Best Buy’s Earnings Were Good, Dividend Hike Was Better

Print Email

Best Buy Co. Inc. (NYSE: BBY) reported fourth-quarter and full fiscal-year 2018 results before markets opened Thursday. The big-box retailer of electronics gear reported adjusted diluted earnings per share (EPS) of $2.42 and $15.36 billion in revenues for the quarter. In the same period a year ago, Best Buy reported EPS of $1.93 on revenue of $13.48 billion. Fourth-quarter results also compare to consensus estimates for EPS of $2.04 and $14.51 billion in revenue.

For the full year, Best Buy reported sales of $42.15 billion and adjusted EPS of $4.42, compared with 2016 revenues of $39.4 billion and EPS of $3.51. Analysts had expected revenues of $41.31 billion and EPS of $4.04. Both the quarter and the full year had an extra week compared with 2016.

Enterprise level same-store sales rose 9% year over year in the quarter, and domestic sales rose by the same amount. For the year both worldwide and domestic same-store sales rose 5.6%. Domestic online sales rose 17.9% for the quarter and 21.8% for the full year. Domestic sales account for about 90% of Best Buy’s revenues.

The company raised its dividend from $0.34 per share per quarter to $0.45, a 32% increase. The company repurchased $2 billion in stock and paid dividends of $409 million.

The company’s chief financial officer, Corrie Barry, said:

From a profitability standpoint, in the Domestic segment, which makes up over 90% of the Enterprise operating income in Q4 FY18, the operating income rate declined. We delivered a flat gross profit rate while our SG&A expenses, excluding tax reform-related expenses, grew slightly more than the revenue growth rate. This is due to the increase in the incentive compensation expense for more than 85,000 store and corporate employees as a result of the very strong performance throughout the year, and to the investments we’ve made in the business. These expenses were partially offset by efficiencies and cost savings.

In its guidance for fiscal year 2019, the company said it expects enterprise revenues to total between $41 billion and $42 billion, enterprise same-store sales flat to up 2% and adjusted EPS of $4.80 to $5.00, an increase of 9% to 13%. Analysts were estimating EPS for the year at $4.75 on revenues of $40.91 billion.

Best Buy guided first-quarter 20198 EPS in a range of $0.68 to $0.73 and enterprise revenues to $8.65 to $8.75 billion. Same-store sales are forecast to rise 1.5% to 2.5%. Analysts were expecting first-quarter EPS of $0.76 on sales of $8.67 billion.

Best Buy attributed fourth-quarter same-store sales growth to better sales of mobile phones, gaming, appliances, smart home, wearables and home theater.

Shares traded up more than 4.5% at $75.80, in a 52-week range of $42.22 to $78.59. The consensus 12-month price target was $69.54 before results were announced, with a high target of $85.00. The stock closed at $72.44 on Wednesday.