Comparable Sales Declined 2.3%
GAAP Diluted EPS Increased 7% to
$1.34
Non-GAAP Diluted EPS Increased 10% to
$1.34
Raises FY25 Non-GAAP Diluted EPS Guidance
Range to $6.10 to $6.35
Best Buy Co., Inc. (NYSE: BBY) today announced results for the
13-week second quarter ended August 3, 2024 (“Q2 FY25”), as
compared to the 13-week second quarter ended July 29, 2023 (“Q2
FY24”).
Q2 FY25
Q2 FY24
Revenue ($ in millions)
Enterprise
$
9,288
$
9,583
Domestic segment
$
8,623
$
8,890
International segment
$
665
$
693
Enterprise comparable sales % change1
(2.3
)%
(6.2
)%
Domestic comparable sales % change1
(2.3
)%
(6.3
)%
Domestic comparable online sales %
change1
(1.6
)%
(7.1
)%
International comparable sales %
change1
(1.8
)%
(5.4
)%
Operating Income
GAAP operating income as a % of
revenue
4.1
%
3.6
%
Non-GAAP operating income as a % of
revenue
4.1
%
3.8
%
Diluted Earnings per Share
("EPS")
GAAP diluted EPS
$
1.34
$
1.25
Non-GAAP diluted EPS
$
1.34
$
1.22
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 better-than-expected sales and
profitability results for the second quarter,” said Corie Barry,
Best Buy CEO. “We delivered strong results in our Domestic tablet
and computing categories, which together posted comparable sales
growth of 6% versus last year. With our market position, expert
sales associates and compelling merchandising, we capitalized on
the demand driven by customers’ desire to replace or upgrade their
products combined with new innovation.”
“We are focused on sharpening our customer experiences and
industry positioning while expanding our non-GAAP operating income
rate in the current environment,” Barry continued. “We see a
consumer who is seeking value and sales events, and one who is also
willing to spend on high price point products when they need to or
when there is new compelling technology. We are balancing our
optimism in both the industry and our positioning with a pragmatic
approach to likely uneven customer behavior going forward.”
FY25 Financial Guidance
“As we look to the back half of the year, we expect our industry
to continue to show increasing stabilization,” said Matt Bilunas,
Best Buy CFO. “Last quarter we said we believed we were likely
trending towards the midpoint of our original comparable sales
guidance and today we are updating our annual comparable sales
guidance range to a decline of 1.5% to 3.0%. At the same time, we
are raising our non-GAAP diluted EPS guidance range as we largely
flow through the better-than-expected profitability of the first
half of the year.”
Bilunas continued, “For Q3 FY25, we expect comparable sales to
decline by approximately 1.0% and our non-GAAP operating income
rate to be approximately 3.7%.”
Best Buy’s updated guidance for FY25 is the following:
- Revenue of $41.3 billion to $41.9 billion, which compares to
prior guidance of $41.3 billion to $42.6 billion
- Comparable sales1 of (3.0%) to (1.5%), which compares to prior
guidance of (3.0%) to 0.0%
- Enterprise non-GAAP operating income rate2 of 4.1% to 4.2%,
which compares to prior guidance of 3.9% to 4.1%
- Non-GAAP effective income tax rate2 of approximately 24.0%,
which compares to prior guidance of approximately 25.0%
- Non-GAAP diluted EPS2 of $6.10 to $6.35, which compares to
prior guidance of $5.75 to $6.20
- Capital expenditures of approximately $750 million, which is
unchanged
Note: FY25 has 52 weeks compared to 53 weeks in FY24. The
company estimates the impact of the extra week in Q4 FY24 added
approximately $735 million in revenue, approximately 15 basis
points of non-GAAP operating income rate and approximately $0.30 of
non-GAAP diluted EPS to the full-year results.
Domestic Segment Q2 FY25
Results
Domestic Revenue
Domestic revenue of $8.62 billion decreased 3.0% versus last
year primarily driven by a comparable sales decline of 2.3%.
From a merchandising perspective, the largest drivers of the
comparable sales decline on a weighted basis were appliances, home
theater and gaming. These drivers were partially offset by growth
in the tablets, computing and services categories.
Domestic online revenue of $2.72 billion decreased 1.6% on a
comparable basis, and as a percentage of total Domestic revenue,
online revenue was 31.5% versus 31.0% last year.
Domestic Gross Profit Rate
Domestic gross profit rate was 23.5% versus 23.1% last year. The
higher gross profit rate was primarily due to improved financial
performance from the company’s services category, including its
membership offerings, which was partially offset by lower product
margin rates and lower 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 expenses were $1.67 billion, or 19.3% of
revenue, versus $1.73 billion, or 19.5% of revenue, last year. On a
non-GAAP basis, SG&A expenses were $1.66 billion, or 19.3% of
revenue, versus $1.71 billion, or 19.2% of revenue, last year. Both
GAAP and non-GAAP SG&A expense decreased primarily due to lower
employee compensation expense and lower expenses across multiple
other areas, including reduced vehicle rental costs and credit card
processing fees. These decreases were partially offset by higher
advertising expense.
International Segment Q2 FY25
Results
International Revenue
International revenue of $665 million decreased 4.0% versus last
year primarily driven by the negative impact of foreign exchange
rates and a comparable sales decline of 1.8%.
International Gross Profit Rate
International gross profit rate was 23.9% versus 24.2% last
year. The lower gross profit rate was primarily due to lower
product margin rates and higher supply chain costs, which were
partially offset by growth in the higher margin services
category.
International SG&A
International SG&A expenses were $142 million, or 21.4% of
revenue, versus $149 million, or 21.5% of revenue, last year. The
lower SG&A expense was primarily driven by the favorable impact
of foreign exchange rates and lower advertising expense, which was
partially offset by expenses associated with new Best Buy Express
locations.
Share Repurchases and
Dividends
In Q2 FY25, the company returned a total of $301 million to
shareholders through dividends of $203 million and share
repurchases of $98 million. On a year-to-date basis, the company
has returned a total of $553 million to shareholders through
dividends of $405 million and share repurchases of $148 million.
The company expects to spend approximately $500 million on share
repurchases during FY25.
Today, the company announced that its board of directors has
authorized the payment of a regular quarterly cash dividend of
$0.94 per common share. The quarterly dividend is payable on
October 10, 2024, to shareholders of record as of the close of
business on September 19, 2024.
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, 2024.
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 and intangible asset
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 recession, inflation rates,
fluctuations in foreign currency exchange rates, limitations on a
government’s ability to borrow and/or spend capital, fluctuations
in housing prices, energy markets, jobless rates and effects
related to the conflicts in Eastern Europe and the Middle East 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 of
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; risks associated with vendors that source products
outside the U.S.; 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 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; and
failure to meet financial-performance guidance or other
forward-looking statements. 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
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Revenue
$
9,288
$
9,583
$
18,135
$
19,050
Cost of sales
7,102
7,363
13,885
14,680
Gross profit
2,186
2,220
4,250
4,370
Gross profit %
23.5
%
23.2
%
23.4
%
22.9
%
Selling, general and administrative
expenses
1,810
1,879
3,547
3,727
SG&A %
19.5
%
19.6
%
19.6
%
19.6
%
Restructuring charges
(7
)
(7
)
8
(16
)
Operating income
383
348
695
659
Operating income %
4.1
%
3.6
%
3.8
%
3.5
%
Other income (expense):
Gain on sale of subsidiary, net
-
21
-
21
Investment income and other
21
12
46
33
Interest expense
(13
)
(12
)
(25
)
(24
)
Earnings before income tax expense and
equity in income of affiliates
391
369
716
689
Income tax expense
101
96
181
171
Effective tax rate
25.8
%
26.1
%
25.3
%
24.8
%
Equity in income of affiliates
1
1
2
-
Net earnings
$
291
$
274
$
537
$
518
Basic earnings per share
$
1.35
$
1.25
$
2.49
$
2.37
Diluted earnings per share
$
1.34
$
1.25
$
2.47
$
2.36
Weighted-average common shares
outstanding:
Basic
216.0
218.6
216.1
218.7
Diluted
217.1
219.0
217.2
219.5
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
($ in millions)
(Unaudited and subject to
reclassification)
August 3, 2024
July 29, 2023
Assets
Current assets:
Cash and cash equivalents
$
1,387
$
1,093
Receivables, net
871
856
Merchandise inventories
5,706
5,651
Other current assets
598
704
Total current assets
8,562
8,304
Property and equipment, net
2,183
2,305
Operating lease assets
2,860
2,813
Goodwill
1,383
1,383
Other assets
636
513
Total assets
$
15,624
$
15,318
Liabilities and equity
Current liabilities:
Accounts payable
$
5,542
$
5,471
Unredeemed gift card liabilities
243
250
Deferred revenue
940
996
Accrued compensation and related
expenses
347
377
Accrued liabilities
756
709
Current portion of operating lease
liabilities
610
615
Current portion of long-term debt
13
15
Total current liabilities
8,451
8,433
Long-term operating lease liabilities
2,316
2,254
Long-term debt
1,157
1,145
Long-term liabilities
593
651
Equity
3,107
2,835
Total liabilities and equity
$
15,624
$
15,318
BEST BUY CO., INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited and subject to
reclassification)
Six Months Ended
August 3, 2024
July 29, 2023
Operating activities
Net earnings
$
537
$
518
Adjustments to reconcile net earnings to
total cash provided by operating activities:
Depreciation and amortization
437
473
Restructuring charges
8
(16
)
Stock-based compensation
74
75
Gain on sale of subsidiary, net
-
(21
)
Other, net
12
2
Changes in operating assets and
liabilities:
Receivables
66
289
Merchandise inventories
(761
)
(508
)
Other assets
(11
)
(32
)
Accounts payable
904
(206
)
Income taxes
(183
)
(148
)
Other liabilities
(266
)
(245
)
Total cash provided by operating
activities
817
181
Investing activities
Additions to property and equipment
(335
)
(395
)
Net proceeds from sale of subsidiary
-
14
Other, net
(17
)
-
Total cash used in investing
activities
(352
)
(381
)
Financing activities
Repurchase of common stock
(148
)
(158
)
Dividends paid
(405
)
(402
)
Other, net
(4
)
-
Total cash used in financing
activities
(557
)
(560
)
Effect of exchange rate changes on cash
and cash equivalents
(3
)
(2
)
Decrease in cash, cash equivalents and
restricted cash
(95
)
(762
)
Cash, cash equivalents and restricted
cash at beginning of period
1,793
2,253
Cash, cash equivalents and restricted
cash at end of period
$
1,698
$
1,491
BEST BUY CO., INC.
SEGMENT INFORMATION
($ in millions)
(Unaudited and subject to
reclassification)
Three Months Ended
Six Months Ended
Domestic Segment Results
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Revenue
$
8,623
$
8,890
$
16,826
$
17,691
Comparable sales % change
(2.3
)%
(6.3
)%
(4.3
)%
(8.4
)%
Comparable online sales % change
(1.6
)%
(7.1
)%
(3.8
)%
(9.7
)%
Gross profit
$
2,027
$
2,052
$
3,944
$
4,044
Gross profit as a % of revenue
23.5
%
23.1
%
23.4
%
22.9
%
SG&A
$
1,668
$
1,730
$
3,266
$
3,440
SG&A as a % of revenue
19.3
%
19.5
%
19.4
%
19.4
%
Operating income
$
367
$
329
$
670
$
619
Operating income as a % of revenue
4.3
%
3.7
%
4.0
%
3.5
%
Domestic Segment Non-GAAP
Results1
Gross profit
$
2,027
$
2,052
$
3,944
$
4,044
Gross profit as a % of revenue
23.5
%
23.1
%
23.4
%
22.9
%
SG&A
$
1,663
$
1,709
$
3,255
$
3,399
SG&A as a % of revenue
19.3
%
19.2
%
19.3
%
19.2
%
Operating income
$
364
$
343
$
689
$
645
Operating income as a % of revenue
4.2
%
3.9
%
4.1
%
3.6
%
Three Months Ended
Six Months Ended
International Segment Results
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Revenue
$
665
$
693
$
1,309
$
1,359
Comparable sales % change
(1.8
)%
(5.4
)%
(2.6
)%
(5.5
)%
Gross profit
$
159
$
168
$
306
$
326
Gross profit as a % of revenue
23.9
%
24.2
%
23.4
%
24.0
%
SG&A
$
142
$
149
$
281
$
287
SG&A as a % of revenue
21.4
%
21.5
%
21.5
%
21.1
%
Operating income
$
16
$
19
$
25
$
40
Operating income as a % of revenue
2.4
%
2.7
%
1.9
%
2.9
%
International Segment Non-GAAP
Results1
Gross profit
$
159
$
168
$
306
$
326
Gross profit as a % of revenue
23.9
%
24.2
%
23.4
%
24.0
%
SG&A
$
142
$
149
$
281
$
287
SG&A as a % of revenue
21.4
%
21.5
%
21.5
%
21.1
%
Operating income
$
17
$
19
$
25
$
39
Operating income as a % of revenue
2.6
%
2.7
%
1.9
%
2.9
%
(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
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Computing and Mobile Phones
44
%
41
%
3.9
%
(6.4
)%
Consumer Electronics
29
%
30
%
(6.2
)%
(5.7
)%
Appliances
13
%
16
%
(14.9
)%
(16.1
)%
Entertainment
6
%
6
%
(7.4
)%
9.0
%
Services
7
%
6
%
8.5
%
7.6
%
Other
1
%
1
%
14.4
%
2.4
%
Total
100
%
100
%
(2.3
)%
(6.3
)%
Revenue Mix
Comparable Sales
Three Months Ended
Three Months Ended
International Segment
August 3, 2024
July 29, 2023
August 3, 2024
July 29, 2023
Computing and Mobile Phones
46
%
45
%
1.7
%
(2.4
)%
Consumer Electronics
28
%
28
%
(2.1
)%
(10.4
)%
Appliances
13
%
13
%
(3.9
)%
(6.1
)%
Entertainment
6
%
7
%
(20.8
)%
2.5
%
Services
6
%
5
%
5.9
%
4.6
%
Other
1
%
2
%
(20.1
)%
(38.1
)%
Total
100
%
100
%
(1.8
)%
(5.4
)%
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
August 3, 2024
July 29, 2023
Domestic
International
Consolidated
Domestic
International
Consolidated
SG&A
$
1,668
$
142
$
1,810
$
1,730
$
149
$
1,879
% of revenue
19.3
%
21.4
%
19.5
%
19.5
%
21.5
%
19.6
%
Intangible asset amortization1
(5
)
-
(5
)
(21
)
-
(21
)
Non-GAAP SG&A
$
1,663
$
142
$
1,805
$
1,709
$
149
$
1,858
% of revenue
19.3
%
21.4
%
19.4
%
19.2
%
21.5
%
19.4
%
Operating income
$
367
$
16
$
383
$
329
$
19
$
348
% of revenue
4.3
%
2.4
%
4.1
%
3.7
%
2.7
%
3.6
%
Intangible asset amortization1
5
-
5
21
-
21
Restructuring charges2
(8
)
1
(7
)
(7
)
-
(7
)
Non-GAAP operating income
$
364
$
17
$
381
$
343
$
19
$
362
% of revenue
4.2
%
2.6
%
4.1
%
3.9
%
2.7
%
3.8
%
Effective tax rate
25.8
%
26.1
%
Intangible asset amortization1
-
%
(0.4
)%
Restructuring charges2
-
%
0.4
%
Loss on investments
-
%
0.5
%
Non-GAAP effective tax rate
25.8
%
26.6
%
Three Months Ended
Three Months Ended
August 3, 2024
July 29, 2023
Pretax Earnings
Net of Tax4
Per Share
Pretax Earnings
Net of Tax4
Per Share
Diluted EPS
$
1.34
$
1.25
Intangible asset amortization1
$
5
$
4
0.02
$
21
$
21
0.10
Restructuring charges2
(7
)
(5
)
(0.02
)
(7
)
(7
)
(0.03
)
Loss on investments
-
-
-
2
2
-
Gain on sale of subsidiary, net3
-
-
-
(21
)
(21
)
(0.10
)
Non-GAAP diluted EPS
$
1.34
$
1.22
Six Months Ended
Six Months Ended
August 3, 2024
July 29, 2023
Domestic
International
Consolidated
Domestic
International
Consolidated
SG&A
$
3,266
$
281
$
3,547
$
3,440
$
287
$
3,727
% of revenue
19.4
%
21.5
%
19.6
%
19.4
%
21.1
%
19.6
%
Intangible asset amortization1
(11
)
-
(11
)
(41
)
-
(41
)
Non-GAAP SG&A
$
3,255
$
281
$
3,536
$
3,399
$
287
$
3,686
% of revenue
19.3
%
21.5
%
19.5
%
19.2
%
21.1
%
19.3
%
Operating income
$
670
$
25
$
695
$
619
$
40
$
659
% of revenue
4.0
%
1.9
%
3.8
%
3.5
%
2.9
%
3.5
%
Intangible asset amortization1
11
-
11
41
-
41
Restructuring charges2
8
-
8
(15
)
(1
)
(16
)
Non-GAAP operating income
$
689
$
25
$
714
$
645
$
39
$
684
% of revenue
4.1
%
1.9
%
3.9
%
3.6
%
2.9
%
3.6
%
Effective tax rate
25.3
%
24.8
%
Intangible asset amortization1
-
%
0.4
%
Restructuring charges2
-
%
(0.1
)%
Non-GAAP effective tax rate
25.3
%
25.1
%
Six Months Ended
Six Months Ended
August 3, 2024
July 29, 2023
Pretax Earnings
Net of Tax4
Per Share
Pretax Earnings
Net of Tax4
Per Share
Diluted EPS
$
2.47
$
2.36
Intangible asset amortization1
$
11
$
8
0.04
$
41
$
36
0.16
Restructuring charges2
8
6
0.03
(16
)
(14
)
(0.06
)
Loss on investments
-
-
-
2
2
0.01
Gain on sale of subsidiary, net3
-
-
-
(21
)
(21
)
(0.10
)
Non-GAAP diluted EPS
$
2.54
$
2.37
(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 associated with
enterprise-wide restructuring initiatives.
(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 charge 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")
August 3, 20241
July 29, 20231
Net earnings
$
1,260
$
1,290
Total assets
15,972
16,130
ROA
7.9
%
8.0
%
Non-GAAP Return on Investment
("ROI")
August 3, 20241
July 29, 20231
Numerator
Operating income
$
1,610
$
1,621
Add: Non-GAAP operating income
adjustments2
208
179
Add: Operating lease interest3
115
113
Less: Income taxes4
(474
)
(469
)
Add: Depreciation
856
855
Add: Operating lease amortization5
660
666
Adjusted operating income after
tax
$
2,975
$
2,965
Denominator
Total assets
$
15,972
$
16,130
Less: Excess cash6
(384
)
(346
)
Add: Accumulated depreciation and
amortization7
5,202
5,071
Less: Adjusted current liabilities8
(8,361
)
(8,706
)
Average invested operating
assets
$
12,429
$
12,149
Non-GAAP ROI
23.9
%
24.4
%
(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
and intangible asset amortization. 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/20240828777710/en/
Investor Contact: Mollie O'Brien
mollie.obrien@bestbuy.com Media Contact: Carly Charlson
carly.charlson@bestbuy.com
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