Best Buy Co's (NYSE:BBY) Posts Q2 Sales In Line With Estimates

Radek Strnad /
2023/08/29 8:47 am EDT

Electronics retailer Best Buy (NYSE:BBY) reported results in line with analysts' expectations in Q2 FY2024, with revenue down 7.22% year on year to $9.58 billion. The company's outlook for the full year was also close to analysts' estimates with revenue guided to $44.2 billion at the midpoint. Best Buy Co made a GAAP profit of $274 million, down from its profit of $306 million in the same quarter last year.

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Best Buy Co (BBY) Q2 FY2024 Highlights:

  • Revenue: $9.58 billion vs analyst estimates of $9.52 billion (small beat)
  • EPS (non-GAAP): $1.22 vs analyst estimates of $1.07 (13.6% beat)
  • The company reconfirmed its revenue guidance for the full year of $44.2 billion at the midpoint
  • Free Cash Flow of $321 million, down 28.5% from the same quarter last year
  • Gross Margin (GAAP): 23.2%, up from 22.1% in the same quarter last year
  • Same-Store Sales were down 6.2% year on year (beat vs. expectations of down 6.8% year on year)

“Today we are reporting second quarter sales results that are at the high-end of the outlook we shared in May and profitability that was better than expectations,” said Corie Barry, Best Buy CEO.

With humble beginnings as a stereo equipment seller, Best Buy (NYSE:BBY) now sells a broad selection of consumer electronics, appliances, and home office products.

After a long day, some of us want to just watch TV, play video games, listen to music, or scroll through our phones; electronics and gaming retailers sell the technology that makes this possible, plus more. Shoppers can find everything from surround-sound speakers to gaming controllers to home appliances in their stores. Competitive prices and helpful store associates that can talk through topics like the latest technology in gaming and installation keep customers coming back. This is a category that has moved rapidly online over the last few decades, so these electronics and gaming retailers have needed to be nimble and aggressive with their e-commerce and omnichannel investments.

Sales Growth

Best Buy Co is a behemoth in the consumer retail sector and benefits from economies of scale, an important advantage giving the business an edge in distribution and more negotiating power with suppliers.

As you can see below, the company's annualized revenue growth rate over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was flat, or 0.75%.

Best Buy Co Total Revenue

This quarter, Best Buy Co reported a rather uninspiring 7.22% year-on-year revenue decline, Looking ahead, the Wall Street analysts covering the company expect revenue to remain relatively flat over the next 12 months.

While most things went back to how they were before the pandemic, a few consumer habits fundamentally changed. One founder-led company is benefiting massively from this shift and is set to beat the market for years to come. The business has grown astonishingly fast, with 40%+ free cash flow margins, and its fundamentals are undoubtedly best-in-class. Still, its total addressable market is so big that the company has room to grow many times in size. You can find it on our platform for free.

Same-Store Sales

A company's same-store sales growth shows the year-on-year change in sales for its brick-and-mortar stores that have been open for at least a year, give or take, and e-commerce platform. This is a key performance indicator for retailers because it measures organic growth and demand.

Best Buy Co's demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 7.1% year on year.

Best Buy Co Year On Year Same Store Sales Growth

In the latest quarter, Best Buy Co's same-store sales fell 6.2% year on year. This decrease was an improvement from the 12.1% year-on-year decline it posted 12 months ago. It's always great to see a business improve its prospects.

Key Takeaways from Best Buy Co's Q2 Results

Sporting a market capitalization of $16.7 billion, more than $1.09 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that Best Buy Co is attractively positioned to invest in growth.

It was good to see Best Buy Co beat analysts' revenue and EPS expectations this quarter, with gross margins improving compared to the same period last year. Guidance was more mixed, with full year same-store sales and revenue guidance lowered from the company's previous outlook. However, Best Buy's profitability outlook is better, resulting in a higher full year operating margin guidance compared to previous. Perhaps the most positive, though, was the CEO's commentary on the demand environment. "...we continue to expect that this year will be the low point in tech demand after two years of sales declines. Next year the consumer electronics industry should see stabilization and possibly growth driven by the natural upgrade and replacement cycles and the normalization of tech innovation." Overall, this was a mixed quarter for Best Buy, but the commentary is a bright spot. The stock is up 2.9% after reporting and currently trades at $76.23 per share.

So should you invest in Best Buy Co right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.

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The author has no position in any of the stocks mentioned in this report.