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Best Buy (BBY) Q4 Earnings Top, Revenues Lag; Stock Down
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Best Buy Company, Inc. (BBY - Free Report) reported mixed quarterly numbers for fourth-quarter fiscal 2017. The company posted earnings per share of $1.95 beating the Zacks Consensus Estimate of $1.66 and increasing 27% year over year. Notably, this is the seventeenth-consecutive quarter in which the company’s earnings have surpassed the estimates. In the reported quarter, earnings were driven by sound promotional strategy, continuous optimization of merchandise margins as well as due to robust expense management.
Including one-time items, quarterly earnings per share came in at $1.91 compared with $1.39 in the year-ago quarter.
However, on the revenues front the company disappointed investors by missing the Zacks Consensus Estimate after surpassing the same in the preceding three quarters. The company’s revenues declined 1% to $13,482 million and also lagged the Zacks Consensus Estimate of $13,608 million. Revenues were near the mid-point of its guidance range. Comparable-store sales (comps) were down 0.7%, compared with a decline of 1.7% in the prior-year period.
Adjusted operating profit came in at $900 million, up 11.4% year over year. While adjusted operating margin was 6.7%, in comparison with 5.9% in the prior-year quarter.
Following the results, the company’s shares decline over 4%. In fact, in the past three months the stock has declined 3.3%, underperforming the Zacks categorized Retail-Consumer Electronic industry which has gained 0.7%.
Segment Details
Domestic segment revenues dipped 1.4% year over year to $12,338 million, primarily due to 0.9% decline in comparable sales and loss of revenues from 11 large-format as well as 31 Best Buy Mobile store shut downs.
Domestic comparable-online sales increased 17.5 % to $2.3 billion. The upside was driven by improved traffic and conversion rates.
The segment’s adjusted gross profit increased 1.7% to $2,749 million during the quarter. Adjusted margin came in at 22.3% compared with 21.6% in the prior-year quarter on the back of better margin rates in the computing as well as home theater categories. Adjusted operating income jumped 8.3% to $819 million while adjusted margin expanded 60 basis points (bps) to 6.6%.
International segment revenues rose 2.5% to $1,144 million, primarily backed by favorable currency impact, periodic profit sharing advantage from the company’s services plan portfolio and growth in Mexico business wherein comparable sales increased 0.9%.
The segment’s adjusted gross profit rose 15.2% to $281 million in the quarter and gross margin increased 280 bps to 24.6%. Adjusted operating profit came in at $81 million in comparison with $52 million recorded in the prior-year quarter. Adjusted operating income margin came in at 7.1% compared with 4.7% in the year-ago quarter.
Best Buy Co., Inc. Price, Consensus and EPS Surprise
Best Buy ended the quarter with cash and cash equivalents of $2,240 million, long-term debt of $1,321 million and total equity of $4,709 million.
On Feb 25, 2016, the board of directors announced a plan to repurchase shares worth $1 billion over the next two years. In the fiscal fourth quarter, the company repurchased 5.3 million shares for $226 million. In fiscal 2017, the company repurchased 21.0 million shares for a total of $743 million.
Guidance
For the fiscal 2018, management forecasts Enterprise revenues (including 53rd week) growth of 1.5%. On a 52-week basis, the company anticipates adjusted operating income growth rate in the low-single digits. On the 52-week basis, it expects enterprise revenues to be flat year over year.
For first-quarter fiscal 2018, management forecasts Enterprise revenues between $8.2 billion and $8.3 billion and comparable sales decline of 1–2%. Management also projects earnings in the range of 30–40 cents a share. The current Zacks Consensus Estimate for the first quarter is pegged at 49 cents, which could witness a correction in the coming days.
Also in the fiscal first quarter, the company expects domestic comparable sales to fall in the range of 1.5–2.5%, while international comparable sales are projected to be in the range of flat to up 3.0%.
Burlington Stores delivered an average positive earnings surprise of 25.6% in the trailing four quarters and has a long-term earnings growth rate of 19.9%.
Big Lots delivered an average positive earnings surprise of 83% in the trailing four quarters and has a long-term earnings growth rate of 13.5%.
Ross Stores delivered an average positive earnings surprise of 5% in the trailing four quarters and has a long-term earnings growth rate of 10.5%.
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Best Buy (BBY) Q4 Earnings Top, Revenues Lag; Stock Down
Best Buy Company, Inc. (BBY - Free Report) reported mixed quarterly numbers for fourth-quarter fiscal 2017. The company posted earnings per share of $1.95 beating the Zacks Consensus Estimate of $1.66 and increasing 27% year over year. Notably, this is the seventeenth-consecutive quarter in which the company’s earnings have surpassed the estimates. In the reported quarter, earnings were driven by sound promotional strategy, continuous optimization of merchandise margins as well as due to robust expense management.
Including one-time items, quarterly earnings per share came in at $1.91 compared with $1.39 in the year-ago quarter.
However, on the revenues front the company disappointed investors by missing the Zacks Consensus Estimate after surpassing the same in the preceding three quarters. The company’s revenues declined 1% to $13,482 million and also lagged the Zacks Consensus Estimate of $13,608 million. Revenues were near the mid-point of its guidance range. Comparable-store sales (comps) were down 0.7%, compared with a decline of 1.7% in the prior-year period.
Adjusted operating profit came in at $900 million, up 11.4% year over year. While adjusted operating margin was 6.7%, in comparison with 5.9% in the prior-year quarter.
Following the results, the company’s shares decline over 4%. In fact, in the past three months the stock has declined 3.3%, underperforming the Zacks categorized Retail-Consumer Electronic industry which has gained 0.7%.
Segment Details
Domestic segment revenues dipped 1.4% year over year to $12,338 million, primarily due to 0.9% decline in comparable sales and loss of revenues from 11 large-format as well as 31 Best Buy Mobile store shut downs.
Domestic comparable-online sales increased 17.5 % to $2.3 billion. The upside was driven by improved traffic and conversion rates.
The segment’s adjusted gross profit increased 1.7% to $2,749 million during the quarter. Adjusted margin came in at 22.3% compared with 21.6% in the prior-year quarter on the back of better margin rates in the computing as well as home theater categories. Adjusted operating income jumped 8.3% to $819 million while adjusted margin expanded 60 basis points (bps) to 6.6%.
International segment revenues rose 2.5% to $1,144 million, primarily backed by favorable currency impact, periodic profit sharing advantage from the company’s services plan portfolio and growth in Mexico business wherein comparable sales increased 0.9%.
The segment’s adjusted gross profit rose 15.2% to $281 million in the quarter and gross margin increased 280 bps to 24.6%. Adjusted operating profit came in at $81 million in comparison with $52 million recorded in the prior-year quarter. Adjusted operating income margin came in at 7.1% compared with 4.7% in the year-ago quarter.
Best Buy Co., Inc. Price, Consensus and EPS Surprise
Best Buy Co., Inc. Price, Consensus and EPS Surprise | Best Buy Co., Inc. Quote
Other Financial Details
Best Buy ended the quarter with cash and cash equivalents of $2,240 million, long-term debt of $1,321 million and total equity of $4,709 million.
On Feb 25, 2016, the board of directors announced a plan to repurchase shares worth $1 billion over the next two years. In the fiscal fourth quarter, the company repurchased 5.3 million shares for $226 million. In fiscal 2017, the company repurchased 21.0 million shares for a total of $743 million.
Guidance
For the fiscal 2018, management forecasts Enterprise revenues (including 53rd week) growth of 1.5%. On a 52-week basis, the company anticipates adjusted operating income growth rate in the low-single digits. On the 52-week basis, it expects enterprise revenues to be flat year over year.
For first-quarter fiscal 2018, management forecasts Enterprise revenues between $8.2 billion and $8.3 billion and comparable sales decline of 1–2%. Management also projects earnings in the range of 30–40 cents a share. The current Zacks Consensus Estimate for the first quarter is pegged at 49 cents, which could witness a correction in the coming days.
Also in the fiscal first quarter, the company expects domestic comparable sales to fall in the range of 1.5–2.5%, while international comparable sales are projected to be in the range of flat to up 3.0%.
Zacks Rank & Key Picks
Best Buy currently carries a Zacks Rank #3 (Hold). Better-ranked stocks which warrant a look in the retail sector include Burlington Stores, Inc. (BURL - Free Report) , Big Lots, Inc. (BIG - Free Report) and Ross Stores, Inc. (ROST - Free Report) , all these stocks carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Burlington Stores delivered an average positive earnings surprise of 25.6% in the trailing four quarters and has a long-term earnings growth rate of 19.9%.
Big Lots delivered an average positive earnings surprise of 83% in the trailing four quarters and has a long-term earnings growth rate of 13.5%.
Ross Stores delivered an average positive earnings surprise of 5% in the trailing four quarters and has a long-term earnings growth rate of 10.5%.
Everything You Need to Know About Snapchat BEFORE It Goes Public
You may be curious about the buzz surrounding Snap Inc.'s IPO on March 2. With the company expected to be valued around $22 billion, it is expected to be the largest IPO since 2014. But should you snap up this tech stock on Day 1?
In the 2017 IPO Watch List, you'll get an inside look at Snap's exciting prospects and potential challenges. You'll also learn about 4 other exciting tech companies with jaw-dropping growth. Each could go public in the coming months.
Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the latest scoop. Download this IPO Watch List today for free >>