Best Buy (BBY) Tops Q1 EPS by 20c, Sales Beat

Best Buy (NYSE: BBY) reported Q1 EPS of $0.60, $0.20 better than the analyst estimate of $0.40. Revenue for the quarter came in at $8.53 billion versus the consensus estimate of $8.27 billion. Enterprise Comparable Sales Increased 1.6%.

GUIDANCE:

Best Buy sees Q2 2018 EPS of $0.57-$0.62, versus the consensus of $0.59.

“We are pleased today to report strong top and bottom line results for the first quarter of fiscal 2018,” said Hubert Joly, Best Buy chairman and CEO. “Our Q1 performance reflects the strength of our customer value proposition and continued momentum in the execution of our strategy. I want to thank all our associates across the company for their hard work in delivering these results.”

Joly continued, “We grew our Enterprise comparable sales by 1.6% during the quarter, driven by growth in both the Domestic and International segments. We also continued to drive significant growth in the online channel – with Domestic online comparable sales increasing 22.5%. On the profitability side, at the Enterprise level, we continued to optimize merchandise margins and exercise good expense management.”

Joly continued, “Compared to our expectations going into the quarter, our revenue was higher due to strong performance in gaming, a better-than-expected result in mobile, and the improvement of overall sales trends due to the arrival of delayed federal tax refund checks.”

Joly concluded, “We are energized about our opportunities and the strategy we are pursuing. We believe we are uniquely positioned to help our customers in a meaningful way with our combination of multi-channel assets – including our online, store and in-home capabilities, and I love how our teams are mobilized to deliver on our mission and Build the New Blue.”

Best Buy CFO Corie Barry commented, “Our second quarter guidance reflects the continuation of much of the positive category momentum we saw in the first quarter, as well as the increased level of growth investments included in our initial annual guidance. For the second quarter, we expect Enterprise comparable sales growth in the range of 1.5% to 2.5% and non-GAAP diluted EPS in the range of $0.57 to $0.62.3”

Barry continued, “For the full year, which as a reminder has an extra week, we are updating our topline guidance to reflect the better-than-expected first quarter results and our second quarter guidance. We are now expecting revenue growth of approximately 2.5% versus our original guidance of approximately 1.5%. Before I discuss our non-GAAP operating income growth guidance, I would like to note that due to a change in the non-GAAP treatment of non-restructuring property and equipment impairments, we have recast last year’s FY17 non-GAAP results.1 Therefore, our updated full-year non-GAAP operating income growth guidance is based on the recast FY17 non-GAAP operating income, which is $26 million, or 1.5%, lower than originally reported. In that context, we are expecting full year non-GAAP operating income growth of 3.5% to 8.5% versus our original guidance of 1% to 3% growth.3 We recognize it is early in the year and that historically the first quarter represents approximately 15% of our annual operating income. As such, this outlook range allows for a level of flexibility as we strategically balance our pace of investments, returns from new initiatives, ongoing cost reductions and efficiencies, and ongoing pressures in the business including approximately $60 million of lower profit share revenue.”

FY18 Financial Guidance

Note: FY18 has 53 weeks compared to 52 weeks in FY17. The extra week occurs in Q4 FY18.

Best Buy is providing the following Q2 FY18 financial outlook:

• Enterprise revenue in the range of $8.6 billion to $8.7 billion
• Enterprise comparable sales change in the range of 1.5% to 2.5%
• Domestic comparable sales change in the range of 1.5% to 2.5%
• International comparable sales change in the range of flat to 3.0%
• Non-GAAP effective income tax rate of 36.5% to 37.0%3
• Diluted weighted average share count of approximately 310 million
• Non-GAAP diluted EPS of $0.57 to $0.623

Best Buy is updating its full year FY18 financial outlook to the following:

• Enterprise revenue growth of approximately 2.5%
• Enterprise non-GAAP operating income growth rate in the range of 3.5% to 8.5%, based on the recast FY17 non-GAAP operating income of $1.733 billion as detailed in the note below1,3
• Enterprise non-GAAP effective income tax rate of approximately 35.5%3
• On a 52-week basis, Enterprise revenue growth of approximately 1.0%
• On a 52-week basis, Enterprise non-GAAP operating income growth rate in the range of 1.5% to 5.5%, based on the recast FY17 non-GAAP operating income of $1.733 billion as detailed in the note below1,3

Note: The company’s full year non-GAAP operating income growth rate on both a 53-week and 52-week basis is based on a recast fiscal 2017 non-GAAP operating income of $1.733 billion, which is $26 million, or 1.5%, lower than originally reported. The recast was done for comparability purposes as the company is no longer excluding non-restructuring property and equipment impairment charges from its non-GAAP results beginning in Q1 FY18. For additional details on the recast financials, please refer to the attached supporting schedule titled “FY16 and FY17 Recast Non-GAAP Segment Information”.1

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

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