Best Buy Reports Third Quarter Results

Comparable Sales Declined 6.9%

GAAP Diluted EPS of $1.21

Non-GAAP Diluted EPS of $1.29

Best Buy Co., Inc. (NYSE:BBY) today announced results for the 13-week third quarter ended October 28, 2023 ("Q3 FY24"), as compared to the 13-week third quarter ended October 29, 2022 ("Q3 FY23").

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

"Today we are reporting better-than-expected profitability on slightly softer-than-expected revenue for the third quarter," said Corie Barry, Best Buy CEO. "These results demonstrate our ongoing, strong operational execution as we navigate through the near-term sales pressure our industry has been experiencing for the past several quarters."

Barry continued, "In the more recent macro environment, consumer demand has been even more uneven and difficult to predict. Based on the sales trends in Q3 and so far in November, we believe it is prudent to lower our annual revenue outlook. The midpoint of our annual non-GAAP diluted EPS guidance is slightly higher than the midpoint of our original guidance as we entered the year."

"We are excited for the important holiday season and are prepared for a customer who is very deal-focused with promotions and deals for all budgets, new shopping experiences, an expanded product assortment, and fast and free fulfillment," continued Barry. "I want to thank our associates for their resilience, determination, and relentless focus on our customers. I continue to be very proud of the way our teams are managing the business today and preparing for our future."

FY24 Financial Guidance

Best Buy CFO Matt Bilunas said, "For the fourth quarter, we expect our comparable sales to decline in the range of 3.0% to 7.0%. On the profitability side, we expect our Q4 FY24 non-GAAP operating income rate to be in a range of 4.7% to 5.0%, which compares to a rate of 4.8% last year."

Best Buy's guidance for FY24, which includes 53 weeks, is the following:

• Revenue of $43.1 billion to $43.7 billion, which compares to prior guidance of $43.8 billion to $44.5 billion
• Comparable sales decline of 6.0% to 7.5%, which compares to prior guidance of a decline of 4.5% to 6.0%
• Enterprise non-GAAP operating income rate² of 4.0% to 4.1%, which compares to prior guidance of 3.9% to 4.1%
• Non-GAAP effective income tax rate² of approximately 24.0%, which compares to prior guidance of approximately 24.5%
• Non-GAAP diluted EPS² of $6.00 to $6.30, which compares to prior guidance of $6.00 to $6.40
• Capital expenditures of approximately $825 million, which compares to prior guidance of approximately $850 million

Note: Incorporated in the above guidance, the 53rd week is expected to add approximately $700 million of revenue to Q4 FY24 and provide a benefit of approximately 10 basis points to the company's full year non-GAAP operating income rate.²

Domestic Segment Q3 FY24 Results

Domestic Revenue

Domestic revenue of $9.00 billion decreased 8.2% versus last year primarily driven by a comparable sales decline of 7.3%.

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

Domestic online revenue of $2.75 billion decreased 9.3% on a comparable basis, and as a percentage of total Domestic revenue, online revenue was 30.6% versus 31.0% last year.

Domestic Gross Profit Rate

Domestic gross profit rate was 22.9% versus 21.9% last year. The higher gross profit rate was primarily due to: (1) improved financial performance from the company's membership offerings, which included higher services margin rates; (2) favorable product margin rates; and (3) lower supply chain costs.

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

Domestic GAAP SG&A was $1.73 billion, or 19.2% of revenue, versus $1.79 billion, or 18.3% of revenue, last year. On a non-GAAP basis, SG&A was $1.71 billion, or 19.0% of revenue, versus $1.77 billion, or 18.1% of revenue, last year. Both GAAP and non-GAAP SG&A decreased primarily due to reduced store payroll and advertising expense, which was partially offset by higher incentive compensation.

International Segment Q3 FY24 Results

International revenue of $760 million decreased 3.4% versus last year. This decrease was primarily driven by a comparable sales decline of 1.9% and the negative impact from foreign currency exchange rates.

International operating income was $18 million, or 2.4% of revenue, compared to $33 million, or 4.2% of revenue, last year. International gross profit rate was 22.1% versus 23.4% last year. The lower gross profit rate was primarily due to unfavorable product margin rates. International GAAP SG&A was $151 million, or 19.9% of revenue, versus $150 million, or 19.1% of revenue, last year.

Share Repurchases and Dividends

In Q3 FY24, the company returned a total of $313 million to shareholders through dividends of $201 million and share repurchases of $112 million. On a year-to-date basis, the company has returned a total of $873 million to shareholders through dividends of $603 million and share repurchases of $270 million.

Today, the company announced that its board of directors has authorized the payment of a regular quarterly cash dividend of $0.92 per common share. The quarterly dividend is payable on January 2, 2024, to shareholders of record as of the close of business on December 12, 2023.

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 November 21, 2023. 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.

(2) A reconciliation of the projected non-GAAP operating income rate, non-GAAP effective income tax rate 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 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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