Summary

• Best Buy Co., Inc. is an American multinational consumer electronics retailer established in 1966 in Minnesota.
• At the end of fiscal 2023, ended January 28, 2023, the company had 90,000 employees and 1,138 stores open. The company has two reportable segments - domestic and international.
• The products of the company can be divided into six revenue categories - computing and mobile phones, consumer electronics, appliances, entertainment, services, and others.
• During the first quarter of the fiscal year ended April 29, 2023, Best Buy has reported total revenue of $9,467 million which was $10,647 million during the corresponding period a year earlier. Gross profit of the company during the periods are $2,150 million and $2,353 million, respectively. Net earnings reported by the company is $244 million and $341 million for the periods, respectively.
• Best Buy has reported $46,298 million revenue in FY23 which was $51,761 million in FY22. Gross profit during FY23 is $9,912 million and $11,640 million a year earlier. Net earnings for the year are $1,419 million and $2,454 million, respectively.

Brief Company Overview

Best Buy Co. (NYSE:BBY), Inc. is an American multinational consumer electronics retailer established in 1966 in Minnesota originally as an audio specialty store called Sound of Music. The company rebranded under its current name in 1983 with a focus on consumer electronics. The company operates both in domestic and international markets. There are six revenue categories - computing and mobile phones, consumer electronics, appliances, entertainment, services, and other.

At the end of the fiscal year 2023, ended January 28, Best Buy employed more than 90,000 employees in the U.S. and Canada. Of the total employees, 58% are full-time employees, 32% are part-time and 10% are seasonal/occasional employees. The company has two reportable segments - domestic and international. The Domestic segment is comprised of the operations in all states, districts and territories of the U.S. and Best Buy Health business, and includes the brand names Best Buy, Best Buy Ads, Best Buy Business, Best Buy Health, CST, Current Health, Geek Squad, Lively, Magnolia, Pacific Kitchen and Home, TechLiquidators and Yardbird and the domain names bestbuy.com, currenthealth.com, lively.com, techliquidators.com and yardbird.com. And the International segment is comprised of all operations in Canada under the brand names Best Buy, Best Buy Mobile and Geek Squad and the domain name bestbuy.ca.

The company had 1,138 stores at the end of fiscal 2023 throughout their Domestic and International segments.

Corie Sue Barry is the current CEO & Director of the company. As of May 2023, the company had 52-weeks price range of $93.32 to $60.79. Trailing P/E ratio of the company is 11.70 times, price to sales ratio (ttm) is 0.36 times, profit margin is 2.93%, operating margin (ttm) is 3.95%, return on assets (ttm) is 7.44%, return on equity (ttm) is 47.55%, diluted EPS (ttm) is $6.29. Payout ratio of the company is 55.96%. The company split its shares on August 03, 2005 to the ratio of 3:2. At the end of first quarter of fiscal 2024, ended April 29, 2023, the company had weighted-average diluted common shares outstanding of 219.9 million.

Recent Developments

• In fiscal 2022, we acquired all of the outstanding shares of Current Health Ltd. (“Current Health”) and Two Peaks, LLC d/b/a Yardbird Furniture (“Yardbird”).
• During November, 2020, Best Buy announced its exit from Mexico - a place where it has comparatively the smallest operation with 49 stores.¹ The decision came amid escalation of Covid-19 cases. The closure was completed by the end of first quarter of fiscal 2022 (end of February 2021).

Recent Financing Activities

• For the Q1 of fiscal 2024 ended April 29, 2023, Best Buy's board authorized a quarterly dividend of $0.92 per common share. The company had 218,499,262 shares of common stock issued and outstanding as of April 29, 2023.²
• In Q1 FY24, Best Buy repurchases shares of $79 million.³
• On February 28, 2022, the Board of the company approved a new $5.0 billion share repurchase program, which replaced the $5.0 billion share repurchase program authorized on February 16, 2021.

Financial Performance Highlights

Q1 2024 Highlights

During the first quarter of the fiscal year ended April 29, 2023, Best Buy has reported total revenue of $9,467 million which was $10,647 million during the corresponding period a year earlier. Gross profit of the company during the periods are $2,150 million and $2,353 million, respectively. Gross profit margin is 22.7% and 22.1% for the periods, respectively. Operating income of the company is $311 in the Q1 of FY24, which was $462 million during the first quarter a year earlier. Net earnings reported by the company is $244 million and $341 million for the periods, respectively. Diluted earnings per share is $1.11 and $1.49, respectively.

In the first quarter of FY24, total revenue comprises 93% of domestic and 7% of international revenue which was similar during the quarter a year earlier. In both the segments, computing and mobile phones is the top product category, representing about 45% of total revenue in each market.

In Q1 FY24, the company returned a total of $281 million to shareholders through dividends of $202 million and share repurchases of $79 million.

Annual Performance Highlights

Best Buy has reported $46,298 million revenue in FY23 which was $51,761 million in FY22. The reasons behind the decline of 10.6% is that there was stronger demand in FY21 and FY22 due to the pandemic, the consumers shifted afterwards towards travel and entertainment instead of spending in durable goods, and the pressure of high inflation. Gross profit during FY23 is $9,912 million and $11,640 million a year earlier. Net earnings for the year are $1,419 million and $2,454 million, respectively.

Total current assets reported by the company on January 28, 2023 is $8,802 million as compared to $10,539 million a year earlier. Total assets of the company is $15,803 million as compared to $17,504 million a year earlier. The company had no preferred stock issued and outstanding at the end of this year. Shares of common stock outstanding for the years are 218.1 million and 227.4 million, respectively.

Total cash provided by operating activities during the years are $1,824 million and $3,252 million, respectively. Cash used in investing activities during the fiscal year ended January 28, 2023 is $962 million, as compared to $1,372 million a year earlier. Total cash used in financing activities during the periods are $1,806 million and $4,297 million, respectively. Total cash and cash equivalent balance at the end of the period is $2,253 million and $3,205 million, respectively.

Business Overview

The business of Best Buy is divided into two segments - domestic and international. Both segments operate an omnichannel platform that allows customers to come to online, to visit stores or to invite the company personnel to their homes. The activities of the company like development of merchandise and service offerings, pricing and promotions, procurement and supply chain, online and mobile application operations, marketing and advertising and labor deployment across all channels are centrally managed. Support and logistics activities like human resources, finance, information technology, and real estate management are managed from the corporate headquarters. The retail stores of the company have procedures for inventory management, asset protection, transaction processing, customer relations, store administration, product sales and services, staff training and merchandise display that are largely standardized. All stores generally operate under standard procedures with a degree of flexibility for store management to address certain local market characteristics. Day-to-day operations of the stores are led by the store management however more strategic decisions regarding, for example, store locations, format, category assortment and fulfillment strategy are addressed at a market or regional level.

The business segments of the company have offerings in six revenue categories.

Computing and Mobile Phones - Computing (including desktops, notebooks and peripherals), mobile phones (including related mobile network carrier
commissions), networking, tablets (including e-readers) and wearables (including smartwatches);
Consumer Electronics - digital imaging, health and fitness products, home theater, portable audio (including headphones and portable speakers) and
smart home;
Appliances - large appliances (including dishwashers, laundry, ovens and refrigerators) and small appliances (including blenders, coffee makers and
vacuums);
Entertainment - drones, gaming (including hardware, peripherals and software), movies, music, toys, virtual reality and other software;
Services - consultation, delivery, design, health-related services, installation, memberships, repair, set-up, technical support and warranty-related
services; and
Other - other product offerings, including baby, food and beverage, luggage, outdoor living and sporting goods.

Best Buy purchases its merchandise from a variety of suppliers. In fiscal 2023, about 79% of its merchandises are sourced from 20 largest suppliers - top 5 suppliers representing 57%. Five largest suppliers of the company are Apple, Samsung, HP, LG and Sony. The company usually does not have any long-term binding contracts with the suppliers. Best Buy continuously monitors consumer demand, adjusts inventory and price levels, enters agreements with vendors regarding sales discount and return privilege of certain products. The company also has a global sourcing operation to design, develop, test and contract-manufacture exclusive brands products. Most merchandise is shipped directly from manufacturers to company's distribution centers.

Customers who avail the option to purchase products online can pick up the products at a Best Buy store (including curbside pick-up for select products at most Domestic stores), or at an alternative pick-up location or can take delivery directly at their homes. At the end of fiscal 2023, Best Buy had 1,138 stores under both the segments. The stores are a part of the company's omnichannel strategy. Best Buy also has the concept of store-within-as-store that allows closer vendor partnerships and a higher quality customer experience.

The company has seasonality in its business. A large proportion of their revenue and earnings is generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season.

Company History

Richard Schulze and his business partners opens up Sound of Music store in St. Paul, Minnesota, USA in 1966. The company acquires Kencraft Hi-Fi Company and Bergo Company in 1967. Sound of Music becomes a publicly traded company a year after and it opens three stores in the Twin Cities area. By 1970, the company hits the $1 million mark in annual revenue. After a decade of expansion, in 1983, the board of directors of the company approves a new corporate name, Best Buy Co., Inc. in 1983. The company with changed name issues IPO on the Nasdaq in 1985 to raise $8 million. Another public stock offering in the following year raises $33.6 million, which helped a 12-store expansion for the company.

In 1989, Best Buy unveils a revolutionary “grab-and-go” store format in a non-commissioned, warehouse-style environment; Best Buy’s brand logo changes to the familiar yellow tag. In 1993, Best Buy becomes the nation's second-largest consumer electronics retailer. In 1995, Best Buy ranked 373 among Fortune's 500 largest American companies. In 1999, Best Buy partnered with Microsoft to cross-promote products. Best Buy enters the online retailing business by launching www.bestbuy.com in 2000. The company enters the international market buy acquiring Future Shop in Canada in 2001. In 2003, Best Buy opens its first global sourcing office in Shanghai, China. Best Buy was named "Company of the Year" by Forbes Magazine in 2004. In 2006, Best Buy acquires majority interest in Jiangsu Five Star Appliance stores in China. The company opens its first retail store in Shanghai, China in 2007.⁴ However, the operation in China was merged with Jiangsu Five Star in 2011 and Best Buy ceased operating in China by closing all of its stores that year.

In April 2013, Best Buy exited the European consumer electronics market when it sold its 50% stake in The Carphone Warehouse back to the UK-based mobile phone retailer. On March 28, 2015, Best Buy announced the shutdown of the Future Shop chain in Canada; 65 of its 131 former locations were converted into Best Buy locations, while the rest (primarily those in close proximity to an existing Best Buy) were closed permanently. On March 1, 2018, the company announced that it would shut down its 250 standalone Best Buy Mobile stores in the United States by the end of May, due to low revenue and high costs. The Best Buy Mobile stores were reported to account for 1% of the company's revenue.

On May 9, 2018, the company unveiled a new logo. On July 2, 2018, Best Buy announced it was cutting the amount of store space devoted to selling physical music, citing the popularity of streaming services as having reduced sales. Despite an increase in sales of computer equipment due to an increase in remote work during the COVID-19 pandemic, Best Buy laid off over 5,000 employees in early 2021 and forced many others into part-time positions.⁵

References

1. ^ https://www.reuters.com/article/us-best-buy-results-mexico-idUSKBN2842RB
2. ^ https://investors.bestbuy.com/investor-relations/news-and-events/financial-releases/news-details/2023/Best-Buy-Announces-Regular-Quarterly-Cash-Dividend-2b727fa3e/default.aspx
3. ^ https://investors.bestbuy.com/investor-relations/news-and-events/financial-releases/news-details/2023/Best-Buy-Reports-First-Quarter-Results/default.aspx
4. ^ https://corporate.bestbuy.com/wp-content/uploads/downloads/BBY_TimeLine.pdf
5. ^ https://www.cnn.com/2021/02/25/business/best-buy-store-closures-workers/index.html