Comparable Sales Declined 6.9%
GAAP Diluted EPS of $1.21
Non-GAAP Diluted EPS of $1.29
Best Buy Co., Inc. (NYSE: BBY) today announced results for the
13-week third quarter ended October 28, 2023 (“Q3 FY24”), as
compared to the 13-week third quarter ended October 29, 2022 (“Q3
FY23”).
Q3 FY24
Q3 FY23
Revenue ($ in millions)
Enterprise
$
9,756
$
10,587
Domestic segment
$
8,996
$
9,800
International segment
$
760
$
787
Enterprise comparable sales % change1
(6.9
)%
(10.4
)%
Domestic comparable sales % change1
(7.3
)%
(10.5
)%
Domestic comparable online sales %
change1
(9.3
)%
(11.6
)%
International comparable sales %
change1
(1.9
)%
(9.3
)%
Operating Income
GAAP operating income as a % of
revenue
3.6
%
3.4
%
Non-GAAP operating income as a % of
revenue
3.8
%
3.9
%
Diluted Earnings per Share
("EPS")
GAAP diluted EPS
$
1.21
$
1.22
Non-GAAP diluted EPS
$
1.29
$
1.38
For GAAP to non-GAAP reconciliations of the measures referred to
in the above table, please refer to the attached supporting
schedule.
“Today we are reporting better-than-expected profitability on
slightly softer-than-expected revenue for the third quarter,” said
Corie Barry, Best Buy CEO. “These results demonstrate our ongoing,
strong operational execution as we navigate through the near-term
sales pressure our industry has been experiencing for the past
several quarters.”
Barry continued, “In the more recent macro environment, consumer
demand has been even more uneven and difficult to predict. Based on
the sales trends in Q3 and so far in November, we believe it is
prudent to lower our annual revenue outlook. The midpoint of our
annual non-GAAP diluted EPS guidance is slightly higher than the
midpoint of our original guidance as we entered the year.”
“We are excited for the important holiday season and are
prepared for a customer who is very deal-focused with promotions
and deals for all budgets, new shopping experiences, an expanded
product assortment, and fast and free fulfillment,” continued
Barry. “I want to thank our associates for their resilience,
determination, and relentless focus on our customers. I continue to
be very proud of the way our teams are managing the business today
and preparing for our future.”
FY24 Financial Guidance
Best Buy CFO Matt Bilunas said, “For the fourth quarter, we
expect our comparable sales to decline in the range of 3.0% to
7.0%. On the profitability side, we expect our Q4 FY24 non-GAAP
operating income rate to be in a range of 4.7% to 5.0%, which
compares to a rate of 4.8% last year.”
Best Buy’s guidance for FY24, which includes 53 weeks, is the
following:
- Revenue of $43.1 billion to $43.7 billion, which compares to
prior guidance of $43.8 billion to $44.5 billion
- Comparable sales decline of 6.0% to 7.5%, which compares to
prior guidance of a decline of 4.5% to 6.0%
- Enterprise non-GAAP operating income rate2 of 4.0% to 4.1%,
which compares to prior guidance of 3.9% to 4.1%
- Non-GAAP effective income tax rate2 of approximately 24.0%,
which compares to prior guidance of approximately 24.5%
- Non-GAAP diluted EPS2 of $6.00 to $6.30, which compares to
prior guidance of $6.00 to $6.40
- Capital expenditures of approximately $825 million, which
compares to prior guidance of approximately $850 million
Note: Incorporated in the above guidance, the 53rd week is
expected to add approximately $700 million of revenue to Q4 FY24
and provide a benefit of approximately 10 basis points to the
company’s full year non-GAAP operating income rate.2
Domestic Segment Q3 FY24
Results
Domestic Revenue Domestic revenue of $9.00 billion
decreased 8.2% versus last year primarily driven by a comparable
sales decline of 7.3%.
From a merchandising perspective, the largest drivers of the
comparable sales decline on a weighted basis were appliances,
computing, home theater and mobile phones. These drivers were
partially offset by growth in gaming.
Domestic online revenue of $2.75 billion decreased 9.3% on a
comparable basis, and as a percentage of total Domestic revenue,
online revenue was 30.6% versus 31.0% last year.
Domestic Gross Profit Rate Domestic gross profit rate was
22.9% versus 21.9% last year. The higher gross profit rate was
primarily due to: (1) improved financial performance from the
company’s membership offerings, which included higher services
margin rates; (2) favorable product margin rates; and (3) lower
supply chain costs.
Domestic Selling, General and Administrative Expenses
(“SG&A”) Domestic GAAP SG&A was $1.73 billion, or 19.2%
of revenue, versus $1.79 billion, or 18.3% of revenue, last year.
On a non-GAAP basis, SG&A was $1.71 billion, or 19.0% of
revenue, versus $1.77 billion, or 18.1% of revenue, last year. Both
GAAP and non-GAAP SG&A decreased primarily due to reduced store
payroll and advertising expense, which was partially offset by
higher incentive compensation.
International Segment Q3 FY24
Results
International revenue of $760 million decreased 3.4% versus last
year. This decrease was primarily driven by a comparable sales
decline of 1.9% and the negative impact from foreign currency
exchange rates.
International operating income was $18 million, or 2.4% of
revenue, compared to $33 million, or 4.2% of revenue, last year.
International gross profit rate was 22.1% versus 23.4% last year.
The lower gross profit rate was primarily due to unfavorable
product margin rates. International GAAP SG&A was $151 million,
or 19.9% of revenue, versus $150 million, or 19.1% of revenue, last
year.
Share Repurchases and
Dividends
In Q3 FY24, the company returned a total of $313 million to
shareholders through dividends of $201 million and share
repurchases of $112 million. On a year-to-date basis, the company
has returned a total of $873 million to shareholders through
dividends of $603 million and share repurchases of $270
million.
Today, the company announced that its board of directors has
authorized the payment of a regular quarterly cash dividend of
$0.92 per common share. The quarterly dividend is payable on
January 2, 2024, to shareholders of record as of the close of
business on December 12, 2023.
Conference Call
Best Buy is scheduled to conduct an earnings conference call at
8:00 a.m. Eastern Time (7:00 a.m. Central Time) on November 21,
2023. A webcast of the call is expected to be available at
www.investors.bestbuy.com, both live and after the call.
Notes: (1) The method of calculating comparable sales
varies across the retail industry. As a result, our method of
calculating comparable sales may not be the same as other
retailers’ methods. For additional information on comparable sales,
please see our most recent Annual Report on Form 10-K, and our
subsequent Quarterly Reports on Form 10-Q, filed with the
Securities and Exchange Commission (“SEC”), and available at
www.investors.bestbuy.com.
(2) A reconciliation of the projected non-GAAP operating income
rate, non-GAAP effective income tax rate and non-GAAP diluted EPS,
which are forward-looking non-GAAP financial measures, to the most
directly comparable GAAP financial measures, is not provided
because the company is unable to provide such reconciliation
without unreasonable effort. The inability to provide a
reconciliation is due to the uncertainty and inherent difficulty
predicting the occurrence, the financial impact and the periods in
which the non-GAAP adjustments may be recognized. These GAAP
measures may include the impact of such items as restructuring
charges; price-fixing settlements; goodwill impairments; gains and
losses on sales of subsidiaries and certain investments; intangible
asset amortization; certain acquisition-related costs; and the tax
effect of all such items. Historically, the company has excluded
these items from non-GAAP financial measures. The company currently
expects to continue to exclude these items in future disclosures of
non-GAAP financial measures and may also exclude other items that
may arise (collectively, “non-GAAP adjustments”). The decisions and
events that typically lead to the recognition of non-GAAP
adjustments, such as a decision to exit part of the business or
reaching settlement of a legal dispute, are inherently
unpredictable as to if or when they may occur. For the same
reasons, the company is unable to address the probable significance
of the unavailable information, which could be material to future
results.
Forward-Looking and Cautionary Statements: This 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. You can identify these statements
by the fact that they use words such as "anticipate," “appear,”
“approximate,” "assume," "believe," “continue,” “could,”
"estimate," "expect," “foresee,” "guidance," "intend," “may,”
“might,” "outlook," "plan," “possible,” "project" “seek,” “should,”
“would,” and other words and terms of similar meaning or the
negatives thereof. Such statements reflect our current views and
estimates with respect to future market conditions, company
performance and financial results, operational investments,
business prospects, our operating model, new strategies and growth
initiatives, the competitive environment, consumer behavior and
other events. These statements involve a number of judgments and
are subject to certain risks and uncertainties, many of which are
outside the control of the Company, that could cause actual results
to differ materially from the potential results discussed in such
forward-looking statements. Readers should review Item 1A, Risk
Factors, of our most recent Annual Report on Form 10-K, and any
updated information in subsequent Quarterly Reports on Form 10-Q,
for a description of important factors that could cause our actual
results to differ materially from those contemplated by the
forward-looking statements made in this release. Among the factors
that could cause actual results and outcomes to differ materially
from those contained in such forward-looking statements are the
following: macroeconomic pressures in the markets in which we
operate (including but not limited to inflation rates, fluctuations
in foreign currency exchange rates, limitations on a government’s
ability to borrow and/or spend capital, fluctuations in housing
prices, energy markets, and jobless rates and effects related to
the conflicts in Eastern Europe and the Middle East or other
geopolitical events); catastrophic events, health crises and
pandemics; susceptibility of the products we sell to technological
advancements, product life cycle fluctuations and changes in
consumer preferences; competition (including from multi-channel
retailers, e-commerce business, technology service providers,
traditional store-based retailers, vendors and mobile network
carriers and in the provision of delivery speed and options); our
ability to attract and retain qualified employees; changes in
market compensation rates; our expansion into health and new
products, services and technologies; our focus on services as a
strategic priority; our reliance on key vendors and mobile network
carriers (including product availability); our ability to maintain
positive brand perception and recognition; our ability to
effectively manage strategic ventures, alliances or acquisitions;
our ability to effectively manage our real estate portfolio;
inability of vendors or service providers to perform components our
supply chain (impacting our stores or other aspects of our
operations) and other various functions of our business; risks
arising from and potentially unique to our exclusive brands
products; our reliance on our information technology systems,
internet and telecommunications access and capabilities; our
ability to prevent or effectively respond to a cyber-attack,
privacy or security breach; product safety and quality concerns;
changes to labor or employment laws or regulations; risks arising
from statutory, regulatory and legal developments (including
statutes and/or regulations related to tax or privacy); evolving
corporate governance and public disclosure regulations and
expectations (including, but not limited to, cybersecurity and
environmental, social and governance matters); risks arising from
our international activities (including those related to the
conflicts in Eastern Europe and the Middle East or fluctuations in
foreign currency exchange rates) and those of our vendors; failure
to effectively manage our costs; our dependence on cash flows and
net earnings generated during the fourth fiscal quarter; pricing
investments and promotional activity; economic or regulatory
developments that might affect our ability to provide attractive
promotional financing; constraints in the capital markets; changes
to our vendor credit terms; changes in our credit ratings; failure
to meet financial-performance guidance or other forward-looking
statements; and general economic uncertainty in key global markets
and worsening of global economic conditions or low levels of
economic growth. We caution that the foregoing list of important
factors is not complete. Any forward-looking statements speak only
as of the date they are made and we assume no obligation to update
any forward-looking statement that we may make.
BEST BUY CO., INC. CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS ($ and shares in millions,
except per share amounts) (Unaudited and subject to
reclassification)
Three Months Ended
Nine Months Ended
October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Revenue
$
9,756
$
10,587
$
28,806
$
31,563
Cost of sales
7,524
8,255
22,204
24,591
Gross profit
2,232
2,332
6,602
6,972
Gross profit %
22.9
%
22.0
%
22.9
%
22.1
%
Selling, general and administrative
expenses
1,878
1,941
5,605
5,713
SG&A %
19.2
%
18.3
%
19.5
%
18.1
%
Restructuring charges
-
26
(16
)
61
Operating income
354
365
1,013
1,198
Operating income %
3.6
%
3.4
%
3.5
%
3.8
%
Other income (expense):
Gain on sale of subsidiary, net
-
-
21
-
Investment income and other
8
4
41
2
Interest expense
(14
)
(10
)
(38
)
(23
)
Earnings before income tax expense and
equity in income (loss) of affiliates
348
359
1,037
1,177
Income tax expense
86
84
257
252
Effective tax rate
24.7
%
23.6
%
24.8
%
21.4
%
Equity in income (loss) of affiliates
1
2
1
(1
)
Net earnings
$
263
$
277
$
781
$
924
Basic earnings per share
$
1.21
$
1.23
$
3.58
$
4.09
Diluted earnings per share
$
1.21
$
1.22
$
3.57
$
4.07
Weighted-average common shares
outstanding:
Basic
217.8
225.5
218.4
225.9
Diluted
218.3
226.2
219.1
226.9
BEST BUY CO., INC. CONDENSED
CONSOLIDATED BALANCE SHEETS ($ in millions) (Unaudited and
subject to reclassification)
October 28, 2023
October 29, 2022
Assets
Current assets:
Cash and cash equivalents
$
636
$
932
Receivables, net
901
1,050
Merchandise inventories
7,562
7,294
Other current assets
766
646
Total current assets
9,865
9,922
Property and equipment, net
2,313
2,373
Operating lease assets
2,827
2,799
Goodwill
1,383
1,383
Other assets
494
544
Total assets
$
16,882
$
17,021
Liabilities and equity
Current liabilities:
Accounts payable
$
7,133
$
7,056
Unredeemed gift card liabilities
245
273
Deferred revenue
934
1,080
Accrued compensation and related
expenses
309
363
Accrued liabilities
760
744
Current portion of operating lease
liabilities
614
638
Current portion of long-term debt
15
16
Total current liabilities
10,010
10,170
Long-term operating lease liabilities
2,270
2,216
Long-term liabilities
660
500
Long-term debt
1,130
1,142
Equity
2,812
2,993
Total liabilities and equity
$
16,882
$
17,021
BEST BUY CO., INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in millions)
(Unaudited and subject to reclassification)
Nine Months Ended
October 28, 2023
October 29, 2022
Operating activities
Net earnings
$
781
$
924
Adjustments to reconcile net earnings to
total cash provided by (used in) operating activities:
Depreciation and amortization
702
679
Restructuring charges
(16
)
61
Stock-based compensation
110
98
Gain on sale of subsidiary, net
(21
)
-
Other, net
7
19
Changes in operating assets and
liabilities:
Receivables
240
(14
)
Merchandise inventories
(2,444
)
(1,365
)
Other assets
(17
)
(1
)
Accounts payable
1,468
224
Income taxes
(200
)
28
Other liabilities
(320
)
(761
)
Total cash provided by (used in) operating
activities
290
(108
)
Investing activities
Additions to property and equipment
(612
)
(696
)
Purchases of investments
(7
)
(46
)
Net proceeds from sale of subsidiary
14
-
Other, net
5
6
Total cash used in investing
activities
(600
)
(736
)
Financing activities
Repurchase of common stock
(270
)
(465
)
Dividends paid
(603
)
(595
)
Other, net
1
2
Total cash used in financing
activities
(872
)
(1,058
)
Effect of exchange rate changes on cash
and cash equivalents
(12
)
(10
)
Decrease in cash, cash equivalents and
restricted cash
(1,194
)
(1,912
)
Cash, cash equivalents and restricted
cash at beginning of period
2,253
3,205
Cash, cash equivalents and restricted
cash at end of period
$
1,059
$
1,293
BEST BUY CO., INC. SEGMENT
INFORMATION ($ in millions) (Unaudited and subject to
reclassification)
Three Months Ended
Nine Months Ended
Domestic Segment Results
October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Revenue
$
8,996
$
9,800
$
26,687
$
29,263
Comparable sales % change
(7.3
)%
(10.5
)%
(8.0
)%
(10.6
)%
Comparable online sales % change
(9.3
)%
(11.6
)%
(9.5
)%
(13.8
)%
Gross profit
$
2,064
$
2,148
$
6,108
$
6,427
Gross profit as a % of revenue
22.9
%
21.9
%
22.9
%
22.0
%
SG&A
$
1,727
$
1,791
$
5,167
$
5,264
SG&A as a % of revenue
19.2
%
18.3
%
19.4
%
18.0
%
Operating income
$
336
$
332
$
955
$
1,104
Operating income as a % of revenue
3.7
%
3.4
%
3.6
%
3.8
%
Domestic Segment Non-GAAP
Results1
Gross profit
$
2,064
$
2,148
$
6,108
$
6,427
Gross profit as a % of revenue
22.9
%
21.9
%
22.9
%
22.0
%
SG&A
$
1,712
$
1,770
$
5,111
$
5,199
SG&A as a % of revenue
19.0
%
18.1
%
19.2
%
17.8
%
Operating income
$
352
$
378
$
997
$
1,228
Operating income as a % of revenue
3.9
%
3.9
%
3.7
%
4.2
%
Three Months Ended
Nine Months Ended
International Segment Results
October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Revenue
$
760
$
787
$
2,119
$
2,300
Comparable sales % change
(1.9
)%
(9.3
)%
(4.2
)%
(5.2
)%
Gross profit
$
168
$
184
$
494
$
545
Gross profit as a % of revenue
22.1
%
23.4
%
23.3
%
23.7
%
SG&A
$
151
$
150
$
438
$
449
SG&A as a % of revenue
19.9
%
19.1
%
20.7
%
19.5
%
Operating income
$
18
$
33
$
58
$
94
Operating income as a % of revenue
2.4
%
4.2
%
2.7
%
4.1
%
International Segment Non-GAAP
Results1
Gross profit
$
168
$
184
$
494
$
545
Gross profit as a % of revenue
22.1
%
23.4
%
23.3
%
23.7
%
SG&A
$
151
$
150
$
438
$
449
SG&A as a % of revenue
19.9
%
19.1
%
20.7
%
19.5
%
Operating income
$
17
$
34
$
56
$
96
Operating income as a % of revenue
2.2
%
4.3
%
2.6
%
4.2
%
(1)
For GAAP to non-GAAP reconciliations,
please refer to the attached supporting schedule titled
Reconciliation of Non-GAAP Financial Measures.
BEST BUY CO., INC. REVENUE
CATEGORY SUMMARY (Unaudited and subject to
reclassification)
Revenue Mix
Comparable Sales
Three Months Ended
Three Months Ended
Domestic Segment
October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Computing and Mobile Phones
44
%
44
%
(8.3
)%
(11.4
)%
Consumer Electronics
29
%
30
%
(9.5
)%
(12.8
)%
Appliances
14
%
15
%
(15.1
)%
(9.6
)%
Entertainment
6
%
5
%
20.6
%
(4.6
)%
Services
6
%
5
%
6.9
%
(0.9
)%
Other
1
%
1
%
4.7
%
39.8
%
Total
100
%
100
%
(7.3
)%
(10.5
)%
Revenue Mix
Comparable Sales
Three Months Ended
Three Months Ended
International Segment
October 28,
2023
October 29,
2022
October 28,
2023
October 29,
2022
Computing and Mobile Phones
50
%
49
%
(1.0
)%
(9.9
)%
Consumer Electronics
26
%
28
%
(8.4
)%
(7.4
)%
Appliances
10
%
9
%
4.0
%
(10.2
)%
Entertainment
7
%
6
%
18.6
%
(8.4
)%
Services
6
%
6
%
2.4
%
(15.2
)%
Other
1
%
2
%
(37.5
)%
3.6
%
Total
100
%
100
%
(1.9
)%
(9.3
)%
BEST BUY CO., INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ($ in millions,
except per share amounts) (Unaudited and subject to
reclassification)
The following information provides
reconciliations of the most comparable financial measures presented
in accordance with accounting principles generally accepted in the
U.S. (GAAP financial measures) to presented non-GAAP financial
measures. The company believes that non-GAAP financial measures,
when reviewed in conjunction with GAAP financial measures, can
provide more information to assist investors in evaluating current
period performance and in assessing future performance. For these
reasons, internal management reporting also includes non-GAAP
financial measures. Generally, presented non-GAAP financial
measures include adjustments for items such as restructuring
charges, goodwill and intangible asset impairments, price-fixing
settlements, gains and losses on subsidiaries and certain
investments, intangible asset amortization, certain
acquisition-related costs and the tax effect of all such items. In
addition, certain other items may be excluded from non-GAAP
financial measures when the company believes this provides greater
clarity to management and investors. These non-GAAP financial
measures should be considered in addition to, and not superior to
or as a substitute for, the GAAP financial measures presented in
this earnings release and the company’s financial statements and
other publicly filed reports. Non-GAAP financial measures as
presented herein may not be comparable to similarly titled measures
used by other companies.
Three Months Ended
Three Months Ended
October 28, 2023
October 29, 2022
Domestic
International
Consolidated
Domestic
International
Consolidated
SG&A
$
1,727
$
151
$
1,878
$
1,791
$
150
$
1,941
% of revenue
19.2
%
19.9
%
19.2
%
18.3
%
19.1
%
18.3
%
Intangible asset amortization1
(15
)
-
(15
)
(21
)
-
(21
)
Non-GAAP SG&A
$
1,712
$
151
$
1,863
$
1,770
$
150
$
1,920
% of revenue
19.0
%
19.9
%
19.1
%
18.1
%
19.1
%
18.1
%
Operating income
$
336
$
18
$
354
$
332
$
33
$
365
% of revenue
3.7
%
2.4
%
3.6
%
3.4
%
4.2
%
3.4
%
Intangible asset amortization1
15
-
15
21
-
21
Restructuring charges2
1
(1
)
-
25
1
26
Non-GAAP operating income
$
352
$
17
$
369
$
378
$
34
$
412
% of revenue
3.9
%
2.2
%
3.8
%
3.9
%
4.3
%
3.9
%
Effective tax rate
24.7
%
23.6
%
Intangible asset amortization1
-
%
0.1
%
Restructuring charges2
-
%
0.1
%
Non-GAAP effective tax rate
24.7
%
23.8
%
Three Months Ended
Three Months Ended
October 28, 2023
October 29, 2022
Pretax Earnings
Net of Tax4
Per Share
Pretax Earnings
Net of Tax4
Per Share
Diluted EPS
$
1.21
$
1.22
Intangible asset amortization1
$
15
$
7
0.03
$
21
$
15
0.08
Restructuring charges2
-
2
0.01
26
19
0.08
Loss on investments
9
9
0.04
-
-
-
Non-GAAP diluted EPS
$
1.29
$
1.38
Nine Months Ended
Nine Months Ended
October 28, 2023
October 29, 2022
Domestic
International
Consolidated
Domestic
International
Consolidated
SG&A
$
5,167
$
438
$
5,605
$
5,264
$
449
$
5,713
% of revenue
19.4
%
20.7
%
19.5
%
18.0
%
19.5
%
18.1
%
Intangible asset amortization1
(56
)
-
(56
)
(65
)
-
(65
)
Non-GAAP SG&A
$
5,111
$
438
$
5,549
$
5,199
$
449
$
5,648
% of revenue
19.2
%
20.7
%
19.3
%
17.8
%
19.5
%
17.9
%
Operating income
$
955
$
58
$
1,013
$
1,104
$
94
$
1,198
% of revenue
3.6
%
2.7
%
3.5
%
3.8
%
4.1
%
3.8
%
Intangible asset amortization1
56
-
56
65
-
65
Restructuring charges2
(14
)
(2
)
(16
)
59
2
61
Non-GAAP operating income
$
997
$
56
$
1,053
$
1,228
$
96
$
1,324
% of revenue
3.7
%
2.6
%
3.7
%
4.2
%
4.2
%
4.2
%
Effective tax rate
24.8
%
21.4
%
Intangible asset amortization1
0.2
%
0.2
%
Restructuring charges2
(0.1
)%
0.1
%
Non-GAAP effective tax rate
24.9
%
21.7
%
Nine Months Ended
Nine Months Ended
October 28, 2023
October 29, 2022
Pretax Earnings
Net of Tax4
Per Share
Pretax Earnings
Net of Tax4
Per Share
Diluted EPS
$
3.57
$
4.07
Intangible asset amortization1
$
56
$
43
0.20
$
65
$
49
0.22
Restructuring charges2
(16
)
(12
)
(0.06
)
61
46
0.20
Loss on investments
11
11
0.05
-
-
-
Gain on sale of subsidiary, net3
(21
)
(21
)
(0.10
)
-
-
-
Non-GAAP diluted EPS
$
3.66
$
4.49
(1)
Represents the non-cash amortization of
definite-lived intangible assets associated with acquisitions,
including customer relationships, tradenames and developed
technology assets.
(2)
Represents charges related to employee
termination benefits and subsequent adjustments from
higher-than-expected employee retention related to previously
planned organizational changes.
(3)
Represents the gain on sale of a Mexico
subsidiary subsequent to our exit from operations in
Mexico.
(4)
The non-GAAP adjustments primarily relate
to the U.S. and Mexico. As such, the forecasted annual income tax
charge on a portion of the U.S. non-GAAP adjustments is calculated
using the statutory tax rate of 24.5%. There is no forecasted
annual income tax for Mexico non-GAAP items and a portion of U.S.
non-GAAP items, as there is no forecasted annual tax
benefit/expense on the income/expenses in the calculation of GAAP
income tax expense.
Return
on Assets and Non-GAAP Return on Investment
The tables below provide calculations of
return on assets ("ROA") (GAAP financial measure) and non-GAAP
return on investment (“ROI”) (non-GAAP financial measure) for the
periods presented. The company believes ROA is the most directly
comparable financial measure to ROI. Non-GAAP ROI is defined as
non-GAAP adjusted operating income after tax divided by average
invested operating assets. All periods presented below apply this
methodology consistently. The company believes non-GAAP ROI is a
meaningful metric for investors to evaluate capital efficiency
because it measures how key assets are deployed by adjusting
operating income and total assets for the items noted below. This
method of determining non-GAAP ROI may differ from other companies'
methods and therefore may not be comparable to those used by other
companies.
Return on Assets ("ROA")
October 28, 20231
October 29, 20221
Net earnings
$
1,276
$
1,550
Total assets
16,069
17,005
ROA
7.9
%
9.1
%
Non-GAAP Return on Investment
("ROI")
October 28, 20231
October 29, 20221
Numerator
Operating income
$
1,610
$
2,001
Add: Non-GAAP operating income
adjustments2
147
159
Add: Operating lease interest3
114
112
Less: Income taxes4
(458
)
(557
)
Add: Depreciation
865
816
Add: Operating lease amortization5
666
652
Adjusted operating income after
tax
$
2,944
$
3,183
Denominator
Total assets
$
16,069
$
17,005
Less: Excess cash6
(318
)
(692
)
Add: Accumulated depreciation and
amortization7
5,055
5,800
Less: Adjusted current liabilities8
(8,632
)
(9,525
)
Average invested operating
assets
$
12,174
$
12,588
Non-GAAP ROI
24.2
%
25.3
%
(1)
Income statement accounts represent the
activity for the trailing 12 months ended as of each of the balance
sheet dates. Balance sheet accounts represent the average account
balances for the trailing 12 months ended as of each of the balance
sheet dates.
(2)
Non-GAAP operating income adjustments
include continuing operations adjustments for intangible asset
amortization, restructuring charges and acquisition-related
transaction costs. Additional details regarding these adjustments
are included in the Reconciliation of Non-GAAP Financial Measures
schedule within the company’s earnings releases.
(3)
Operating lease interest represents the
add-back to operating income to approximate the total interest
expense that the company would incur if its operating leases were
owned and financed by debt. The add-back is approximated by
multiplying average operating lease assets by 4%, which
approximates the interest rate on the company’s operating lease
liabilities.
(4)
Income taxes are approximated by using a
blended statutory rate at the Enterprise level based on statutory
rates from the countries in which the company does business, which
primarily consists of the U.S. with a statutory rate of 24.5% for
the periods presented.
(5)
Operating lease amortization represents
operating lease cost less operating lease interest. Operating lease
cost includes short-term leases, which are immaterial, and excludes
variable lease costs as these costs are not included in the
operating lease asset balance.
(6)
Excess cash represents the amount of cash,
cash equivalents and short-term investments greater than $1
billion, which approximates the amount of cash the company believes
is necessary to run the business and may fluctuate over
time.
(7)
Accumulated depreciation and amortization
represents accumulated depreciation related to property and
equipment and accumulated amortization related to definite-lived
intangible assets.
(8)
Adjusted current liabilities represent
total current liabilities less short-term debt and the current
portions of operating lease liabilities and long-term
debt.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231120498872/en/
Investor Contact: Mollie O'Brien
mollie.obrien@bestbuy.com
Media Contact: Carly Charlson
carly.charlson@bestbuy.com
Best Buy (NYSE:BBY)
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