Best Buy (BBY) Tops Q1 EPS by 9c; Comps Outpace Views
Best Buy (NYSE: BBY) reported Q1 EPS of $0.44, $0.09 better than the analyst estimate of $0.35. Revenue for the quarter came in at $8.44 billion versus the consensus estimate of $8.29 billion.
Comps fell 0.1%, versus a 1.6 percent drop expected.
Our teams delivered a strong first quarter, with better-than-expected revenue, improved profitability and progress against our fiscal 2017 initiatives,” said Best Buy Chairman and CEO Hubert Joly. “We are reaffirming our previously provided full year financial outlook which includes approximately flat revenue and non-GAAP operating income, with non-GAAP EPS growth driven by share repurchases. Although we are reporting better-than-expected results today, we are not raising our full year outlook as the first quarter represents less than 15% of full year earnings and at this stage we have no new material information as it relates to product launches throughout the year.”
Joly continued, “In our Domestic business, we are reporting essentially flat comparable sales versus guidance of a 1% to 2% decline driven by strong year-over-year sales growth in health & wearables, home theater and appliances offset by continued softness in mobile phones and tablets. Contributing to these better-than-expected results was the strong performance in our online channel, which grew 24% in the quarter.”
Joly concluded, “As we look forward, we remain focused on our FY17 priorities. These priorities are (1) to build on our strong industry position and multi-channel capabilities to drive the existing business; (2) to drive cost reductions and efficiencies; and (3) to advance key initiatives to drive future growth and differentiation. We are investing to make it easy for customers to learn about and enjoy the latest technology as they pursue their passions and take care of what is important to them in their lives. With our combination of digital, store and in-home assets, we feel we have a great opportunity to address key customer pain points, build stronger ongoing relationships with our customers and unleash growth opportunities.”
Sharon McCollam, Best Buy EVP, CAO and CFO, commented, “As Hubert said, we are reaffirming our previously provided full year financial outlook of approximately flat revenue and non-GAAP operating income, including lapping the significant periodic profit sharing benefits from our services plan portfolio that we earned in FY16. A key element to achieve this will be the delivery of our cost reduction and gross profit optimization initiatives. Based on current industry dynamics and how we see the various product cycles playing out, we are expecting slight declines in revenue in the first half followed by growth in the back half. As discussed in our last earnings release, we recognize this will be challenging without a strong mobile cycle and improvements in the NPD-reported categories overall.”
McCollam continued, “For Q2 FY17, our guidance is Enterprise revenue in the range of $8.35 billion to $8.45 billion and both Enterprise and Domestic comparable sales of approximately flat. We expect our Q2 non-GAAP diluted earnings per share to be in the range of $0.38 to $0.42, assuming a diluted weighted average share count of approximately 325 million and a non-GAAP effective income tax rate in the range of 36.0% to 36.5%.”
McCollam concluded, “In line with our original expectations, there are two factors impacting our year-over-year non-GAAP EPS guidance for the second quarter. First, we are expecting an approximate $0.03 net negative impact from the lapping of the periodic profit sharing benefit from our services plan portfolio that we received in the second quarter of last year. Second, we are expecting an approximate $0.06 negative impact from the carryover of last September’s services pricing investment. In addition, in digital imaging, we are now expecting an approximate $0.03 to $0.04 negative impact due to the April 2016 earthquake in Japan, which is impacting inventory availability in this high-margin category. Combined, these are putting $0.12 to $0.13 of pressure on Q2 FY17, which will be partially offset by an approximate $0.04 benefit from share repurchases.”
Q2 FY17 Financial Guidance
Best Buy is providing the following Q2 FY17 financial guidance:
- Enterprise revenue in the range of $8.35 to $8.45 billion, a decline of (2.1%) to (0.9%)
- International revenue decline of (5%) to (10%)
- Enterprise and Domestic comparable sales of approximately flat
- Non-GAAP effective income tax rate of approximately 36.0% to 36.5% versus 37.1% last year
- Diluted weighted average share count of 325 million versus 354 million last year, resulting in a positive $0.04 year-over-year non-GAAP EPS impact
- Non-GAAP diluted EPS of $0.38 to $0.42 versus $0.49 last year
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