Best Buy

  • Consumer electronics retailer Best Buy posted better-than-expected third quarter sales   and earnings growth but cautioned that it may be impacted by higher shipping   costs, inventory challenges and lower-margin holiday sales.

  • Third quarter revenue rose 21.4% to $11.85 billion from a year   earlier, with total same-store sales increasing by 23%. In the US, its   domestic segment, same-store sales improved by 22.6%. Internationally sales   rose by 27.3%, with the international segment accounting for 1/10th of total   revenues.

  • Revenue from the online channel in the US increased by 174% to $3.82   billion, making it the second best online revenue quarter ever. One of the   reasons for this is that the company did shut its stores and switch to a   curbside pickup only option early in the year even though it was declared an   essential retailer and wasn’t required to do so. This spurred consumers to   make use of the online ordering systems. Gross profit came in at $2.8 billion   as margins fell 60 basis points to 23.6%.

  • Operating profit increased by 42% year-on-year to $561 million. The   company decided to exit its Mexican operations in the period resulting in   restructuring charges of $111 million. Selling General and Administrative   expenses fell in the period despite increased incentive compensation, higher   sales costs like credit card processing fees and a $40 million donation to   the Best Buy Foundation. These items were partially offset by lower store   payroll expenses.

  • Net income came in at $391 million (or $1.48 a share), a 33.4%   improvement year-on-year. Adjusted, to exclude certain once-off items,   earnings rose 82% to $2.06 per share, smashing forecasts.

  • The company returned a total of $142 million to shareholders in the   period through dividends. Share buybacks were suspended in March to preserve   capital, and as a result Cash and cash equivalents have jumped 326.2% to $5.1   billion at the end of the period from a year earlier. Total liabilities   increased 24% over the same period to $17.1 billion. Return on assets (ROA)   dipped from 10.1% to 9.8% whilst Best Buys' return on investment (ROI)   improved from 22.5% to 26.9%.

  • Best Buy benefitted from the work-at-home trend as consumers required tech to establish a home office or get their children online for remote learning. It also enjoyed a demand boost as Americans spent less on travelling and eating-out, and more on their homes. However, Best Buy declined to provide fourth quarter guidance due to ongoing Covid-19 uncertainty. But it did say that costs for delivering low-margin videogame consoles, which are popular holiday gifts, would put pressure on profits in the current period. The share is up 30.8% this year. The stock is not one which we own. We are holders of Amazon.com instead in the Cratos BCI Worldwide Flexible Fund.

Best Buy