Domestic Segment Revenue Increased 1.2%
Non-GAAP Diluted EPS from Continuing Operations Increased 21% to
GAAP Diluted EPS from Continuing Operations Increased 12% to
Q3 FY16 | Q3 FY15 | |||
Enterprise Revenue ($ in millions)1 | $8,819 | $9,032 | ||
Domestic segment | $8,090 | $7,992 | ||
International segment1 | $729 | $1,040 | ||
Enterprise Comparable Sales % Change: | ||||
Excluding the estimated benefit of installment billing2,3 | 0.5% | 2.2%4 | ||
Estimated benefit of installment billing3 | 0.3% | 0.7% | ||
Comparable sales % change2 | 0.8% | 2.9%4 | ||
Domestic Comparable Sales % Change: | ||||
Excluding the estimated benefit of installment billing2,3 | 0.5% | 2.4% | ||
Estimated benefit of installment billing3 | 0.3% | 0.8% | ||
Comparable sales % change2 | 0.8% | 3.2% | ||
Comparable online sales % change2 | 18.3% | 21.6% | ||
Q3 FY16 | Q3 FY15 | |||
Operating Income: | ||||
GAAPoperating income as a % of revenue | 2.6% | 2.3% | ||
Non-GAAPoperating income as a % of revenue5 | 2.8% | 2.4% | ||
Diluted Earnings per Share (EPS): | ||||
GAAP diluted EPS from continuing operations | $0.37 | $0.33 | ||
Impact of non-restructuring SG&A charges6 | $0.02 | $0.02 | ||
Impact of restructuring charges6 | $0.02 | $0.01 | ||
Impact of gain on investments, net | $0.00 | ($0.01) | ||
Income tax impact of Non-GAAP adjustments7 | $0.00 | ($0.01) | ||
Non-GAAP diluted EPS from continuing operations5 | $0.41 | $0.34 | ||
Joly continued, “In the Domestic business, our comparable sales, excluding the impact of installment billing, increased 0.5%. Online comparable sales increased 18% as our new mobile site and overall enhanced dotcom capabilities continued to drive higher conversion rates and increased traffic. These results were achieved in a context where industry sales in the NPD-tracked categories were down 4.3%.8”
Joly continued, “We are excited by what we are offering and delivering to our customers during this Holiday shopping season. First, we have created an expansive assortment of amazing technology products, especially in 4K TVs, health & wearables, connected or smart devices, drones, and many other giftable items. These products will be offered at very attractive prices to our customers throughout the Holiday shopping season.
“Second, we have built some terrific new capabilities since last year, including (1) a range of new digital capabilities, especially Blue Assist which provides the ability to call on Blue Shirt advice from our new mobile app; (2) an additional 1,100 stores-within-a-store which come on top of the over 3,700 we had a year ago; (3) the increasing expertise and proficiency of our sales people; (4) our enhanced multi-channel delivery capabilities, illustrated by faster shipping enabled by ship-from-store and a better in-store pickup experience; (5) the optimization of our supply chain to enable earlier store replenishments and higher order fill rates; and (6) a range of services offered to our customers, including free Geek Squad setup on top tech gifts and the ability for customers to give a gift of a Geek Squad agent’s time. Also, from a marketing perspective, we believe we are entering the quarter with a high-performing media campaign, a significantly greater social media presence and more refined personalization capabilities through our investments in our Athena database.”
Joly continued, “We of course recognize that we are up against a strong performance in the fourth quarter of last year and that the NPD industry declines that we saw in the third quarter, both sequentially and year-over-year, may continue throughout this year’s fourth quarter. We have also made incremental investments in services pricing and SG&A that are putting pressure on our fourth quarter earnings outlook.”
Joly concluded, “Irrespective, one thing we are certain about is our team’s ability to execute exceptionally well throughout the Holiday. We are going into the Holiday clear on our priorities and our plan, and with a better trained, engaged and most importantly, highly determined team. I am grateful for what they have accomplished so far this year and extremely proud of their capabilities and passion to win.”
“Based on the above expectations, our Enterprise level outlook is as
follows: (1) a negative low-single digit revenue growth rate; and (2) a
non-GAAP operating income rate decline of 25 to 45 basis points. From a
tax rate perspective, we expect the non-GAAP effective income tax rate
from continuing operations to be in the range of 36% to 37%, versus
34.2% last year, which is expected to result in a negative
Domestic Segment Third Quarter Results
Domestic Revenue
Domestic revenue of
From a merchandising perspective, comparable sales growth in computing, major appliances, health & wearables and large-screen televisions was partially offset by declines in tablets, mobile phones and digital imaging. The company also saw continued revenue declines in services, which was almost entirely due to the reduction of frequency and severity of claims on extended warranties, which has reduced repair revenue, and to a much lesser extent, declining attach rates of traditional warranty plans.
Domestic online revenue of
Domestic Gross Profit Rate
Domestic gross profit rate was
24.1% versus 23.0% last year. This 110-basis point increase was
primarily due to (1) the positive impact of changes in mobile warranty
plans which resulted in lower costs due to lower claim frequency and
severity; (2) an increased mix of higher-margin large screen
televisions; (3) a positive mix benefit from significantly decreased
revenue in the lower-margin tablet category; (4) a greater portion of
vendor funding being recorded as an offset to cost of goods sold rather
than SG&A and (5) a 20-basis point impact from a periodic profit sharing
benefit based on the performance of the company’s externally managed
extended service plan portfolio. These increases were partially offset
by the lapping of a prior year benefit from the receipt of restitution
on a legal claim related to an inventory dispute of 15 basis points.
Domestic Selling, General and Administrative Expenses (“SG&A”)
Domestic
SG&A expenses were
International Segment Third Quarter Results
International Revenue
International revenue of
International Gross Profit Rate
International gross profit
rate was 22.5% versus 22.6% last year. On a non-GAAP basis, gross profit
rate was 22.4% versus 22.6% last year. This 20-basis point decrease was
primarily due to a higher mix of sales from our
International SG&A
International SG&A expenses were
Income Taxes
In Q3 FY16, the
non-GAAP continuing operations effective income tax rate decreased 100
basis points to 37.1% versus 38.1% last year driven by discrete income
tax benefits in the quarter.
For Q4 FY16, the non-GAAP continuing operations effective income tax
rate is expected to be in the range of 36% to 37%, versus 34.2% last
year, which is expected to result in a negative
Dividends and Share Repurchases
On
On
Conference Call
(1) On
(2) Best Buy’s comparable sales is comprised of revenue at stores, websites and call centers operating for at least 14 full months, as well as revenue related to certain other comparable sales channels. Relocated stores, as well as remodeled, expanded and downsized stores closed more than 14 days, are excluded from the comparable sales calculation until at least 14 full months after reopening. Acquisitions are included in the comparable sales calculation beginning with the first full quarter following the first anniversary of the date of the acquisition. The calculation of comparable sales excludes the impact of revenue from discontinued operations.
The Canadian brand consolidation, which includes the permanent closure
of 66 Future Shop stores, the conversion of 65 Future Shop stores to
(3) In April of 2014,
(4) Enterprise comparable sales for Q3 FY15 include revenue from continuing operations in the International segment. Excluding the International segment, Enterprise comparable sales for Q3 FY15, excluding the impact of installment billing, would have been 2.4%, or equal to Domestic comparable sales excluding the impact of installment billing, for the same period.
(5) The company defines non-GAAP gross profit, non-GAAP SG&A, non-GAAP operating income, non-GAAP net earnings and non-GAAP diluted earnings per share for the periods presented as its gross profit, SG&A, operating income, net earnings and diluted earnings per share for those periods calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”), adjusted to exclude cathode ray tube (CRT) Litigation settlements, restructuring charges, non-restructuring asset impairments, other Canadian brand consolidation charges, gains on investments and the acceleration of a non-cash tax benefit as a result of reorganizing certain European legal entities.
These non-GAAP financial measures provide investors with an
understanding of the company’s financial performance adjusted to exclude
the effect of the items described above. These non-GAAP financial
measures assist investors in making a ready comparison of the company’s
financial results for its fiscal quarter ended
(6) The company has consolidated certain line items from the Reconciliation of Non-GAAP Financial Measures schedule included at the back of this earnings release. The impact of non-restructuring SG&A charges line includes (1) non-restructuring asset impairments and (2) other Canadian brand consolidation charges. The impact of restructuring charges line includes (1) restructuring charges and (2) restructuring charges – COGS.
(7) Income tax impact of Non-GAAP adjustments is the summation of the calculated income tax charge related to each non-GAAP non-income tax adjustment. Income tax charge is calculated using the estimated annual effective tax rate in effect during the period of the related non-GAAP adjustment.
(8) According to The NPD Group’s Weekly Tracking Service as published
Forward-Looking and Cautionary Statements:
This earnings
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, 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,” “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: macro-economic
conditions (including fluctuations in housing prices, oil markets and
jobless rates), conditions in the industries and categories in which we
operate, changes in consumer preferences, changes in consumer
confidence, consumer spending and debt levels, online sales levels and
trends, average ticket size, the mix of products and services offered
for sale in our physical stores and online, credit market changes and
constraints, product availability, competitive initiatives of
competitors (including pricing actions and promotional activities of
competitors), strategic and business decisions of our vendors (including
actions that could impact promotional support, product margin and/or
supply), the success of new product launches, the impact of pricing
investments and promotional activity, weather, natural or man-made
disasters, attacks on our data systems, the company’s ability to prevent
or react to a disaster recovery situation, changes in law or
regulations, changes in tax rates, changes in taxable income in each
jurisdiction, tax audit developments and resolution of other discrete
tax matters, foreign currency fluctuation, availability of suitable real
estate locations, the company’s ability to manage its property
portfolio, the impact of labor markets, the company’s ability to retain
qualified employees, failure to achieve anticipated expense and cost
reductions from operational and restructuring changes, disruptions in
our supply chain, the costs of procuring goods the company sells,
failure to achieve anticipated revenue and profitability increases from
operational and restructuring changes (including investments in our
multi-channel capabilities and brand consolidations), inability to
secure or maintain favorable vendor terms, failure to accurately predict
the duration over which we will incur costs, acquisitions and
development of new businesses, divestitures of existing businesses,
failure to complete or achieve anticipated benefits of announced
transactions, integration challenges relating to new ventures, and our
ability to protect information relating to our employees and customers.
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
BEST BUY CO., INC. | ||||||||||||||||
CONSOLIDATED STATEMENTS OF EARNINGS | ||||||||||||||||
($ in millions, except per share amounts) | ||||||||||||||||
(Unaudited and subject to reclassification) | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
October 31, | November 1, | October 31, | November 1, | |||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue | $ | 8,819 | $ | 9,032 | $ | 25,905 | $ | 26,130 | ||||||||
Cost of goods sold | 6,708 | 6,956 | 19,661 | 20,109 | ||||||||||||
Restructuring charges - cost of goods sold | (1 | ) | - | 4 | - | |||||||||||
Gross profit | 2,112 | 2,076 | 6,240 | 6,021 | ||||||||||||
Gross profit % | 23.9 | % | 23.0 | % | 24.1 | % | 23.0 | % | ||||||||
Selling, general and administrative expenses | 1,874 | 1,866 | 5,451 | 5,369 | ||||||||||||
SG&A % | 21.2 | % | 20.7 | % | 21.0 | % | 20.5 | % | ||||||||
Restructuring charges | 8 | 5 | 185 | 12 | ||||||||||||
Operating income | 230 | 205 | 604 | 640 | ||||||||||||
Operating income % | 2.6 | % | 2.3 | % | 2.3 | % | 2.4 | % | ||||||||
Other income (expense): | ||||||||||||||||
Gain on sale of investments | - | 5 | 2 | 7 | ||||||||||||
Investment income and other | 3 | - | 14 | 10 | ||||||||||||
Interest expense | (20 | ) | (22 | ) | (60 | ) | (68 | ) | ||||||||
Earnings from continuing operations before income tax (benefit) expense | 213 | 188 | 560 | 589 | ||||||||||||
Income tax (benefit) expense | 84 | 72 | 230 | (133 | ) | |||||||||||
Effective tax rate | 39.4 | % | 38.2 | % | 41.1 | % | (22.7 | %) | ||||||||
Net earnings from continuing operations | 129 | 116 | 330 | 722 | ||||||||||||
Gain (loss) from discontinued operations, net of tax | (4 | ) | (9 | ) | 88 | (7 | ) | |||||||||
Net earnings including noncontrolling interest | 125 | 107 | 418 | 715 | ||||||||||||
Net earnings from discontinued operations attributable to noncontrolling interests | - | - | - | (1 | ) | |||||||||||
Net earnings attributable to Best Buy Co., Inc. shareholders | $ | 125 | $ | 107 | $ | 418 | $ | 714 | ||||||||
Amounts attributable to Best Buy Co., Inc. shareholders | ||||||||||||||||
Net earnings from continuing operations | $ | 129 | $ | 116 | $ | 330 | $ | 722 | ||||||||
Net earnings (loss) from discontinued operations | (4 | ) | (9 | ) | 88 | (8 | ) | |||||||||
Net earnings attributable to Best Buy Co., Inc. shareholders | $ | 125 | $ | 107 | $ | 418 | $ | 714 | ||||||||
Basic earnings per share attributable to Best Buy Co., Inc. shareholders | ||||||||||||||||
Continuing operations | $ | 0.37 | $ | 0.33 | $ | 0.95 | $ | 2.07 | ||||||||
Discontinued operations | (0.01 | ) | (0.03 | ) | 0.25 | (0.02 | ) | |||||||||
Basic earnings per share | $ | 0.36 | $ | 0.30 | $ | 1.20 | $ | 2.05 | ||||||||
Diluted earnings per share attributable to Best Buy Co., Inc. shareholders | ||||||||||||||||
Continuing operations | $ | 0.37 | $ | 0.33 | $ | 0.93 | $ | 2.04 | ||||||||
Discontinued operations | (0.01 | ) | (0.03 | ) | 0.25 | (0.02 | ) | |||||||||
Diluted earnings per share | $ | 0.36 | $ | 0.30 | $ | 1.18 | $ | 2.02 | ||||||||
Dividends declared per common share | $ | 0.23 | $ | 0.19 | $ | 1.20 | $ | 0.53 | ||||||||
Weighted average common shares outstanding (in millions) | ||||||||||||||||
Basic | 344.7 | 350.1 | 348.9 | 349.0 | ||||||||||||
Diluted | 349.0 | 354.0 | 353.6 | 352.5 | ||||||||||||
BEST BUY CO., INC. | |||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
($ in millions) | |||||||||
(Unaudited and subject to reclassification) | |||||||||
Excluding | |||||||||
Five Star | |||||||||
November 1, | |||||||||
October 31, 2015 | November 1, 2014 | 2014(1) | |||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 1,697 | $ | 1,929 | $ | 1,711 | |||
Short-term investments | 1,650 | 1,209 | 1,209 | ||||||
Receivables, net | 1,061 | 1,066 | 1,030 | ||||||
Merchandise inventories | 6,651 | 6,900 | 6,573 | ||||||
Other current assets | 676 | 959 | 764 | ||||||
Current assets held for sale | - | - | 776 | ||||||
Total current assets | 11,735 | 12,063 | 12,063 | ||||||
Property and equipment, net | 2,304 | 2,524 | 2,391 | ||||||
Goodwill | 425 | 425 | 425 | ||||||
Intangibles, net | 18 | 99 | 63 | ||||||
Other assets | 636 | 651 | 650 | ||||||
Noncurrent assets held for sale | 32 | - | 170 | ||||||
TOTAL ASSETS | $ | 15,150 | $ | 15,762 | $ | 15,762 | |||
LIABILITIES & EQUITY | |||||||||
Current liabilities | |||||||||
Accounts payable | $ | 6,184 | $ | 6,626 | $ | 6,079 | |||
Unredeemed gift card liabilities | 379 | 381 | 380 | ||||||
Deferred revenue | 330 | 449 | 378 | ||||||
Accrued compensation and related expenses | 306 | 305 | 294 | ||||||
Accrued liabilities | 789 | 788 | 737 | ||||||
Accrued income taxes | 23 | 33 | 33 | ||||||
Current portion of long-term debt | 386 | 44 | 44 | ||||||
Current liabilities held for sale | - | - | 681 | ||||||
Total current liabilities | 8,397 | 8,626 | 8,626 | ||||||
Long-term liabilities | 874 | 972 | 953 | ||||||
Long-term debt | 1,229 | 1,591 | 1,591 | ||||||
Long-term liabilities held for sale | - | - | 18 | ||||||
Equity | 4,650 | 4,573 | 4,574 | ||||||
TOTAL LIABILITIES & EQUITY | $ | 15,150 | $ | 15,762 | $ | 15,762 | |||
(1) Represents Condensed Consolidated Balance Sheet as of
BEST BUY CO., INC. | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
($ in millions) | ||||||||
(Unaudited and subject to reclassification) | ||||||||
Nine Months Ended | ||||||||
October 31, 2015 | November 1, 2014 | |||||||
OPERATING ACTIVITIES | ||||||||
Net earnings | $ | 418 | $ | 715 | ||||
Adjustments to reconcile net earnings to total cash provided by (used in) operating activities: | ||||||||
Depreciation | 494 | 484 | ||||||
Restructuring charges | 189 | 17 | ||||||
Gain on sale of business, net | (99 | ) | (1 | ) | ||||
Stock-based compensation | 80 | 63 | ||||||
Deferred income taxes | (43 | ) | (381 | ) | ||||
Other, net | 3 | 4 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables | 229 | 237 | ||||||
Merchandise inventories | (1,494 | ) | (1,541 | ) | ||||
Other assets | 20 | 14 | ||||||
Accounts payable | 1,152 | 1,526 | ||||||
Other liabilities | (271 | ) | (263 | ) | ||||
Income taxes | (215 | ) | (100 | ) | ||||
Total cash provided by operating activities | 463 | 774 | ||||||
INVESTING ACTIVITIES | ||||||||
Additions to property and equipment | (493 | ) | (425 | ) | ||||
Purchases of investments, net | (196 | ) | (983 | ) | ||||
Proceeds from sale of business, net of cash transferred upon sale | 102 | 38 | ||||||
Change in restricted assets | (45 | ) | 25 | |||||
Settlement of net investment hedges | 14 | - | ||||||
Other, net | - | 3 | ||||||
Total cash used in investing activities | (618 | ) | (1,342 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Repurchase of common stock | (385 | ) | - | |||||
Repayments of debt, net | (18 | ) | (19 | ) | ||||
Dividends paid | (421 | ) | (185 | ) | ||||
Issuance of common stock | 44 | 27 | ||||||
Other, net | 19 | 2 | ||||||
Total cash used in financing activities | (761 | ) | (175 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (13 | ) | (6 | ) | ||||
DECREASE IN CASH AND CASH EQUIVALENTS | (929 | ) | (749 | ) | ||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD EXCLUDING HELD FOR SALE | 2,432 | 2,678 | ||||||
CASH AND CASH EQUIVALENTS HELD FOR SALE AT BEGINNING OF PERIOD | 194 | - | ||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 1,697 | $ | 1,929 | ||||
BEST BUY CO., INC. | ||||||||
SEGMENT INFORMATION | ||||||||
($ in millions) | ||||||||
(Unaudited and subject to reclassification) | ||||||||
Domestic Segment Performance Summary | ||||||||
Three Months Ended | Nine Months Ended | |||||||
October 31, | November 1, | October 31, | November 1, | |||||
2015 | 2014 | 2015 | 2014 | |||||
Revenue | $8,090 | $7,992 | $23,858 | $23,358 | ||||
Gross profit | $1,948 | $1,841 | $5,780 | $5,382 | ||||
SG&A | $1,702 | $1,632 | $4,922 | $4,688 | ||||
Operating income | $244 | $204 | $857 | $688 | ||||
Key Metrics | ||||||||
Comparable sales % change1 | 0.8% | 3.2% | 1.7% | 0.0% | ||||
Comparable sales % change, excluding installment billing2 | 0.5% | 2.4% | 0.8% | (0.3%) | ||||
Comparable online sales % change1 | 18.3% | 21.6% | 13.3% | 24.3% | ||||
Gross profit as a % of revenue | 24.1% | 23.0% | 24.2% | 23.0% | ||||
SG&A as a % of revenue | 21.0% | 20.4% | 20.6% | 20.1% | ||||
Operating income as a % of revenue | 3.0% | 2.6% | 3.6% | 2.9% | ||||
Non-GAAP Results 3 | ||||||||
Gross profit | $1,948 | $1,841 | $5,692 | $5,382 | ||||
Gross profit as a % of revenue | 24.1% | 23.0% | 23.9% | 23.0% | ||||
SG&A | $1,693 | $1,626 | $4,878 | $4,662 | ||||
SG&A as a % of revenue | 20.9% | 20.3% | 20.4% | 20.0% | ||||
Operating income | $255 | $215 | $814 | $720 | ||||
Operating income as a % of revenue | 3.2% | 2.7% | 3.4% | 3.1% | ||||
International Segment Performance Summary | ||||||||
Three Months Ended | Nine Months Ended | |||||||
October 31, | November 1, | October 31, | November 1, | |||||
2015 | 2014 | 2015 | 2014 | |||||
Revenue | $729 | $1,040 | $2,047 | $2,772 | ||||
Gross profit | $164 | $235 | $460 | $639 | ||||
SG&A | $172 | $234 | $529 | $681 | ||||
Operating income (loss) | ($14) | $1 | ($253) | ($48) | ||||
Key Metrics | ||||||||
Comparable sales % change1 | N/A | 0.2% | N/A | (3.2%) | ||||
Gross profit as a % of revenue | 22.5% | 22.6% | 22.5% | 23.1% | ||||
SG&A as a % of revenue | 23.6% | 22.5% | 25.8% | 24.6% | ||||
Operating income (loss) as a % of revenue | (1.9%) | 0.1% | (12.4%) | (1.7%) | ||||
Non-GAAP Results 3 | ||||||||
Gross profit | $163 | $235 | $464 | $639 | ||||
Gross profit as a % of revenue | 22.4% | 22.6% | 22.7% | 23.1% | ||||
SG&A | $171 | $234 | $520 | $680 | ||||
SG&A as a % of revenue | 23.5% | 22.5% | 25.4% | 24.5% | ||||
Operating income (loss) | ($8) | $1 | ($56) | ($41) | ||||
Operating income (loss) as a % of revenue | (1.1%) | 0.1% | (2.7%) | (1.5%) | ||||
(1) Best Buy’s comparable sales is comprised of revenue at stores, websites and call centers operating for at least 14 full months, as well as revenue related to certain other comparable sales channels. Relocated stores, as well as remodeled, expanded and downsized stores closed more than 14 days, are excluded from the comparable sales calculation until at least 14 full months after reopening. Acquisitions are included in the comparable sales calculation beginning with the first full quarter following the first anniversary of the date of the acquisition. The calculation of comparable sales excludes the impact of revenue from discontinued operations. The Canadian brand consolidation, which includes the permanent closure of 66 Future Shop stores, the conversion of 65 Future Shop stores to Bust Buy stores and the elimination of the Future Shop website, is expected to have a material impact on a year-over-year basis on the Canadian retail stores and the website. As such, all store and website revenue has been removed from the comparable sales base and International no longer has a comparable metric until International revenue is comparable on a year-over-year basis.
(2) In April of 2014,
(3) Please see table titled “Reconciliation of Non-GAAP Financial Measures” at the back of this release.
BEST BUY CO., INC. | ||||||||
REVENUE CATEGORY SUMMARY | ||||||||
(Unaudited and subject to reclassification) | ||||||||
Excluding the estimated benefit of mobile phone installment billing1 | ||||||||
Revenue Mix Summary | Comparable Sales | |||||||
Three Months Ended | Three Months Ended | |||||||
Domestic Segment |
October 31, |
November 1, |
October 31, |
November 1, | ||||
Consumer Electronics | 30% | 29% | 3.0% | 3.1% | ||||
Computing and Mobile Phones | 48% | 49% | (1.5%) | 1.6% | ||||
Entertainment | 7% | 7% | (6.0%) | 16.6% | ||||
Appliances | 9% | 8% | 16.4% | 5.7% | ||||
Services2 | 5% | 6% | (11.1%) | (10.3%) | ||||
Other | 1% | 1% | n/a | n/a | ||||
Total | 100% | 100% | 0.5% | 2.4% | ||||
Including the estimated benefit of mobile phone installment billing1 | ||||||||
Revenue Mix Summary | Comparable Sales | |||||||
Three Months Ended | Three Months Ended | |||||||
Domestic Segment |
October 31, |
November 1, |
October 31, |
November 1, | ||||
Consumer Electronics | 30% | 29% | 3.0% | 3.1% | ||||
Computing and Mobile Phones | 49% | 49% | (0.9%) | 3.2% | ||||
Entertainment | 6% | 7% | (6.0%) | 16.6% | ||||
Appliances | 9% | 8% | 16.4% | 5.7% | ||||
Services2 | 5% | 6% | (11.1%) | (10.3%) | ||||
Other | 1% | 1% | n/a | n/a | ||||
Total | 100% | 100% | 0.8% | 3.2% | ||||
Revenue Mix Summary | ||||||||
Three Months Ended | ||||||||
International Segment3 |
October 31, |
November 1, | ||||||
Consumer Electronics | 27% | 25% | ||||||
Computing and Mobile Phones | 55% | 54% | ||||||
Entertainment | 8% | 9% | ||||||
Appliances | 4% | 5% | ||||||
Services2 | 5% | 6% | ||||||
Other | 1% | 1% | ||||||
Total | 100% | 100% | ||||||
(1) In April of 2014,
(2) The 'Services' revenue category consists primarily of service contracts, extended warranties, computer related services, product repair and delivery and installation for home theater, mobile audio and appliances.
(3) The Canadian brand consolidation is expected to have a material impact on all of the Canadian retail stores and the website on a year-over-year basis. As such, all Canadian revenue has been removed from the comparable sales base and International no longer has a comparable metric until International revenue is comparable on a year-over-year basis.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
CONTINUING OPERATIONS
($ in millions,
except per share amounts)
(Unaudited and subject to
reclassification)
The following information provides reconciliations of non-GAAP financial measures from continuing operations to the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The company has provided non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in the accompanying news release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the news release. The non-GAAP financial measures in the accompanying news release may differ from similar measures used by other companies.
The following tables reconcile gross profit, SG&A, operating income, net earnings and diluted earnings per share for the periods presented for continuing operations (GAAP financial measures) to non-GAAP gross profit, non-GAAP SG&A, non-GAAP operating income, non-GAAP net earnings and non-GAAP diluted earnings per share for continuing operations (non-GAAP financial measures) for the periods presented.
Three Months Ended | Three Months Ended | |||||||
October 31, 2015 | November 1, 2014 | |||||||
$ |
% of | $ |
% of | |||||
Domestic - Continuing Operations | ||||||||
SG&A | $1,702 | 21.0% | $1,632 | 20.4% | ||||
Non-restructuring asset impairments - SG&A | (9) | (0.1%) | (6) | (0.1%) | ||||
Non-GAAP SG&A | $1,693 | 20.9% | $1,626 | 20.3% | ||||
Operating income | $244 | 3.0% | $204 | 2.6% | ||||
Non-restructuring asset impairments - SG&A | 9 | 0.1% | 6 | 0.1% | ||||
Restructuring charges | 2 | 0.0% | 5 | 0.1% | ||||
Non-GAAP operating income | $255 | 3.2% | $215 | 2.7% | ||||
International - Continuing Operations | ||||||||
Gross profit | $164 | 22.5% | $235 | 22.6% | ||||
Restructuring charges - COGS | (1) | (0.1%) | 0 | 0.0% | ||||
Non-GAAP gross profit | $163 | 22.4% | $235 | 22.6% | ||||
SG&A | $172 | 23.6% | $234 | 22.5% | ||||
Other Canada brand consolidation charges - SG&A2 | (1) | (0.1%) | 0 | 0.0% | ||||
Non-GAAP SG&A | $171 | 23.5% | $234 | 22.5% | ||||
Operating income (loss) | ($14) | (1.9%) | $1 | 0.1% | ||||
Restructuring charges - COGS | (1) | (0.1%) | 0 | 0.0% | ||||
Other Canada brand consolidation charges - SG&A2 | 1 | 0.1% | 0 | 0.0% | ||||
Restructuring charges | 6 | 0.8% | 0 | 0.0% | ||||
Non-GAAP operating income (loss) | ($8) | (1.1%) | $1 | 0.1% | ||||
Consolidated - Continuing Operations | ||||||||
Gross profit | $2,112 | 23.9% | $2,076 | 23.0% | ||||
Restructuring charges - COGS | (1) | (0.0%) | 0 | 0.0% | ||||
Non-GAAP gross profit | $2,111 | 23.9% | $2,076 | 23.0% | ||||
SG&A | $1,874 | 21.2% | $1,866 | 20.7% | ||||
Other Canada brand consolidation charges - SG&A2 | (1) | (0.0%) | 0 | 0.0% | ||||
Non-restructuring asset impairments - SG&A | (9) | (0.1%) | (6) | (0.1%) | ||||
Non-GAAP SG&A | $1,864 | 21.1% | $1,860 | 20.6% | ||||
Operating income | $230 | 2.6% | $205 | 2.3% | ||||
Restructuring charges - COGS | (1) | (0.0%) | 0 | 0.0% | ||||
Other Canada brand consolidation charges - SG&A2 | 1 | 0.0% | 0 | 0.0% | ||||
Non-restructuring asset impairments - SG&A | 9 | 0.1% | 6 | 0.1% | ||||
Restructuring charges | 8 | 0.1% | 5 | 0.1% | ||||
Non-GAAP operating income | $247 | 2.8% | $216 | 2.4% | ||||
Net earnings | $129 | $116 | ||||||
Restructuring charges - COGS | (1) | 0 | ||||||
Other Canada brand consolidation charges - SG&A2 | 1 | 0 | ||||||
Non-restructuring asset impairments - SG&A | 9 | 6 | ||||||
Restructuring charges | 8 | 5 | ||||||
Gain on investments, net | 0 | (5) | ||||||
Income tax impact of Non-GAAP adjustments4 | (2) | (1) | ||||||
Non-GAAP net earnings | $144 | $121 | ||||||
Diluted EPS | $0.37 | $0.33 | ||||||
Per share impact of restructuring charges - COGS | 0.00 | 0.00 | ||||||
Per share impact of other Canada brand consolidation charges - SG&A2 | 0.00 | 0.00 | ||||||
Per share impact of non-restructuring asset impairments - SG&A | 0.02 | 0.02 | ||||||
Per share impact of restructuring charges | 0.02 | 0.01 | ||||||
Per share impact of gain on investments, net | 0.00 | (0.01) | ||||||
Per share income tax impact of Non-GAAP adjustments4 | 0.00 | (0.01) | ||||||
Non-GAAP diluted EPS | $0.41 | $0.34 | ||||||
Nine Months Ended | Nine Months Ended | |||||||
October 31, 2015 | November 1, 2014 | |||||||
$ |
% of | $ |
% of | |||||
Domestic - Continuing Operations | ||||||||
Gross profit | $5,780 | 24.2% | $5,382 | 23.0% | ||||
CRT settlements1 | (88) | (0.4%) | 0 | 0.0% | ||||
Non-GAAP gross profit | $5,692 | 23.9% | $5,382 | 23.0% | ||||
SG&A | $4,922 | 20.6% | $4,688 | 20.1% | ||||
CRT settlement legal fees and costs1 | (13) | (0.1%) | 0 | 0.0% | ||||
Non-restructuring asset impairments - SG&A | (31) | (0.1%) | (26) | (0.1%) | ||||
Non-GAAP SG&A | $4,878 | 20.4% | $4,662 | 20.0% | ||||
Operating income | $857 | 3.6% | $688 | 2.9% | ||||
Net CRT settlements1 | (75) | (0.3%) | 0 | 0.0% | ||||
Non-restructuring asset impairments - SG&A | 31 | 0.1% | 26 | 0.1% | ||||
Restructuring charges | 1 | 0.0% | 6 | 0.0% | ||||
Non-GAAP operating income | $814 | 3.4% | $720 | 3.1% | ||||
International - Continuing Operations | ||||||||
Gross profit | $460 | 22.5% | $639 | 23.1% | ||||
Restructuring charges - COGS | 4 | 0.2% | 0 | 0.0% | ||||
Non-GAAP gross profit | $464 | 22.7% | $639 | 23.1% | ||||
SG&A | $529 | 25.8% | $681 | 24.6% | ||||
Other Canada brand consolidation charges - SG&A2 | (6) | (0.3%) | 0 | 0.0% | ||||
Non-restructuring asset impairments - SG&A | (3) | (0.1%) | (1) | (0.0%) | ||||
Non-GAAP SG&A | $520 | 25.4% | $680 | 24.5% | ||||
Operating loss | ($253) | (12.4%) | ($48) | (1.7%) | ||||
Restructuring charges - COGS | 4 | 0.2% | 0 | 0.0% | ||||
Other Canada brand consolidation charges - SG&A2 | 6 | 0.3% | 0 | 0.0% | ||||
Non-restructuring asset impairments - SG&A | 3 | 0.1% | 1 | 0.0% | ||||
Restructuring charges | 184 | 9.0% | 6 | 0.2% | ||||
Non-GAAP operating loss | ($56) | (2.7%) | ($41) | (1.5%) | ||||
Consolidated - Continuing Operations | ||||||||
Gross profit | $6,240 | 24.1% | $6,021 | 23.0% | ||||
CRT settlements1 | (88) | (0.3%) | 0 | 0.0% | ||||
Restructuring charges - COGS | 4 | 0.0% | 0 | 0.0% | ||||
Non-GAAP gross profit | $6,156 | 23.8% | $6,021 | 23.0% | ||||
SG&A | $5,451 | 21.0% | $5,369 | 20.5% | ||||
CRT settlement legal fees and costs1 | (13) | (0.1%) | 0 | 0.0% | ||||
Other Canada brand consolidation charges - SG&A2 | (6) | (0.0%) | 0 | 0.0% | ||||
Non-restructuring asset impairments - SG&A | (34) | (0.1%) | (27) | (0.1%) | ||||
Non-GAAP SG&A | $5,398 | 20.8% | $5,342 | 20.4% | ||||
Operating income | $604 | 2.3% | $640 | 2.4% | ||||
Net CRT settlements1 | (75) | (0.3%) | 0 | 0.0% | ||||
Restructuring charges - COGS | 4 | 0.0% | 0 | 0.0% | ||||
Other Canada brand consolidation charges - SG&A2 | 6 | 0.0% | 0 | 0.0% | ||||
Non-restructuring asset impairments - SG&A | 34 | 0.1% | 27 | 0.1% | ||||
Restructuring charges | 185 | 0.7% | 12 | 0.0% | ||||
Non-GAAP operating income | $758 | 2.9% | $679 | 2.6% | ||||
Net earnings | $330 | $722 | ||||||
Impact of net CRT settlements1 | (75) | 0 | ||||||
Impact of restructuring charges - COGS | 4 | 0 | ||||||
Impact of other Canada brand consolidation charges - SG&A2 | 6 | 0 | ||||||
Impact of non-restructuring asset impairments - SG&A | 34 | 27 | ||||||
Impact of restructuring charges | 185 | 12 | ||||||
Impact of gain on investments, net | (2) | (7) | ||||||
Income tax impact of Europe legal entity reorganization3 | 0 | (353) | ||||||
Income tax impact of Non-GAAP adjustments4 | (33) | (9) | ||||||
Non-GAAP net earnings | $449 | $392 | ||||||
Diluted EPS | $0.93 | $2.04 | ||||||
Per share impact of net CRT settlements1 | (0.21) | 0.00 | ||||||
Per share impact of restructuring charges - COGS | 0.01 | 0.00 | ||||||
Per share impact of other Canada brand consolidation charges - SG&A2 | 0.02 | 0.00 | ||||||
Per share impact of non-restructuring asset impairments - SG&A | 0.10 | 0.08 | ||||||
Per share impact of restructuring charges | 0.52 | 0.03 | ||||||
Per share impact of gain on investments, net | (0.01) | (0.02) | ||||||
Per share impact of income tax effect of Europe legal entity reorganization3 | 0.00 | (1.00) | ||||||
Per share income tax impact of Non-GAAP adjustments4 | (0.09) | (0.02) | ||||||
Non-GAAP diluted EPS | $1.27 | $1.11 | ||||||
(1) On
(2)
Represents charges related to the Canadian brand consolidation,
primarily due to retention bonuses and other store-related costs, that
did not qualify as restructuring charges.
(3) Represents the
acceleration of a non-cash tax benefit of
(4) Income tax impact of Non-GAAP adjustments
is the summation of the calculated income tax charge related to each
non-GAAP non-income tax adjustment. Income tax charge is calculated
using the estimated annual effective tax rate in effect during the
period of the related non-GAAP adjustment.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
($ in millions)
(Unaudited and subject to
reclassification)
The following information provides a reconciliation of a non-GAAP financial measure to the most comparable financial measure calculated and presented in accordance with GAAP. The company has provided the non-GAAP financial measure, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measure that is calculated and presented in accordance with GAAP. Such non-GAAP financial measure should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measure. The non-GAAP financial measure in the accompanying news release may differ from similar measures used by other companies.
The following table includes the calculation of Non-GAAP ROIC for total operations, which includes both continuing and discontinued operations (non-GAAP financial measures), along with a reconciliation to the calculation of return on total assets ('ROA') (GAAP financial measure) for the periods presented.
Calculation of Return on Invested Capital1 | ||||||
October 31, | November 1, | |||||
20152 | 20142 | |||||
Net Operating Profit After Taxes (NOPAT) | ||||||
Operating income - continuing operations | $ | 1,414 | $ | 1,092 | ||
Operating income (loss) - discontinued operations | 77 | (19) | ||||
Total operating income | 1,491 | 1,073 | ||||
Add: Operating lease interest3 | 411 | 465 | ||||
Add: Investment income | 21 | 26 | ||||
Less: Net (earnings) loss attributable to noncontrolling interest (NCI) | (1) | (2) | ||||
Less: Income taxes4 | (767) | (659) | ||||
NOPAT | $ | 1,155 | $ | 903 | ||
Add: Restructuring charges and impairments5 | 176 | 225 | ||||
Non-GAAP NOPAT | $ | 1,331 | $ | 1,128 | ||
Average Invested Capital | ||||||
Total assets | $ | 14,423 | $ | 14,509 | ||
Less: Excess cash6 | (3,259) | (2,628) | ||||
Add: Capitalized operating lease obligations7 | 6,581 | 7,434 | ||||
Total liabilities | (9,638) | (10,130) | ||||
Exclude: Debt8 | 1,613 | 1,644 | ||||
Less: Noncontrolling interests | (1) | (4) | ||||
Average invested capital | $ | 9,719 | $ | 10,825 | ||
Non-GAAP return on invested capital (ROIC) | 13.7% | 10.4% | ||||
Calculation of Return on Assets1 | ||||||
October 31, | November 1, | |||||
2015(2) | 2014(2) | |||||
Net earnings including noncontrolling interests | $ | 938 | $ | 1,009 | ||
Total assets | 14,423 | 14,509 | ||||
Return on assets (ROA) | 6.5% | 7.0% | ||||
(1) The calculations of Return on
(2) Income statement accounts represent the activity
for the 12 months ended as of each of the balance sheet dates. Balance
sheet accounts represent the average account balances for the 4 quarters
ended as of each of the balance sheet dates.
(3) Operating lease
interest represents the add-back to operating income driven by the
capitalization of our lease obligations using the multiple of eight
times annual rent expense and represents 50 percent of our annual rental
expense, which we consider to be appropriate for our lease portfolio.
(4)
Income taxes are calculated using a blended statutory rate at the
enterprise level based on statutory rates from the countries we do
business in.
(5) Includes all restructuring charges in costs of
goods sold and operating expenses, tradename impairments and
non-restructuring impairments.
(6) Cash and cash equivalents and
short-term investments are capped at the greater of 1% of revenue or
actual amounts on hand. The cash and cash equivalents and short-term
investments in excess of the cap are subtracted from our calculation of
average invested capital to show their exclusion from total assets.
(7)
The multiple of eight times annual rental expense in the calculation of
our capitalized operating lease obligations is the multiple used for the
retail sector by one of the nationally recognized credit rating agencies
that rates our creditworthiness, and we consider it to be an appropriate
multiple for our lease portfolio.
(8) Debt includes short-term
debt, current portion of long-term debt and long-term debt and is added
back to our calculation of average invested capital to show its
exclusion from total liabilities.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151119005336/en/
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