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Last Update: 01-Mar-13 08:14 ET
Best Buy shares rise 5% following beat on earnings
Best Buy (BBY $17.26 +0.85) reported fourth quarter earnings of $1.64 per share, excluding non-recurring items, $0.11 better than the Capital IQ consensus of $1.53, while revenues rose 0.2% year/year to $16.71 billion the $16.29 bln consensus. "Fourth quarter Domestic comparable store sales increased 0.9%, with an overall 10 basis point decline in the gross profit rate. Domestic online revenue increased 11%." It is important to note, however, that comparable store sales in the quarter benefitted from an estimated 35 basis points due to a calendar shift in this year's "pre-Super Bowl" sales from Q1 FY14 to Q4 FY13. Adjusted (non-GAAP) Domestic gross profit rate was 22.4% (22.4% on a GAAP basis) vs. 22.5% (22.3% on a GAAP basis) last year. This 10 basis point decrease is a net impact of two business drivers.
The first, which represents a 40 basis point decrease, is higher promotional activity principally in home theater, that was partially offset by lower sales in gaming which sells at a lower gross profit rate. The second is a 30 basis point benefit from a periodic profit sharing payment that was earned by the co based on the long-term performance of the co's externally managed extended service plan portfolio. Adjusted free cash flow FY13 was $965 million vs. the most recently provided guidance of $500 million. This better-than-expected outcome was primarily driven by an aggressive inventory reduction plan and an intense focus on working capital and cash flow mgmt initiatives that were both implemented after the co's last financial press release, in addition to the impact of better-than-expected Q4 FY13 earnings. To build on this momentum in fiscal 2014, we remain intently focused on the two problems we have to solve: stabilizing and improving our comparable store sales and increasing profitability across our global businesses. We recognize, however, that fiscal 2014 is a year of transition and that further investment will be required to advance our Renew Blue transformation. "From a revenue and earnings perspective in fiscal 2014, we will not be providing financial guidance. Directionally, however, we do expect the first quarter to be under significant pressure due to 1) the absence of an additional week and the impact of this year's "pre-Super Bowl" sales shifting into Q4 FY13 versus Q1 FY14 (an impact of approximately $0.14 in diluted EPS); 2) a less favorable product and services mix due to the timing of high velocity product launches that occurred in Q1 FY13 that are not expected to recur in Q1 FY14; 3) the first quarter carry-over effect of sales and marketing investments that were implemented in the second and third quarters of FY13; 4) greater investment in price competitiveness, including the impact of the company's recently launched price match program; and 5) the timing and impact of capital and SG&A investments in the P&L versus the timing of the realization of the benefits (including the insourcing of IT and replatforming of bestbuy.com)."
Reports out last night indicate talks with Founder Schulz to take the co private have ended.
The first, which represents a 40 basis point decrease, is higher promotional activity principally in home theater, that was partially offset by lower sales in gaming which sells at a lower gross profit rate. The second is a 30 basis point benefit from a periodic profit sharing payment that was earned by the co based on the long-term performance of the co's externally managed extended service plan portfolio. Adjusted free cash flow FY13 was $965 million vs. the most recently provided guidance of $500 million. This better-than-expected outcome was primarily driven by an aggressive inventory reduction plan and an intense focus on working capital and cash flow mgmt initiatives that were both implemented after the co's last financial press release, in addition to the impact of better-than-expected Q4 FY13 earnings. To build on this momentum in fiscal 2014, we remain intently focused on the two problems we have to solve: stabilizing and improving our comparable store sales and increasing profitability across our global businesses. We recognize, however, that fiscal 2014 is a year of transition and that further investment will be required to advance our Renew Blue transformation. "From a revenue and earnings perspective in fiscal 2014, we will not be providing financial guidance. Directionally, however, we do expect the first quarter to be under significant pressure due to 1) the absence of an additional week and the impact of this year's "pre-Super Bowl" sales shifting into Q4 FY13 versus Q1 FY14 (an impact of approximately $0.14 in diluted EPS); 2) a less favorable product and services mix due to the timing of high velocity product launches that occurred in Q1 FY13 that are not expected to recur in Q1 FY14; 3) the first quarter carry-over effect of sales and marketing investments that were implemented in the second and third quarters of FY13; 4) greater investment in price competitiveness, including the impact of the company's recently launched price match program; and 5) the timing and impact of capital and SG&A investments in the P&L versus the timing of the realization of the benefits (including the insourcing of IT and replatforming of bestbuy.com)."
Reports out last night indicate talks with Founder Schulz to take the co private have ended.
