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Best Buy Co., Inc. operates in the U.S. and Canada, focusing on retailing consumer electronics and related services. The company is divided into two segments: Domestic, which includes all U.S. operations and Best Buy Health, and International, which covers Canadian operations . Best Buy offers a wide range of products, including computing and mobile phones, consumer electronics, appliances, entertainment, and services, and emphasizes its exclusive brands like Best Buy Essentials, Dynex, and Insignia .
- Computing and Mobile Phones - Offers a variety of computing devices and mobile phones, catering to both personal and professional needs.
- Consumer Electronics - Provides a broad selection of electronic devices, including televisions, audio systems, and cameras.
- Appliances - Sells major household appliances such as refrigerators, washers, and ovens.
- Entertainment - Features a range of entertainment products, including video games, movies, and music.
- Services - Delivers various services, including installation, repair, and technical support for electronic devices.
What went well
- Expansion of store formats, including outlets and smaller stores like the new Bosman and Kansas City locations, allows Best Buy to reach new markets, meet customer demand for value, and operate profitably.
- Planned launch of a curated online marketplace in the U.S. targeting mid-next year, leveraging their trusted brand to offer a wider assortment and engage customers in deeper categories, driving incremental revenue streams.
- Strategic promotional activities and early start to the holiday season position Best Buy well to capture consumer demand, maintain market share in key categories like computing, TVs, and appliances, and improve price perception. ,
What went wrong
- Despite increased promotional efforts, Best Buy is struggling to stimulate consumer demand, particularly during periods between sales events, as customers remain deal-focused and less responsive to promotions.
- Potential tariffs on imports from China could significantly impact Best Buy's cost of goods sold, as approximately 60% of their COGS comes from China, and the company faces challenges diversifying its supply chain.
- Uncertainty surrounds Best Buy's new store formats and marketplace launch, as these initiatives are in early stages with limited consumer response data, posing execution risks and potential delays in realizing benefits.
Q&A Summary
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Q4 Guidance and Factors
Q: Explain Q4 comp outlook given strong start.
A: Management forecasts a flat to down 3% comp for Q4, despite a 5% increase in the first three weeks, due to factors like a shorter holiday season, changes in promotional timing, and calendar shifts. They noted the first three weeks account for only about 20% of Q4 sales and anticipate potential low points between sales events, especially in December. -
Tariff Impact and Sourcing
Q: What's your exposure to China and Mexico tariffs?
A: They confirmed that about 60% of their cost of goods sold comes from China, consistent with prior periods. While they directly import only 2%-3% of products, with most controlled manufacturing moved out of China, tariffs remain complex and could lead to higher prices for customers. They are collaborating with vendors on mitigation strategies, but diversification is challenging due to complex supply chains. -
Profit Improvement in Services
Q: Are recent service improvements sustainable next year?
A: This year's gross profit expansion in services and membership was driven by program changes and cost reductions, benefits that will likely normalize next year. However, the warranty business is strong, with increasing attach rates potentially driving continued improvements. They expect services to remain healthy but not at this year's growth level. -
Promotional Environment
Q: How is the promotional environment affecting sales?
A: The company anticipates a highly promotional Q4, similar to the rest of the year, due to value-seeking consumers. They've invested in price and feel well-positioned but note inconsistencies in promotion effectiveness. Overall, promotions have improved price perception and sales during key periods. -
Membership Renewals and Guidance
Q: Any update on membership renewals and wide Q4 OI guidance?
A: Membership retention rates are outperforming internal expectations for both Total and Plus tiers, with paid members showing higher engagement and spend. While not disclosing specific rates, they are pleased with the metrics. The wide Q4 operating income guidance reflects potential SG&A deleverage at varying comp levels. -
Laptop Sales and AI
Q: What's driving laptop sales and AI's impact?
A: Laptops achieved a 7% comp increase, the highest since April 2021. While AI features are expanding, with 50% of premium Windows laptops including AI capabilities, current sales are mainly driven by the upgrade and replacement cycle. Interest in AI is expected to grow, particularly with Windows 10 support ending in October 2025. -
Mobile Phones Performance
Q: How are mobile phones and AI models performing?
A: Mobile phone trends improved slightly in Q3 over Q2 but remain down year-over-year. The impact of AI-optimized models like the iPhone 16 is not fully realized, as much innovation is forthcoming. There's rising customer interest in phones evolving into virtual assistants and a shift towards purchasing unlocked premium phones. -
New Store Formats
Q: How are new store formats performing?
A: They are exploring new store formats, including expanding outlets and opening smaller stores in markets like Bosman and Kansas City. Early community response has been positive, but it's too soon for performance insights. They aim to serve markets effectively by adapting store sizes and formats. -
Marketplace Opportunity
Q: What's the opportunity with the upcoming marketplace?
A: Best Buy plans to launch a curated marketplace to offer deeper assortments tailored to their customers. This strategy leverages increased digital shopping behaviors and allows them to meet customer needs without stocking every item in-store. They are focused on integrating the marketplace seamlessly with in-store and digital experiences. -
Best Buy Express Profitability
Q: How profitable is Best Buy Express internationally?
A: Currently, Best Buy Express contributes neutral profitability due to ramp-up costs, but they expect improved earnings next year as the locations mature and sales increase.
Guidance Changes
Quarterly guidance for Q4 2025:
- Comparable Sales Outlook: Flat to a decline of 3% (no prior guidance)
- Non-GAAP Operating Income Rate: 4.6% to 4.8% (no prior guidance)
- Gross Profit Rate: Expected to improve versus last year, but at a lesser degree than reported for the third quarter (no prior guidance)
Annual guidance for FY 2025:
- Revenue: $41.1B to $41.5B (lowered from $41.3B to $41.9B )
- Comparable Sales Decline: 2.5% to 3.5% (lowered from 1.5% to 3% )
- Non-GAAP Operating Income Rate: 4.1% to 4.2% (no change from prior guidance )
- Non-GAAP Effective Income Tax Rate: Approximately 23.5% (lowered from approximately 24% )
- Non-GAAP Diluted Earnings Per Share: $6.10 to $6.25 (lowered from $6.10 to $6.35 )
- Gross Profit Rate: Expected to expand by approximately 40 basis points compared to last year (raised from approximately 35 basis points )
- Non-GAAP SG&A Dollars: Expected to decline by over $200 million compared to last year (raised from a ~2% decline )
- Given the expected slowdown in profit improvement from your services and membership categories next year, particularly as you have lapped the changes to your membership offerings, how do you plan to sustain growth and profitability in this segment?
- With the anticipation that product margin rates will be a larger pressure in the fourth quarter compared to the third, can you elaborate on the specific factors contributing to this decline and how you intend to mitigate its impact on overall gross profit rates?
- As you have increased advertising and technology expenses, resulting in higher SG&A dollars excluding the benefit from the extra week last year, how are you balancing these increased costs with the need to improve SG&A leverage amid softer revenue performance?
- Considering the complexities and potential risks associated with tariffs and your sourcing exposure to China and Mexico, especially for the 2% to 3% of products where you are the importer of record, what specific strategies are you implementing to mitigate these risks and manage supply chain disruptions?
- In light of the highly promotional environment and inconsistencies in promotional effectiveness, how are you adjusting your pricing and promotional strategies to protect margins while ensuring you remain competitive and meet the value expectations of consumers?
Q3 2025 Earnings Call
- Issued Period: Q3 2025
- Guided Period: Q4 2025 and FY 2025
- Guidance:
- Q4 Comparable Sales Outlook: Flat to a decline of 3% .
- Full Year Fiscal '25 Guidance:
- Revenue: $41.1 billion to $41.5 billion .
- Comparable Sales Decline: 2.5% to 3.5% .
- Non-GAAP Operating Income Rate: 4.1% to 4.2% .
- Non-GAAP Effective Income Tax Rate: Approximately 23.5% .
- Non-GAAP Diluted Earnings Per Share: $6.10 to $6.25 .
- Gross Profit Rate: Expected to expand by approximately 40 basis points compared to last year .
- Non-GAAP SG&A Dollars: Expected to decline by over $200 million compared to last year .
- Q4 Non-GAAP Operating Income Rate: 4.6% to 4.8% .
- Q4 Gross Profit Rate: Expected to improve versus last year, but at a lesser degree than reported for the third quarter .
Q2 2025 Earnings Call
- Issued Period: Q2 2025
- Guided Period: FY 2025
- Guidance:
- Annual Sales Guidance: Decline of 1.5% to 3% .
- Earnings Per Share Guidance: Raised due to better-than-expected results in the first half of the year .
- Comparable Sales for Q3: Expected to be down approximately 1% versus last year .
- Non-GAAP Operating Income Rate for Q3: Approximately 3.7% .
- Annual Gross Profit Rate: Expected to expand approximately 35 basis points compared to last year .
- Annual SG&A Expectations: Non-GAAP SG&A dollars expected to decline by approximately 2% compared to last year .
- Revenue for Fiscal Year 2025: $41.3 billion to $41.9 billion .
- Non-GAAP Operating Income Rate for Fiscal Year 2025: 4.1% to 4.2% .
- Non-GAAP Effective Income Tax Rate: Approximately 24% .
- Non-GAAP Diluted Earnings Per Share for Fiscal Year 2025: $6.10 to $6.35 .
- Capital Expenditures for Fiscal Year 2025: Approximately $750 million .
- Share Repurchases for Fiscal Year 2025: Increased from $350 million to $500 million .
Q1 2025 Earnings Call
- Issued Period: Q1 2025
- Guided Period: FY 2025
- Guidance:
- Enterprise Revenue: $41.3 billion to $42.6 billion .
- Enterprise Comparable Sales: Down 3% to flat .
- Enterprise Non-GAAP Operating Income Rate: 3.9% to 4.1% .
- Non-GAAP Effective Income Tax Rate: Approximately 25% .
- Non-GAAP Diluted Earnings Per Share: $5.75 to $6.20 .
- Capital Expenditures: Approximately $750 million for fiscal '25 .
- Share Repurchases: Approximately $350 million .
- Annual Dividend Expense: Approximately $800 million .
Q4 2024 Earnings Call
- Issued Period: Q4 2024
- Guided Period: FY 2025
- Guidance:
- Enterprise Revenue: $41.3 billion to $42.6 billion .
- Enterprise Comparable Sales: Down 3% to flat .
- Enterprise Non-GAAP Operating Income Rate: 3.9% to 4.1% .
- Non-GAAP Effective Income Tax Rate: Approximately 25% .
- Non-GAAP Diluted Earnings Per Share: $5.75 to $6.20 .
- Capital Expenditures: $750 million to $800 million .
- Share Repurchases: Approximately $350 million .
- Store Closures: 10 to 15 stores in fiscal '25 .
- Gross Profit Rate Expansion: 20 to 30 basis points compared to fiscal '24 .
- Best Buy Health Contribution: Expected to add approximately 10 basis points to the gross profit rate on a year-over-year basis .
Competitors mentioned in the company's latest 10K filing.
- Multi-channel retailers
- E-commerce businesses
- Technology service providers
- Traditional store-based retailers
- Vendors
- Mobile network carriers
These competitors are described as entities that offer products and services directly to customers, and some have lower cost operating structures, competing primarily on price .
Recent developments and announcements about BBY.
Financial Reporting
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Revenue: The company reported a total revenue of $9.45 billion, a decrease from $9.76 billion in the same quarter last year. The domestic segment contributed $8.70 billion, while the international segment added $748 million .
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Comparable Sales: Enterprise comparable sales declined by 2.9%, with domestic comparable sales down by 2.8% and international comparable sales down by 3.7% .
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Earnings Per Share (EPS): GAAP diluted EPS increased by 4% to $1.26, while non-GAAP diluted EPS decreased by 2% to $1.26 .
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Operating Income: GAAP operating income as a percentage of revenue was 3.7%, consistent with the previous year. Non-GAAP operating income as a percentage of revenue was also 3.7% .
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Domestic Segment Performance: The domestic gross profit rate improved to 23.6% from 22.9% last year, driven by better performance in the services category. However, domestic revenue decreased by 3.3% due to declines in appliances, home theater, and gaming, partially offset by growth in computing, tablets, and services .
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International Segment Performance: International revenue decreased by 1.6%, with a gross profit rate increase to 22.5% from 22.1% last year. The decline was primarily due to a comparable sales drop and negative foreign exchange impacts .
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Shareholder Returns: Best Buy returned $339 million to shareholders in the third quarter through dividends and share repurchases. The company plans to spend approximately $500 million on share repurchases during FY25 .
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Guidance: For FY25, Best Buy adjusted its full-year comparable sales guidance to a decline of 2.5% to 3.5% and maintained its non-GAAP operating income rate guidance of 4.1% to 4.2% .
Earnings Call
The recent earnings call for Best Buy (BBY) provided several key insights into the company's financial performance and strategic initiatives. For the third quarter, Best Buy reported revenue of $9.4 billion, with a non-GAAP operating income rate of 3.7% . The company experienced a comparable sales decline of 2.5%, attributed to softer customer demand due to macroeconomic uncertainties and distractions such as the election period . Despite these challenges, Best Buy managed to expand its gross margin rate by 6 basis points, driven by improvements in membership and services offers .
Management provided forward guidance, indicating expectations for fourth-quarter comparable sales to range from flat to a decline of 3% . They anticipate continued growth in computing and services, with improved trends in other categories during the holiday season . The company is maintaining its full-year non-GAAP operating income rate guidance between 4.1% and 4.2% .
Strategically, Best Buy is focusing on enhancing customer experiences through digital and store channels, with initiatives like the AI-powered virtual assistant and improvements in app personalization . The company is also expanding its physical presence through collaborations, such as the rebranding of The Source stores in Canada to Best Buy Express .
Analyst questions during the call touched on various topics, including the performance of new store formats and the impact of AI on product offerings. Best Buy executives highlighted the positive reception of new store formats and the growing interest in AI-driven products, particularly in the laptop category .
Overall, Best Buy is navigating a challenging retail environment by leveraging its strengths in customer service, digital innovation, and strategic partnerships to drive future growth.
Earnings Report
Best Buy Co., Inc. (BBY) Third Quarter Earnings Results
On November 26, 2024, Best Buy Co., Inc. announced its financial results for the third quarter ended November 2, 2024. Here are the key highlights:
These results reflect the challenges Best Buy faces in a fluctuating market environment, with a focus on maintaining profitability and shareholder returns despite a decline in sales .