Domestic Comparable Sales Increased 2.0% on
Top of 22.6% Last Year
GAAP Diluted EPS Increased 35% to
$2.00
Non-GAAP Diluted EPS Increased 1% to
$2.08
Raises Full-Year Enterprise Comparable Sales
Growth Outlook to a Range of 10.5% to 11.5%
Best Buy Co., Inc. (NYSE: BBY) today announced results for the
13-week third quarter ended October 30, 2021 (“Q3 FY22”), as
compared to the 13-week third quarter ended October 31, 2020 (“Q3
FY21”).
Q3 FY22
Q3 FY21
Revenue ($ in millions)
Enterprise
$
11,910
$
11,853
Domestic segment
$
10,985
$
10,850
International segment
$
925
$
1,003
Enterprise comparable sales % change1
1.6
%
23.0
%
Domestic comparable sales % change1
2.0
%
22.6
%
Domestic comparable online sales %
change1
(10.1)
%
173.7
%
International comparable sales %
change1
(3.0)
%
27.3
%
Operating Income
GAAP operating income as a % of
revenue
5.6
%
4.7
%
Non-GAAP operating income as a % of
revenue
5.8
%
6.1
%
Diluted Earnings per Share
("EPS")
GAAP diluted EPS
$
2.00
$
1.48
Non-GAAP diluted EPS
$
2.08
$
2.06
For GAAP to non-GAAP reconciliations of the measures referred to
in the above table, please refer to the attached supporting
schedule.
“We delivered record Q3 results, including 2% Domestic
comparable sales on top of 22.6% last year, as our leaders
continued to drive new ways of operating and our employees
continued to do amazing things to support our customer’s technology
needs in knowledgeable, fast and convenient ways,” said Corie
Barry, Best Buy CEO. “Our omnichannel capabilities and our ability
to inspire and support across all of technology in a way no one
else can means we are uniquely positioned to seize the opportunity
in this environment and in the future.”
“More people continue to sustainably work, entertain, cook and
connect at home, and while customers are returning to stores,
digital sales were still more than double pre-pandemic levels, and
phone, chat and in-home sales continued to grow,” Barry continued.
“During the third quarter, we reached our fastest small-package
online shipping times ever as our same-day delivery was up 400% and
we nearly doubled the percent of products delivered within one day
compared to last year.”
“We are looking forward to a strong holiday season and believe
we are extremely well-positioned with both the tech customers want
and fast and convenient ways to get it,” said Matt Bilunas, Best
Buy CFO. “We are committed to driving initiatives that will deliver
future growth and our Q4 outlook reflects continued investments in
our new membership program, technology, advertising and our health
strategy.”
Financial Outlook
The company is providing the following Enterprise outlook:
Q4 FY22:
- Revenue of $16.4 billion to $16.9 billion
- Comparable sales growth of -2.0% to +1.0%
- Non-GAAP gross profit rate2 decline of approximately 30 basis
points to last year
- Non-GAAP SG&A2 dollar growth of approximately 8% to last
year
- Non-GAAP effective income tax rate2 of approximately 24.0%
FY22:
- Revenue of $51.8 billion to $52.3 billion compared to the prior
outlook of $51.0 billion to $52.0 billion
- Comparable sales growth of 10.5% to 11.5% compared to the prior
outlook of 9% to 11% growth
- Non-GAAP gross profit rate2 slightly higher than last year,
which remains unchanged
- Non-GAAP SG&A2 growth of approximately 9.5% compared to the
prior outlook of 9% growth
- Non-GAAP effective income tax rate2 of approximately 20.0%,
which remains unchanged
- Share repurchases of more than $2.5 billion, which remains
unchanged
Domestic Segment Q3 FY22
Results
Domestic Revenue
Domestic revenue of $10.99 billion increased 1.2% versus last
year. The increase was primarily driven by comparable sales growth
of 2.0%, which was partially offset by the loss of revenue from
permanent store closures in the past year.
From a merchandising perspective, the largest drivers of
comparable sales growth on a weighted basis were appliances, home
theater and mobile phones. These positive drivers were partially
offset by a decline in computing.
Domestic online revenue of $3.44 billion decreased 10.1% on a
comparable basis, and as a percentage of total Domestic revenue,
online revenue decreased to approximately 31.3% versus 35.2% last
year.
Domestic Gross Profit Rate
Domestic gross profit rate was 23.4% versus 24.0% last year. The
gross profit rate decrease of approximately 60 basis points was
primarily due to (1) lower product margin rates, which were driven
by lapping low levels of promotions, product damages and returns
last year, as well as increased inventory shrink; and (2) lower
services margin rates, which included rate pressure associated with
the company’s new Totaltech membership offering. The previous items
were partially offset by higher profit-sharing revenue from the
company’s private label and co-branded credit card arrangement.
Domestic Selling, General and Administrative Expenses
(“SG&A”)
Domestic GAAP SG&A was $1.96 billion, or 17.9% of revenue,
versus $1.95 billion, or 18.0% of revenue, last year. On a non-GAAP
basis, SG&A was $1.94 billion, or 17.6% of revenue, versus
$1.93 billion, or 17.8% of revenue, last year. Both GAAP and
non-GAAP SG&A increased primarily due to higher advertising
expense and increased technology investments, which were partially
offset by lapping last year’s $40 million donation to the Best Buy
Foundation and lower incentive compensation.
International Segment Q3 FY22
Results
International Revenue
International revenue of $925 million decreased 7.8% versus last
year. This decrease was primarily driven by the loss of revenue
from exiting Mexico and a comparable sales decline of 3.0% in
Canada. These items were partially offset by the benefit of
approximately 450 basis points of favorable foreign currency
exchange rates.
International Gross Profit Rate
International GAAP gross profit rate was 25.0% versus 19.0% last
year. On a non-GAAP basis, the gross profit rate was 25.0% versus
22.6% last year. The higher GAAP and non-GAAP gross profit rates
were primarily driven by improved product margin rates in Canada,
and sales mixing out of Mexico, which had a lower gross profit rate
than Canada. The higher GAAP gross profit also included the impact
of lapping $36 million of inventory markdowns associated with the
company’s decision to exit its operations in Mexico last year.
International SG&A
International SG&A was $171 million, or 18.5% of revenue,
versus $175 million, or 17.4% of revenue, last year. SG&A
decreased primarily due to the company’s exit of its Mexico
operations, which was partially offset by the impact of foreign
exchange rates and increased store payroll expense in Canada.
Dividends and Share
Repurchases
In Q3 FY22, the company returned a total of $577 million to
shareholders through share repurchases of $405 million and
dividends of $172 million. On a year-to-date basis, the company has
returned a total of $2.25 billion to shareholders through share
repurchases of $1.73 billion and dividends of $522 million.
Today, the company announced its board of directors has
authorized the payment of a regular quarterly cash dividend of
$0.70 per common share. The quarterly dividend is payable on
January 4, 2022, to shareholders of record as of the close of
business on December 14, 2021.
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 23,
2021. A webcast of the call is expected to be available at
www.investors.bestbuy.com, both
live and after the call.
Notes:
(1) Comparable sales include revenue from all stores that were
temporarily closed or operating an enhanced curbside-only operating
model as a result of COVID-19. The method of calculating comparable
sales varies across the retail industry, including the treatment of
store closures as a result of COVID-19. As a result, our method of
calculating comparable sales may not be the same as other
retailers’ methods. On November 24, 2020, the company announced its
decision to exit its operations in Mexico. As a result, all revenue
from Mexico operations has been excluded from the comparable sales
calculation beginning in fiscal December FY21. For additional
information on comparable sales, please see our most recent Annual
Report on Form 10-K, and any 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 gross profit
rate, non-GAAP SG&A and non-GAAP effective income tax rate,
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 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 that reflect
management’s current views and estimates regarding future market
conditions, company performance and financial results, operational
investments, business prospects, new strategies, the competitive
environment and other events. You can identify these statements by
the fact that they use words such as “anticipate,” “believe,”
“assume,” “estimate,” “expect,” “intend,” “foresee,” “project,”
“guidance,” “plan,” “outlook,” and other words and terms of similar
meaning. These statements involve a number of risks and
uncertainties that could cause actual results to differ materially
from the potential results discussed in the forward-looking
statements. Among the factors that could cause actual results and
outcomes to differ materially from those contained in such
forward-looking statements are the following: the duration and
scope of the COVID-19 pandemic and its resurgence and the impact on
demand for our products and services, levels of consumer confidence
and our supply chain; the effects and duration of steps we have
taken and will continue to take in response to the pandemic,
including the implementation of our interim and evolving operating
model; actions governments, businesses and individuals have taken
and will continue to take in response to the pandemic and their
impact on economic activity and consumer spending; the pace of
recovery when the COVID-19 pandemic subsides; general economic
uncertainty in key global markets and a worsening of global
economic conditions or low levels of economic growth; competition
(including from multi-channel retailers, e-commerce business,
technology service providers, traditional store-based retailers,
vendors and mobile network carriers), our expansion strategies, our
focus on services as a strategic priority, our reliance on key
vendors and mobile network carriers, our ability to attract and
retain qualified employees, changes in market compensation rates,
risks arising from statutory, regulatory and legal developments,
macroeconomic pressures in the markets in which we operate, failure
to effectively manage our costs, our reliance on our information
technology systems, our ability to prevent or effectively respond
to a privacy or security breach, our ability to effectively manage
strategic ventures, alliances or acquisitions, our dependence on
cash flows and net earnings generated during the fourth fiscal
quarter, susceptibility of our products to technological
advancements, product life cycle preferences and changes in
consumer preferences, economic or regulatory developments that
might affect our ability to provide attractive promotional
financing, interruptions and other supply chain issues,
catastrophic events, health crises, pandemics, our ability to
maintain positive brand perception and recognition, product safety
and quality concerns, changes to labor or employment laws or
regulations, our ability to effectively manage our real estate
portfolio, constraints in the capital markets or our vendor credit
terms, changes in our credit ratings, any material disruption in
our relationship with or the services of third-party vendors, risks
related to our exclusive brand products and risks associated with
vendors that source products outside of the U.S., including trade
restrictions or changes in the costs of imports (including existing
or new tariffs or duties and changes in the amount of any such
tariffs or duties) and risks arising from our international
activities.
A further list and description of these risks, uncertainties and
other matters can be found in the company’s annual report and other
reports filed from time to time with the SEC, including, but not
limited to, Best Buy’s Annual Report on Form 10-K filed with the
SEC on March 19, 2021 and its Quarterly Reports on Form 10-Q filed
with the SEC. Best Buy cautions that the foregoing list of
important factors is not complete, and any forward-looking
statements speak only as of the date they are made, and Best Buy
assumes no obligation to update any forward-looking statement that
it 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 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Revenue
$
11,910
$
11,853
$
35,396
$
30,325
Cost of sales
9,108
9,058
27,069
23,295
Gross profit
2,802
2,795
8,327
7,030
Gross profit %
23.5
%
23.6
%
23.5
%
23.2
%
Selling, general and administrative
expenses
2,133
2,123
6,130
5,560
SG&A %
17.9
%
17.9
%
17.3
%
18.3
%
Restructuring charges
(1)
111
(39)
112
Operating income
670
561
2,236
1,358
Operating income %
5.6
%
4.7
%
6.3
%
4.5
%
Other income (expense):
Investment income and other
1
5
7
19
Interest expense
(7)
(11)
(19)
(43)
Earnings before income tax expense and
equity in income of affiliates
664
555
2,224
1,334
Income tax expense
166
164
402
352
Effective tax rate
25.1
%
29.6
%
18.1
%
26.4
%
Equity in income of affiliates
1
-
6
-
Net earnings
$
499
$
391
$
1,828
$
982
Basic earnings per share
$
2.02
$
1.50
$
7.31
$
3.79
Diluted earnings per share
$
2.00
$
1.48
$
7.23
$
3.74
Weighted-average common shares
outstanding:
Basic
246.4
259.8
249.9
259.3
Diluted
249.1
263.7
252.9
262.5
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
($ in millions)
(Unaudited and subject to
reclassification)
October 30, 2021
October 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
3,465
$
5,136
Short-term investments
-
545
Receivables, net
1,016
1,028
Merchandise inventories
8,553
7,459
Other current assets
486
383
Total current assets
13,520
14,551
Property and equipment, net
2,256
2,265
Operating lease assets
2,688
2,692
Goodwill
986
986
Other assets
652
708
Total assets
$
20,102
$
21,202
Liabilities and equity
Current liabilities:
Accounts payable
$
8,405
$
9,110
Unredeemed gift card liabilities
306
278
Deferred revenue
977
788
Accrued compensation and related
expenses
703
446
Accrued liabilities
895
968
Current portion of operating lease
liabilities
645
685
Current portion of long-term debt
15
670
Total current liabilities
11,946
12,945
Long-term operating lease liabilities
2,102
2,117
Long-term liabilities
553
798
Long-term debt
1,223
1,256
Equity
4,278
4,086
Total liabilities and equity
$
20,102
$
21,202
BEST BUY CO., INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
($ in millions)
(Unaudited and subject to
reclassification)
Nine Months Ended
October 30, 2021
October 31, 2020
Operating activities
Net earnings
$
1,828
$
982
Adjustments to reconcile net earnings to
total cash provided by operating activities:
Depreciation and amortization
644
628
Restructuring charges
(39)
112
Stock-based compensation
105
107
Deferred income taxes
(16)
19
Other, net
3
10
Changes in operating assets and
liabilities:
Receivables
43
106
Merchandise inventories
(2,924)
(2,300)
Other assets
(12)
(60)
Accounts payable
1,387
3,824
Income taxes
(172)
121
Other liabilities
214
358
Total cash provided by operating
activities
1,061
3,907
Investing activities
Additions to property and equipment
(548)
(534)
Purchases of investments
(221)
(620)
Sales of investments
64
-
Other, net
(2)
1
Total cash used in investing
activities
(707)
(1,153)
Financing activities
Repurchase of common stock
(1,728)
(62)
Issuance of common stock
28
28
Dividends paid
(522)
(426)
Borrowings of debt
-
1,892
Repayments of debt
(123)
(1,261)
Other, net
(2)
(1)
Total cash provided by (used in) financing
activities
(2,347)
170
Effect of exchange rate changes on cash
and cash equivalents
6
(8)
Increase (decrease) in cash, cash
equivalents and restricted cash
(1,987)
2,916
Cash, cash equivalents and restricted
cash at beginning of period
5,625
2,355
Cash, cash equivalents and restricted
cash at end of period
$
3,638
$
5,271
BEST BUY CO., INC.
SEGMENT INFORMATION
($ in millions)
(Unaudited and subject to
reclassification)
Three Months Ended
Nine Months Ended
Domestic Segment Results
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Revenue
$
10,985
$
10,850
$
32,837
$
27,893
Comparable sales % change
2.0
%
22.6
%
18.3
%
7.5
%
Comparable online sales % change
(10.1)
%
173.7
%
(12.5)
%
191.4
%
Gross profit
$
2,571
$
2,604
$
7,703
$
6,509
Gross profit as a % of revenue
23.4
%
24.0
%
23.5
%
23.3
%
SG&A
$
1,962
$
1,948
$
5,647
$
5,087
SG&A as a % of revenue
17.9
%
18.0
%
17.2
%
18.2
%
Operating income
$
609
$
612
$
2,100
$
1,377
Operating income as a % of revenue
5.5
%
5.6
%
6.4
%
4.9
%
Domestic Segment Non-GAAP
Results1
Gross profit
$
2,571
$
2,604
$
7,703
$
6,509
Gross profit as a % of revenue
23.4
%
24.0
%
23.5
%
23.3
%
SG&A
$
1,937
$
1,928
$
5,582
$
5,027
SG&A as a % of revenue
17.6
%
17.8
%
17.0
%
18.0
%
Operating income
$
634
$
676
$
2,121
$
1,482
Operating income as a % of revenue
5.8
%
6.2
%
6.5
%
5.3
%
Three Months Ended
Nine Months Ended
International Segment Results
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Revenue
$
925
$
1,003
$
2,559
$
2,432
Comparable sales % change
(3.0)
%
27.3
%
7.7
%
15.1
%
Gross profit
$
231
$
191
$
624
$
521
Gross profit as a % of revenue
25.0
%
19.0
%
24.4
%
21.4
%
SG&A
$
171
$
175
$
483
$
473
SG&A as a % of revenue
18.5
%
17.4
%
18.9
%
19.4
%
Operating income (loss)
$
61
$
(51)
$
136
$
(19)
Operating income (loss) as a % of
revenue
6.6
%
(5.1)
%
5.3
%
(0.8)
%
International Segment Non-GAAP
Results1
Gross profit
$
231
$
227
$
618
$
557
Gross profit as a % of revenue
25.0
%
22.6
%
24.2
%
22.9
%
SG&A
$
171
$
175
$
483
$
473
SG&A as a % of revenue
18.5
%
17.4
%
18.9
%
19.4
%
Operating income
$
60
$
52
$
135
$
84
Operating income as a % of revenue
6.5
%
5.2
%
5.3
%
3.5
%
(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 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Computing and Mobile Phones
45
%
47
%
(2.4)
%
21.5
%
Consumer Electronics
30
%
29
%
5.5
%
21.1
%
Appliances
15
%
14
%
10.9
%
39.3
%
Entertainment
5
%
5
%
4.1
%
17.5
%
Services
5
%
5
%
(5.6)
%
12.7
%
Other
-
%
-
%
N/A
N/A
Total
100
%
100
%
2.0
%
22.6
%
Revenue Mix
Comparable Sales
Three Months Ended
Three Months Ended
International Segment
October 30, 2021
October 31, 2020
October 30, 2021
October 31, 2020
Computing and Mobile Phones
50
%
53
%
(6.7)
%
35.7
%
Consumer Electronics
27
%
27
%
(0.8)
%
13.3
%
Appliances
9
%
9
%
(1.8)
%
40.1
%
Entertainment
6
%
5
%
15.0
%
35.6
%
Services
6
%
5
%
(2.2)
%
4.3
%
Other
2
%
1
%
17.0
%
22.0
%
Total
100
%
100
%
(3.0)
%
27.3
%
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, price-fixing
settlements, goodwill impairments, gains and losses on 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 30, 2021
October 31, 2020
Domestic
International
Consolidated
Domestic
International
Consolidated
Gross profit
$
2,571
$
231
$
2,802
$
2,604
$
191
$
2,795
% of revenue
23.4
%
25.0
%
23.5
%
24.0
%
19.0
%
23.6
%
Restructuring - inventory markdowns1
-
-
-
-
36
36
Non-GAAP gross profit
$
2,571
$
231
$
2,802
$
2,604
$
227
$
2,831
% of revenue
23.4
%
25.0
%
23.5
%
24.0
%
22.6
%
23.9
%
SG&A
$
1,962
$
171
$
2,133
$
1,948
$
175
$
2,123
% of revenue
17.9
%
18.5
%
17.9
%
18.0
%
17.4
%
17.9
%
Intangible asset amortization2
(20)
-
(20)
(20)
-
(20)
Acquisition-related transaction costs2
(5)
-
(5)
-
-
-
Non-GAAP SG&A
$
1,937
$
171
$
2,108
$
1,928
$
175
$
2,103
% of revenue
17.6
%
18.5
%
17.7
%
17.8
%
17.4
%
17.7
%
Operating income (loss)
$
609
$
61
$
670
$
612
$
(51)
$
561
% of revenue
5.5
%
6.6
%
5.6
%
5.6
%
(5.1)
%
4.7
%
Restructuring - inventory markdowns1
-
-
-
-
36
36
Intangible asset amortization2
20
-
20
20
-
20
Acquisition-related transaction costs2
5
-
5
-
-
-
Restructuring charges3
-
(1)
(1)
44
67
111
Non-GAAP operating income
$
634
$
60
$
694
$
676
$
52
$
728
% of revenue
5.8
%
6.5
%
5.8
%
6.2
%
5.2
%
6.1
%
Effective tax rate
25.1
%
29.6
%
Intangible asset amortization2
(0.1)
%
(1.5)
%
Restructuring charges3
-
%
(3.2)
%
Non-GAAP effective tax rate
25.0
%
24.9
%
Three Months Ended
Three Months Ended
October 30, 2021
October 31, 2020
Pretax Earnings
Net of Tax4
Per Share
Pretax Earnings
Net of Tax4
Per Share
GAAP diluted EPS
$
2.00
$
1.48
Restructuring - inventory markdowns1
$
-
$
-
-
$
36
$
36
0.14
Intangible asset amortization2
20
14
0.06
20
15
0.06
Acquisition-related transaction costs2
5
5
0.02
-
-
-
Restructuring charges3
(1)
-
-
111
100
0.38
Non-GAAP diluted EPS
$
2.08
$
2.06
Nine Months Ended
Nine Months Ended
October 30, 2021
October 31, 2020
Domestic
International
Consolidated
Domestic
International
Consolidated
Gross profit
$
7,703
$
624
$
8,327
$
6,509
$
521
$
7,030
% of revenue
23.5
%
24.4
%
23.5
%
23.3
%
21.4
%
23.2
%
Restructuring - inventory markdowns1
-
(6)
(6)
-
36
36
Non-GAAP gross profit
$
7,703
$
618
$
8,321
$
6,509
$
557
$
7,066
% of revenue
23.5
%
24.2
%
23.5
%
23.3
%
22.9
%
23.3
%
SG&A
$
5,647
$
483
$
6,130
$
5,087
$
473
$
5,560
% of revenue
17.2
%
18.9
%
17.3
%
18.2
%
19.4
%
18.3
%
Intangible asset amortization2
(60)
-
(60)
(60)
-
(60)
Acquisition-related transaction costs2
(5)
-
(5)
-
-
-
Non-GAAP SG&A
$
5,582
$
483
$
6,065
$
5,027
$
473
$
5,500
% of revenue
17.0
%
18.9
%
17.1
%
18.0
%
19.4
%
18.1
%
Operating income (loss)
$
2,100
$
136
$
2,236
$
1,377
$
(19)
$
1,358
% of revenue
6.4
%
5.3
%
6.3
%
4.9
%
(0.8)
%
4.5
%
Restructuring - inventory markdowns1
-
(6)
(6)
-
36
36
Intangible asset amortization2
60
-
60
60
-
60
Acquisition-related transaction costs2
5
-
5
-
-
-
Restructuring charges3
(44)
5
(39)
45
67
112
Non-GAAP operating income
$
2,121
$
135
$
2,256
$
1,482
$
84
$
1,566
% of revenue
6.5
%
5.3
%
6.4
%
5.3
%
3.5
%
5.2
%
Effective tax rate
18.1
%
26.4
%
Intangible asset amortization2
0.1
%
(1.1)
%
Restructuring charges3
(0.1)
%
(0.8)
%
Non-GAAP effective tax rate
18.1
%
24.5
%
Nine Months Ended
Nine Months Ended
October 30, 2021
October 31, 2020
Pretax Earnings
Net of Tax4
Per Share
Pretax Earnings
Net of Tax4
Per Share
GAAP diluted EPS
$
7.23
$
3.74
Restructuring - inventory markdowns1
$
(6)
$
(6)
(0.02)
$
36
$
36
0.13
Intangible asset amortization2
60
44
0.17
60
45
0.17
Acquisition-related transaction costs2
5
5
0.02
-
-
-
Restructuring charges3
(39)
(27)
(0.11)
112
101
0.39
Non-GAAP diluted EPS
$
7.29
$
4.43
(1) Represents inventory markdown
adjustments recorded within cost of sales associated with the
decision to exit operations in Mexico.
(2) Represents charges associated with
acquisitions, including: (1) the non-cash amortization of
definite-lived intangible assets, including customer relationships,
tradenames and developed technology; and (2) acquisition-related
transaction and due diligence costs, primarily comprised of
professional fees.
(3) Represents charges and subsequent
adjustments related to actions taken in the Domestic segment to
better align the company’s organizational structure with its
strategic focus and the decision to exit operations in Mexico in
the International segment.
(4) The non-GAAP adjustments primarily
relate to the U.S. and Mexico. As such, the income tax charge is
calculated using the statutory tax rate of 24.5% for all U.S.
non-GAAP items for all periods presented. There is no income tax
charge for Mexico non-GAAP items, as there was no tax benefit
recognized on these 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 30, 20211
October 31, 20201
Net earnings
$
2,644
$
1,727
Total assets
19,125
17,571
ROA
13.8
%
9.8
%
Non-GAAP Return on Investment
("ROI")
October 30, 20211
October 31, 20201
Numerator
Operating income - total operations
$
3,269
$
2,325
Add: Non-GAAP operating income
adjustments2
148
227
Add: Operating lease interest3
108
112
Less: Income taxes4
(864)
(653)
Add: Depreciation
775
754
Add: Operating lease amortization5
661
665
Adjusted operating income after
tax
$
4,097
$
3,430
Denominator
Total assets
$
19,125
$
17,571
Less: Excess cash6
(3,692)
(3,164)
Add: Accumulated depreciation and
amortization7
7,090
7,056
Less: Adjusted current liabilities8
(10,095)
(8,724)
Average invested operating
assets
$
12,428
$
12,739
Non-GAAP ROI
33.0
%
26.9
%
(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 restructuring charges, intangible asset
amortization, acquisition-related transaction costs and
price-fixing settlements. Additional details regarding these
adjustments are included in the Reconciliation of Non-GAAP
Financial Measures schedule within the company's quarterly 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/20211123005436/en/
Investor Contact: Mollie O'Brien
mollie.obrien@bestbuy.com
Media Contact: Carly Charlson
carly.charlson@bestbuy.com
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