Comparable Sales Declined 9.3%
GAAP Diluted EPS of $2.23
Non-GAAP Diluted EPS of $2.61
Increased Quarterly Dividend 5% to $0.92 per
Share
Expects FY24 Non-GAAP Diluted EPS of $5.70
to $6.50
Best Buy Co., Inc. (NYSE: BBY) today announced results for the
13-week fourth quarter ended January 28, 2023 (“Q4 FY23”), as
compared to the 13-week fourth quarter ended January 29, 2022 (“Q4
FY22”).
Q4 FY23
Q4 FY22
FY23
FY22
Revenue ($ in millions)
Enterprise
$
14,735
$
16,365
$
46,298
$
51,761
Domestic segment
$
13,531
$
14,993
$
42,794
$
47,830
International segment
$
1,204
$
1,372
$
3,504
$
3,931
Enterprise comparable sales % change1
(9.3)
%
(2.3)
%
(9.9)
%
10.4
%
Domestic comparable sales % change1
(9.6)
%
(2.1)
%
(10.3)
%
11.0
%
Domestic comparable online sales %
change1
(13.0)
%
(11.2)
%
(13.5)
%
(12.0)
%
International comparable sales %
change1
(5.7)
%
(3.8)
%
(5.4)
%
3.3
%
Operating Income
GAAP operating income as a % of
revenue
4.1
%
4.9
%
3.9
%
5.9
%
Non-GAAP operating income as a % of
revenue
4.8
%
5.1
%
4.4
%
6.0
%
Diluted Earnings per Share
("EPS")
GAAP diluted EPS
$
2.23
$
2.62
$
6.29
$
9.84
Non-GAAP diluted EPS
$
2.61
$
2.73
$
7.08
$
10.01
For GAAP to non-GAAP reconciliations of the measures referred to
in the above table, please refer to the attached supporting
schedule.
“Today we are reporting Q4 sales that were in line with our
expectations and profitability that was better than expected,” said
Corie Barry, Best Buy CEO. “Throughout Q4 and FY23, we remained
committed to balancing our near-term response to current conditions
and managing well what is in our control, while also advancing our
strategic initiatives and investing in areas important for our
long-term performance.”
“We believe the macro and industry backdrop will continue to be
pressured in FY24 and we will continue to adjust,” Barry added. “At
the same time, we remain incredibly excited about our industry and
our future - there are more technology products than ever in
peoples’ homes, technology is increasingly a necessity in our
lives, and technology innovation will continue. Our initiatives to
deliver our omnichannel retail model evolution, build customer
relationships through membership, and remove cost and improve
efficiency and effectiveness will allow us to deliver even more
experiences no one else can and capitalize on the opportunities
ahead of us.”
FY24 Financial Guidance
“As we enter FY24, the consumer electronics industry continues
to feel the effects of the broader macro environment and its impact
on consumers,” said Matt Bilunas, Best Buy CFO. “As a result, our
outlook assumes comparable sales decline 3% to 6% for the year,
with the most sales pressure in the first quarter, as
year-over-year comparisons ease through the year.”
“During FY24, we expect to expand our gross profit rate
approximately 40 to 70 basis points versus the past year as we
evolve our membership program and realize benefits from our cost
optimization efforts,” Bilunas continued. “Non-GAAP SG&A
expense is expected to increase versus last year as our cost
takeout initiatives and lower variable costs are offset by the
addback of incentive compensation, the extra week and higher
depreciation.”
Best Buy is providing the following financial guidance for FY24,
which includes 53 weeks.
- Revenue of $43.8 billion to $45.2 billion
- Comparable sales decline of 3.0% to 6.0%
- Enterprise non-GAAP operating income rate2 of 3.7% to 4.1%
- Non-GAAP effective income tax rate2 of approximately 24.5%
- Non-GAAP diluted EPS2 of $5.70 to $6.50
- Capital expenditures of approximately $850 million
Note: Incorporated in the above guidance, the 53rd week is
expected to add approximately $700 million of revenue to Q4 FY24
and provide a benefit of approximately 10 basis points to the
company’s full year non-GAAP operating income rate.2
Domestic Segment Q4 FY23
Results
Domestic Revenue Domestic revenue of $13.53 billion
decreased 9.8% versus last year primarily driven by a comparable
sales decline of 9.6%.
From a merchandising perspective, the largest drivers of the
comparable sales decline on a weighted basis were computing, home
theater, appliances and mobile phones. These drivers were partially
offset by growth in the gaming and tablet categories.
Domestic online revenue of $5.14 billion decreased 13.0% on a
comparable basis, and as a percentage of total Domestic revenue,
online revenue was 38.0% versus 39.4% last year.
Domestic Gross Profit Rate Domestic gross profit rate was
19.8% versus 20.0% last year. The lower gross profit rate was
primarily due to lower product margin rates, which were partially
offset by favorable services margin rates and higher profit-sharing
revenue from the company’s private label and co-branded credit card
arrangement. The improved services margin rates were primarily
driven by an approximately $30 million profit-sharing benefit from
the company’s services plan portfolio.
Domestic Selling, General and Administrative Expenses
(“SG&A”) Domestic GAAP SG&A was $2.07 billion, or 15.3%
of revenue, versus $2.30 billion, or 15.3% of revenue, last year.
On a non-GAAP basis, SG&A was $2.05 billion, or 15.1% of
revenue, versus $2.27 billion, or 15.1% of revenue, last year. Both
GAAP and non-GAAP SG&A decreased primarily due to reduced store
payroll expense, incentive compensation and advertising
expenses.
International Segment Q4 FY23
Results
International Revenue International revenue of $1.20
billion decreased 12.2% versus last year. This decrease was
primarily driven by a comparable sales decline of 5.7% and the
negative impact of approximately 570 basis points from foreign
currency exchange rates.
International Gross Profit Rate International gross
profit rate was 21.7% versus 22.9% last year. The lower gross
profit rate was primarily driven by lower product margin rates,
which included increased promotions, and a lower mix of revenue
from the higher margin rate services category.
International SG&A International SG&A was $189
million, or 15.7% of revenue, versus $206 million, or 15.0% of
revenue, last year. SG&A decreased primarily due to the impact
of foreign currency exchange rates and lower incentive
compensation.
Restructuring Charges
The company incurred $86 million of restructuring costs in Q4
FY23, primarily related to employee termination benefits associated
with an enterprise-wide restructuring initiative that commenced in
Q2 FY23 to better align its spending with critical strategies and
operations, as well as to optimize its cost structure. Consistent
with prior practice, restructuring costs are excluded from the
company’s non-GAAP results.
Share Repurchases and
Dividends
In Q4 FY23, the company returned a total of $743 million to
shareholders through share repurchases of $549 million and
dividends of $194 million. For the full year, the company returned
a total of $1.8 billion to shareholders through share repurchases
of $1.0 billion and dividends of $789 million.
Today, the company announced its board of directors approved a
5% increase in the regular quarterly dividend to $0.92 per share.
The regular quarterly dividend will be payable on April 13, 2023,
to shareholders of record as of the close of business on March 23,
2023.
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 March 2, 2023. A
webcast of the call is expected to be available at
www.investors.bestbuy.com, both live and after the call.
Notes: (1) The method of calculating comparable sales
varies across the retail industry. 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 our
subsequent Quarterly Reports on Form 10-Q, filed with the
Securities and Exchange Commission (“SEC”), and available at
www.investors.bestbuy.com.
(2) A reconciliation of the projected non-GAAP operating income
rate, non-GAAP effective income tax rate and non-GAAP diluted EPS,
which are forward-looking non-GAAP financial measures, to the most
directly comparable GAAP financial measures, is not provided
because the company is unable to provide such reconciliation
without unreasonable effort. The inability to provide a
reconciliation is due to the uncertainty and inherent difficulty
predicting the occurrence, the financial impact and the periods in
which the non-GAAP adjustments may be recognized. These GAAP
measures may include the impact of such items as restructuring
charges; price-fixing settlements; goodwill impairments; gains and
losses on investments; intangible asset amortization; certain
acquisition-related costs; and the tax effect of all such items.
Historically, the company has excluded these items from non-GAAP
financial measures. The company currently expects to continue to
exclude these items in future disclosures of non-GAAP financial
measures and may also exclude other items that may arise
(collectively, “non-GAAP adjustments”). The decisions and events
that typically lead to the recognition of non-GAAP adjustments,
such as a decision to exit part of the business or reaching
settlement of a legal dispute, are inherently unpredictable as to
if or when they may occur. For the same reasons, the company is
unable to address the probable significance of the unavailable
information, which could be material to future results.
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. These statements
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,"
“appear,” “approximate,” "assume," "believe," “continue,” “could,”
"estimate," "expect," “foresee,” "guidance," "intend," “may,”
“might,” "outlook," "plan," “possible,” "project" “seek,” “should,”
“would,” and other words and terms of similar meaning or the
negatives thereof. Such statements reflect our current views and
estimates with respect to future market conditions, company
performance and financial results, operational investments,
business prospects, our operating model, new strategies and growth
initiatives, the competitive environment, consumer behavior and
other events. These statements involve a number of judgments and
are subject to certain risks and uncertainties, many of which are
outside the control of the Company, that could cause actual results
to differ materially from the potential results discussed in such
forward-looking statements. Readers should review Item 1A, Risk
Factors, of our most recent Annual Report on Form 10-K, and any
updated information in subsequent Quarterly Reports on Form 10-Q,
for a description of important factors that could cause our actual
results to differ materially from those contemplated by the
forward-looking statements made in this release. Among the factors
that could cause actual results and outcomes to differ materially
from those contained in such forward-looking statements are the
following: macroeconomic pressures in the markets in which we
operate (including but not limited to the effects of COVID-19,
recession, inflation rates, fluctuations in foreign currency
exchange rates, limitations on a government’s ability to borrow
and/or spend capital, fluctuations in housing prices, energy
markets, and jobless rates and effects related to the conflict in
Ukraine or other geopolitical events); catastrophic events, health
crises and pandemics (including the COVID-19 pandemic);
susceptibility of the products we sell to technological
advancements, product life cycle fluctuations and changes in
consumer preferences; competition (including from multi-channel
retailers, e-commerce business, technology service providers,
traditional store-based retailers, vendors and mobile network
carriers and in the provision of delivery speed and options); our
ability to attract and retain qualified employees; changes in
market compensation rates; our expansion into health and new
products, services and technologies; our focus on services as a
strategic priority; our reliance on key vendors and mobile network
carriers (including product availability); our ability to maintain
positive brand perception and recognition; our ability to
effectively manage strategic ventures, alliances or acquisitions;
our ability to effectively manage our real estate portfolio;
inability of vendors or service providers to perform components our
supply chain (impacting our stores or other aspects of our
operations) and other various functions of our business; risks
arising from and potentially unique to our exclusive brands
products; our reliance on our information technology systems,
internet and telecommunications access and capabilities; our
ability to prevent or effectively respond to a cyber-attack,
privacy or security breach; product safety and quality concerns;
changes to labor or employment laws or regulations; risks arising
from statutory, regulatory and legal developments (including
statutes and/or regulations related to tax or privacy); evolving
corporate governance and public disclosure regulations and
expectations (including, but not limited to, cybersecurity and
environmental, social and governance matters); risks arising from
our international activities (including those related to the
conflict in Ukraine or fluctuations in foreign currency exchange
rates) and those of our vendors; failure to effectively manage our
costs; our dependence on cash flows and net earnings generated
during the fourth fiscal quarter; pricing investments and
promotional activity; economic or regulatory developments that
might affect our ability to provide attractive promotional
financing; constraints in the capital markets; changes to our
vendor credit terms; changes in our credit ratings; failure to meet
financial-performance guidance or other forward-looking statements;
and general economic uncertainty in key global markets and
worsening of global economic conditions or low levels of economic
growth. We caution that the foregoing list of important factors is
not complete. Any forward-looking statements speak only as of the
date they are made and we assume no obligation to update any
forward-looking statement that we 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
Twelve Months Ended
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Revenue
$
14,735
$
16,365
$
46,298
$
51,761
Cost of sales
11,795
13,052
36,386
40,121
Gross profit
2,940
3,313
9,912
11,640
Gross profit %
20.0
%
20.2
%
21.4
%
22.5
%
Selling, general and administrative
expenses
2,257
2,505
7,970
8,635
SG&A %
15.3
%
15.3
%
17.2
%
16.7
%
Restructuring charges
86
5
147
(34)
Operating income
597
803
1,795
3,039
Operating income %
4.1
%
4.9
%
3.9
%
5.9
%
Other income (expense):
Gain on sale of investments
-
-
1
-
Investment income and other
26
3
27
10
Interest expense
(12)
(6)
(35)
(25)
Earnings before income tax expense and
equity in income (loss) of affiliates
611
800
1,788
3,024
Income tax expense
118
172
370
574
Effective tax rate
19.3
%
21.4
%
20.7
%
19.0
%
Equity in income (loss) of affiliates
2
(2)
1
4
Net earnings
$
495
$
626
$
1,419
$
2,454
Basic earnings per share
$
2.24
$
2.65
$
6.31
$
9.94
Diluted earnings per share
$
2.23
$
2.62
$
6.29
$
9.84
Weighted-average common shares
outstanding:
Basic
220.9
236.6
224.8
246.8
Diluted
221.8
239.0
225.7
249.3
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
($ in millions)
(Unaudited and subject to
reclassification)
January 28, 2023
January 29, 2022
Assets
Current assets:
Cash and cash equivalents
$
1,874
$
2,936
Receivables, net
1,141
1,042
Merchandise inventories
5,140
5,965
Other current assets
647
596
Total current assets
8,802
10,539
Property and equipment, net
2,352
2,250
Operating lease assets
2,746
2,654
Goodwill
1,383
1,384
Other assets
520
677
Total assets
$
15,803
$
17,504
Liabilities and equity
Current liabilities:
Accounts payable
$
5,687
$
6,803
Unredeemed gift card liabilities
274
316
Deferred revenue
1,116
1,103
Accrued compensation and related
expenses
405
845
Accrued liabilities
843
946
Current portion of operating lease
liabilities
638
648
Current portion of long-term debt
16
13
Total current liabilities
8,979
10,674
Long-term operating lease liabilities
2,164
2,061
Long-term liabilities
705
533
Long-term debt
1,160
1,216
Equity
2,795
3,020
Total liabilities and equity
$
15,803
$
17,504
BEST BUY CO., INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited and subject to
reclassification)
Twelve Months Ended
January 28, 2023
January 29, 2022
Operating activities
Net earnings
$
1,419
$
2,454
Adjustments to reconcile net earnings to
total cash provided by operating activities:
Depreciation and amortization
918
869
Restructuring charges
147
(34)
Stock-based compensation
138
141
Deferred income taxes
51
14
Other, net
12
11
Changes in operating assets and
liabilities, net of acquired assets and liabilities:
Receivables
(103)
17
Merchandise inventories
809
(328)
Other assets
(21)
(14)
Accounts payable
(1,099)
(201)
Income taxes
36
(156)
Other liabilities
(483)
479
Total cash provided by operating
activities
1,824
3,252
Investing activities
Additions to property and equipment
(930)
(737)
Purchases of investments
(46)
(233)
Sales of investments
7
66
Acquisitions, net of cash acquired
-
(468)
Other, net
7
-
Total cash used in investing
activities
(962)
(1,372)
Financing activities
Repurchase of common stock
(1,014)
(3,502)
Issuance of common stock
16
29
Dividends paid
(789)
(688)
Repayments of debt
(19)
(133)
Other, net
-
(3)
Total cash used in financing
activities
(1,806)
(4,297)
Effect of exchange rate changes on cash
and cash equivalents
(8)
(3)
Decrease in cash, cash equivalents and
restricted cash
(952)
(2,420)
Cash, cash equivalents and restricted
cash at beginning of period
3,205
5,625
Cash, cash equivalents and restricted
cash at end of period
$
2,253
$
3,205
BEST BUY CO., INC.
SEGMENT INFORMATION
($ in millions)
(Unaudited and subject to
reclassification)
Three Months Ended
Twelve Months Ended
Domestic Segment Results
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Revenue
$
13,531
$
14,993
$
42,794
$
47,830
Comparable sales % change
(9.6)
%
(2.1)
%
(10.3)
%
11.0
%
Comparable online sales % change
(13.0)
%
(11.2)
%
(13.5)
%
(12.0)
%
Gross profit
$
2,679
$
2,999
$
9,106
$
10,702
Gross profit as a % of revenue
19.8
%
20.0
%
21.3
%
22.4
%
SG&A
$
2,068
$
2,299
$
7,332
$
7,946
SG&A as a % of revenue
15.3
%
15.3
%
17.1
%
16.6
%
Operating income
$
530
$
695
$
1,634
$
2,795
Operating income as a % of revenue
3.9
%
4.6
%
3.8
%
5.8
%
Domestic Segment Non-GAAP
Results1
Gross profit
$
2,679
$
2,999
$
9,106
$
10,702
Gross profit as a % of revenue
19.8
%
20.0
%
21.3
%
22.4
%
SG&A
$
2,047
$
2,271
$
7,246
$
7,853
SG&A as a % of revenue
15.1
%
15.1
%
16.9
%
16.4
%
Operating income
$
632
$
728
$
1,860
$
2,849
Operating income as a % of revenue
4.7
%
4.9
%
4.3
%
6.0
%
Three Months Ended
Twelve Months Ended
International Segment Results
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Revenue
$
1,204
$
1,372
$
3,504
$
3,931
Comparable sales % change
(5.7)
%
(3.8)
%
(5.4)
%
3.3
%
Gross profit
$
261
$
314
$
806
$
938
Gross profit as a % of revenue
21.7
%
22.9
%
23.0
%
23.9
%
SG&A
$
189
$
206
$
638
$
689
SG&A as a % of revenue
15.7
%
15.0
%
18.2
%
17.5
%
Operating income
$
67
$
108
$
161
$
244
Operating income as a % of revenue
5.6
%
7.9
%
4.6
%
6.2
%
International Segment Non-GAAP
Results1
Gross profit
$
261
$
314
$
806
$
932
Gross profit as a % of revenue
21.7
%
22.9
%
23.0
%
23.7
%
SG&A
$
189
$
206
$
638
$
689
SG&A as a % of revenue
15.7
%
15.0
%
18.2
%
17.5
%
Operating income
$
72
$
108
$
168
$
243
Operating income as a % of revenue
6.0
%
7.9
%
4.8
%
6.2
%
(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
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Computing and Mobile Phones
41
%
42
%
(10.0)
%
(6.0)
%
Consumer Electronics
33
%
34
%
(11.8)
%
2.9
%
Appliances
12
%
13
%
(13.2)
%
7.9
%
Entertainment
9
%
8
%
0.2
%
(9.5)
%
Services
5
%
3
%
12.4
%
(14.8)
%
Other
-
%
-
%
N/A
N/A
Total
100
%
100
%
(9.6)
%
(2.1)
%
Revenue Mix
Comparable Sales
Three Months Ended
Three Months Ended
International Segment
January 28, 2023
January 29, 2022
January 28, 2023
January 29, 2022
Computing and Mobile Phones
43
%
40
%
(0.5)
%
(6.0)
%
Consumer Electronics
33
%
35
%
(10.1)
%
(3.8)
%
Appliances
9
%
9
%
(2.5)
%
(1.2)
%
Entertainment
9
%
10
%
(10.5)
%
(6.9)
%
Services
4
%
4
%
(15.1)
%
23.0
%
Other
2
%
2
%
(6.2)
%
2.8
%
Total
100
%
100
%
(5.7)
%
(3.8)
%
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, price-fixing settlements, 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
January 28, 2023
January 29, 2022
Domestic
International
Consolidated
Domestic
International
Consolidated
SG&A
$
2,068
$
189
$
2,257
$
2,299
$
206
$
2,505
% of revenue
15.3
%
15.7
%
15.3
%
15.3
%
15.0
%
15.3
%
Intangible asset amortization1
(21)
-
(21)
(22)
-
(22)
Acquisition-related transaction costs2
-
-
-
(6)
-
(6)
Non-GAAP SG&A
$
2,047
$
189
$
2,236
$
2,271
$
206
$
2,477
% of revenue
15.1
%
15.7
%
15.2
%
15.1
%
15.0
%
15.1
%
Operating income
$
530
$
67
$
597
$
695
$
108
$
803
% of revenue
3.9
%
5.6
%
4.1
%
4.6
%
7.9
%
4.9
%
Intangible asset amortization1
21
-
21
22
-
22
Acquisition-related transaction costs2
-
-
-
6
-
6
Restructuring charges3
81
5
86
5
-
5
Non-GAAP operating income
$
632
$
72
$
704
$
728
$
108
$
836
% of revenue
4.7
%
6.0
%
4.8
%
4.9
%
7.9
%
5.1
%
Effective tax rate
19.3
%
21.4
%
Intangible asset amortization1
0.1
%
-
%
Restructuring charges3
0.4
%
-
%
Non-GAAP effective tax rate
19.8
%
21.4
%
Three Months Ended
Three Months Ended
January 28, 2023
January 29, 2022
Pretax Earnings
Net of Tax5
Per Share
Pretax Earnings
Net of Tax5
Per Share
Diluted EPS
$
2.23
$
2.62
Intangible asset amortization1
$
21
$
16
0.08
$
22
$
18
0.08
Acquisition-related transaction costs2
-
-
-
6
5
0.02
Restructuring charges3
86
67
0.30
5
3
0.01
Non-GAAP diluted EPS
$
2.61
$
2.73
Twelve Months Ended
Twelve Months Ended
January 28, 2023
January 29, 2022
Domestic
International
Consolidated
Domestic
International
Consolidated
Gross profit
$
9,106
$
806
$
9,912
$
10,702
$
938
$
11,640
% of revenue
21.3
%
23.0
%
21.4
%
22.4
%
23.9
%
22.5
%
Restructuring - inventory markdowns4
-
-
-
-
(6)
(6)
Non-GAAP gross profit
$
9,106
$
806
$
9,912
$
10,702
$
932
$
11,634
% of revenue
21.3
%
23.0
%
21.4
%
22.4
%
23.7
%
22.5
%
SG&A
$
7,332
$
638
$
7,970
$
7,946
$
689
$
8,635
% of revenue
17.1
%
18.2
%
17.2
%
16.6
%
17.5
%
16.7
%
Intangible asset amortization1
(86)
-
(86)
(82)
-
(82)
Acquisition-related transaction costs2
-
-
-
(11)
-
(11)
Non-GAAP SG&A
$
7,246
$
638
$
7,884
$
7,853
$
689
$
8,542
% of revenue
16.9
%
18.2
%
17.0
%
16.4
%
17.5
%
16.5
%
Operating income
$
1,634
$
161
$
1,795
$
2,795
$
244
$
3,039
% of revenue
3.8
%
4.6
%
3.9
%
5.8
%
6.2
%
5.9
%
Intangible asset amortization1
86
-
86
82
-
82
Acquisition-related transaction costs2
-
-
-
11
-
11
Restructuring charges3
140
7
147
(39)
5
(34)
Restructuring - inventory markdowns4
-
-
-
-
(6)
(6)
Non-GAAP operating income
$
1,860
$
168
$
2,028
$
2,849
$
243
$
3,092
% of revenue
4.3
%
4.8
%
4.4
%
6.0
%
6.2
%
6.0
%
Effective tax rate
20.7
%
19.0
%
Intangible asset amortization1
0.1
%
0.1
%
Restructuring charges3
0.2
%
(0.1)
%
Non-GAAP effective tax rate
21.0
%
19.0
%
Twelve Months Ended
Twelve Months Ended
January 28, 2023
January 29, 2022
Pretax Earnings
Net of Tax5
Per Share
Pretax Earnings
Net of Tax5
Per Share
Diluted EPS
$
6.29
$
9.84
Intangible asset amortization1
$
86
$
65
0.29
$
82
$
62
0.25
Acquisition-related transaction costs2
-
-
-
11
10
0.04
Restructuring charges3
147
113
0.50
(34)
(24)
(0.10)
Restructuring - inventory markdowns4
-
-
-
(6)
(6)
(0.02)
Non-GAAP diluted EPS
$
7.08
$
10.01
(1)
Represents the non-cash amortization of
definite-lived intangible assets associated with acquisitions,
including customer relationships, tradenames and developed
technology assets.
(2)
Represents charges associated with
acquisition-related transaction and due diligence costs, primarily
comprised of professional fees.
(3)
Represents charges primarily related to
employee termination benefits in the Domestic segment associated
with an enterprise-wide initiative that commenced in Q2 FY23 to
better align the company’s spending with critical strategies and
operations, as well as to optimize its cost structure, for the
periods ended January 28, 2023. Represents charges and subsequent
adjustments primarily related to actions taken in the Domestic
segment to better align the company’s organizational structure with
its strategic focus and the exit from operations in Mexico in the
International segment for the periods ended January 29, 2022.
(4)
Represents inventory markdown adjustments
recorded within cost of sales associated with the exit from
operations in Mexico.
(5)
The non-GAAP adjustments primarily relate
to the U.S., Canada and Mexico. As such, the income tax charge is
calculated using the statutory tax rate of 24.5% for the U.S. and
26.4% for Canada applied to the non-GAAP adjustments of each
country. There is no income tax charge for Mexico non-GAAP items
and a minimal amount of U.S. non-GAAP items, as there was no tax
benefit recognized on these expenses in the calculation of GAAP
income tax expense.
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")
January 28, 20231
January 29, 20221
Net earnings
$
1,419
$
2,454
Total assets
16,490
18,743
ROA
8.6
%
13.1
%
Non-GAAP Return on Investment
("ROI")
January 28, 20231
January 29, 20221
Numerator
Operating income
$
1,795
$
3,039
Add: Non-GAAP operating income
adjustments2
233
53
Add: Operating lease interest3
113
108
Less: Income taxes4
(525)
(784)
Add: Depreciation
832
787
Add: Operating lease amortization5
661
657
Adjusted operating income after
tax
$
3,109
$
3,860
Denominator
Total assets
$
16,490
$
18,743
Less: Excess cash6
(270)
(3,055)
Add: Accumulated depreciation and
amortization7
5,375
6,957
Less: Adjusted current liabilities8
(9,143)
(10,122)
Average invested operating
assets
$
12,452
$
12,523
Non-GAAP ROI
25.0
%
30.8
%
(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 restructuring
charges, intangible asset amortization and acquisition-related
transaction costs. Additional details regarding these adjustments
are included in the Reconciliation of Non-GAAP Financial Measures
schedule in this earnings release.
(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. 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)
Accumulated depreciation and amortization
represents accumulated depreciation related to property and
equipment and accumulated amortization related to definite-lived
intangible assets.
(8)
Adjusted current liabilities represent
total current liabilities less short-term debt and the current
portions of operating lease liabilities and long-term debt.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230301006037/en/
Investor Contact: Mollie O'Brien
mollie.obrien@bestbuy.com
Media Contact: Carly Charlson
carly.charlson@bestbuy.com
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