How Did Best Buy Fare In Q4, And What Can We Expect In Fiscal 2020?

by Trefis Team
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Best Buy (NYSE: BBY) announced solid fourth quarter results recently, as both its revenue and earnings per share came in ahead of market expectations. In Q4, Best Buy’s comparable sales were up 3% during the quarter, which topped the consensus estimates of 1.8%. The retailer’s online sales grew 9.3% on a comparable basis, primarily due to higher conversion and increased traffic. However, the company’s revenue declined 4% year-over-year (y-o-y) to around $14.8 billion, largely driven by the lapping of the prior year’s extra week and the loss of revenue from 257 Best Buy Mobile and 12 large format store closures in the past year. The company benefited from stronger consumer demand across the gaming and wearables categories, partially offset by lower than expected sales in mobile phones. Best Buy also reported non-GAAP EPS of $2.72 for the quarter, up 12% y-o-y, primarily driven by a lower effective tax rate and higher operating income.

Our $73 price estimate for Best Buy’s stock is almost 10% ahead of the current market price. We have created an interactive dashboard on How Did Best Buy Fare In Q4, And What Can We Expect In Fiscal 2020?, which outlines our forecasts for the company. You can modify our forecasts to see the impact any changes would have on the company’s earnings and valuation, and see all Trefis Consumer Discretionary company data here.

Best Buy is executing on its strategy to cut costs, optimize square footage, grow online sales and stabilize its revenues. As a result, the company’s fourth quarter marked its fifth consecutive comps and EPS beat. Going forward, Best Buy expects its top line to range between $9.05 billion and $9.15 billion in the fiscal first quarter. In addition, the retailer also expects non-GAAP EPS of $0.83 to $0.88. Further, Best Buy expects its enterprise comparable sales growth of flat to 1%.
Fiscal 2020 Outlook

For full-year fiscal 2020, Best Buy expects revenues of $42.9 billion to $43.9 billion. The retailer is also calling for same-store sales to climb as much as 0.5% to 2.5%. Best Buy’s gross profit margin is expected to remain flat relative to fiscal 2019, as continued investments in supply chain and higher transportation costs could be offset by the higher marginal rate of GreatCall. Further, the retailer’s SG&A expenses are expected to grow in low-single-digits, driven by continued investments in technology and wages. The retailer’s investments in specialty labor, supply chain and increased depreciation related to strategic capital investments, as well as ongoing pressures in the business, will be partially offset by a combination of returns from new initiatives and ongoing cost reductions and efficiencies.

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