Best Buy Reports Fiscal Q1: Comparable Sales Down 6.1%

Best Buy Co., Inc. (NYSE: BBY) reported its financial results for the first quarter of fiscal year 2025 (Q1 FY25), which ended on May 4, 2024.

The company announced that enterprise revenue for the quarter stood at $8.85 billion, a decrease from $9.47 billion in Q1 FY24. The domestic segment saw a revenue decline of 6.8%, totaling $8.20 billion, while the international segment experienced a 3.3% decrease, bringing in $644 million. Comparable sales for the enterprise fell by 6.1%, with domestic comparable sales dropping by 6.3% and international comparable sales by 3.3%.

Despite the revenue decline, Best Buy reported a slight increase in profitability. GAAP diluted earnings per share (EPS) rose to $1.13 from $1.11 the previous year, while non-GAAP diluted EPS increased to $1.20 from $1.15.

The company’s GAAP operating income as a percentage of revenue improved to 3.5% from 3.3%, and non-GAAP operating income grew to 3.8% from 3.4%. CEO Corie Barry highlighted that the company managed its profitability well despite a challenging sales environment, making strides in growing its paid membership base and enhancing customer experiences. The domestic segment’s gross profit rate increased to 23.4% from 22.6% last year, primarily due to improved financial performance in the services category, including membership offerings.

However, lower product margin rates partially offset this and reduced profit-sharing revenue from the company’s private label and co-branded credit card arrangement. Domestic selling, general, and administrative (SG&A) expenses were reduced to $1.60 billion, or 19.5% of revenue, down from $1.71 billion, or 19.4% of revenue, last year, primarily due to lower employee compensation expenses and reduced vehicle rental costs.

Best Buy Beats EPS Forecasts But Falls Short of Revenue in Fiscal Q1

When comparing Best Buy’s Q1 FY25 performance against market expectations, the company slightly exceeded EPS forecasts but fell short on revenue.

Analysts had anticipated an EPS of $1.08, but Best Buy delivered a GAAP diluted EPS of $1.13 and a non-GAAP diluted EPS of $1.20. This performance reflects the company’s ability to manage costs effectively and maintain profitability despite decreased sales.

However, revenue came in below the expected $8.97 billion, with the actual figure at $8.85 billion, indicating softer-than-expected sales.CEO Corie Barry acknowledged the challenging sales environment, attributing it to macroeconomic factors.

The largest drivers of the comparable sales decline in the domestic segment were appliances, home theater, gaming, and mobile phones, partially offset by growth in services and laptop categories. The international segment also saw a decrease in revenue and gross profit rate, with the latter falling to 22.8% from 23.7% last year due to lower product margin rates.

Despite the revenue shortfall, Best Buy’s operational efficiency and strategic focus on high-margin services helped mitigate the impact on profitability. The company’s ability to exceed EPS expectations suggests that its cost management strategies and emphasis on services and membership offerings are paying off.

Join our Telegram group and never miss a breaking story.

Best Buy Maintains Guidance for Fiscal Year 2025, Expects EPS Between $5.75 to $6.20

Best Buy has maintained its guidance for the full fiscal year 2025. The company expects revenue to range between $41.3 billion and $42.6 billion, with comparable sales projected to decline by 3.0% to remain flat.

The enterprise non-GAAP operating income rate is anticipated to be between 3.9% and 4.1%, and the non-GAAP diluted EPS is expected to be in the range of $5.75 to $6.20. Capital expenditures are projected to be approximately $750 million.CFO Matt Bilunas expressed confidence in achieving profitability at the high end of the non-GAAP operating income rate guidance, citing a higher gross profit rate in the membership and services offerings.

For the second quarter of FY25, Best Buy expects comparable sales to decline by approximately 3% and the non-GAAP operating income rate to be around 3.5%. Despite the ongoing challenges in the retail sector, the company remains optimistic about sequential improvement in comparable sales performance throughout the year.

Best Buy’s strategic priorities for FY25 include strengthening its position in key categories such as computing, home theater, and major appliances through differentiated experiences, targeted marketing spend, and competitive pricing. The company also aims to enhance its membership base and customer experiences, leveraging new technological innovations.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.