Best Buy reported results for the first quarter of fiscal year 2025, which ended May 4, 2024. Revenue was $8.85 billion, down 6.1% from the same period last year, when revenue was $9.47 billion. This growth was followed by other segments. We have devoted this analysis to them and the company's overall business.

Operating profit on a GAAP basis was 3.5% of sales, up from 3.3% in the prior year. Non-GAAP operating profit was 3.8%, up from 3.4% in the prior year. GAAP earnings per share increased 2% to $1.13 and non-GAAP earnings per share increased 4% to $1.20.

CEO Corie Barry said the company delivered better-than-expected earnings due to strong execution and is preparing for future growth. However, she also acknowledged that the sales environment was challenging and sales were slightly lower than expected. Financial guidance for fiscal 2025 remains unchanged with earnings per share expected to be between $5.75 and $6.20. Best Buy also expects sales between $41.3 billion and $42.6 billion and capital expenditures of around $750 million. Management is confident that the company can maintain a strong financial performance despite the difficulties.

The stock reacted very positively to these results, gaining 13.14% in the first follow-up session after the market opened. However, the growth has continued to date. The stock is more than 20% more expensive since the results were announced.

Management

Corie Sue Barry - CEO

Corie Barry is the CEO of Best Buy. She also serves on the company's board of directors. Under her leadership, Best Buy is on a path to become one of the best places to work in America, doubling major customer relationship events to 50 million and growing annual sales to $50 billion by fiscal year 2025.

Corie joined Best Buy in 1999 and has held various finance and operations roles throughout the organization, both in the field and in the corporate office. She became CFO in 2016 and prior to that served as Chief Strategy Officer. She also served as senior vice president of domestic finance and interim president of Best Buy's service organization.

Prior to joining Best Buy, Corie began her career as an auditor at Deloitte & Touche. A native of Minnesota, Ms. Barry holds a Bachelor of Science degree in Accounting and Management from the College of St. Benedict, where she now serves on the Board of Trustees. In addition, she serves on the board of directors of Domino's Pizza.

If you would like to learn more about the CEO herself, you can check out her Linkedinwhere she has a full history of education and job roles. She also occasionally posts here about what's going on in the company.

Industry/Specialty

Consumer Electronics: Best Buy offers a wide range of electronic devices, including televisions, audio systems, cameras, smartphones and tablets. Top-selling brands include Apple, Samsung, Sony and LG.

Home appliances:$BBY sells a variety of home appliances such as refrigerators, washers, dryers, microwaves and other kitchen appliances from brands like Whirlpool, GE and KitchenAid.

Computers and accessories: The company offers various types of computers, including desktops, laptops and their accessories. Products are available from companies such as Microsoft, HP, Dell and Lenovo.

Gaming equipment and consoles: In gaming products ,$BBY' s offerings include gaming consoles, games, accessories, and virtual reality. Popular brands include Sony PlayStation, Microsoft Xbox and Nintendo.

Software and Services: $BBY sells a variety of software products, including operating systems, office suites and security software. The company also offers technical support and repair services through Geek Squad, which provides assistance with installation, maintenance, and repair of electronic devices.

Smart Home: The company's product line includes smart home products such as smart thermostats, lighting, security systems, and home assistants such as Amazon Echo and Google Home.

The company's profitability and cash

The stock has hit its highest level since mid-February 2023 after recent very good results. However, it is still currently trading rather lower as it is in a sideways trend. If we compare the share price now and before the Covid pandemic, it is at lower levels today.

The company's market capitalization is $19.02 billion. This is the value at which, as we have now learned, the company was trading a few years ago. However, at the time of growth (2021), it has moved to higher values. It is now 61.7% away from its absolute peak. If the company could at least match this value, its capitalisation would exceed USD 40 billion. The company employs 85 000 people.

19.32 million shares are still held privately off the market. The remainder (91.07% of the shares) is split between investors in the market. The company's debt is $3 billion and $980 million. This is a manageable figure when you consider that the cash available to management is $1.71 billion.

In 2019, the company's revenue was $43.64 billion. Operating margins were at 3.53%, making net income $1.54 billion. In the year when the covid pandemic broke out, revenue increased to $47.26 billion and profit margin increased to 3.8%. The company's profit was thus $1.8 billion. The next year, the company's revenue reached its highest level to date. They were $51.76 billion. Profit margins jumped to 4.74% and net profit was $2.45 billion. In the last two years, the company's sales have been declining. In 2022, their value was $46.3 billion. Margins fell to 3.06% and net profit came in at $1.42 billion. Last year, sales fell to $43.45 billion. Profit margin was 2.86% and net profit was $1.24 billion. These were the worst results in several years.

The company has its business spread only in the US and Canada due to its nature. It is easier to operate brick-and-mortar stores in a smaller territory. Revenues for 2023 were $40.1 billion from the United States. Canada then added 7.72% of sales equivalent to $3.36 billion.

Earnings per share were at $3.56 in 2016. This was 8.43% above market estimates. The company managed to beat the consensus for the next few years. In 2017, EPS was $4.42, which was above estimates by 9.25%. The next year, the beat was 2.73%, and for 2019, it was 2.34%. Covid's 2020 delivered earnings per share of $7.91. But it was the last year in a long run of being above consensus. In 23021, the company did deliver the largest earnings per share in its history ($10.01), but the market was still expecting 0.1% more. In recent years, even as earnings per share have declined, management has once again managed to beat estimates. For this year, they should be down even further to $6.09. But the trend should reverse in the years ahead. EPS could get as high as $9.69 by 2027.

Revenues have not had such a positive development in all years. In 2016, their value was $39.4 billion. At that time, the company missed estimates by 0.37%. In 2017, however, it managed to beat the consensus by 2.05%. Revenue was $42.15 billion. But in the next two years, revenue stagnated and didn't move much. The surge came only in 2020, when revenue reached $47.26 billion. The growth continued in 2021, when revenue was $51.76 billion. To this day, that is the highest revenue figure for the company. But in both of these growth years, the company failed to beat analysts' estimates. They were counting on slightly higher figures. In 2022, sales dropped to $46.3 billion. Last year's revenue was $43.45 billion. This year, the figure is expected to drop even slightly. Starting in 2025, revenues should stagnate around the $43.5 billion mark.

Revenue from the "Domestic" sector as the company calls those revenues that come from the United States stood at $38.66 billion in 2017. Last year they were $40.1 billion, so despite the decline in the last two years, growth is still at least slightly visible. However, revenues from Canada "International" have declined over the same time period. They were $3.49 billion in 2017 and $3.36 billion last year.

Operating expenses

The company's operating costs have been on the same patter for a long time. Spending has held at similar levels throughout the year, but the company spends significantly more in the first quarter of each year. In 2010, that largest expense was $14.8 billion. "Classic" quarters after that, management came out at $11 billion apiece. By 2016, the company's operating costs were declining. At the low they reached $8 billion with a peak spend of $12.6 billion. From then until 2021, they began to increase. At its peak three years ago, the company needed $11.2 billion to operate one quarter. The maximum spend at the beginning of the year was $15.9 billion. For the most recent quarter, the company spent $14 billion (this was the first quarter of the year). So we can see a slowing trend.

Dividend

$BBY paid its first dividend at the end of 2003. Its value was 20 cents. From the beginning, the company resorted to a quarterly payout. In 2005, the stock split was 3/2 and the new dividend was 8 cents per share.

Since then, the value of the payout has only increased. Currently, stockholders earn 94 cents each quarter for each share they hold. That puts the annual dividend yield at a nice 4.28%.

Valuation/Comparison with peers

The company is clearly one of the more defensive and dividend-paying stocks in the market. Investors are therefore not expecting significant price increases from it. Its valuation, which has been increasing but very slowly, also looks accordingly. It will not be without a few hiccups. Let's look back to 2012, when the company went into a loss. The P/E ratio was thus logically at zero. The same was repeated two years later. But once $BBY got out of that situation, the P/E was 10.9. By today, that figure has only moved to 15.48 points. In fact, the stock and earnings per share have risen in tandem over the years, offsetting each other's valuations.

Rivals

Walmart $WMT: is one of the largest retail companies in the world. The company was founded by Sam Walton in 1962 in Arkansas. Walmart operates more than 11,000 stores in 27 countries under 55 different names. The company's history dates back to 1962, when Sam Walton opened the first Walmart. Since then, Walmart has grown rapidly not only in the U.S. but also in international markets. In 1970, the company went public, which allowed for further expansion and growth. Walmart operates various types of stores, including hypermarkets, supermarkets, discount stores, and smaller convenience stores. In addition, the company has a strong online presence with a robust e-commerce system that includes Walmart.com and other online platforms.

Target Corporation $TGT: is one of the largest retail chains in the United States. The company was founded in 1902 by George Dayton in Minneapolis. Target operates thousands of stores across the United States and is known for its wide selection of quality merchandise at competitive prices. The company's history began when George Dayton opened the Goodfellow Dry Goods store. This store was renamed Dayton's Department Store in 1911 and became the first Target department store in 1962. Since then, Target has grown rapidly and has become a major player in the American retail market. In 1970, Target became part of the publicly traded Dayton-Hudson Corporation, which was renamed Target Corporation in 2000.

Costco $COST: Costco Wholesale Corporation, known simply as Costco, is one of the largest retail chains in the world, specializing in the sale of high-volume merchandise at low prices. The company was founded in 1983 by James Sinegal and Jeffrey Brotman. Costco operates more than 800 warehouse clubs around the world, including the United States, Canada, Mexico, the United Kingdom, Japan, South Korea, Taiwan, Australia and other countries. Costco membership is mandatory for purchases at their stores, which ensures a steady income from membership fees.

Blue - $BBY, Yellow - $COST, Orange - $WMT, Turquoise - $TGT

After a covid drop, almost all companies in today's comparison have managed to get to higher levels to date, erasing the drop for good. Only $BBY failed to do so thanks to the 2022 decline. $TGT is slightly better off . It also went through a significant fall two years ago, but is still 35% higher today than in 2020. $WMT is even slightly better off. This company is currently trading at its highs. But the biggest growth, which is more in line with a tech company, is attributed to $COST. Its stock is up 185% in the last 4 years and 5 months.

Future plans

Strengthening online presence: Best Buy is investing in improving its e-commerce platforms to offer customers a better online shopping experience. This includes faster and more reliable delivery, expanding in-store order pickup options, and improving the user interface of the website and mobile apps.

Geek Squad: $BBY plans to expand its technical support and repair services through Geek Squad, which provides assistance with installation, maintenance and repair of electronic equipment. The goal is to offer customers a comprehensive technology solution and foster customer loyalty.

Environmental initiatives: The company is committed to achieving zero carbon emissions by 2040. The company is investing in renewable energy, electronics recycling and waste reduction.

New Markets: Best Buy is considering entering new international markets to expand its global presence and increase sales. This includes analyzing potential markets and adapting business models to local conditions.

Personalisation and data-driven marketing: The company is focusing on using data and analytics to personalize its offerings and improve the customer experience. The goal is to offer more relevant products and services based on individual customer preferences.

Outlook

The company is still trading in a sideways trend after a rough fall in 2022. After recent results, the stock has taken a breath and reached its upper boundary, but has not yet been able to break through it. This would be a very positive sign. The share price would finally get above its early 2020 level. This peak does form the upper boundary of the sideways trend. Investors can still get one share below $90 in the market now. However, given the positive earnings per share outlook, the company could rise significantly in the coming years or become cheaper based on the P/E ratio. The dividend, which continues to grow and is now a few hundredths of a percent below 5%, is another attraction. How do Wall Street analysts view future developments?

Of the 30 analysts surveyed, 9 of them would buy the stock now, Their outlook for the next 12 months is for a 14.88% rise. One share would sell for $101 on the market. Another analyst also anticipates growth, but only 0.4% to $88.28. But most, 18 analysts, would do nothing with the stock now and just hold it. The last 2 would prefer to get rid of the company. They are afraid of a possible 27.21% drop. If that were to happen, the stock would be available on the exchange for $64. How do you feel about Best Buy?

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