Business context and reporting period
Best Buy Co., Inc. operates an omnichannel consumer-electronics retail and services business in the U.S. and Canada through Domestic and International segments. Its fiscal 2024 ended February 3, 2024, and included 53 weeks; fiscal 2023 ended January 28, 2023, and included 52 weeks. Fiscal 2024 figures therefore include an extra week, which contributed approximately $735 million of revenue.
Financial results
| Metric | Fiscal 2024 | Fiscal 2023 | Change |
|---|---|---|---|
| Revenue | $43.452 billion | $46.298 billion | Down 6.1% |
| Comparable sales | Down 6.8% | Down 9.9% | Improved decline |
| Gross profit / margin | $9.603 billion / 22.1% | $9.912 billion / 21.4% | Margin up 0.7 percentage points |
| SG&A / revenue | $7.876 billion / 18.1% | $7.970 billion / 17.2% | Expense lower; rate higher |
| Operating income / margin | $1.574 billion / 3.6% | $1.795 billion / 3.9% | Down 12.3%; margin down 0.3 points |
| Net earnings | $1.241 billion | $1.419 billion | Down 12.5% |
| Diluted EPS | $5.68 | $6.29 | Down 9.7% |
| Operating cash flow | $1.470 billion | $1.824 billion | Down $354 million |
| Capital expenditures | $795 million | $930 million | Down $135 million |
Domestic revenue was $40.097 billion, down 6.3%, with comparable sales down 7.1%; operating income was $1.467 billion, down from $1.634 billion. International revenue was $3.355 billion, down 4.3%; operating income fell to $107 million from $161 million. Domestic gross margin improved, aided by membership offerings and Best Buy Health, but lower sales reduced leverage on fixed costs. International gross margin declined.
Cash and cash equivalents were $1.447 billion at year-end, versus $1.874 billion a year earlier. The current ratio was 1.0 in both years. Cash used in financing was $1.144 billion, including $801 million of dividends and $340 million of share repurchases. The company reported $1.150 billion of principal debt: $500 million of notes due 2028 and $650 million due 2030. It had no revolving-facility borrowings and $1.25 billion of undrawn capacity; it reported compliance with facility covenants. Debt-to-earnings increased to 0.9 from 0.8.
Material changes versus the prior year
- Revenue and earnings declined for a second consecutive year, although the comparable-sales decline narrowed from 9.9% to 6.8%.
- Domestic comparable sales fell most sharply in appliances, down 15.1%; computing and mobile phones fell 7.8%, and consumer electronics fell 8.6%. Entertainment rose 9.7% and services rose 8.7%, supported by gaming hardware and membership-related activity.
- Online revenue was $13.102 billion, or 32.7% of Domestic revenue; comparable online sales declined 7.8%.
- Fiscal 2024 included $153 million of restructuring charges, primarily employee termination benefits. The company also recorded a $21 million gain on the sale of a Mexico subsidiary.
- The effective tax rate rose to 23.5% from 20.7%, mainly reflecting lower benefits from tax matter resolutions and stock-based compensation. Non-GAAP diluted EPS was $6.37, compared with $7.08.
Outlook, commentary and risks
Management expects fiscal 2025 to bring increasing industry stabilization as innovation improves and consumers begin replacing or upgrading products purchased during the pandemic. This is a qualitative outlook; the filing text does not provide clear fiscal 2025 revenue or EPS guidance. Management’s stated priorities are to improve customer experience and positioning while maintaining, if not expanding, profitability.
- Fiscal 2025 capital expenditures are expected to be $750 million to $800 million; planned share repurchases are approximately $350 million. The regular quarterly dividend was raised 2% to $0.94 per share in February 2024.
- Best Buy expects to close approximately 10 to 15 stores in fiscal 2025. Fiscal 2024 included 24 large-format store closures and eight Experience store remodels.
- The fiscal 2024 restructuring initiative is expected to incur another $10 million to $30 million of charges in fiscal 2025. Up to $135 million of termination benefits is expected to be paid in fiscal 2025, with the balance in fiscal 2026.
- Management cited inflation, consumer spending shifts toward travel and entertainment, prior demand pull-forward and limited product innovation as pressures on fiscal 2024 demand. Key risks include intense price competition, vendor concentration, supply-chain and geopolitical disruption, cybersecurity and privacy incidents, labor costs, and regulatory exposure in health services.
- The five largest suppliers—Apple, Samsung, HP, Sony and LG—accounted for approximately 55% of merchandise purchased. Best Buy Health goodwill fair value exceeded carrying value by approximately 30%, down from approximately 40% the prior year; further deterioration in projections could lead to impairment.
- The company disclosed legal proceedings but the provided filing text does not give a clear aggregate exposure value. It reported $71 million of outstanding letters of credit and no off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether consumer-electronics demand stabilizes in fiscal 2025 and whether comparable-sales trends improve without relying on the extra fiscal 2024 week.
- Whether margin gains from memberships and services can offset lower sales and fixed-cost deleverage, particularly in Domestic operations.
- Execution and cash costs of restructuring, planned store closures, and store refresh investment.
- Best Buy Health revenue and profitability assumptions underlying its goodwill valuation and the remaining impairment cushion.
- Liquidity and capital returns relative to working-capital needs, lease commitments, debt maturities, and ongoing dividend and repurchase plans.
- Material developments in tax audits, legal contingencies, vendor funding, supplier concentration, and cybersecurity or privacy risks.