Best Buy 2021 Q1 Earnings. Should you Buy, Sell or Hold?

 

Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week first quarter ended May 1, 2021 (“Q1 FY22”), as compared to the 13-week first quarter ended May 2, 2020 (“Q1 FY21”).

Best Buy CFO Matt Bilunas said, “The year has clearly started out much stronger than we originally expected. The sales momentum is continuing into Q2 and we are raising our annual comparable sales growth outlook. As we think about the back half of this year, we expect shopping behavior will evolve as customers are able to spend more time on activities like eating out, traveling and other events. It is difficult to know exactly how that impacts our business, especially as we lap particularly strong sales in the back half of last year. Therefore, at this time, we are leaving our original FY22 back-half sales assumptions unchanged.”

The company is providing the following outlook:

FY22:

  • Enterprise comparable sales growth of 3% to 6%, which compares to prior outlook of (-2%) to 1%
  • Enterprise non-GAAP gross profit rate2 approximately flat to the FY21 rate of 22.4%, which compares to prior outlook of slightly below the FY21 rate of 22.4%
  • Enterprise non-GAAP SG&A2 growth rate of 6% to 7%, which compares to prior outlook of a growth rate in the low single-digits
  • Share repurchases of approximately $2.5 billion, which compares to prior outlook of at least $2.0 billion
  • Capital expenditures of $750 million to $850 million, which remains unchanged

Q2 FY22:

  • Enterprise comparable sales growth of approximately 17%
  • Enterprise non-GAAP gross profit rate2 approximately flat to the Q2 FY21 rate of 22.9%
  • Enterprise non-GAAP SG&A2 growth of approximately 20%

Domestic Segment Q1 FY22 Results

Domestic Revenue

Domestic revenue of $10.84 billion increased 37.0% versus last year. The increase was primarily driven by comparable sales growth of 37.9%, which was partially offset by the loss of revenue from permanent store closures in the past year.

From a merchandising perspective, the company generated comparable sales growth across almost all its categories, with the largest drivers being home theater, computing and appliances.

Domestic online revenue of $3.60 billion increased 7.6% on a comparable basis, primarily due to higher average order values and increased traffic. As a percentage of total Domestic revenue, online revenue was 33.2% versus 42.2% last year.

Domestic Gross Profit Rate

Domestic gross profit rate was 23.3% versus 23.0% last year. The gross profit rate increase of approximately 30 basis points was primarily driven by improved product margin rates, including reduced promotions, and rate leverage from supply chain costs. These items were partially offset by increased installation and delivery costs.

Domestic Selling, General and Administrative Expenses (“SG&A”)

Domestic GAAP SG&A was $1.84 billion, or 16.9% of revenue, versus $1.58 billion, or 19.9% of revenue, last year. On a non-GAAP basis, SG&A was $1.82 billion, or 16.8% of revenue, versus $1.56 billion, or 19.7% of revenue, last year. Both GAAP and non-GAAP SG&A increased primarily due to: (1) increased incentive compensation expense; (2) increased investments in technology and in support of the company’s health initiatives; and (3) increased variable expense related to the higher sales growth, including items such as credit card processing fees.

 

International Revenue

International revenue of $796 million increased 23.0% versus last year. This increase was primarily driven by comparable sales growth of 27.8% and the benefit of approximately 1,000 basis points of favorable foreign currency exchange rates. These items were partially offset by lower revenue in Mexico of $69 million, which was a result of the company exiting operations from the country, as previously announced on November 24, 2020.

 

CWEB Analyst’s have initiated a STRONG BUY Rating for  Best Buy Co., Inc. (NYSE: BBY) and potential upside of $259 by end of 2021. Best Buy’s first-quarter net income rose to $595 million, or $2.32 per share, up from $159 million, or 61 cents per share, a year earlier. Excluding items, it earned $2.23 per share, more than the $1.39 per share. Staggering revenues will continue to boost in the bottom line in Q2

Click Here For Full Stock Research on Best Buy by CWEB

 

 


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