Best Buy Co., Inc. (NYSE: BBY) has reported mixed results for the first quarter of Fiscal 2023 (ended April 30, 2022). Its earnings came in line with the consensus estimate, while revenues exceeded the same by 2.4%.
Shares of this $16.5-billion consumer electronics company rose 1.2% to close at $73.47 on Tuesday. Also, the shares gained an additional 0.4% in the extended trading session.
Financial and Operational Highlights
In the quarter, Best Buy reported non-GAAP earnings of $1.57 per share, in line with the consensus estimate. The bottom line was down 29.6% from the year-ago tally of $2.23 per share, due to lower revenue generated in the quarter and a weak margin profile.
Revenues were $10.65 billion, up from the consensus estimate of $10.4 billion. On a year-over-year basis, the top line declined 8.25% on weak business in two segments. The Domestic segment’s revenues decreased 8.7% year-over-year to $9.89 billion, while the International segment’s revenues stood at $0.75 billion, down 5.4% year-over-year.
The company’s comparable sales decreased 8% in the quarter against a rise of 37.2% in the year-ago quarter. Specifically, comparable sales of online domestic sales were down 14.9%.
Non-GAAP gross margin in the quarter decreased 120 basis points (bps) year-over-year to 22.1%, while operating margin (non-GAAP) was 4.6%, down 180 bps from the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, Best Buy had cash and cash equivalents of $640 million, down 85% year-over-year. Long-term debts were $1,170 million, down compared with $1,229 million recorded in the year-ago quarter.
In the quarter, the company used $1.38 billion for its operating activities, compared with $105 million generated in the year-ago quarter. Capital expenditure was $215 million, up 33.5% year-over-year.
Projections
For Fiscal 2023 (ending January 2023), Best Buy anticipates revenue of $48.3 billion to $49.9 billion, down from the previous expectation of $49.3 billion to $50.8 billion. Comparable sales changes are expected to be (3%)-(6%) versus (1%)-(4%) predicted earlier.
Non-GAAP earnings are expected to be $8.40 to $9.00, down from $8.85 to $9.15 per share stated earlier. The company also intends to repurchase shares worth $1.5 billion in the year.
The CFO of Best Buy, Matt Bilunas, said, “…we anticipate that our comparable sales and the year-over-year decline in our non-GAAP operating income rate will both be very similar to our first quarter results.”
CEO’s Take
Best Buy’s CEO, Corie Barry, said, “Even with the expected slowdown this year, we continue to be in a fundamentally stronger position than we were before the pandemic from both a revenue and operating income rate perspective.”
Capital Deployment
The company distributed dividends of $199 million in the first quarter, while repurchased shares worth $455 million.
Stock Rating
On May 24, 2022, Peter Keith of Piper Sandler reiterated a Buy rating on BBY and lowered the price target to $91 (23.86% upside potential) from $144.
Overall, the Street has a Moderate Buy consensus rating on BBY based on seven Buys, nine Holds, and one Sell. BBY’s average price target of $96.75 suggests 31.69% upside potential from current levels. Shares of the company have declined 35.8% over the past year.
Website Traffic
TipRanks’ Website Traffic Tool, powered by data from SEMrush Holdings, Inc. (NYSE: SEMR), offers an insight into Best Buy’s performance.
According to the tool, the total number of visits (globally) to the company’s websites in Q1 showed a downtrend. Further, the website visits in the quarter decreased 35% sequentially and 21.5% year-over-year.
Notably, the predictions based on TipRanks’ website visit data are in line with Best Buy’s weak quarterly performance (year-over-year).
Conclusion
The wind seems to be blowing against Best Buy, as the company lowers its revenue and earnings projections for the current fiscal year. Efforts to overcome the hurdles will be welcoming and help improve the company’s investment appeal.
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