Comparable Sales Declined 6.2%
GAAP Diluted EPS of $1.25
Non-GAAP Diluted EPS of $1.22
Best Buy Co., Inc. (NYSE: BBY) today announced results for the
13-week second quarter ended July 29, 2023 (“Q2 FY24”), as compared
to the 13-week second quarter ended July 30, 2022 (“Q2 FY23”).
Q2 FY24
Q2 FY23
Revenue ($ in millions)
Enterprise
$
9,583
$
10,329
Domestic segment
$
8,890
$
9,569
International segment
$
693
$
760
Enterprise comparable sales % change1
(6.2
)%
(12.1
)%
Domestic comparable sales % change1
(6.3
)%
(12.7
)%
Domestic comparable online sales %
change1
(7.1
)%
(14.7
)%
International comparable sales %
change1
(5.4
)%
(4.2
)%
Operating Income
GAAP operating income as a % of
revenue
3.6
%
3.6
%
Non-GAAP operating income as a % of
revenue
3.8
%
4.1
%
Diluted Earnings per Share
("EPS")
GAAP diluted EPS
$
1.25
$
1.35
Non-GAAP diluted EPS
$
1.22
$
1.54
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 second quarter sales results that are at
the high-end of the outlook we shared in May and profitability that
was better than expectations,” said Corie Barry, Best Buy CEO.
“These results continue to demonstrate our strong operational
execution as we balance our reaction to the current industry sales
pressure with our ongoing strategic investments.”
“Our financial results were better than expected, and they
reflect a consumer electronics industry that remains challenged due
to the pull-forward of demand in prior years and the various
macroeconomic factors that we are all too familiar with,” Barry
continued. “With that said, we continue to expect that this year
will be the low point in tech demand after two years of sales
declines. Next year the consumer electronics industry should see
stabilization and possibly growth driven by the natural upgrade and
replacement cycles and the normalization of tech innovation. I am
very proud of the way our teams are managing the business and
preparing for our future, and we remain incredibly excited about
our future opportunities.”
FY24 Financial Guidance
“In May, we noted that we were preparing for a number of
scenarios within our annual guidance range, and we believed our
sales were aligning closer to the midpoint of the annual comparable
sales guidance,” said Matt Bilunas, Best Buy CFO. “Today we are
lowering the high-end of our full year revenue outlook to our
previous midpoint, while keeping the low-end of our revenue
guidance unchanged. At the same time, we are narrowing our
profitability ranges, effectively raising the midpoint of our
previous annual guidance for non-GAAP operating income rate and
non-GAAP diluted EPS.”
Bilunas continued, “As it relates specifically to the third
quarter, we expect our comparable sales to be slightly better than
the negative 6.2% we reported for the second quarter and our
non-GAAP operating income rate to be approximately 3.4%.”
Best Buy’s guidance for FY24, which includes 53 weeks, is the
following:
- Revenue of $43.8 billion to $44.5 billion, which compares to
prior guidance of $43.8 billion to $45.2 billion
- Comparable sales decline of 4.5% to 6.0%, which compares to
prior guidance of a decline of 3.0% to 6.0%
- Enterprise non-GAAP operating income rate2 of 3.9% to 4.1%,
which compares to prior guidance of 3.7% to 4.1%
- Non-GAAP effective income tax rate2 of approximately 24.5%,
which remains unchanged
- Non-GAAP diluted EPS2 of $6.00 to $6.40, which compares to
prior guidance of $5.70 to $6.50
- Capital expenditures of approximately $850 million, which
remains unchanged
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 Q2 FY24
Results
Domestic Revenue
Domestic revenue of $8.89 billion decreased 7.1% versus last
year primarily driven by a comparable sales decline of 6.3%.
From a merchandising perspective, the largest drivers of the
comparable sales decline on a weighted basis were appliances, home
theater, computing and mobile phones. These drivers were partially
offset by growth in gaming.
Domestic online revenue of $2.76 billion decreased 7.1% on a
comparable basis, and as a percentage of total Domestic revenue,
online revenue was flat to last year at 31.0%.
Domestic Gross Profit Rate
Domestic gross profit rate was 23.1% versus 22.0% last year. The
higher gross profit rate was primarily due to: (1) favorable
product margin rates; (2) improved financial performance from the
company’s membership offerings, which included higher services
margin rates and reduced costs associated with program changes made
to the company’s free membership offering; and (3) an improved
gross profit rate from the company’s Health initiatives.
Domestic Selling, General and Administrative Expenses
(“SG&A”)
Domestic GAAP SG&A was $1.73 billion, or 19.5% of revenue,
versus $1.73 billion, or 18.1% of revenue, last year. On a non-GAAP
basis, SG&A was $1.71 billion, or 19.2% of revenue, versus
$1.71 billion, or 17.9% of revenue, last year. Both GAAP and
non-GAAP SG&A were approximately flat to last year, as higher
incentive compensation was primarily offset by reduced store
payroll expense.
International Segment Q2 FY24
Results
International revenue of $693 million decreased 8.8% versus last
year. This decrease was primarily driven by a comparable sales
decline of 5.4% and the negative impact of approximately 340 basis
points from foreign currency exchange rates.
International operating income was $19 million, or 2.7% of
revenue, compared to $28 million, or 3.7% of revenue, last year.
The lower operating income rate was primarily driven by SG&A
deleverage on lower revenue, which was partially offset by an
improvement in the company’s gross profit rate of approximately 80
basis points compared to last year.
Income Taxes
The Q2 FY24 GAAP effective tax rate was 26.1% versus 15.6% last
year. On a non-GAAP basis, the effective tax rate was 26.6% versus
16.7% last year. The lower GAAP and non-GAAP effective tax rates
last year were primarily due to the resolution of certain discrete
tax matters.
Share Repurchases and
Dividends
In Q2 FY24, the company returned a total of $279 million to
shareholders through dividends of $200 million and share
repurchases of $79 million. On a year-to-date basis, the company
has returned a total of $560 million to shareholders through
dividends of $402 million and share repurchases of $158
million.
Today, the company announced that its board of directors has
authorized the payment of a regular quarterly cash dividend of
$0.92 per common share. The quarterly dividend is payable on
October 10, 2023, to shareholders of record as of the close of
business on September 19, 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 August 29, 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 sales of subsidiaries and certain 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. 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 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; 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
Six Months Ended
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Revenue
$
9,583
$
10,329
$
19,050
$
20,976
Cost of sales
7,363
8,042
14,680
16,336
Gross profit
2,220
2,287
4,370
4,640
Gross profit %
23.2
%
22.1
%
22.9
%
22.1
%
Selling, general and administrative
expenses
1,879
1,882
3,727
3,772
SG&A %
19.6
%
18.2
%
19.6
%
18.0
%
Restructuring charges
(7
)
34
(16
)
35
Operating income
348
371
659
833
Operating income %
3.6
%
3.6
%
3.5
%
4.0
%
Other income (expense):
Gain on sale of subsidiary, net
21
-
21
-
Investment income (expense) and other
12
3
33
(2
)
Interest expense
(12
)
(7
)
(24
)
(13
)
Earnings before income tax expense and
equity in income (loss) of affiliates
369
367
689
818
Income tax expense
96
58
171
168
Effective tax rate
26.1
%
15.6
%
24.8
%
20.5
%
Equity in income (loss) of affiliates
1
(3
)
-
(3
)
Net earnings
$
274
$
306
$
518
$
647
Basic earnings per share
$
1.25
$
1.36
$
2.37
$
2.86
Diluted earnings per share
$
1.25
$
1.35
$
2.36
$
2.85
Weighted-average common shares
outstanding:
Basic
218.6
225.4
218.7
226.1
Diluted
219.0
226.1
219.5
227.2
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
($ in millions)
(Unaudited and subject to
reclassification)
July 29, 2023
July 30, 2022
Assets
Current assets:
Cash and cash equivalents
$
1,093
$
840
Receivables, net
856
840
Merchandise inventories
5,651
6,043
Other current assets
704
621
Total current assets
8,304
8,344
Property and equipment, net
2,305
2,319
Operating lease assets
2,813
2,796
Goodwill
1,383
1,385
Other assets
513
575
Total assets
$
15,318
$
15,419
Liabilities and equity
Current liabilities:
Accounts payable
$
5,471
$
5,406
Unredeemed gift card liabilities
250
273
Deferred revenue
996
1,133
Accrued compensation and related
expenses
377
374
Accrued liabilities
709
820
Current portion of operating lease
liabilities
615
629
Current portion of long-term debt
15
15
Total current liabilities
8,433
8,650
Long-term operating lease liabilities
2,254
2,221
Long-term liabilities
651
472
Long-term debt
1,145
1,184
Equity
2,835
2,892
Total liabilities and equity
$
15,318
$
15,419
BEST BUY CO., INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited and subject to
reclassification)
Six Months Ended
July 29, 2023
July 30, 2022
Operating activities
Net earnings
$
518
$
647
Adjustments to reconcile net earnings to
total cash provided by (used in) operating activities:
Depreciation and amortization
473
453
Restructuring charges
(16
)
35
Stock-based compensation
75
65
Gain on sale of subsidiary, net
(21
)
-
Other, net
2
19
Changes in operating assets and
liabilities:
Receivables
289
201
Merchandise inventories
(508
)
(79
)
Other assets
(32
)
(13
)
Accounts payable
(206
)
(1,434
)
Income taxes
(148
)
42
Other liabilities
(245
)
(645
)
Total cash provided by (used in) operating
activities
181
(709
)
Investing activities
Additions to property and equipment
(395
)
(441
)
Purchases of investments
(2
)
(46
)
Net proceeds from sale of subsidiary
14
-
Other, net
2
3
Total cash used in investing
activities
(381
)
(484
)
Financing activities
Repurchase of common stock
(158
)
(465
)
Dividends paid
(402
)
(397
)
Other, net
-
1
Total cash used in financing
activities
(560
)
(861
)
Effect of exchange rate changes on cash
and cash equivalents
(2
)
1
Decrease in cash, cash equivalents and
restricted cash
(762
)
(2,053
)
Cash, cash equivalents and restricted
cash at beginning of period
2,253
3,205
Cash, cash equivalents and restricted
cash at end of period
$
1,491
$
1,152
BEST BUY CO., INC.
SEGMENT INFORMATION
($ in millions)
(Unaudited and subject to
reclassification)
Three Months Ended
Six Months Ended
Domestic Segment Results
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Revenue
$
8,890
$
9,569
$
17,691
$
19,463
Comparable sales % change
(6.3
)%
(12.7
)%
(8.4
)%
(10.6
)%
Comparable online sales % change
(7.1
)%
(14.7
)%
(9.7
)%
(14.8
)%
Gross profit
$
2,052
$
2,109
$
4,044
$
4,279
Gross profit as a % of revenue
23.1
%
22.0
%
22.9
%
22.0
%
SG&A
$
1,730
$
1,732
$
3,440
$
3,473
SG&A as a % of revenue
19.5
%
18.1
%
19.4
%
17.8
%
Operating income
$
329
$
343
$
619
$
772
Operating income as a % of revenue
3.7
%
3.6
%
3.5
%
4.0
%
Domestic Segment Non-GAAP
Results1
Gross profit
$
2,052
$
2,109
$
4,044
$
4,279
Gross profit as a % of revenue
23.1
%
22.0
%
22.9
%
22.0
%
SG&A
$
1,709
$
1,710
$
3,399
$
3,429
SG&A as a % of revenue
19.2
%
17.9
%
19.2
%
17.6
%
Operating income
$
343
$
399
$
645
$
850
Operating income as a % of revenue
3.9
%
4.2
%
3.6
%
4.4
%
Three Months Ended
Six Months Ended
International Segment Results
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Revenue
$
693
$
760
$
1,359
$
1,513
Comparable sales % change
(5.4
)%
(4.2
)%
(5.5
)%
(2.8
)%
Gross profit
$
168
$
178
$
326
$
361
Gross profit as a % of revenue
24.2
%
23.4
%
24.0
%
23.9
%
SG&A
$
149
$
150
$
287
$
299
SG&A as a % of revenue
21.5
%
19.7
%
21.1
%
19.8
%
Operating income
$
19
$
28
$
40
$
61
Operating income as a % of revenue
2.7
%
3.7
%
2.9
%
4.0
%
International Segment Non-GAAP
Results1
Gross profit
$
168
$
178
$
326
$
361
Gross profit as a % of revenue
24.2
%
23.4
%
24.0
%
23.9
%
SG&A
$
149
$
150
$
287
$
299
SG&A as a % of revenue
21.5
%
19.7
%
21.1
%
19.8
%
Operating income
$
19
$
28
$
39
$
62
Operating income as a % of revenue
2.7
%
3.7
%
2.9
%
4.1
%
(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 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Computing and Mobile Phones
41
%
42
%
(6.4
)%
(16.6
)%
Consumer Electronics
30
%
30
%
(5.7
)%
(14.7
)%
Appliances
16
%
17
%
(16.1
)%
(1.2
)%
Entertainment
6
%
5
%
9.0
%
(9.2
)%
Services
6
%
5
%
7.6
%
(8.5
)%
Other
1
%
1
%
2.4
%
15.6
%
Total
100
%
100
%
(6.3
)%
(12.7
)%
Revenue Mix
Comparable Sales
Three Months Ended
Three Months Ended
International Segment
July 29, 2023
July 30, 2022
July 29, 2023
July 30, 2022
Computing and Mobile Phones
45
%
43
%
(2.4
)%
(7.6
)%
Consumer Electronics
28
%
29
%
(10.4
)%
(4.8
)%
Appliances
13
%
14
%
(6.1
)%
6.8
%
Entertainment
7
%
7
%
2.5
%
(5.8
)%
Services
5
%
5
%
4.6
%
(0.4
)%
Other
2
%
2
%
(38.1
)%
12.6
%
Total
100
%
100
%
(5.4
)%
(4.2
)%
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, goodwill and intangible asset impairments, price-fixing
settlements, gains and losses on subsidiaries and certain
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 29, 2023
July 30, 2022
Domestic
International
Consolidated
Domestic
International
Consolidated
SG&A
$
1,730
$
149
$
1,879
$
1,732
$
150
$
1,882
% of revenue
19.5
%
21.5
%
19.6
%
18.1
%
19.7
%
18.2
%
Intangible asset amortization1
(21
)
-
(21
)
(22
)
-
(22
)
Non-GAAP SG&A
$
1,709
$
149
$
1,858
$
1,710
$
150
$
1,860
% of revenue
19.2
%
21.5
%
19.4
%
17.9
%
19.7
%
18.0
%
Operating income
$
329
$
19
$
348
$
343
$
28
$
371
% of revenue
3.7
%
2.7
%
3.6
%
3.6
%
3.7
%
3.6
%
Intangible asset amortization1
21
-
21
22
-
22
Restructuring charges2
(7
)
-
(7
)
34
-
34
Non-GAAP operating income
$
343
$
19
$
362
$
399
$
28
$
427
% of revenue
3.9
%
2.7
%
3.8
%
4.2
%
3.7
%
4.1
%
Effective tax rate
26.1
%
15.6
%
Intangible asset amortization1
(0.4
)%
0.4
%
Restructuring charges2
0.4
%
0.7
%
Loss on investments
0.5
%
-
%
Non-GAAP effective tax rate
26.6
%
16.7
%
Three Months Ended
Three Months Ended
July 29, 2023
July 30, 2022
Pretax Earnings
Net of Tax4
Per Share
Pretax Earnings
Net of Tax4
Per Share
Diluted EPS
$
1.25
$
1.35
Intangible asset amortization1
$
21
$
21
0.10
$
22
$
17
0.07
Restructuring charges2
(7
)
(7
)
(0.03
)
34
26
0.12
Loss on investments
2
2
-
-
-
-
Gain on sale of subsidiary, net3
(21
)
(21
)
(0.10
)
-
-
-
Non-GAAP diluted EPS
$
1.22
$
1.54
Six Months Ended
Six Months Ended
July 29, 2023
July 30, 2022
Domestic
International
Consolidated
Domestic
International
Consolidated
SG&A
$
3,440
$
287
$
3,727
$
3,473
$
299
$
3,772
% of revenue
19.4
%
21.1
%
19.6
%
17.8
%
19.8
%
18.0
%
Intangible asset amortization1
(41
)
-
(41
)
(44
)
-
(44
)
Non-GAAP SG&A
$
3,399
$
287
$
3,686
$
3,429
$
299
$
3,728
% of revenue
19.2
%
21.1
%
19.3
%
17.6
%
19.8
%
17.8
%
Operating income
$
619
$
40
$
659
$
772
$
61
$
833
% of revenue
3.5
%
2.9
%
3.5
%
4.0
%
4.0
%
4.0
%
Intangible asset amortization1
41
-
41
44
-
44
Restructuring charges2
(15
)
(1
)
(16
)
34
1
35
Non-GAAP operating income
$
645
$
39
$
684
$
850
$
62
$
912
% of revenue
3.6
%
2.9
%
3.6
%
4.4
%
4.1
%
4.3
%
Effective tax rate
24.8
%
20.5
%
Intangible asset amortization1
0.4
%
0.2
%
Restructuring charges2
(0.1
)%
0.1
%
Non-GAAP effective tax rate
25.1
%
20.8
%
Six Months Ended
Six Months Ended
July 29, 2023
July 30, 2022
Pretax Earnings
Net of Tax4
Per Share
Pretax Earnings
Net of Tax4
Per Share
Diluted EPS
$
2.36
$
2.85
Intangible asset amortization1
$
41
$
36
0.16
$
44
$
34
0.14
Restructuring charges2
(16
)
(14
)
(0.06
)
35
27
0.12
Loss on investments
2
2
0.01
-
-
-
Gain on sale of subsidiary, net3
(21
)
(21
)
(0.10
)
-
-
-
Non-GAAP diluted EPS
$
2.37
$
3.11
(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 related to employee
termination benefits and subsequent adjustments from
higher-than-expected employee retention related to previously
planned organizational changes.
(3)
Represents the gain on sale of a Mexico
subsidiary subsequent to our exit from operations in Mexico.
(4)
The non-GAAP adjustments primarily relate
to the U.S. and Mexico. As such, the forecasted annual income tax
charge on the U.S. non-GAAP adjustments is calculated using the
statutory tax rate of 24.5%. There is no forecasted annual income
tax benefit for Mexico non-GAAP items, as there is no forecasted
annual tax expense on the income 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 29, 20231
July 30, 20221
Net earnings
$
1,290
$
1,772
Total assets
16,130
17,702
ROA
8.0
%
10.0
%
Non-GAAP Return on Investment
("ROI")
July 29, 20231
July 30, 20221
Numerator
Operating income
$
1,621
$
2,306
Add: Non-GAAP operating income
adjustments2
179
136
Add: Operating lease interest3
113
110
Less: Income taxes4
(469
)
(625
)
Add: Depreciation
855
806
Add: Operating lease amortization5
666
653
Adjusted operating income after
tax
$
2,965
$
3,386
Denominator
Total assets
$
16,130
$
17,702
Less: Excess cash6
(346
)
(1,374
)
Add: Accumulated depreciation and
amortization7
5,071
6,212
Less: Adjusted current liabilities8
(8,706
)
(9,866
)
Average invested operating
assets
$
12,149
$
12,674
Non-GAAP ROI
24.4
%
26.7
%
(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 intangible asset
amortization and restructuring charges. Additional details
regarding these adjustments are included in the Reconciliation of
Non-GAAP Financial Measures schedule within the company’s 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/20230828127131/en/
Investor Contact: Mollie O'Brien
mollie.obrien@bestbuy.com
Media Contact: Carly Charlson
carly.charlson@bestbuy.com
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