Best Buy Reports Fourth Quarter Results

Comparable Sales Declined 4.8%

GAAP Diluted EPS of $2.12

Non-GAAP Diluted EPS of $2.72

Increasing Quarterly Dividend 2% to $0.94 per Share

Expects FY25 Non-GAAP Diluted EPS of $5.75 to $6.20

Best Buy Co., Inc. (NYSE:BBY) today announced results for the 14-week fourth quarter ended February 3, 2024 ("Q4 FY24"), as compared to the 13-week fourth quarter ended January 28, 2023 ("Q4 FY23").

For GAAP to non-GAAP reconciliations of the measures referred to in the above table, please refer to the attached supporting schedule.

"I'm proud of the performance of our teams across the company as they showed resourcefulness, passion, and an unwavering focus on our customers this past year," said Corie Barry, Best Buy CEO. "In the fourth quarter and throughout FY24, we demonstrated strong operational execution as we navigated a pressured consumer electronics sales environment. This allowed us to deliver annual profitability at the high end of our original guidance range even though sales came in below our original guidance range. Importantly, we grew our paid membership base and drove customer experience improvements in many areas of our business, particularly in services and delivery."

"As we enter FY25, we are energized about delivering on our purpose to Enrich Lives through Technology in our vibrant, always changing industry," continued Barry. "In what we expect to be a year of increasing industry sales stabilization, we are focused on sharpening our customer experiences and industry positioning while maintaining, if not expanding, our operating income rate on a 52-week basis."

FY25 Financial Guidance

Note: FY25 has 52 weeks compared to 53 weeks in FY24. The company estimates the impact of the extra week in FY24 added approximately $735 million in revenue, approximately 15 basis points of non-GAAP operating income rate, and approximately $0.30 of non-GAAP diluted EPS to the full year results.

Best Buy's guidance for FY25 is the following:

• Revenue of $41.3 billion to $42.6 billion
• Comparable sales of (3.0%) to 0.0%
• Enterprise non-GAAP operating income rate² of 3.9% to 4.1%
• Non-GAAP effective income tax rate² of approximately 25.0%
• Non-GAAP diluted EPS² of $5.75 to $6.20
• Capital expenditures of $750 to $800 million

"For FY25, we expect to expand our gross profit rate approximately 20 to 30 basis points versus FY24 as we continue to annualize the benefits of prior changes to our membership program, partially offset by expected pressure coming from the profit share on our credit card arrangement," said Matt Bilunas, Best Buy CFO. "At the high-end of our non-GAAP EPS guide, non-GAAP SG&A expense² is expected be similar to FY24."

Bilunas continued, "For Q1 FY25, we expect comparable sales to decline by approximately 5% and our non-GAAP operating income rate to be approximately 3.4%, which is flat to Q1 FY24."

Domestic Segment Q4 FY24 Results

Domestic Revenue

Domestic revenue of $13.41 billion decreased 0.9% versus last year driven by a comparable sales decline of 5.1%, which was partially offset by approximately $675 million of revenue from the extra week.

From a merchandising perspective, the largest drivers of the comparable sales decline on a weighted basis were home theater, appliances, mobile phones and tablets. These drivers were partially offset by growth in gaming.

Domestic online revenue of $5.10 billion decreased 4.8% on a comparable basis, and as a percentage of total Domestic revenue, online revenue was flat to last year at 38.0%.

Domestic Gross Profit Rate

Domestic gross profit rate was 20.4% versus 19.8% last year. The higher gross profit rate was primarily due to improved financial performance from the company's membership offerings, which included higher services margin rates, and an improved gross profit rate from the company's Health initiatives. These items were partially offset by unfavorable product margin rates.

Domestic Selling, General and Administrative Expenses ("SG&A")

Domestic GAAP SG&A expenses were $2.07 billion, or 15.4% of revenue, versus $2.07 billion, or 15.3% of revenue, last year. On a non-GAAP basis, SG&A expenses were $2.06 billion, or 15.4% of revenue, versus $2.05 billion, or 15.1% of revenue, last year. Both GAAP and non-GAAP SG&A increased primarily due to the impact of the extra week and higher incentive compensation. These increases were partially offset by reduced store payroll and advertising expense.

International Segment Q4 FY24 Results

International Revenue

International revenue of $1.24 billion increased 2.7% versus last year. This increase was primarily driven by approximately $60 million of revenue from the extra week, which was partially offset by a comparable sales decline of 1.4% and the negative impact from foreign currency exchange rates.

International Gross Profit Rate

International gross profit rate was 21.0% versus 21.7% last year. The lower gross profit rate was primarily due to unfavorable product margin rates.

International SG&A

International SG&A expenses were $202 million, or 16.3% of revenue, versus $189 million, or 15.7% of revenue, last year. SG&A increased primarily due to higher incentive compensation and the impact of the extra week.

Restructuring Charges

The company incurred $169 million of restructuring charges in Q4 FY24, primarily related to employee termination benefits associated with an enterprise-wide restructuring initiative that commenced in Q4 FY24. The restructuring initiative is intended to help the company to: (1) align field labor resources with where customers want to shop to optimize the customer experience; (2) redirect corporate resources for better alignment with the company's strategy; and (3) right-size resources to better align with the company's revenue outlook for FY25.

The company expects approximately $10 million to $30 million of additional charges in FY25 for this initiative and to pay up to $135 million of the employee termination benefits during FY25, with the remainder being paid in FY26. Consistent with prior practice, restructuring charges are excluded from the company's non-GAAP results.

Share Repurchases and Dividends

In Q4 FY24, the company returned a total of $268 million to shareholders through dividends of $198 million and share repurchases of $70 million. For the full year, the company returned a total of $1.1 billion to shareholders through dividends of $801 million and share repurchases of $340 million.

Today, the company announced its board of directors approved a 2% increase in the regular quarterly dividend to $0.94 per share. The regular quarterly dividend will be payable on April 11, 2024, to shareholders of record as of the close of business on March 21, 2024.

Conference Call

Best Buy is scheduled to conduct an earnings conference call at 8:00 a.m. Eastern Time (7:00 a.m. Central Time) on February 29, 2024. A webcast of the call is expected to be available at www.investors.bestbuy.com, both live and after the call.

Notes:

(1) The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as other retailers' methods. For additional information on comparable sales, please see our most recent Annual Report on Form 10-K, and our subsequent Quarterly Reports on Form 10-Q, filed with the Securities and Exchange Commission ("SEC"), and available at www.investors.bestbuy.com.

Revenue for the 14-week Q4 FY24 and 53-week FY24 includes approximately $675 million and $60 million related to our Domestic and International segments, respectively, as a result of the extra week in Q4 FY24. Comparable sales for the 14-week Q4 FY24 and 53-week FY24 exclude the impact of the extra week.

(2) A reconciliation of the projected non-GAAP operating income rate, non-GAAP effective income tax rate, non-GAAP SG&A expense and non-GAAP diluted EPS, which are forward-looking non-GAAP financial measures, to the most directly comparable GAAP financial measures, is not provided because the company is unable to provide such reconciliation without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-GAAP adjustments may be recognized. These GAAP measures may include the impact of such items as restructuring charges; price-fixing settlements; goodwill and intangible asset impairments; gains and losses on sales of subsidiaries and certain investments; intangible asset amortization; certain acquisition-related costs; and the tax effect of all such items. Historically, the company has excluded these items from non-GAAP financial measures. The company currently expects to continue to exclude these items in future disclosures of non-GAAP financial measures and may also exclude other items that may arise (collectively, "non-GAAP adjustments"). The decisions and events that typically lead to the recognition of non-GAAP adjustments, such as a decision to exit part of the business or reaching settlement of a legal dispute, are inherently unpredictable as to if or when they may occur. For the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to future results.

Forward-Looking and Cautionary Statements:

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify these statements by the fact that they use words such as "anticipate," "appear," "approximate," "assume," "believe," "continue," "could," "estimate," "expect," "foresee," "guidance," "intend," "may," "might," "outlook," "plan," "possible," "project" "seek," "should," "would," and other words and terms of similar meaning or the negatives thereof. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, our operating model, new strategies and growth initiatives, the competitive environment, consumer behavior and other events. These statements involve a number of judgments and are subject to certain risks and uncertainties, many of which are outside the control of the Company, that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our most recent Annual Report on Form 10-K, and any updated information in subsequent Quarterly Reports on Form 10-Q, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this release. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: macroeconomic pressures in the markets in which we operate (including but not limited to inflation rates, fluctuations in foreign currency exchange rates, limitations on a government's ability to borrow and/or spend capital, fluctuations in housing prices, energy markets, and jobless rates and effects related to the conflicts in Eastern Europe and the Middle East or other geopolitical events); catastrophic events, health crises and pandemics; susceptibility of the products we sell to technological advancements, product life cycle fluctuations and changes in consumer preferences; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers and in the provision of delivery speed and options); our ability to attract and retain qualified employees; changes in market compensation rates; our expansion into health and new products, services and technologies; our focus on services as a strategic priority; our reliance on key vendors and mobile network carriers (including product availability); our ability to maintain positive brand perception and recognition; our ability to effectively manage strategic ventures, alliances or acquisitions; our ability to effectively manage our real estate portfolio; inability of vendors or service providers to perform components our supply chain (impacting our stores or other aspects of our operations) and other various functions of our business; risks arising from and potentially unique to our exclusive brands products; our reliance on our information technology systems, internet and telecommunications access and capabilities; our ability to prevent or effectively respond to a cyber-attack, privacy or security breach; product safety and quality concerns; changes to labor or employment laws or regulations; risks arising from statutory, regulatory and legal developments (including statutes and/or regulations related to tax or privacy); evolving corporate governance and public disclosure regulations and expectations (including, but not limited to, cybersecurity and environmental, social and governance matters); risks arising from our international activities (including those related to the conflicts in Eastern Europe and the Middle East or fluctuations in foreign currency exchange rates) and those of our vendors; failure to effectively manage our costs; our dependence on cash flows and net earnings generated during the fourth fiscal quarter; pricing investments and promotional activity; economic or regulatory developments that might affect our ability to provide attractive promotional financing; constraints in the capital markets; changes to our vendor credit terms; changes in our credit ratings; failure to meet financial-performance guidance or other forward-looking statements; and general economic uncertainty in key global markets and worsening of global economic conditions or low levels of economic growth. We caution that the foregoing list of important factors is not complete. Any forward-looking statements speak only as of the date they are made and we assume no obligation to update any forward-looking statement that we may make.

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