Best Buy (BBY) Q2 Earnings & Sales Beat Estimates, Up Y/Y

Best Buy Co., Inc. BBY reported robust second-quarter fiscal 2021 results, with the top and the bottom line improving year on year and surpassing the Zacks Consensus Estimate. Notably, this marked the 11th straight quarter of earnings beat, while sales have surpassed estimates four times in a row.

Top-line results in the quarter gained from growth in products that support stay-at-home practices such as tablets, computing devices and household appliances. Moreover, as the company opened its stores more broadly, it witnessed growth across most categories and services.

Although the company has continued to witness growth in the first three weeks of fiscal third-quarter, management is somewhat cautious regarding the ongoing uncertainties induced by the pandemic. For the third quarter, even though sales are expected to rise year-on-year, the rate of growth is likely to slow down from the current quarter-to-date level of approximately 20%.

Shares of the company were down in the pre-market trading hours on Aug 25.

Let’s Delve Deeper

This consumer electronics retailer’s adjusted earnings per share of $1.71 have surpassed the Zacks Consensus Estimate of $1.09. The bottom line increased nearly 58% year over year.

On a GAAP basis, earnings per share came in at $1.65, up from 89 cents in the year-ago quarter.

The company’s Enterprise revenues rose nearly 4% year over year to $9,910 million and beat the consensus mark of $9,841 million. Enterprise comparable sales were up 5.8% compared with 1.6% growth recorded in the prior-year quarter.

Markedly, enterprise sales in the quarter gained from higher demand for computing products, appliances and tablets. In fact, enterprise sales growth was nearly 16% in the last seven weeks of the second quarter, after the company opened its stores.

The company recorded gross profit of $2,270 million, down 0.5% year over year. Also, gross margin contracted 100 basis points (bps) to 22.9%. Nevertheless, adjusted operating income surged nearly 54% to $588 million, while adjusted operating margin expanded 190 bps to 5.9%.

Best Buy Co., Inc. Price, Consensus and EPS Surprise

Best Buy Co., Inc. Price, Consensus and EPS Surprise

Best Buy Co., Inc. price-consensus-eps-surprise-chart | Best Buy Co., Inc. Quote

Segment Details

Domestic segment revenues increased 3.5% year over year to $9,128 million. Growth was mainly driven by comparable sales rise of 5%, partly offset by revenue loss from the closure of 25 stores. Comparable sales during the quarter gained from growth in computing, appliances and tablets, which were partly negated by declines in mobile phones, digital imaging and services. 

Meanwhile, comparable online sales at this division increased 242.2% to $4.85 billion, mainly owing to higher traffic and conversion rates. As a percentage of overall Domestic revenues, online revenues grew by a substantial 3,700 bps to 53.1% compared with 16.1% recorded in the prior-year quarter.

However, the segment’s gross margin contracted 120 bps year over year to 22.8% due to higher supply chain costs due to higher mix of online revenue.

International segment revenues increased 9.4% to $782 million. The upside was backed by comparable sales rise of 15.1%, partly offset by the adverse impact of currency exchange rates to the tune of 490 bps. The segment’s gross margin was flat year-on-year at 23.8%.

Other Financial Details

Best Buy ended the quarter with cash and cash equivalents of $5,305 million, long-term debt of $632 million and total equity of $3,778 million.

In the fiscal second quarter, the company returned about $143 million to shareholders via dividends. On a year-to-date basis, the company has returned $346 million to shareholders, via share repurchases worth $62 million and dividend payouts worth $284 million.

In addition, the company’s board of directors approved a quarterly dividend of 55 cents per share. The dividend will be paid out on Oct 6, 2020 to shareholders of record as on Sep 15.

Price Performance & Zacks Rank

In the past three months, shares of this Zacks Rank #2 (Buy) company have surged 52.6% compared with the industry’s rise of 51.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3 Stocks Hogging the Limelight

Big Lots BIG, a Zacks Rank #1 stock, has a long-term earnings growth rate of 7.1%.

Sprouts Farmers Market SFM has a trailing four-quarter average earnings surprise of 49.9% and a Zacks Rank #1.

Dollar General DG has a long-term earnings growth rate of 12.5%. Currently, it carries a Zacks Rank #2.

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