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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210824005140/en/
Investor Contact: Mollie O'Brien
mollie.obrien@bestbuy.com
Media Contact: Carly Charlson
carly.charlson@bestbuy.com
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