Best Buy sees first-quarter revenue decline

GaryPageau
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Best Buy Co., Inc. announced lower first-quarter revenues. Domestic revenue of $8.80 billion decreased 11.0% versus last year primarily driven by a comparable sales decline of 10.4%. International revenue of $666 million decreased by 11.6% versus last year. 

 Q1 FY24  Q1 FY23
Revenue ($ in millions)
Enterprise $9,467 $10,647
Domestic segment  $8,801 $9,894
International segment $666 $753
Enterprise comparable sales % change1 (10.1)% (8.0)%
Domestic comparable sales % change1 (10.4)% (8.5)%
Domestic comparable online sales % change1 (12.1)% (14.9)%
International comparable sales % change1 (5.5)% (1.4)%
Operating Income
GAAP operating income as a % of revenue 3.3% 4.3%
Non-GAAP operating income as a % of revenue 3.4% 4.6%
Diluted Earnings per Share (“EPS”)
GAAP diluted EPS $1.11 $1.49
Non-GAAP diluted EPS $1.15 $1.57
Corie Barry, Best Buy CEO

“Today we are reporting Q1 sales results that are right in line with the expectations we shared in March and profitability that was better than expected, demonstrating our strong operational execution,” said Corie Barry, Best Buy CEO. “We continue to appropriately balance the need to adjust in response to the current industry sales trends with the need to invest so we can capitalize on opportunities as our industry moves through this downturn and returns to growth.”

“In this environment, customers are clearly feeling cautious and making tradeoff decisions as they continue to deal with high inflation and low consumer confidence due to a number of factors,” continued Barry. “At the same time, in the first quarter, we continued to see our purchasing customer behavior remain relatively consistent in terms of demographics and the percentage of purchases categorized as premium. In addition, our focus on being there for our customers with expertise and support was highlighted by material improvements in customer satisfaction scores for our in-home services and delivery, and record scores in remote support, in-home repair, store care, and Best Buy Totaltech call center experiences – all key differentiators for us.”

“Our sales performance in the first quarter aligned with our expectations and we are maintaining the full-year guidance we provided this past March,” said Matt Bilunas, Best Buy CFO. “As a reminder, our guidance assumed the consumer electronics industry would continue to feel the pressure of the broader macro environment and a high degree of uncertainty as it relates to the consumer.”

“As we enter the second quarter, we expect our comparable sales to decline in the range of 6% to 8% and our non-GAAP operating income rate to be approximately 3% or slightly higher,” Bilunas continued. “Given the current environment, we are of course preparing for a number of scenarios within our annual guidance range. At this point, we believe our sales align closer to the midpoint of the annual comparable sales guidance. It is still early in the year, so we will continue to watch the trends closely and adjust as necessary.”

Best Buy’s guidance for FY24, which includes 53 weeks, remains unchanged from last quarter and is the following:

  • Revenue of $43.8 billion to $45.2 billion
  • Comparable sales decline of 3.0% to 6.0%
  • Enterprise non-GAAP operating income rate2 of 3.7% to 4.1%
  • Non-GAAP effective income tax rate2 of approximately 24.5%
  • Non-GAAP diluted EPS2 of $5.70 to $6.50
  • Capital expenditures of approximately $850 million

Note: Incorporated in the above guidance, the 53rd week is expected to add approximately $700 million of revenue to Q4 FY24 and provide a benefit of approximately 10 basis points to the company’s full year non-GAAP operating income rate.2 

Domestic Revenue

Domestic revenue of $8.80 billion decreased 11.0% versus last year primarily driven by a comparable sales decline of 10.4%.

From a merchandising perspective, the largest drivers of the comparable sales decline on a weighted basis were computing, appliances, home theater and mobile phones. These drivers were partially offset by growth in the gaming and services categories.

Domestic online revenue of $2.69 billion decreased 12.1% on a comparable basis, and as a percentage of total Domestic revenue, online revenue was 30.5% versus 30.9% last year.

Domestic gross profit rate was 22.6% versus 21.9% last year. The higher gross profit rate was primarily due to: (1) improved financial performance from the company’s membership offerings, which included higher services margin rates and reduced costs associated with program changes made to the company’s free membership offering; (2) favorable product margin rates; and (3) the profit-sharing revenue from the company’s private label and co-branded credit card arrangement.

International Revenue

International revenue of $666 million decreased 11.6% versus last year. This decrease was primarily driven by the negative impact of approximately 610 basis points from foreign currency exchange rates and a comparable sales decline of 5.5%.

International Gross Profit Rate

International gross profit rate was 23.7% versus 24.3% last year. The lower gross profit rate was primarily driven by a lower mix of revenue from the higher margin rate services category.