Best Buy (BBY) Tops Q1 EPS by 8c

Best Buy (NYSE: BBY) reported Q1 EPS of $0.37, $0.08 better than the analyst estimate of $0.29. Revenue for the quarter came in at $8.56 billion versus the consensus estimate of $8.46 billion.

Comps, excluding installment billing, fell 0.7 percent.

Hubert Joly, Best Buy president and CEO, commented, “Enterprise revenue of $8.6 billion, in addition to our non-GAAP operating income rate and non-GAAP diluted EPS, all exceeded our expectations during the quarter due to a stronger-than-expected performance in the Domestic business. Our non-GAAP operating income rate of 2.6% was flat to last year, including approximately 35 basis points of increased costs to support our investments in future growth initiatives, and our non-GAAP diluted EPS of $0.37 was up 6%. In the Domestic business, against a backdrop where the NPD-reported consumer electronics categories, which represent approximately 65% of our revenue, were down 5.3%7, our comparable sales, excluding the impact of installment billing, declined only 0.7% as we continued to take advantage of strong product cycles in large screen televisions and iconic mobile phones and continued growth in the major appliance category.”

Joly continued, “Throughout the quarter, our strategy of delivering ‘Advice, Service and Convenience at Competitive Prices’ continued to resonate with our customers. While merchandising, marketing and operational execution were the tactical drivers of our better-than-expected first quarter financial results, strategically, we believe the cumulative impact of the progress we have made to improve our multi-channel customer experience is what has allowed us to consistently outperform the market. We have made real progress and it is showing up in our results. I therefore want to thank our teams across all functions for delivering this progress and these results. Let me be clear though, all of us know that we have significant opportunities and work ahead of us.”

Joly concluded, “While the Consumer Electronics industry is subject to product cycles, we are excited about the role that technology plays in people’s lives and the opportunities that this creates. We are also confident that we are executing against the right investment strategy that will allow us to capitalize on key technology waves and customer-experience opportunities to build sustainable long-term shareholder value.”

Sharon McCollam, Best Buy EVP, CAO and CFO, commented, “Our outlook for Q2 FY16 is based on the following assumptions: (1) in the Domestic business, a flat to positive low-single digit revenue growth rate; (2) higher year-over-year non-GAAP Domestic SG&A dollars due to increased investments in future growth initiatives and SG&A inflation; (3) in International, a revenue decline of 30% to 35% due to store closures and overall disruption from the Canadian brand consolidation in addition to the ongoing negative impact of foreign exchange rates; and (4) an International non-GAAP operating income rate in the range of negative 3.5% to negative 5.0%, reflecting the near-term impacts of the Canadian brand consolidation that we have already discussed.

“With these assumptions, our Enterprise outlook for Q2 FY16 includes (1) a flat to negative low-single digit revenue growth rate and (2) a year-over-year non-GAAP operating income rate decline in the range of negative 30 to 50 basis points, which is in-line with our previous outlook. This outlook, however, now assumes a strengthening in our Domestic business versus our previous outlook, offset by the near-term impacts of the Canadian brand consolidation. Additionally, we expect the non-GAAP continuing operations effective income tax rate to be in the range of 38 to 40%.”

For earnings history and earnings-related data on Best Buy (BBY) click here.

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