Best Buy's fiscal Q2 net income down 30.3% year-over-year to US$177M; revenue flat at US$11.3B while same-store sales fell 2.8% with declines in TV, gaming, mobile phones

MINNEAPOLIS , September 13, 2011 (press release) – Best Buy Reports Fiscal Second Quarter Results

Strong revenue growth in tablets and appliances; total revenue flat
Share repurchases reach $863 million fiscal year to date
Company updates fiscal year EPS guidance

Fiscal Second Quarter Highlights

  • Domestic segment mobile computing (including tablets) comparable store sales growth of 9 percent
  • Domestic segment appliances comparable store sales growth of 12 percent
  • Domestic segment online revenue growth of 13 percent
  • Domestic segment connections growth of 4 percent
  • International segment highlighted by Five Star China comparable store sales growth of 7 percent
  • Total Company SG&A growth of 1 percent (excluding the effect of foreign currency exchange rate fluctuations)
  • Operating income decline of 30 percent, driven by a decline in gross profit dollars and increased SG&A
  • Share repurchases of $358 million (12.7 million shares) in the fiscal second quarter; $863 million (29.2 million shares) in the first half of the fiscal year
  • Fiscal year EPS guidance range updated to $3.35 to $3.65, including the estimated impact from fiscal 2012 share repurchases (expected to benefit annual EPS by $0.20 to $0.25)
Best Buy Co., Inc. (NYSE: BBY), a leading multi-channel global retailer and developer of technology products and services, today reported net earnings of $177 million, or $0.47 per diluted share, for its fiscal second quarter ended August 27, 2011, compared with $254 million, or $0.60 per diluted share, for the prior-year period.

"I'd like to thank our employees around the world for continuing to provide a great experience for our customers," said Brian J. Dunn, CEO of Best Buy. "While results in the second quarter and our outlook reflect continued macro challenges to overall consumer spending and lower consumer electronics industry sales, we have made good progress on our key strategic focus areas in this environment. Looking forward to the important holiday season, I believe Best Buy is well positioned to bring the benefits of our multi-channel model to our customers and shareholders."

Revenue

Total Company revenue was $11.3 billion during the quarter, which was essentially flat compared to the prior-year period and included a comparable store sales decline of 2.8 percent. Within the Domestic segment, areas of comparable store sales growth included mobile computing (including tablets), appliances, and eReaders. The online channel delivered a 13 percent revenue increase in the Domestic segment during the quarter, driven largely by traffic growth. These sales gains were offset primarily by comparable store sales declines in television, gaming, digital imaging and physical media. The Company noted that mobile phones comparable stores sales experienced a 5 percent decline due to industry softness driven by the lack of significant new phone launches during the quarter relative to the prior-year period. The Company believes that it continued to grow share in mobile phones in the second quarter. The growth of International segment revenue was driven by foreign currency exchange rates and the continued solid growth performance of the Five Star business in China, which delivered comparable store sales gains during the period, partially offset by Europe and Canada, which each experienced comparable store sales declines.

Gross Profit

Total Company gross profit dollars declined 2 percent during the quarter compared to the prior-year period. The Domestic segment gross profit dollar decline was driven by a rate decline of 50 basis points and the 1.5 percent decline in revenue. The primary factors influencing the rate decline included continued promotional activity to increase sales in select categories and higher sales of service products which include deferred revenue, partially offset by an improved rate in mobile phones. The International segment gross profit dollar growth of 4 percent during the quarter was driven primarily by foreign currency exchange rates as well as increased revenue and an improved gross profit rate in the Five Star business, partially offset by a gross profit decline in Europe. The International segment gross profit rate declined 20 basis points, driven primarily by promotional activity within Europe, partially offset by an improved profit rate in Canada.

Selling, General and Administrative expenses ("SG&A")

Total Company SG&A spending increased 3 percent during the quarter compared to the prior-year period. Excluding the effect of foreign currency exchange rates, total Company SG&A increased 1 percent. Within the Domestic segment, the 2 percent increase in SG&A was primarily driven by the net addition of 113 Best Buy Mobile stand-alone stores and 14 large-format Best Buy locations, as well as increased advertising support. Within the International segment, SG&A spending increased 6 percent. Excluding the impact of foreign currency, International segment SG&A spending declined 2 percent.

Operating Income

Share Repurchases and Dividend

During the second quarter of fiscal 2012, the Company repurchased $358 million, or 12.7 million shares, of its common stock at an average price of $28.31 per share. For the first six months of fiscal 2012, the Company repurchased $863 million, or 29.2 million shares, of its common stock at an average price of $29.51 per share. On July 26, 2011, the Company paid a quarterly dividend of $0.15 per common share outstanding, or $56 million in the aggregate.

Company Updates Fiscal 2012 Annual Guidance

Based on consumer spending and CE industry trends experienced year-to-date and expectations for the remainder of the fiscal year, the Company has updated its annual guidance:
  • Revenue continued to be expected in the range of $51.0 billion to $52.5 billion.
  • Comparable store sales continued to be expected in the range of flat to a 3 percent decline.
  • SG&A dollars expected to increase 3 percent to 4 percent, excluding the impact of foreign currency exchange rate fluctuations.
  • Operating income dollars expected to be in the range of a 5 percent decline to 2 percent growth.
Annual net earnings per diluted share (EPS) expected to be in the range of $3.35 to $3.65 (including the impact from fiscal 2012 share repurchases). This updated guidance range now includes the favorable impact of fiscal 2012 share repurchases expected to total approximately $1.5 billion for the full fiscal year which results in approximately $0.20 to $0.25 of annual EPS benefit. The Company also noted that excluding the impact of fiscal 2012 share repurchases, its updated EPS guidance is lower than its previous adjusted annual net earnings per diluted share guidance range of $3.30 to $3.55.

Conference Call

Best Buy is scheduled to conduct an earnings conference call at 10 a.m. Eastern Time (9 a.m. Central Time) on September 13, 2011. A webcast of the call is expected to be available on its Web site at www.investors.bestbuy.com both live and after the call. A telephone replay is also available starting at approximately 12:30 pm Eastern Time (11:30 a.m. Central Time) on September 13 through September 20. The dial-in number for the replay is 800-406-7325 (domestic) or 303-590-3030 (international), and the access code is 4465962.


About Best Buy Co., Inc.

Best Buy Co., Inc. (NYSE: BBY) is a leading multi-channel global retailer and developer of technology products and services. Every day our employees - 180,000 strong - are committed to helping deliver the technology solutions that enable easy access to people, knowledge, ideas and fun. We are keenly aware of our role and impact on the world, and we are committed to developing and implementing business strategies that bring sustainable technology solutions to our consumers and communities. For additional information about Best Buy, visit www.investors.bestbuy.com.

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