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Best Buy (BBY)
F2Q2014 Earnings Call
August 20, 2013 8:00 a.m. ET
Hubert Joly - President and CEO
Sharon McCollam - CAO and CFO
Bill Seymour - VP, Investor Relations
Matthew Fassler - Goldman Sachs
Gary Balter - Credit Suisse
Anthony Chukumba - BBT Capital Markets
David Gober - Morgan Stanley
Kate McShane - Citi
Chris Horvers - JPMorgan
Michael Lasser - UBS
Mike Baker - Deutsche Bank
Previous Statements by BBY
» Best Buy Co. Discusses Q2 2014 Results (Webcast)
» Best Buy's CEO Hosts 2013 Regular Meeting of Shareholders (Transcript)
» Best Buy Co's CEO Presents at Sanford C Bernstein Strategic Decisions Conference (Transcript)
I’d now like to turn the conference call over to Bill Seymour, vice president of investor relations. Please go ahead, sir.
Good morning and thank you. Joining me on the call today are Hubert Joly, our president and CEO and Sharon McCollam, our CAO and CFO. As usual, the media will be participating in this call in a listen-only mode.
This morning’s conference call must be considered in conjunction with the press release that we issued earlier today. They both contain non-GAAP financial measures that exclude the impact of certain business events. These non-GAAP financial measures are provided to facilitate meaningful year-on-year comparisons, but should not be considered superior to or as a substitute for, and should not be read in conjunction with, the GAAP financial measures for the period.
A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and an explanation of why these non-GAAP financial measures are useful can be found in this morning’s release.
Today’s press release and conference call also include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements address the financial condition, results of operation, business initiatives, growth plans, operational investments, and prospects of the company, and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
Please refer to the company’s current press release and SEC filings for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call.
I would like to highlight that during our second quarter we reached settlements with multiple defendants under which we will receive a total of $229 million net of litigation costs. These settlements were the result of a lawsuit filed by the company as disclosed in our most recent form 10-Q that alleges price fixing by certain manufacturers of TST LCD panels from 1998 to 2006.
We have excluded the impact of the settlements reached during Q2 FY14, and our non-GAAP financial results provide meaningful comparisons versus last year. And where applicable we will be referring to those non-GAAP results in this morning’s call.
Again, complete information regarding our GAAP and non-GAAP results can be found in this morning’s release. I will now turn the call over to Hubert.
Thank you, Bill, and good morning everyone and thank you for joining us. I’d like to begin today with an overview of our second quarter results, as well as an update on our Renew Blue priorities. Then I will turn the call over to Sharon to provide further details.
Before I do that, I’d like to welcome Chris Askew, our new president of services, to our One Best Buy team, as we focus on strengthening one of our greatest competitive advantages, our network of 20,000 Geek Squad agents and the service they provide to our customers.
Chris joins us with a strong track record in managing large, complex services organizations, including at NCR, Dell, and Lenovo. We’re thrilled to have him on board, and excited about reinvigorating this growth engine within the company.
Now let me come back to our second quarter results. In November of last year, at our investor meeting, we talked about the two problems we had to solve: declining comparable store sales, and declining operating margins. Since that time, the resolution of these two problems has become our Renew Blue rallying cry, and the organization’s goals and objectives as we prioritize accordingly.
While we are clear that there’s much more work ahead, we have made measurable progress since we unveiled Renew Blue last year, including near-flat comparable store sales, substantial cost take outs, and better than expected earnings in the past three consecutive quarters.
From a financial perspective, we delivered better than expected results on both the top and bottom lines during this last quarter. On total company revenue from continuing operations of $9.3 billion, we delivered non-GAAP diluted earnings per share of $0.32. As expected, domestic comparable store sales were down 0.4%.
This was driven by short term disruptions caused by the retail deployments of the Samsung Experience shops, Windows stores, and floor space optimization, as well as our continued rationalization of noncore businesses. Excluding these impacts, domestic comparable store sales were flat to slightly positive for the quarter.
During the second quarter, we continued to make substantial progress on our Renew Blue priorities. This progress included, number one, driving a more than 10% increase in domestic comparable online sales; number two, improving our net [unintelligible] score; number three, enriching our retail customer experience for the rollout of our Samsung Experience shops in Windows stores; number four, piloting our buy online, ship from store initiative in 50 stores; and number five, eliminating an additional $65 million in annualized costs, bringing our nine-month total of annualized cost reductions to $390 million toward our target of $725 million.