Retail

Best Buy Earnings Skewed by Dividend and Buyback

Jon C. Ogg

Published: February 25, 2016 11:50 am

Last Updated: January 13, 2020 12:43 pm

The Best Buy Co. Inc. (NYSE: BBY) earnings report was deemed less than great, despite being slightly ahead of earnings estimates. The electronics and home appliances retail giant posted $1.53 in adjusted earnings per share (EPS) and revenues of $13.62 billion. Thomson Reuters was calling for $1.30 EPS and $13.61 billion in revenue.

One key driver here was news that Best Buy was boosting its dividend by more than 20% to $0.28 per quarter. Best Buy also announced a special dividend of $0.45 per share and a new buyback plan of up to $1 billion.

What stands out is that the revenue figure is a 4% drop from a year earlier. Domestic sales were down by 1.5% to $12.5 billion, driven by a drop in computing and phones. To show how much Best Buy is changing: its strong sales were in wearables, major appliances and in home theater.

Another show of force is that Best Buy’s e-commerce revenue rose by almost 14% (200 basis points) to a total of 15.6% of its total domestic revenue.

Best Buy’s international sales were down about 26% to $1.1 billion, but foreign exchange pressure and store closures were cited for much of that weakness.

Earnings guidance was $0.31 to $0.35 (versus $0.37 a year ago) on revenues of $8.25 billion to $8.35 billion (down 2.4% to 3.6% from a year earlier) in the coming quarter, and best Buy sees no meaningful growth in operating income nor in revenues. Best Buy expects its Enterprise and Domestic comparable sales to disappoint at -1.0% to -2.0%, and it also expects that international revenues will decline by 15% to 20%.

Best Buy’s capital return plan was stated as follows:

This plan is consistent with the company’s long-term capital allocation strategy to first fund operations and investments in growth, including potential acquisitions, and then to return excess free cash flow over time to shareholders through dividends and share repurchases, while maintaining investment grade credit metrics.

Best Buy shares were up fractionally at $31.74 late Thursday morning. The consensus analyst price target is $34.41 and the 52-week trading range is $25.31 to $42.00.