. COST has an expected EPS growth rate of 8.6% for three-five years.