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Best Buy (BBY) Down 2.1% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Best Buy (BBY - Free Report) . Shares have lost about 2.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Best Buy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Best Buy's Q3 Earnings Beat, Comparable Sales Fall 10.4%
Best Buy posted better-than-expected results for third-quarter fiscal 2023 results, wherein the top and the bottom line outpaced the Zacks Consensus Estimate. However, both sales and earnings decreased year over year.
Q3 Details
Best Buy’s adjusted earnings of $1.38 per share beat the Zacks Consensus Estimate of $1.03 and our estimate of $1.01. The bottom line decreased from $2.08 recorded in the year-ago fiscal period.
Enterprise revenues declined 12.8% from the last fiscal year’s quarterly number to $10,587 million, exceeding the Zacks Consensus Estimate of $10,324 million and our estimate of $10,325 million. Enterprise comparable sales dropped 10.4% against 1.6% growth seen in the year-ago fiscal quarter.
Gross profit declined 16.8% to $2,332 million, while gross margin contracted 150 basis points (bps) to 22%. Adjusted operating income came in at $378 million, down from $634 million recorded in the year-ago fiscal quarter. Adjusted operating margin shrank 190 bps to 3.9%.
We note that adjusted SG&A expenses fell 9% to $1,941 million, while as a percentage of revenues, the same increased 40 bps to 18.3%.
Segment Details
Domestic segment revenues fell 10.8% to $9,800 million. This decline from the last fiscal year’s quarterly reading was mainly induced by a comparable sales decrease of 10.5%. From a merchandising perspective, comparable sales decreased in almost all categories, with the major drivers being computing and home theater.
Domestic online revenues of $3.04 billion declined 11.6% from the last fiscal year’s quarterly tally on a comparable basis. As a percentage of total domestic revenues, online revenues were 31% compared with the last fiscal year’s 31.3%.
Segment adjusted gross profit rate decreased 150 basis points to 21.9% due to lower services margin rates with pressures related to Best Buy’s Totaltech membership offering, reduced product margin rates and increased supply-chain costs. This was partly offset by increased profit-sharing revenues from its private label and co-branded credit card arrangement.
In the International segment, revenues fell 14.9% to $787 million, mainly due to a comparable sales decline of 9.3% and adverse foreign currency translations of 480 bps. The segment’s gross profit rate decreased 160 bps to 23.4%, induced by lower product margin rates and increased supply-chain costs.
Other Details
Best Buy ended the quarter with cash and cash equivalents of $932 million, long-term debt of $1,142 million and total equity of $2,993 million.
At the end of the reported quarter, merchandise inventories of $7,294 million decreased 14.7% from the year-ago fiscal quarter’s reading due to lower revenues and the impact of the timing of inventory receipts.
During the quarter, BBY returned about $198 million to its shareholders via dividends. Year to date, Best Buy has returned a total of $1.06 billion to its shareholders through share repurchases of $465 million and dividends worth $595 million. Management informed that it resumed share repurchases in November after pausing in the preceding fiscal quarter. It now expects to make share repurchases of roughly $1 billion in fiscal 2023.
BBY’s board authorized a quarterly cash dividend of 88 cents per share, payable Jan 3, 2023, to its shareholders of record as of Dec 13, 2022.
Guidance
For fiscal 2023, management envisions a comparable sales decline of about 10% and the adjusted operating income rate to be slightly above 4%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Best Buy has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Best Buy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Best Buy (BBY) Down 2.1% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Best Buy (BBY - Free Report) . Shares have lost about 2.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Best Buy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Best Buy's Q3 Earnings Beat, Comparable Sales Fall 10.4%
Best Buy posted better-than-expected results for third-quarter fiscal 2023 results, wherein the top and the bottom line outpaced the Zacks Consensus Estimate. However, both sales and earnings decreased year over year.
Q3 Details
Best Buy’s adjusted earnings of $1.38 per share beat the Zacks Consensus Estimate of $1.03 and our estimate of $1.01. The bottom line decreased from $2.08 recorded in the year-ago fiscal period.
Enterprise revenues declined 12.8% from the last fiscal year’s quarterly number to $10,587 million, exceeding the Zacks Consensus Estimate of $10,324 million and our estimate of $10,325 million. Enterprise comparable sales dropped 10.4% against 1.6% growth seen in the year-ago fiscal quarter.
Gross profit declined 16.8% to $2,332 million, while gross margin contracted 150 basis points (bps) to 22%. Adjusted operating income came in at $378 million, down from $634 million recorded in the year-ago fiscal quarter. Adjusted operating margin shrank 190 bps to 3.9%.
We note that adjusted SG&A expenses fell 9% to $1,941 million, while as a percentage of revenues, the same increased 40 bps to 18.3%.
Segment Details
Domestic segment revenues fell 10.8% to $9,800 million. This decline from the last fiscal year’s quarterly reading was mainly induced by a comparable sales decrease of 10.5%. From a merchandising perspective, comparable sales decreased in almost all categories, with the major drivers being computing and home theater.
Domestic online revenues of $3.04 billion declined 11.6% from the last fiscal year’s quarterly tally on a comparable basis. As a percentage of total domestic revenues, online revenues were 31% compared with the last fiscal year’s 31.3%.
Segment adjusted gross profit rate decreased 150 basis points to 21.9% due to lower services margin rates with pressures related to Best Buy’s Totaltech membership offering, reduced product margin rates and increased supply-chain costs. This was partly offset by increased profit-sharing revenues from its private label and co-branded credit card arrangement.
In the International segment, revenues fell 14.9% to $787 million, mainly due to a comparable sales decline of 9.3% and adverse foreign currency translations of 480 bps. The segment’s gross profit rate decreased 160 bps to 23.4%, induced by lower product margin rates and increased supply-chain costs.
Other Details
Best Buy ended the quarter with cash and cash equivalents of $932 million, long-term debt of $1,142 million and total equity of $2,993 million.
At the end of the reported quarter, merchandise inventories of $7,294 million decreased 14.7% from the year-ago fiscal quarter’s reading due to lower revenues and the impact of the timing of inventory receipts.
During the quarter, BBY returned about $198 million to its shareholders via dividends. Year to date, Best Buy has returned a total of $1.06 billion to its shareholders through share repurchases of $465 million and dividends worth $595 million. Management informed that it resumed share repurchases in November after pausing in the preceding fiscal quarter. It now expects to make share repurchases of roughly $1 billion in fiscal 2023.
BBY’s board authorized a quarterly cash dividend of 88 cents per share, payable Jan 3, 2023, to its shareholders of record as of Dec 13, 2022.
Guidance
For fiscal 2023, management envisions a comparable sales decline of about 10% and the adjusted operating income rate to be slightly above 4%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Best Buy has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Best Buy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.