Best Buy Co., Inc. Reports Holiday Revenue Results

OREANDA-NEWS.  Best Buy Co., Inc. (NYSE:BBY) today announced revenue results for the nine weeks ended January 2, 2016 as compared to the nine weeks ended January 3, 2015.

Hubert Joly, Best Buy chairman and CEO, commented, “During the holiday period, Domestic revenue declined 0.8% against a backdrop where the NPD-reported categories were down a greater-than-expected 4.8%. The Domestic decline was primarily driven by the mobile phone category, which was softer than both our expectations and the prior year. Excluding mobile phones, Domestic revenue increased year over year due to our strong performance in health & wearables, home theater and appliances. Online revenue increased 12.6% on top of a 13.4% increase last year. In addition, we saw a significant improvement in our Net Promoter Score. From a financial perspective, despite a slightly softer-than-expected topline, we are improving our fourth quarter operating income rate outlook as a result of our continuing conviction to a disciplined promotional strategy and strong expense management.”

Joly concluded, “These results and our outlook are driven by the solid execution of our holiday strategy and the leveraging of investments in our merchandise assortment, digital capabilities, higher in-stocks, Blue Shirt and Geek Squad expertise and faster shipping. Ultimately, this performance is the result of the hard work, dedication and customer focus on the part of all of our associates.”

Sharon McCollam, Best Buy EVP, CAO and CFO, commented, “Based on the holiday results Hubert just discussed, we are updating our fourth quarter outlook as follows. In the Domestic business, we are expecting (1) a revenue decline of near 1.5% versus our previous expectation of near flat due to softer consumer demand in mobile phones and greater-than-expected declines in the NPD-reported categories; and (2) a non-GAAP operating income rate decline of 10 to 15 basis points versus our previous expectation of a rate decline of 20 to 35 basis points. As a reminder, the shift of the Super Bowl into Q1 FY17 is driving an expected 40 basis points of pressure on this quarter’s revenue.

“In the International business, our outlook has not changed. We continue to expect (1) an International revenue decline of approximately 30% due to the ongoing impacts of the Canadian brand consolidation, foreign currency fluctuations and softness in the Canadian market; and (2) an International non-GAAP operating income rate in the range of positive 2.0% to 3.0%.

“Based on the above, our Enterprise outlook includes a revenue decline of near 4% versus our previous expectation of a low single-digit decline; and (2) a non-GAAP operating income rate decline of approximately 15 to 30 basis points versus our previous expectation of a rate decline of 25 to 45 basis points. From a tax rate perspective, we now expect the non-GAAP effective income tax rate from continuing operations to be in the range of 34.5% to 35%, versus 34.2% last year, which is expected to result in a negative $0.01 to negative $0.03 year-over-year non-GAAP diluted EPS impact in Q4 FY16.”

Share Repurchases Reach $588 million

On March 3, 2015, the company announced the intent to repurchase $1 billion worth of its shares over a three-year period. On a year-to-date basis, the company has already repurchased 17.8 million shares for a total of $588 million – of which 6.6 million shares, or $203 million, were repurchased in the nine-week period ended January 2, 2016. The company intends to continue to repurchase shares through the end of the fourth quarter.

Domestic Segment Holiday Revenue Results

Domestic revenue of $10.1 billion decreased 0.8% versus last year. This decrease was primarily driven by a comparable sales decline of 1.4%, excluding the estimated 20-basis point benefit associated with the classification of revenue for the mobile carrier installment billing plans³ and the loss of revenue from closed stores. These declines were partially offset by an estimated 20-basis point benefit associated with installment billing³ and an approximate 95-basis point periodic profit sharing benefit from our externally-managed extended service plan portfolio.

Domestic online revenue of $1.7 billion increased 12.6% on a comparable basis primarily due to a higher conversion rate. As a percentage of total Domestic revenue, online revenue increased 200 basis points to 16.7% from 14.7% last year.

From a merchandising perspective, comparable sales growth in health & wearables, home theater and major appliances was more than offset by significant declines in mobile phones, tablets and digital imaging. The company also saw continued revenue declines in services due to investments in services pricing, declining attach rates of traditional warranty plans and, to a lesser extent, the reduction of frequency and severity of claims on extended warranties which has reduced repair revenue.

International Segment Holiday Revenue Results

International revenue of $911 million declined 26.1% versus last year. This decline was primarily driven by a negative foreign currency impact of approximately 1,350 basis points; the loss of revenue associated with closed stores as part of the Canadian brand consolidation; and (3) ongoing softness in the Canadian economy and consumer electronics industry.