How Is Best Buy Likely To Grow In The Next 2 Years?

by Trefis Team
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Best Buy
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Best Buy (NYSE:BBY) is executing on its strategy to cut costs, optimize square footage, grow online sales and stabilize its revenue stream. The retailer returned to real growth in fiscal 2018, with revenue growth of 7% y-o-y to around $42 billion, primarily driven by an enterprise comparable sales increase of nearly 6%. This growth followed largely flattish revenue growth in previous fiscal years.

Going forward, we expect Best Buy’s revenue to remain largely flat through fiscal 2020. To arrive at our fiscal 2020 net revenue estimates for Best Buy, we have broken down the revenue streams and estimated separately. We have also created an interactive dashboard for Best Buy which provides a detailed analysis of how to arrive at this growth number. You can make changes to these variables to arrive at your own revenue estimates for the company. We have a $74 price estimate for Best Buy, which is about in line with the current market price.

We expect Best Buy to generate around $42 billion in revenues in fiscal 2019, and earnings of almost $1 billion. Our revenue forecast of $42 billion represents a year-on-year decline of around 1%. Of the total expected revenues in fiscal 2019, we estimate $38 billion in the Best Buy U.S. business and almost $4 billion in the Best Buy International business. Best Buy closed its 250 small mobile stores across the U.S., and therefore, we have excluded these numbers from our forecast. To add to that, the company also expects these mobile store closures to negatively impact full-year fiscal 2019 revenue by approximately $225 million, with a flat to slightly positive impact on its operating income. It should be noted that fiscal 2019 has 52 weeks as compared to 53 weeks in fiscal 2018.

We also expect Best Buy’s revenues to grow slightly y-o-y to $42.5 billion in fiscal 2020, driven by strong performance in domestic segment. We have calculated Best Buy’s total revenue in fiscal 2020 by estimating the revenues from the company’s domestic sales, international sales, and other standalone store sales. Further, we have calculated the retailer’s divisional revenues by estimating the number of stores, square footage per store and revenue per square foot in fiscal 2020. We expect Best Buy’s 2020 store count in the U.S. to be just over 990, with an average square footage per store of 39k and revenue per square foot of $1004, translating into $39 billion (+2% y-o-y) in domestic revenues in fiscal 2020. In addition, we also expect close to 210 stores in international markets, with an average square footage per store of 21k and revenue per square foot of $796, translating into $3.6 billion (-9% y-o-y) in international revenues in the same period. On similar lines, we expect other standalone store revenues to reach $400 million (flat y-o-y) in fiscal 2020, with 28 stores, 26k square footage per store and $514 of revenue per square foot.

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