Enterprise Comparable Sales Increased 20%

GAAP Diluted EPS Increased 76% to $2.90

Non-GAAP Diluted EPS Increased 74% to $2.98

Excluding a $0.47 Benefit from a Lower Year-Over-Year Effective Tax Rate,

GAAP and Non-GAAP Diluted EPS Increased Approximately 47%

Raises Full-Year Enterprise Comparable Sales Growth Outlook to a Range of 9% to 11%

Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week second quarter ended July 31, 2021 (“Q2 FY22”), as compared to the 13-week second quarter ended August 1, 2020 (“Q2 FY21”).

 

 

 

 

 

 

 

 

Q2 FY22

Q2 FY21

Revenue ($ in millions)

 

 

 

 

 

 

Enterprise

$

11,849

 

$

9,910

 

Domestic segment

$

11,011

 

$

9,128

 

International segment

$

838

 

$

782

 

Enterprise comparable sales % change1

 

19.6

%

 

5.8

%

Domestic comparable sales % change1

 

20.8

%

 

5.0

%

Domestic comparable online sales % change1

 

(28.1)

%

 

242.2

%

International comparable sales % change1

 

5.0

%

 

15.1

%

Operating Income

 

 

 

 

 

 

GAAP operating income as a % of revenue

 

6.7

%

 

5.7

%

Non-GAAP operating income as a % of revenue

 

6.9

%

 

5.9

%

Diluted Earnings per Share ("EPS")

 

 

 

 

 

 

GAAP diluted EPS

$

2.90

 

$

1.65

 

Non-GAAP diluted EPS

$

2.98

 

$

1.71

 

For GAAP to non-GAAP reconciliations of the measures referred to in the above table, please refer to the attached supporting schedule.

“We are reporting record second quarter results today with comparable sales growth of 20% and operating income growth of 40% compared to last year,” said Corie Barry, Best Buy CEO. “We are lapping an unusual quarter last year as our stores were limited to curbside service or in-store appointments for roughly half the quarter. When we compare to two years ago, our results are also very strong. Compared to the second quarter of FY20, revenue is up 24% and our operating income has more than doubled.”

Barry continued, “Customer demand for technology products and services during the quarter remained very strong. Customers continued to leverage technology to meet their needs, and we are providing solutions that help them work, learn, entertain, cook and connect at home. The demand was also bolstered by the overall strong consumer spending ability, aided by government stimulus, improving wages and high savings levels.”

Barry added, “I am so proud of the execution of our teams as they continue to evolve our operating model and safely meet the needs of our customers. To all of our associates across the company, I thank you for your customer obsession, perseverance and ingenuity.”

“Over the longer term, we are fundamentally in a stronger position than we expected just two years ago,” Barry continued. “There has been a dramatic and structural increase in the need for technology. We now serve a much larger install base of consumer electronics with customers who have an elevated appetite to upgrade due to constant technology innovation and needs that reflect permanent life changes, like hybrid work and streaming entertainment content. Our unique omnichannel assets, including our ability to inspire what is possible across the breadth of CE products as well as our ability to keep it all working together the way customers want, truly differentiate us going forward in this new landscape.”

Financial Outlook

“Based on the strength of the business and our expectations for continued customer demand as we lap the strong comparable sales growth from the second half of last year, we are raising our outlook for the year,” said Matt Bilunas, Best Buy CFO. “For the second half of FY22, we expect our comparable sales to be in the range of flat to down 3% versus last year, compared to our previous annual outlook that implied a high single-digit decline.”

The company is providing the following outlook:

FY22:

  • Enterprise revenue of $51.0 billion to $52.0 billion
  • Enterprise comparable sales growth of 9% to 11% compared to the prior outlook of 3% to 6% growth
  • Enterprise non-GAAP gross profit rate2 slightly higher than last year compared to the prior outlook of approximately flat to last year
  • Enterprise non-GAAP SG&A2 growth of approximately 9% compared to the prior outlook of 6% to 7% growth
  • Non-GAAP effective income tax rate of approximately 20.0%2
  • Share repurchases of more than $2.5 billion compared to the prior outlook of approximately $2.5 billion

Q3 FY22:

  • Enterprise revenue of $11.4 billion to $11.6 billion
  • Enterprise comparable sales decline of -1% to -3%
  • Enterprise non-GAAP gross profit rate2 decline of approximately 30 basis points
  • Enterprise non-GAAP SG&A2 dollars approximately flat to last year
  • Non-GAAP effective income tax rate of approximately 25.0%2

Domestic Segment Q2 FY22 Results

Domestic Revenue

Domestic revenue of $11.01 billion increased 20.6% versus last year. The increase was primarily driven by comparable sales growth of 20.8%, which was partially offset by the loss of revenue from permanent store closures in the past year.

From a merchandising perspective, the company generated comparable sales growth across almost all its categories, with the largest drivers on a weighted basis being home theater, appliances, computing, mobile phones and services.

Domestic online revenue of $3.49 billion decreased 28.1% on a comparable basis, and as a percentage of total Domestic revenue, online revenue decreased to approximately 31.7% versus 53.1% last year.

Domestic Gross Profit Rate

Domestic gross profit rate was 23.7% versus 22.8% last year. The gross profit rate increase of approximately 90 basis points was primarily driven by improved product margin rates, rate leverage from our supply chain costs and higher profit-sharing revenue from the company’s private label and co-branded credit card arrangement.

Domestic Selling, General and Administrative Expenses (“SG&A”)

Domestic GAAP SG&A was $1.85 billion, or 16.8% of revenue, versus $1.56 billion, or 17.1% of revenue, last year. On a non-GAAP basis, SG&A was $1.83 billion, or 16.6% of revenue, versus $1.54 billion, or 16.9% of revenue, last year. Both GAAP and non-GAAP SG&A increased primarily due to pandemic-related actions last year, which resulted in higher costs this year for incentive compensation, store payroll expense, advertising expense, medical claims expense and 401(k) company match. In addition, SG&A increased due to investments in support of the company’s technology initiatives.

International Segment Q2 FY22 Results

International Revenue

International revenue of $838 million increased 7.2% versus last year. This increase was primarily driven by the benefit of approximately 1,070 basis points of favorable foreign currency exchange rates and comparable sales growth of 5.0%. These items were partially offset by lower revenue in Mexico of $60 million, which was a result of the company exiting operations from the country, as previously announced on November 24, 2020.

International Gross Profit Rate

International gross profit rate was 24.3% versus 23.8% last year. The higher gross profit rate was primarily driven by sales mixing out of Mexico, which had a lower gross profit rate than Canada.

International SG&A

International SG&A was $160 million, or 19.1% of revenue, versus $142 million, or 18.2% of revenue, last year. SG&A increased primarily due to the unfavorable impact of foreign exchange rates and increased store payroll and incentive compensation expense in Canada, partially offset by the company’s exit of its Mexico operations.

Income Taxes

The Q2 FY22 GAAP effective tax rate was 8.0% versus 22.9% last year. On a non-GAAP basis, the effective tax rate was 8.4% versus 23.0% last year. The lower GAAP and non-GAAP effective tax rates in Q2 FY22 were primarily due to a multi-jurisdiction, multi-year non-cash benefit from the resolution of certain discrete tax matters.

Dividends and Share Repurchases

In Q2 FY22, the company returned a total of $571 million to shareholders through share repurchases of $396 million and dividends of $175 million. On a year-to-date basis, the company has returned a total of $1.7 billion to shareholders through share repurchases of $1.3 billion and dividends of $350 million.

Today, the company announced its board of directors has authorized the payment of a regular quarterly cash dividend of $0.70 per common share. The quarterly dividend is payable on October 5, 2021, to shareholders of record as of the close of business on September 14, 2021.

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 August 24, 2021. A webcast of the call is expected to be available at www.investors.bestbuy.com, both live and after the call.

Notes:

(1) Comparable sales include revenue from all stores that were temporarily closed or operating an enhanced curbside-only operating model as a result of COVID-19. The method of calculating comparable sales varies across the retail industry, including the treatment of store closures as a result of COVID-19. As a result, our method of calculating comparable sales may not be the same as other retailers’ methods. On November 24, 2020, the company announced its decision to exit its operations in Mexico. As a result, all revenue from Mexico operations has been excluded from the comparable sales calculation beginning in fiscal December FY21. For additional information on comparable sales, please see our most recent Annual Report on Form 10-K, and any 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 gross profit rate, non-GAAP SG&A and non-GAAP effective income tax rate, 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 that 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,” “believe,” “assume,” “estimate,” “expect,” “intend,” “foresee,” “project,” “guidance,” “plan,” “outlook,” and other words and terms of similar meaning. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: the duration and scope of the COVID-19 pandemic and its resurgence and the impact on demand for our products and services, levels of consumer confidence and our supply chain; the effects and duration of steps we have taken and will continue to take in response to the pandemic, including the implementation of our interim and evolving operating model; actions governments, businesses and individuals have taken and will continue to take in response to the pandemic and their impact on economic activity and consumer spending; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers), our expansion strategies, our focus on services as a strategic priority, our reliance on key vendors and mobile network carriers, our ability to attract and retain qualified employees, changes in market compensation rates, risks arising from statutory, regulatory and legal developments, macroeconomic pressures in the markets in which we operate, failure to effectively manage our costs, our reliance on our information technology systems, our ability to prevent or effectively respond to a privacy or security breach, our ability to effectively manage strategic ventures, alliances or acquisitions, our dependence on cash flows and net earnings generated during the fourth fiscal quarter, susceptibility of our products to technological advancements, product life cycle preferences and changes in consumer preferences, economic or regulatory developments that might affect our ability to provide attractive promotional financing, interruptions and other supply chain issues, catastrophic events, health crises, pandemics, our ability to maintain positive brand perception and recognition, product safety and quality concerns, changes to labor or employment laws or regulations, our ability to effectively manage our real estate portfolio, constraints in the capital markets or our vendor credit terms, changes in our credit ratings, any material disruption in our relationship with or the services of third-party vendors, risks related to our exclusive brand products and risks associated with vendors that source products outside of the U.S., including trade restrictions or changes in the costs of imports (including existing or new tariffs or duties and changes in the amount of any such tariffs or duties) and risks arising from our international activities.

A further list and description of these risks, uncertainties and other matters can be found in the company’s annual report and other reports filed from time to time with the SEC, including, but not limited to, Best Buy’s Annual Report on Form 10-K filed with the SEC on March 19, 2021 and its Quarterly Reports on Form 10-Q filed with the SEC. Best Buy cautions that the foregoing list of important factors is not complete, and any forward-looking statements speak only as of the date they are made, and Best Buy assumes no obligation to update any forward-looking statement that it 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

 

Six Months Ended

 

July 31, 2021

 

August 1, 2020

 

July 31, 2021

 

August 1, 2020

Revenue

$

11,849

 

 

$

9,910

 

 

$

23,486

 

 

$

18,472

 

Cost of sales

 

9,039

 

 

 

7,640

 

 

 

17,961

 

 

 

14,237

 

Gross profit

 

2,810

 

 

 

2,270

 

 

 

5,525

 

 

 

4,235

 

Gross profit %

 

23.7

%

 

 

22.9

%

 

 

23.5

%

 

 

22.9

%

Selling, general and administrative expenses

2,009

 

 

 

1,702

 

 

 

3,997

 

 

 

3,437

 

SG&A %

 

17.0

%

 

 

17.2

%

 

 

17.0

%

 

 

18.6

%

Restructuring charges

 

4

 

 

 

-

 

 

 

(38)

 

 

 

1

 

Operating income

 

797

 

 

 

568

 

 

 

1,566

 

 

 

797

 

Operating income %

 

6.7

%

 

 

5.7

%

 

 

6.7

%

 

 

4.3

%

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment income and other

 

3

 

 

 

8

 

 

 

6

 

 

 

14

 

Interest expense

 

(6)

 

 

 

(15)

 

 

 

(12)

 

 

 

(32)

 

Earnings before income tax expense and equity in income of affiliates

 

794

 

 

 

561

 

 

 

1,560

 

 

 

779

 

Income tax expense

 

64

 

 

 

129

 

 

 

236

 

 

 

188

 

Effective tax rate

 

8.0

%

 

 

22.9

%

 

 

15.1

%

 

 

24.2

%

Equity in income of affiliates

 

4

 

 

 

-

 

 

 

5

 

 

 

-

 

Net earnings

$

734

 

 

$

432

 

 

$

1,329

 

 

$

591

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

2.93

 

 

$

1.67

 

 

$

5.28

 

 

$

2.28

 

Diluted earnings per share

$

2.90

 

 

$

1.65

 

 

$

5.22

 

 

$

2.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

250.2

 

 

 

259.5

 

 

 

251.7

 

 

 

259.0

 

Diluted

 

252.8

 

 

 

262.1

 

 

 

254.7

 

 

 

261.4

 

BEST BUY CO., INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

(Unaudited and subject to reclassification)

 

 

 

 

 

 

 

 

July 31, 2021

 

August 1, 2020

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

$

4,340

 

 

$

5,305

Receivables, net

 

883

 

 

 

906

Merchandise inventories

 

6,417

 

 

 

4,136

Other current assets

 

400

 

 

 

336

Total current assets

 

12,040

 

 

 

10,683

Property and equipment, net

 

2,226

 

 

 

2,277

Operating lease assets

 

2,670

 

 

 

2,770

Goodwill

 

986

 

 

 

986

Other assets

 

657

 

 

 

696

Total assets

$

18,579

 

 

$

17,412

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

$

6,946

 

 

$

6,613

Unredeemed gift card liabilities

 

293

 

 

 

267

Deferred revenue

 

854

 

 

 

699

Accrued compensation and related expenses

 

605

 

 

 

253

Accrued liabilities

 

892

 

 

 

893

Short-term debt

 

110

 

 

 

-

Current portion of operating lease liabilities

 

643

 

 

 

674

Current portion of long-term debt

 

14

 

 

 

681

Total current liabilities

 

10,357

 

 

 

10,080

Long-term operating lease liabilities

 

2,090

 

 

 

2,206

Long-term liabilities

 

554

 

 

 

716

Long-term debt

 

1,243

 

 

 

632

Equity

 

4,335

 

 

 

3,778

Total liabilities and equity

$

18,579

 

 

$

17,412

BEST BUY CO., INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

(Unaudited and subject to reclassification)

 

 

 

 

 

 

 

 

 

Six Months Ended

 

July 31, 2021

 

August 1, 2020

Operating activities

 

 

 

 

 

 

 

Net earnings

$

1,329

 

 

$

591

 

Adjustments to reconcile net earnings to total cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

430

 

 

 

414

 

Restructuring charges

 

(38)

 

 

 

1

 

Stock-based compensation

 

71

 

 

 

65

 

Deferred income taxes

 

2

 

 

 

13

 

Other, net

 

-

 

 

 

9

 

Changes in operating assets and liabilities:

 

 

 

 

 

Receivables

 

175

 

 

 

232

 

Merchandise inventories

 

(794)

 

 

 

1,014

 

Other assets

 

(19)

 

 

 

(17)

 

Accounts payable

 

(58)

 

 

 

1,343

 

Income taxes

 

(162)

 

 

 

108

 

Other liabilities

 

(72)

 

 

 

15

 

Total cash provided by operating activities

 

864

 

 

 

3,788

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Additions to property and equipment

 

(323)

 

 

 

(340)

 

Purchases of investments

 

(93)

 

 

 

(46)

 

Sales of investments

 

60

 

 

 

-

 

Other, net

 

(2)

 

 

 

3

 

Total cash used in investing activities

 

(358)

 

 

 

(383)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Repurchase of common stock

 

(1,323)

 

 

 

(62)

 

Issuance of common stock

 

22

 

 

 

22

 

Dividends paid

 

(350)

 

 

 

(284)

 

Borrowings of debt

 

-

 

 

 

1,250

 

Repayments of debt

 

(10)

 

 

 

(1,257)

 

Other, net

 

(1)

 

 

 

(1)

 

Total cash used in financing activities

 

(1,662)

 

 

 

(332)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

5

 

 

 

(6)

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

(1,151)

 

 

 

3,067

 

Cash, cash equivalents and restricted cash at beginning of period

 

5,625

 

 

 

2,355

 

Cash, cash equivalents and restricted cash at end of period

$

4,474

 

 

$

5,422

 

BEST BUY CO., INC.

SEGMENT INFORMATION

($ in millions)

(Unaudited and subject to reclassification)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

Domestic Segment Results

July 31, 2021

 

August 1, 2020

 

July 31, 2021

 

August 1, 2020

Revenue

$

11,011

 

 

$

9,128

 

 

$

21,852

 

 

$

17,043

 

Comparable sales % change

 

20.8

%

 

 

5.0

%

 

 

28.7

%

 

 

(0.3)

%

Comparable online sales % change

 

(28.1)

%

 

 

242.2

%

 

 

(13.5)

%

 

 

200.5

%

Gross profit

$

2,606

 

 

$

2,084

 

 

$

5,132

 

 

$

3,905

 

Gross profit as a % of revenue

 

23.7

%

 

 

22.8

%

 

 

23.5

%

 

 

22.9

%

SG&A

$

1,849

 

 

$

1,560

 

 

$

3,685

 

 

$

3,139

 

SG&A as a % of revenue

 

16.8

%

 

 

17.1

%

 

 

16.9

%

 

 

18.4

%

Operating income

$

757

 

 

$

524

 

 

$

1,491

 

 

$

765

 

Operating income as a % of revenue

 

6.9

%

 

 

5.7

%

 

 

6.8

%

 

 

4.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic Segment Non-GAAP Results1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

2,606

 

 

$

2,084

 

 

$

5,132

 

 

$

3,905

 

Gross profit as a % of revenue

 

23.7

%

 

 

22.8

%

 

 

23.5

%

 

 

22.9

%

SG&A

$

1,829

 

 

$

1,540

 

 

$

3,645

 

 

$

3,099

 

SG&A as a % of revenue

 

16.6

%

 

 

16.9

%

 

 

16.7

%

 

 

18.2

%

Operating income

$

777

 

 

$

544

 

 

$

1,487

 

 

$

806

 

Operating income as a % of revenue

 

7.1

%

 

 

6.0

%

 

 

6.8

%

 

 

4.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

International Segment Results

July 31, 2021

 

August 1, 2020

 

July 31, 2021

 

August 1, 2020

Revenue

$

838

 

 

$

782

 

 

$

1,634

 

 

$

1,429

 

Comparable sales % change

 

5.0

%

 

 

15.1

%

 

 

15.0

%

 

 

8.0

%

Gross profit

$

204

 

 

$

186

 

 

$

393

 

 

$

330

 

Gross profit as a % of revenue

 

24.3

%

 

 

23.8

%

 

 

24.1

%

 

 

23.1

%

SG&A

$

160

 

 

$

142

 

 

$

312

 

 

$

298

 

SG&A as a % of revenue

 

19.1

%

 

 

18.2

%

 

 

19.1

%

 

 

20.9

%

Operating income

$

40

 

 

$

44

 

 

$

75

 

 

$

32

 

Operating income as a % of revenue

 

4.8

%

 

 

5.6

%

 

 

4.6

%

 

 

2.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International Segment Non-GAAP Results1

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

$

204

 

 

$

186

 

 

$

387

 

 

$

330

 

Gross profit as a % of revenue

 

24.3

%

 

 

23.8

%

 

 

23.7

%

 

 

23.1

%

SG&A

$

160

 

 

$

142

 

 

$

312

 

 

$

298

 

SG&A as a % of revenue

 

19.1

%

 

 

18.2

%

 

 

19.1

%

 

 

20.9

%

Operating income

$

44

 

 

$

44

 

 

$

75

 

 

$

32

 

Operating income as a % of revenue

 

5.3

%

 

 

5.6

%

 

 

4.6

%

 

 

2.2

%

(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

July 31, 2021

 

August 1, 2020

 

July 31, 2021

 

August 1, 2020

Computing and Mobile Phones

43

%

 

47

%

 

11.4

%

 

11.7

%

Consumer Electronics

31

%

 

29

%

 

27.4

%

 

(3.8)

%

Appliances

16

%

 

14

%

 

31.1

%

 

14.5

%

Entertainment

5

%

 

5

%

 

36.4

%

 

(4.4)

%

Services

5

%

 

5

%

 

23.6

%

 

(8.7)

%

Other

-

%

 

-

%

 

N/A

 

 

N/A

 

Total

100

%

 

100

%

 

20.8

%

 

5.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue Mix

 

Comparable Sales

 

Three Months Ended

 

Three Months Ended

International Segment

July 31, 2021

 

August 1, 2020

 

July 31, 2021

 

August 1, 2020

Computing and Mobile Phones

44

%

 

49

%

 

(1.6)

%

 

31.0

%

Consumer Electronics

30

%

 

27

%

 

11.8

%

 

(4.7)

%

Appliances

12

%

 

12

%

 

11.6

%

 

13.4

%

Entertainment

7

%

 

6

%

 

13.7

%

 

44.5

%

Services

5

%

 

4

%

 

2.2

%

 

(11.1)

%

Other

2

%

 

2

%

 

10.8

%

 

12.0

%

Total

100

%

 

100

%

 

5.0

%

 

15.1

%

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

 

July 31, 2021

 

August 1, 2020

 

Domestic

 

International

 

Consolidated

 

Domestic

 

International

 

Consolidated

SG&A

$

1,849

 

 

$

160

 

 

$

2,009

 

 

$

1,560

 

 

$

142

 

 

$

1,702

 

% of revenue

 

16.8

%

 

 

19.1

%

 

 

17.0

%

 

 

17.1

%

 

 

18.2

%

 

 

17.2

%

Intangible asset amortization1

 

(20)

 

 

 

-

 

 

 

(20)

 

 

 

(20)

 

 

 

-

 

 

 

(20)

 

Non-GAAP SG&A

$

1,829

 

 

$

160

 

 

$

1,989

 

 

$

1,540

 

 

$

142

 

 

$

1,682

 

% of revenue

 

16.6

%

 

 

19.1

%

 

 

16.8

%

 

 

16.9

%

 

 

18.2

%

 

 

17.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

757

 

 

$

40

 

 

$

797

 

 

$

524

 

 

$

44

 

 

$

568

 

% of revenue

 

6.9

%

 

 

4.8

%

 

 

6.7

%

 

 

5.7

%

 

 

5.6

%

 

 

5.7

%

Intangible asset amortization1

 

20

 

 

 

-

 

 

 

20

 

 

 

20

 

 

 

-

 

 

 

20

 

Restructuring charges2

 

-

 

 

 

4

 

 

 

4

 

 

 

-

 

 

 

-

 

 

 

-

 

Non-GAAP operating income

$

777

 

 

$

44

 

 

$

821

 

 

$

544

 

 

$

44

 

 

$

588

 

% of revenue

 

7.1

%

 

 

5.3

%

 

 

6.9

%

 

 

6.0

%

 

 

5.6

%

 

 

5.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

 

 

 

 

 

 

 

 

8.0

%

 

 

 

 

 

 

 

 

 

 

22.9

%

Intangible asset amortization1

 

 

 

 

 

 

 

 

 

0.4

%

 

 

 

 

 

 

 

 

 

 

0.1

%

Non-GAAP effective tax rate

 

 

 

 

 

 

 

 

 

8.4

%

 

 

 

 

 

 

 

 

 

 

23.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Three Months Ended

 

July 31, 2021

 

August 1, 2020

 

Pretax Earnings

 

Net of Tax4

 

Per Share

 

Pretax Earnings

 

Net of Tax4

 

Per Share

GAAP diluted EPS

 

 

 

 

 

 

 

 

$

2.90

 

 

 

 

 

 

 

 

 

 

$

1.65

 

Intangible asset amortization1

$

20

 

 

$

15

 

 

 

0.06

 

 

$

20

 

 

$

15

 

 

 

0.06

 

Restructuring charges2

 

4

 

 

 

4

 

 

 

0.02

 

 

 

-

 

 

 

-

 

 

 

-

 

Non-GAAP diluted EPS

 

 

 

 

 

 

 

 

$

2.98

 

 

 

 

 

 

 

 

 

 

$

1.71

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

Six Months Ended

 

July 31, 2021

 

August 1, 2020

 

Domestic

 

International

 

Consolidated

 

Domestic

 

International

 

Consolidated

Gross profit

$

5,132

 

 

$

393

 

 

$

5,525

 

 

$

3,905

 

 

$

330

 

 

$

4,235

 

% of revenue

 

23.5

%

 

 

24.1

%

 

 

23.5

%

 

 

22.9

%

 

 

23.1

%

 

 

22.9

%

Restructuring - inventory markdowns3

 

-

 

 

 

(6)

 

 

 

(6)

 

 

 

-

 

 

 

-

 

 

 

-

 

Non-GAAP gross profit

$

5,132

 

 

$

387

 

 

$

5,519

 

 

$

3,905

 

 

$

330

 

 

$

4,235

 

% of revenue

 

23.5

%

 

 

23.7

%

 

 

23.5

%

 

 

22.9

%

 

 

23.1

%

 

 

22.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A

$

3,685

 

 

$

312

 

 

$

3,997

 

 

$

3,139

 

 

$

298

 

 

$

3,437

 

% of revenue

 

16.9

%

 

 

19.1

%

 

 

17.0

%

 

 

18.4

%

 

 

20.9

%

 

 

18.6

%

Intangible asset amortization1

 

(40)

 

 

 

-

 

 

 

(40)

 

 

 

(40)

 

 

 

-

 

 

 

(40)

 

Non-GAAP SG&A

$

3,645

 

 

$

312

 

 

$

3,957

 

 

$

3,099

 

 

$

298

 

 

$

3,397

 

% of revenue

 

16.7

%

 

 

19.1

%

 

 

16.8

%

 

 

18.2

%

 

 

20.9

%

 

 

18.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

$

1,491

 

 

$

75

 

 

$

1,566

 

 

$

765

 

 

$

32

 

 

$

797

 

% of revenue

 

6.8

%

 

 

4.6

%

 

 

6.7

%

 

 

4.5

%

 

 

2.2

%

 

 

4.3

%

Intangible asset amortization1

 

40

 

 

 

-

 

 

 

40

 

 

 

40

 

 

 

-

 

 

 

40

 

Restructuring charges2

 

(44)

 

 

 

6

 

 

 

(38)

 

 

 

1

 

 

 

-

 

 

 

1

 

Restructuring - inventory markdowns3

 

-

 

 

 

(6)

 

 

 

(6)

 

 

 

-

 

 

 

-

 

 

 

-

 

Non-GAAP operating income

$

1,487

 

 

$

75

 

 

$

1,562

 

 

$

806

 

 

$

32

 

 

$

838

 

% of revenue

 

6.8

%

 

 

4.6

%

 

 

6.7

%

 

 

4.7

%

 

 

2.2

%

 

 

4.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effective tax rate

 

 

 

 

 

 

 

 

 

15.1

%

 

 

 

 

 

 

 

 

 

 

24.2

%

Intangible asset amortization1

 

 

 

 

 

 

 

 

 

0.3

%

 

 

 

 

 

 

 

 

 

 

-

%

Restructuring charges2

 

 

 

 

 

 

 

 

 

(0.3)

%

 

 

 

 

 

 

 

 

 

 

-

%

Non-GAAP effective tax rate

 

 

 

 

 

 

 

 

 

15.1

%

 

 

 

 

 

 

 

 

 

 

24.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

Six Months Ended

 

July 31, 2021

 

August 1, 2020

 

Pretax Earnings

 

Net of Tax4

 

Per Share

 

Pretax Earnings

 

Net of Tax4

 

Per Share

GAAP diluted EPS

 

 

 

 

 

 

 

 

$

5.22

 

 

 

 

 

 

 

 

 

 

$

2.26

 

Intangible asset amortization1

$

40

 

 

$

30

 

 

 

0.12

 

 

$

40

 

 

$

30

 

 

 

0.12

 

Restructuring charges2

 

(38)

 

 

 

(27)

 

 

 

(0.11)

 

 

 

1

 

 

 

1

 

 

 

-

 

Restructuring - inventory markdowns3

 

(6)

 

 

 

(6)

 

 

 

(0.02)

 

 

 

-

 

 

 

-

 

 

 

-

 

Non-GAAP diluted EPS

 

 

 

 

 

 

 

 

$

5.21

 

 

 

 

 

 

 

 

 

 

$

2.38

 

(1)

 

Represents the non-cash amortization of definite-lived intangible assets associated with acquisitions, including customer relationships, tradenames and developed technology.

(2)

 

Represents adjustments to previously planned organizational changes and higher-than-expected retention rates in the Domestic segment and charges associated with the decision to exit operations in Mexico in the International segment for the periods ended July 31, 2021. Represents charges associated with U.S. retail operating model changes for the periods ended August 1, 2020.

(3)

 

Represents inventory markdown adjustments recorded within cost of sales associated with the decision to exit operations in Mexico.

(4)

 

The non-GAAP adjustments primarily relate to the U.S. and Mexico. As such, the income tax charge is calculated using the statutory tax rate of 24.5% for all U.S. non-GAAP items for all periods presented. There is no income tax charge for Mexico 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")

July 31, 20211

 

August 1, 20201

Net earnings

$

2,536

 

 

$

1,629

 

Total assets

 

19,295

 

 

 

16,612

 

ROA

 

13.1

%

 

 

9.8

%

 

 

 

 

 

 

 

 

Non-GAAP Return on Investment ("ROI")

July 31, 20211

 

August 1, 20201

Numerator

 

 

 

 

 

 

 

Operating income - total operations

$

3,160

 

 

$

2,159

 

Add: Non-GAAP operating income adjustments2

 

291

 

 

 

71

 

Add: Operating lease interest3

 

109

 

 

 

112

 

Less: Income taxes4

 

(872)

 

 

 

(574)

 

Add: Depreciation

 

775

 

 

 

748

 

Add: Operating lease amortization5

 

663

 

 

 

667

 

Adjusted operating income after tax

$

4,126

 

 

$

3,183

 

 

 

 

 

 

 

 

 

Denominator

 

 

 

 

 

 

 

Total assets

$

19,295

 

 

$

16,612

 

Less: Excess cash6

 

(4,219)

 

 

 

(2,081)

 

Add: Accumulated depreciation and amortization7

 

7,166

 

 

 

6,964

 

Less: Adjusted current liabilities8

 

(10,163)

 

 

 

(8,124)

 

Average invested operating assets

$

12,079

 

 

$

13,371

 

 

 

 

 

 

 

 

 

Non-GAAP ROI

 

34.2

%

 

 

23.8

%

(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, price-fixing settlements and intangible asset amortization. Additional details regarding these adjustments are included in the Reconciliation of Non-GAAP Financial Measures schedule within the company's quarterly earnings releases.

(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.

 

Investor Contact: Mollie O'Brien mollie.obrien@bestbuy.com

Media Contact: Carly Charlson carly.charlson@bestbuy.com

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