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Best Buy's (BBY) Q1 Earnings Beat, Comparable Sales Down 10.1%
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Best Buy Co., Inc. (BBY - Free Report) posted better-than-expected earnings for first-quarter fiscal 2024. However, both sales and earnings decreased year over year. Best Buy’s adjusted earnings of $1.15 per share beat the Zacks Consensus Estimate of earnings of $1.12 per share. The bottom line decreased from $1.57 per share recorded in the year-ago fiscal period.
Over the past three months, this presently Zacks Rank #3 (Hold) stock has lost 16.3%,compared with the industry’s 7.8% drop.
Q1 Details
Enterprise revenues declined 12.8% from the last fiscal year’s quarterly number to $9,467 million, lagging the Zacks Consensus Estimate of $9,522 million. Enterprise comparable sales dropped 10.1%, wider than the 8% decline seen in the year-ago fiscal quarter.
Gross profit declined 16.8% to $2,332 million, while the 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%.
Best Buy Co., Inc. Price, Consensus and EPS Surprise
We note that adjusted selling, general and administrative expenses fell 9% to $1,941 million, while as a percentage of revenues, the same increased 40 bps to 18.3%.
Segment Details
The Domestic segment’s revenues fell 11% to $8,801 million. This decline from the last fiscal year’s quarterly reading was mainly induced by a comparable sales decrease of 10.4%. From a merchandising perspective, comparable sales decreased in categories, with the major drivers being computing, mobile phones, appliances and home theater.
The Domestic segment’s online revenues of $2.69 billion declined 12.1% from the last fiscal year’s quarterly tally on a comparable basis. As a percentage of total domestic revenues, online revenues were 30.5%, compared with the last fiscal year’s 30.9%.
The segment’s gross profit rate increased 70 bps to 22.6% due to better performance from the company’s membership offerings, including higher service margin rates and lower costs; favorable product margin rates and profit-sharing revenues from the private label and co-branded credit card arrangement.
In the International segment, revenues fell 11.6% to $666 million, mainly due to a comparable sales decline of 5.5% and adverse foreign currency translations of 610 bps. The segment’s gross profit rate decreased 60 bps to 23.7%, induced by a lower mix of revenues from the increased margin rate services category.
Other Details
Best Buy ended the quarter with cash and cash equivalents of $1,030 million, long-term debt of $1,155 million and total equity of $2,793 million.
At the end of the reported quarter, merchandise inventories of $5,219 million decreased 16.6% from the year-ago fiscal quarter’s reading.
During the quarter, BBY returned about $281 million to its shareholders via dividends of $202 million and share repurchases of $79 million. The company’s board has announced the payment of a regular quarterly cash dividend of 92 cents per share, payable on Jul 6, 2023, to shareholders of record as on Jun 15, 2023.
Guidance
For fiscal 2024, including 53 weeks, management continues to project revenues of $43.8-$45.2 billion and a comparable sales decline of 3-6%.
The company expects a fiscal 2024 adjusted operating margin of 3.7-4.7%. The upside can be attributed to an evolving membership program and gains from cost optimization initiatives. For fiscal 2024, management anticipates adjusted SG&A expenses to rise year over year on increased depreciation, add-back of incentive compensation and an extra week. The company expects adjusted earnings per share (EPS) between $5.70 and $6.50 for fiscal 2024. Capital expenditures are anticipated to be nearly $850 million.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 2.1% and 472%, respectively, from the year-ago reported figures. ANF delivered a negative trailing four-quarter earnings surprise of 141.2%.
Urban Outfitters, a retailer of fashion apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). URBN delivered break-even earnings in the last reported quarter.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 4% and 40.6%, respectively, from the year-ago reported figures.
Hibbett, a sporting goods retailer, currently carries a Zacks Rank of 2. The company has a negative trailing four-quarter earnings surprise of 13.9%, on average.
The consensus estimate for Hibbett’s current financial-year sales suggests growth of 5.7% from the year-ago reported figure.
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Best Buy's (BBY) Q1 Earnings Beat, Comparable Sales Down 10.1%
Best Buy Co., Inc. (BBY - Free Report) posted better-than-expected earnings for first-quarter fiscal 2024. However, both sales and earnings decreased year over year. Best Buy’s adjusted earnings of $1.15 per share beat the Zacks Consensus Estimate of earnings of $1.12 per share. The bottom line decreased from $1.57 per share recorded in the year-ago fiscal period.
Over the past three months, this presently Zacks Rank #3 (Hold) stock has lost 16.3%,compared with the industry’s 7.8% drop.
Q1 Details
Enterprise revenues declined 12.8% from the last fiscal year’s quarterly number to $9,467 million, lagging the Zacks Consensus Estimate of $9,522 million. Enterprise comparable sales dropped 10.1%, wider than the 8% decline seen in the year-ago fiscal quarter.
Gross profit declined 16.8% to $2,332 million, while the 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%.
Best Buy Co., Inc. Price, Consensus and EPS Surprise
Best Buy Co., Inc. price-consensus-eps-surprise-chart | Best Buy Co., Inc. Quote
We note that adjusted selling, general and administrative expenses fell 9% to $1,941 million, while as a percentage of revenues, the same increased 40 bps to 18.3%.
Segment Details
The Domestic segment’s revenues fell 11% to $8,801 million. This decline from the last fiscal year’s quarterly reading was mainly induced by a comparable sales decrease of 10.4%. From a merchandising perspective, comparable sales decreased in categories, with the major drivers being computing, mobile phones, appliances and home theater.
The Domestic segment’s online revenues of $2.69 billion declined 12.1% from the last fiscal year’s quarterly tally on a comparable basis. As a percentage of total domestic revenues, online revenues were 30.5%, compared with the last fiscal year’s 30.9%.
The segment’s gross profit rate increased 70 bps to 22.6% due to better performance from the company’s membership offerings, including higher service margin rates and lower costs; favorable product margin rates and profit-sharing revenues from the private label and co-branded credit card arrangement.
In the International segment, revenues fell 11.6% to $666 million, mainly due to a comparable sales decline of 5.5% and adverse foreign currency translations of 610 bps. The segment’s gross profit rate decreased 60 bps to 23.7%, induced by a lower mix of revenues from the increased margin rate services category.
Other Details
Best Buy ended the quarter with cash and cash equivalents of $1,030 million, long-term debt of $1,155 million and total equity of $2,793 million.
At the end of the reported quarter, merchandise inventories of $5,219 million decreased 16.6% from the year-ago fiscal quarter’s reading.
During the quarter, BBY returned about $281 million to its shareholders via dividends of $202 million and share repurchases of $79 million. The company’s board has announced the payment of a regular quarterly cash dividend of 92 cents per share, payable on Jul 6, 2023, to shareholders of record as on Jun 15, 2023.
Guidance
For fiscal 2024, including 53 weeks, management continues to project revenues of $43.8-$45.2 billion and a comparable sales decline of 3-6%.
The company expects a fiscal 2024 adjusted operating margin of 3.7-4.7%. The upside can be attributed to an evolving membership program and gains from cost optimization initiatives. For fiscal 2024, management anticipates adjusted SG&A expenses to rise year over year on increased depreciation, add-back of incentive compensation and an extra week. The company expects adjusted earnings per share (EPS) between $5.70 and $6.50 for fiscal 2024. Capital expenditures are anticipated to be nearly $850 million.
Solid Picks in Retail
We have highlighted three top-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Urban Outfitters (URBN - Free Report) and Hibbett Sports (HIBB - Free Report) .
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 2.1% and 472%, respectively, from the year-ago reported figures. ANF delivered a negative trailing four-quarter earnings surprise of 141.2%.
Urban Outfitters, a retailer of fashion apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). URBN delivered break-even earnings in the last reported quarter.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 4% and 40.6%, respectively, from the year-ago reported figures.
Hibbett, a sporting goods retailer, currently carries a Zacks Rank of 2. The company has a negative trailing four-quarter earnings surprise of 13.9%, on average.
The consensus estimate for Hibbett’s current financial-year sales suggests growth of 5.7% from the year-ago reported figure.