Best Buy Co., Inc. — Fiscal 2021 Form 10-K
Reporting period: Fiscal year ended January 30, 2021 (52 weeks). Although the request identifies “2020 Q4,” this filing is an annual report, not a standalone quarterly report. Best Buy operates Domestic and International segments, selling consumer technology products and services through stores, online channels and in-home services.
Financial results and liquidity
| Metric | Fiscal 2021 | Fiscal 2020 |
|---|---|---|
| Revenue | $47.262 billion | $43.638 billion |
| Comparable sales growth | 9.7% | 2.1% |
| Gross profit / gross margin | $10.573 billion / 22.4% | $10.048 billion / 23.0% |
| Operating income / margin | $2.391 billion / 5.1% | $2.009 billion / 4.6% |
| Net earnings | $1.798 billion | $1.541 billion |
| Diluted EPS | $6.84 | $5.75 |
| Cash from operating activities | $4.927 billion | $2.565 billion |
| Cash and cash equivalents at year-end | $5.494 billion | $2.229 billion |
| Total debt, including current portion | $1.377 billion | $1.271 billion |
| Current ratio | 1.2 | 1.1 |
Capital expenditures were $713 million. The company reported $254 million of restructuring charges in operating expenses and a separate $23 million of Mexico-exit inventory markdowns in cost of sales. The GAAP effective tax rate was 24.3%, compared with 22.7%.
Material changes and operating performance
- Revenue increased 8.3%, driven mainly by pandemic-related demand for technology supporting work, learning, cooking, entertainment and connectivity at home. Management reported Domestic online revenue of $18.674 billion, up 144.4% on a comparable basis, and equal to 43.1% of Domestic segment revenue.
- Domestic revenue rose 7.9% to $43.293 billion; comparable sales grew 9.2%. International revenue rose 12.6% to $3.969 billion; comparable sales grew 15.0%.
- Gross margin fell 60 basis points, mainly from higher supply-chain costs as online sales increased and lower credit-card profit-sharing income. SG&A fell as a share of revenue from 18.3% to 16.8%, reflecting lower store payroll, advertising and overhead, plus $81 million of CARES Act employee-retention credits. Increased sales leverage contributed to operating-margin expansion.
- Operating cash flow rose substantially, with management citing higher earnings, inventory turnover and timing of inventory purchases and payments, as well as compensation-related payment timing. Cash increased by $3.270 billion during the year.
- The company temporarily drew the full $1.25 billion revolving facility in March 2020 and repaid it in July. No revolver borrowings remained at year-end; the company reported compliance with facility covenants.
Outlook, risks and unusual items
- Management described a continuing shift toward digital shopping and expects customer behavior, workforce needs and the role of technology to have lasting effects. The filing does not provide a clear quantified fiscal 2022 revenue or earnings forecast.
- Best Buy decided to exit Mexico in the third quarter. The exit was substantially complete at year-end; management did not expect material additional Mexico-exit restructuring charges in fiscal 2022. The company recorded $277 million of total Mexico-exit and strategic-realignment charges, including the $23 million inventory markdown; $144 million related to International operations and $133 million to Domestic operations. Further strategic restructuring costs remain possible, but timing and magnitude were not forecast.
- COVID-19 risks include renewed operating restrictions, shifts in consumer spending after the pandemic, product shortages, higher freight and supply-chain costs, store lease costs, and lower profitability if sales migrate toward lower-margin online channels. The company also highlighted competition, supplier concentration, labor costs, cybersecurity and privacy, and risks in its health-services expansion.
- Twenty suppliers represented about 80% of merchandise purchases; Apple, Samsung, HP, LG and Sony together represented about 57%. Approximately 25% of revenue was transacted using branded credit cards, making related customer demand and profit-sharing income relevant risks.
- Goodwill totaled $986 million, including $542 million for Best Buy Health. No impairment was recorded; the auditor identified the Health reporting unit’s revenue forecasts as a critical audit matter.
- After year-end, the Board approved a new $5 billion share-repurchase authorization; management announced plans to spend at least $2 billion on repurchases in fiscal 2022 and raised the quarterly dividend from $0.55 to $0.70 per share. The company repurchased 8.1 million shares for $873 million between fiscal year-end and March 18, 2021.
- Unrecognized tax benefits were $327 million; the company said these could decrease by as much as $120 million within 12 months, although timing and outcome were uncertain. The filing also discusses legal proceedings and contingencies but does not provide a clear quantified aggregate exposure.
Most important facts for investors to verify
- Whether elevated pandemic-era demand and 144.4% comparable online growth persist, and how sales and margins evolve as shopping patterns normalize.
- Whether supply-chain expenses, online sales mix and credit-card profit sharing continue to pressure gross margin.
- Execution and final costs of the Mexico exit, and whether other strategic realignment charges arise.
- Cash conversion and working-capital trends, particularly inventory and accounts-payable timing, alongside planned repurchases, dividends and capital investment.
- Best Buy Health growth and goodwill assumptions, as well as resolution of tax matters and any material legal or other contingencies.