Best Buy Reports Better-Than-Expected First Quarter Earnings

Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week first quarter ended May 4, 2019 (“Q1 FY20”), as compared to the 13-week first quarter ended May 5, 2018 (“Q1 FY19”).

“Q1 was a strong quarter and a good start to the year,” said Hubert Joly, Best Buy chairman and CEO. “We reported comparable sales growth at the high end of our guidance and delivered better-than-expected profitability. In addition to these strong financial results, we continued to make significant progress implementing our Best Buy 2020 strategy to enrich lives through technology and further develop our competitive differentiation.”

Joly continued, “As you know, we made an exciting announcement last month. On June 11, 2019, Corie Barry will become the fifth CEO in Best Buy’s 53-year history. At that time, I will transition to the newly created role of executive chairman of the board. I am very proud of the seamless transition we have decided to implement, as it reflects positively on our momentum as well as our focus on executive development and succession planning.”

Best Buy’s CFO and Strategic Transformation Officer Corie Barry commented, “I am deeply grateful to Hubert and the rest of the board of directors for their confidence in me and their clear belief that this leadership evolution is in the best interests of Best Buy and all its stakeholders. As I think about my new role, I could not be more fortunate to have Mike Mohan at my side as our new president and COO. Our strategy is the right one and is resonating with customers. I am so excited to work with the entire leadership team in this next chapter as we continue to implement the strategy that we helped build together.”

Barry continued, “We are pleased with our Q1 performance. As we look to the full year, we are reiterating the guidance we provided at the beginning of the year. This outlook balances our better-than-expected Q1 earnings, the fact that it is early in the year and our best estimate of the impact associated with the recent increase in tariffs on goods imported from China. Specifically, I am referring to the increase in tariffs from 10% to 25% on the products on the $200 billion List 3 that originally went into effect last September.”

Domestic revenue of $8.48 billion increased 0.8% versus last year. The increase was driven by comparable sales growth of 1.3% and revenue from GreatCall, Inc. (“GreatCall”), which was acquired in Q3 FY19, partially offset by the loss of revenue from 105 Best Buy Mobile and 12 large-format store closures in the past year.

From a merchandising perspective, the largest comparable sales growth drivers were appliances, wearables and tablets. These drivers were partially offset by declines in the entertainment category.

Domestic online revenue of $1.31 billion increased 14.5% on a comparable basis primarily due to higher average order values and increased traffic. As a percentage of total Domestic revenue, online revenue increased approximately 180 basis points to 15.4% versus 13.6% last year.

Domestic gross profit rate was 23.7% versus 23.3% last year. The gross profit rate increase of approximately 40 basis points was primarily driven by the impact of GreatCall’s higher gross profit rate and improved product margin rates, which include the benefit of gross profit optimization initiatives. These favorable items were partially offset by higher supply chain costs.

International revenue of $661 million decreased 5.2% versus last year. This decline was primarily driven by the impact of approximately 390 basis points of negative foreign currency exchange rates and a comparable sales decline of 1.2%, which was driven by Canada.

International gross profit rate was 24.2% versus 23.4% last year. The gross profit rate increase of approximately 80 basis points was primarily due to Canada, which delivered improved gross profit rates in several product categories and increased revenue in the higher margin rate services category.
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