An Overview Of Best Buy’s 2017 Performance

Best Buy‘s (NYSE: BBY) announced better-than-expected 2017 results so far, as both its revenue and earnings per share came in ahead of market expectations in the first two quarters, and its earnings per share came in line but revenue missed market expectations in the third quarter. In the first nine months of 2017, Best Buy’s revenue grew 3% year-over-year (y-o-y) to around $27 billion, primarily due to an enterprise comparable sales increase of nearly 4%. The company benefited from stronger consumer demand across most categories, particularly computing, wearables, gaming, and tablets. During this period, the retailer’s online sales grew 13% y-o-y to $3.2 billion, which is now 12% of its domestic revenue. In addition, the retailer’s stock is now trading almost 50% higher than its price at the beginning of the year.

In the first three quarters, the retailer reported non-GAAP EPS of $2.06, up 30% y-o-y, primarily driven by higher domestic revenue. Also, the company’s SG&A costs grew 1% y-o-y, due to increases in growth investments, higher incentive compensation expenses, and higher variable costs due to increased revenue.

Best Buy U.S. Continues To Grow

In the first nine months of 2017, Best Buy’s domestic segment’s revenue increased 3% y-o-y to $25 billion, as domestic comparable sales grew 3.8%, partially offset by the loss of revenue from Best Buy and Best Buy Mobile stores closed during the past year. From a merchandising perspective, the company saw positive comps across almost all its product categories, with the largest drivers being appliances, computing, and smart home. In the international segment, the company’s revenue increased 5% y-o-y to $2.1 billion, also driven by comparable sales growth of 3.8%. This positive comparable growth was driven by growth in both Canada and Mexico.

Boost in Holiday Sales

For the fourth quarter, Best Buy expects its sales to benefit from the positive category momentum from the first nine months of the year. As a result, the company expects its total revenue to be in the range of $14.2-$14.5 billion in the fourth quarter. It also expects domestic comparable sales growth in the range of 1% to 3%, and adjusted earnings per diluted share of $1.89 to $1.99 for the company. To add to that, U.S. retailers recorded a 6% y-o-y gain in the month of November in the electronics and appliances stores. Based on this number, we expect Best Buy to witness a boost in its holiday sales. Also, positive-leaning weather trends and an extra weekend shopping day this year could help the retailer grow its holiday sales in December as well.

For the full year fiscal 2018, the company raised its guidance and now expects revenue growth to range between 4% to 4.8% compared to the prior outlook of approximately 4%. It also expects full year non-GAAP operating income growth of 7% to 9.5% versus its original outlook of 4% to 9% growth.

Our $60 price estimate for Best Buy’s stock is about 10% below the current market price.

Have more questions about Best Buy? Please refer to our complete analysis for Best Buy 

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology