Best Buy Company, Inc.
) posted fourth-quarter fiscal 2014 adjusted earnings of $1.24
per share that surpassed the Zacks Consensus Estimate of $1.01
but was lower than $1.47 earned in the year-ago quarter. The
performance was aided by effective cost containment, partly
offset by soft top-line performance.
Including one-time items and discontinued operations, the company
reported quarterly earnings of 88 cents per share, sharply up
from the loss of $1.36 per share reported in the prior-year
For the full year, Best Buy reported adjusted earnings per share
of $2.07, which easily surpassed the Zacks Consensus Estimate of
$1.85 but was lower than the year-ago quarter figure of $2.54 per
share. Including one-time items, earnings came in at $1.98 per
share, sharply up from the loss of 80 cents in the prior-year
Best Buy is undergoing a turnaround program that includes a price
match policy, multi-channel strategy, multi-year cost reduction
program and the closure of some big box stores. In the year,
under the Renew Blue transformation program, the company achieved
$765 million reduction in annualized costs, much ahead of the
targeted $725 million. The company now has raised its target of
cost reduction to $1 billion.
Management is undertaking a competitive pricing strategy and
making investments in areas such as online, mobile and the
multi-channel approach. It is also making optimum utilization of
floor area and refurbishing the functionality of its website
(bestbuy.com). Best Buy extended its "buy online - ship from
store" endeavors to more than 1,400 outlets.
Moreover, the company is leaving no stone unturned in wooing
consumers and capturing incremental revenues, as evident from its
strategic initiative of opening "Samsung Experience Shops" within
its stores. Taking the initiatives further, Best Buy entered into
) to roll out "Windows Store." The company has unveiled 1,400
Samsung and 600 Windows stores-within-a-store so far and has
completed the first phase of its floor space optimization
Best Buy is also divesting its non-core operations, a move that
will help this consumer electronic retailer to concentrate more
on its core operations, to better compete with bellwethers like
Wal-Mart Stores Inc.
Coming to the results, total revenue fell 3.0% to $14,470 million
and lagged the Zacks Consensus Estimate of $14,684 million. For
the full year, revenues came in at $42,410 million, down 3.4%
year over year and falling short of the Zacks Consensus Estimate
of $42,721 million. Comparable-store sales (comps) declined
1.2% compared with a fall of 1.4% in the prior-year period.
Gross profit slid 12.4% year over year to $2,917 million during
the quarter due to weak top-line performance, partly offset by
decreased cost of goods sold. Gross margin contracted 210 basis
points (bps) to 20.2%. However, adjusted operating margin
contracted 120 bps to 4.5%.
segment revenues fell 1.8% to $12,298 million due to 1.2%
decrease in comps.
Domestic online sales increased 20%. Comparable online sales rose
25.8% to $1.57 billion driven by improved traffic, increased
average order value, along with better inventory availability
through the company's ship-from-store and online distribution
center expansion endeavors.
Decline in categories like movies, digital imaging and home
theater more than offset the growth witnessed in computing,
gaming and appliances.
The segment's adjusted gross profit fell 12.3% to $2,454
million during the quarter, while gross margin came in at 20.0%,
down 230 bps due to higher costs related to product warranty,
unfavorable mix of mobile phone service plans and increased
segment revenues fell 9.6% to $2,172 million due to the closure
of big box stores in Canada and China in the prior year, a
decline of 1.7% in comps and fluctuations in foreign exchange
rates. The decrease in comps was due to sluggish industry trends
in Canada and Mexico.
The International segment's gross profit fell 13.5% to $463
million in the quarter while gross margin shrunk 100 bps to
21.3%, reflecting lower margin product mix and increased
Other Financial Details
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Best Buy ended the quarter with cash and cash equivalents of
$2,678 million, long-term debt of $1,612 million and
shareholders' equity of $3,989 million.
In Feb 2014, Best Buy concluded the sale of mindSHIFT
Technologies, which was acquired in Dec 2011.
For the first half of fiscal 2015, Best Buy expects revenues and
comps to be negative, similar to trends observed in the fourth
quarter of fiscal 2014 due to the persistent weakness in the
overall consumer electronics category.
Currently, Best Buy carries a Zacks Rank #5 (Strong Sell).