24/7 Wall St.

Retailer after retailer has cut store counts over the past year. Some chains have shuttered many of their locations. One that has done very little pruning is Best Buy Co. Inc. (NYSE: BBY). Based on revenue, store count and comparable store sales, that is a surprise.

Over the course of Best Buy’s past six fiscal years, or 24 quarters, domestic comparable store sales have been down in 14. In another four, they have been up less than 1%. In the most recent fiscal year, 2017, same-store sales were higher by only 0.2% for the year. In fiscal 2016, they were only higher by 0.5%.

In fiscal 2012, Best Buy had 1,447 stores. By the end of the most recent fiscal year, that number had dropped to 1,363. However, over the same period, annual sales have fallen from $50.3 billion in fiscal 2012 to $40.0 billion in the most recent year.

Best Buy, if it is like most other major retailers, faces the deep problem of how much business has gone online. Many analysts believe Best Buy has done a better job than most as it tries to keep business from Amazon.com Inc. (NASDAQ: AMZN). However, a successful e-commerce strategy argues for fewer stores.

In the most recent quarter, its fourth of fiscal 2017, Best Buy announced domestic revenue of $12.3 billion, down from $12.5 billion in the same quarter a year ago. Its forecast for the next quarter, the current one, was depressing:

Best Buy is providing the following Q1 FY18 financial outlook:

• Enterprise revenue in the range of $8.2 billion to $8.3 billion
• Enterprise comparable sales change in the range of (1.0%) to (2.0%)
• Domestic comparable sales change in the range of (1.5%) to (2.5%)
• International comparable sales change in the range of flat to 3.0%
• Non-GAAP effective income tax rate of 38.0% to 38.5%4
• Diluted weighted average share count of approximately 313 million
• Non-GAAP diluted EPS of $0.35 to $0.404

Hubert Joly, Best Buy chairman and CEO, said, in part, at the time:

In this next phase, we go from turning the company around to shaping our future and creating a company customers and employees love that continues to generate a superior return for our shareholders. We are driven by our purpose to help customers pursue their passions and enrich their lives with the help of technology.

Best Buy is not turned around, at least as measured by revenue and comparable store sales. Fiscal 2018 is shaping up as another in which store sales will drop. It is hard to argue there is enough cash for Best Buy’s current 1,363 stores. If early fiscal 2018 follows the pattern of recent years, the store count becomes a larger problem.

Best Buy comments:

In the paragraph comparing FY12 and FY17, you are using domestic store counts, but overall enterprise revenue numbers. As you may remember, since FY12, we sold out out our joint venture in Europe and sold our China business.

While we had around $50 billion in enterprise revenue in FY12, we the following breakdown of stores: 1447 in the US, 256 in Canada, 8 in Mexico, 2475 in Europe and 204 in China for a total of 4390.

In FY17, when had just shy of $40 billion our store breakdown is 1363 in the US, 187 in Canada and 25 in Mexico.

If you want to look at domestic revenue and stores, in FY12 we generated $37.615 in US revenue through a store base of 1447. In FY17, we generated $36.248 billion through a store base of 1363.

Points well taken. However, if Best Buy e-commerce has risen very sharply over the period, yield per store has gotten worse.