March 3, 2015 Last Updated 4:18 pm

Best Buy reports 1.3% increase and big jump in earnings

Company also announces a special, one-time dividend of $0.51 per share, or approximately $180 million

Press Release:

MINNEAPOLIS, Minn. – March 3, 2015 — Best Buy Co., Inc. today announced results for the fourth quarter and year ended January 31, 2015, as compared to the fourth quarter and year ended February 1, 2014. The company today also announced that on February 13, 2015, it completed the sale of its Five Star business in China, which was classified as held for sale as of January 31, 2015, and is reporting the Five Star results in discontinued operations. All information regarding the company’s results pertains to its continuing operations, unless otherwise noted.

Hubert Joly, Best Buy president and CEO, commented, “In the fourth quarter, our teams delivered positive comparable sales, improved profitability and continued progress in our Renew Blue transformation. This resulted in a 1.3% increase in revenue to $14.2 billion and a 23% increase in non-GAAP diluted EPS to $1.48 versus $1.20 last year, primarily driven by growth in the Domestic segment. A compelling merchandise assortment and strong multi-channel execution drove these better-than-expected results as we capitalized on the product cycles in large screen televisions and mobile phones. These two categories were the primary drivers of our year-over-year revenue growth, and more than offset weakness in the tablet category which was impacted by material industry declines.”

Joly continued, “On a full year basis, we continued to make progress against the two main problems we had to solve that we outlined in November of 2012 – declining comps and declining operating income rate. In fiscal 2015, we stabilized comparable sales and delivered incremental non-GAAP SG&A reductions of approximately $420 million, resulting in non-GAAP operating income rate expansion of 80 basis points and a 26% increase in non-GAAP diluted EPS to $2.60. We also ended the year with $3.9 billion in cash, cash equivalents and short term investments versus $2.6 billion last year.

“In light of this progress, we were pleased to announce this morning, in a separate press release, our plan to return excess capital to shareholders including a special, one-time dividend, an increase in our regular quarterly dividend and the resumption of our share repurchase program. The announcement demonstrates our commitment to returning excess capital to our shareholders, while preserving our strong balance sheet and our ability to continue to invest in the growth of our business.”

Joly continued, “As we look forward to fiscal 2016 and beyond, it is imperative that we continue to focus on driving comparable sales and improving our operating income rate while funding investments in our future. As we’ve previously shared, we are pursuing a strategy that is focused on delivering advice, service and convenience at competitive prices to our customers. Within this strategy, we are focused on driving a number of growth initiatives around key product categories, life events and services. To drive these initiatives, we are pursuing and investing in the transformation of key functions and processes. We will also, in fiscal 2016, be facing industry and economic pressures on our business related to deflationary pricing and weak industry demand in certain product categories that we discussed last quarter.

“To win against this backdrop, investing now is imperative. While these investments will put pressure on our fiscal 2016 operating income rate, we believe they leverage our executional momentum and will allow us to build a differentiated customer experience and a foundation for long-term success.”

Sharon McCollam, Best Buy EVP, CAO and CFO, commented, “In fiscal 2016, we expect the financial impact of the investments and economic pressures that Hubert just described to begin in Q1 and continue throughout the year.

“From a topline perspective, our current expectation is consistent with the outlook we provided in our holiday sales release and continues to reflect limited visibility to major new product launches. As such, Q1 and Q2 Enterprise revenue and comparable sales growth, excluding the estimated impact of installment billing, is

expected to be in the range of flat to negative low-single digits. This change in trend versus Q4 is primarily driven by ongoing material declines in the tablet category, in addition to typical holiday momentum around high-profile, giftable products not continuing post-holiday. We will also be anniversarying approximately 80 basis points of Enterprise growth in the first half of last year driven by the chain-wide rollout of ship-from-store.

“From a non-GAAP operating income rate perspective, we are also reiterating our outlook for Q1 and Q2 of down approximately 30 to 50 basis points, including lapping last year’s Q1 15-basis point one-time benefit associated with the new credit card agreement. This decline reflects the economic and growth pressures that we just outlined, the investments we are making to drive our fiscal 2016 growth initiatives and our anticipated SG&A inflation. Additionally, we expect the Q1 and Q2 non-GAAP continuing operations effective income tax rate to be in the range of 39% to 40%.”


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