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Best Buy (BBY) Tops Q2 EPS by 15c

August 25, 2015 7:01 AM EDT

Best Buy (NYSE: BBY) reported Q2 EPS of $0.49, $0.15 better than the analyst estimate of $0.34. Revenue for the quarter came in at $8.53 billion versus the consensus estimate of $8.29 billion.

Comps rose 3.8 percent.

Hubert Joly, Best Buy chairman and CEO, commented, “We believe these better-than-expected second quarter results are affirmation that our strategy of offering advice, service and convenience at competitive prices is paying off. Enterprise revenue grew 0.8% to $8.5 billion driven by a 3.9% increase in the Domestic segment, partially offset by the impact of the Canadian brand consolidation and 120 basis points of pressure from foreign currency. Better year-over-year performance in the Domestic segment drove a 50-basis point increase in the Enterprise non-GAAP operating income rate to 3.4% and a 17% increase in non-GAAP diluted EPS to $0.49. We also returned $321 million in cash to shareholders through share repurchases in addition to $81 million in regular dividends.”

Joly continued, “In the Domestic business, our comparable sales increased 2.7%, excluding the impact of installment billing3, driven by continued strong performance in major appliances, large screen televisions and mobile phones. Online comparable sales increased 17.0% as our investments in new capabilities continued to drive increased traffic and higher conversion rates. We also saw industry revenue in the NPD-tracked categories, representing 65% of our revenue, improve from a decline of 5.3% in Q1 to a decline of 1.3%8 in Q2.”

Joly concluded, “As we look forward, while we are cognizant of the recent financial market turbulence, we believe the combination of an opportunity-rich environment and the strength of our competitive advantages leads us to have a positive outlook about our future prospects, starting with the important back-to-school third quarter. We would like to thank all of our associates for their hard work and contributions to our success. The opportunities we have before us today are possible because of the talent and engagement of our entire team – and I am extremely proud of their performance and ability to win.”

Sharon McCollam, Best Buy EVP, CAO and CFO, commented, “As Hubert said, our competitive advantages and strong execution provide us a positive outlook on our Domestic performance versus the industry, which bodes well for us as we enter the third quarter. It is difficult to know, though, if the recent volatility in the financial markets will affect overall consumer spending. To date, however, we have not seen a measurable impact versus our original expectations. As such, our outlook assumes there will be no material changes in consumer spending in the third quarter. With that said, our year-over-year non-GAAP outlook for Q3 FY16 is as follows. In the Domestic business we are expecting (1) flat to low-single digit revenue growth; and (2) an approximately flat operating income rate change driven by a higher gross profit rate offset by increased SG&A due to inflation and growth-related investments. In the International business, due to the ongoing impacts of the Canadian brand consolidation and foreign currency, we are expecting (1) an International revenue decline of approximately 30% and (2) an International non-GAAP operating income rate in the range of negative 2.5% to negative 3.5%.

“With these expectations, which assume continued strength in our Domestic business offset by the near-term impacts of Canada, at the Enterprise level we expect (1) a flat to negative low-single digit revenue growth rate and (2) an operating income rate growth of flat to negative 20 basis points. Additionally, we expect the non-GAAP continuing operations effective income tax rate to be in the range of 39% to 40%, versus 38.1% last year, which could result in a negative $0.01 year-over-year non-GAAP diluted EPS impact in Q3 FY16.”

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



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