Best Buy reports second quarter sales decline 2.3%
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Getting your Trinity Audio player ready...
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Best Buy Co., Inc. announced results for the 13-week second quarter ended Aug. 3, 2024 as compared to the 13-week second quarter ended July 29, 2023. Comparable sales declined 2.3% to
Q2 FY25 |
Q2 FY24 |
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| Revenue ($ in millions) | ||
| Enterprise | $9,288 | $9,583 |
| Domestic segment | $8,623 | $8,890 |
| International segment | $665 | $693 |
| Enterprise comparable sales % change1 | (2.3)% | (6.2)% |
| Domestic comparable sales % change1 | (2.3)% | (6.3)% |
| Domestic comparable online sales % change1 | (1.6)% | (7.1)% |
| International comparable sales % change1 | (1.8)% | (5.4)% |
| Operating Income | ||
| GAAP operating income as a % of revenue | 4.1% | 3.6% |
| Non-GAAP operating income as a % of revenue | 4.1% | 3.8% |
| Diluted Earnings per Share (“EPS”) | ||
| GAAP diluted EPS | $1.34 | $1.25 |
| Non-GAAP diluted EPS | $1.34 | $1.22 |
“We are focused on sharpening our customer experiences and industry positioning while expanding our non-GAAP operating income rate in the current environment,” Barry continued. “We see a consumer who is seeking value and sales events, and one who is also willing to spend on high price point products when they need to or when there is new compelling technology. We are balancing our optimism in both the industry and our positioning with a pragmatic approach to likely uneven customer behavior going forward.”
FY25 Financial Guidance
“As we look to the back half of the year, we expect our industry to continue to show increasing stabilization,” said Matt Bilunas, Best Buy CFO. “Last quarter we said we believed we were likely trending towards the midpoint of our original comparable sales guidance and today we are updating our annual comparable sales guidance range to a decline of 1.5% to 3.0%. At the same time, we are raising our non-GAAP diluted EPS guidance range as we largely flow through the better-than-expected profitability of the first half of the year.”
Bilunas continued, “For Q3 FY25, we expect comparable sales to decline by approximately 1.0% and our non-GAAP operating income rate to be approximately 3.7%.”
Best Buy’s updated guidance for FY25 is:
- Revenue of $41.3 billion to $41.9 billion, which compares to prior guidance of $41.3 billion to $42.6 billion
- Comparable sales of (3.0%) to (1.5%), which compares to prior guidance of (3.0%) to 0.0%
- Enterprise non-GAAP operating income rate2 of 4.1% to 4.2%, which compares to prior guidance of 3.9% to 4.1%
- Non-GAAP effective income tax rate2 of approximately 24.0%, which compares to prior guidance of approximately 25.0%
- Non-GAAP diluted EPS of $6.10 to $6.35, which compares to prior guidance of $5.75 to $6.20
- Capital expenditures of approximately $750 million, which is unchanged
Note: FY25 has 52 weeks compared to 53 weeks in FY24. The company estimates the impact of the extra week in Q4 FY24 added approximately $735 million in revenue, approximately 15 basis points of non-GAAP operating income rate and approximately $0.30 of non-GAAP diluted EPS to the full-year results.
Domestic revenue of $8.62 billion decreased 3.0% versus last year primarily driven by a comparable sales decline of 2.3%.
From a merchandising perspective, the largest drivers of the comparable sales decline on a weighted basis were appliances, home theater and gaming. These drivers were partially offset by growth in the tablets, computing and services categories.
Domestic online revenue of $2.72 billion decreased 1.6% on a comparable basis, and as a percentage of total Domestic revenue, online revenue was 31.5% versus 31.0% last year.
Domestic gross profit rate was 23.5% versus 23.1% last year. The higher gross profit rate was primarily due to improved financial performance from the company’s services category, including its membership offerings, which was partially offset by lower product margin rates and lower 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 expenses were $1.67 billion, or 19.3% of revenue, versus $1.73 billion, or 19.5% of revenue, last year. On a non-GAAP basis, SG&A expenses were $1.66 billion, or 19.3% of revenue, versus $1.71 billion, or 19.2% of revenue, last year. Both GAAP and non-GAAP SG&A expense decreased primarily due to lower employee compensation expense and lower expenses across multiple other areas, including reduced vehicle rental costs and credit card processing fees. These decreases were partially offset by higher advertising expense.
International Revenue
International revenue of $665 million decreased 4.0% versus last year primarily driven by the negative impact of foreign exchange rates and a comparable sales decline of 1.8%.
International Gross Profit Rate
International gross profit rate was 23.9% versus 24.2% last year. The lower gross profit rate was primarily due to lower product margin rates and higher supply chain costs, which were partially offset by growth in the higher margin services category.
International SG&A
International SG&A expenses were $142 million, or 21.4% of revenue, versus $149 million, or 21.5% of revenue, last year. The lower SG&A expense was primarily driven by the favorable impact of foreign exchange rates and lower advertising expense, which was partially offset by expenses associated with new Best Buy Express locations.