What happened
Shares of Best Buy (NYSE: BBY) rose 9% on Thursday the consumer electronics leader said it would increase its capital returns to shareholders.
So what
Best Buy's revenue declined by 3.3% year over year to $16.4 billion in its fiscal 2022 fourth quarter, which ended on Jan. 29. The retailer's comparable-store sales decreased by 2.3% after surging 12.6% in the year-ago quarter.
CEO Corie Barry said Best Buy's sales were dented by inventory shortages that prevented it from stocking some high-demand items during the holiday shopping season. The retailer was also forced to reduce its store hours in some locations, due to staffing issues related to the omicron variant of the coronavirus.
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Moreover, Best Buy's growth investments weighed on its profitability. Its adjusted operating margin dropped to 5.1% from 6.9% in the prior-year period. The company's adjusted earnings per share, in turn, fell 21.6% to $2.73.
Barry said Best Buy's investments will bear fruit over time. The company sees its new membership program and health-related services as key drivers of its long-term growth, and it's spending heavily to further these initiatives. "We are deliberately investing in our future and furthering our competitive differentiation," Barry said.
Now what
Those investments will continue in the year ahead. And with Best Buy's comparable sales projected to decline by 1% to 4% as pandemic-related consumer spending moderates, management expects its adjusted earnings per share to decline by roughly 10%, to $9, in fiscal 2023.
Yet looking further ahead, management projects Best Buy's revenue will grow to as much as $56.5 billion in fiscal 2025, fueled by its membership- and health-related gains. The company also sees its adjusted operating margin rising as high as 6.8% by that time.
This upbeat long-term growth forecast likely influenced Best Buy's decision to boost its quarterly cash dividend by 26% to $0.88 per share. Its board of directors also authorized a $5 billion share repurchase program.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns and recommends Best Buy. The Motley Fool has a disclosure policy.
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