Best Buy Co. (NYE:BBY) recently released its Q4 2022 earnings report, which revealed revenue of $14.7 billion, a decline of -10.4% compared to the previous year. In this article, we’ll examine the Q4 report and review the company’s future guidance for FY2024 and beyond.
Q4 Earnings Review
The company’s comparable-store sales (SSS) fell -9.3%, which was modestly better than the -10% decline the company predicted in its Q3 call. Domestic revenue dropped -9.8% to $13.5 billion, with online revenue falling by -13.0%. International sales also declined by -12.4% to $1.2 billion.
Adjusted earnings per share (EPS) came in at $2.61, a decline of -4.4%. This was well ahead of analyst estimates, beating the consensus by 47 cents. Gross margins came in at 20.0%, down 20 basis points from the previous year.
Capital Allocation and Insider Sales
In 2022, BBY returned cash to shareholders in the form of dividends and buybacks. After pausing repurchases in 2023, the company restarted buying back shares in November and ended the year with over $1 billion in repurchases. It also paid out $789 million in dividends and raised its dividend to 92 cents a quarter, a 5% increase.
Meanwhile, insiders have generally been sellers. Earlier this month, CMO Jason Bonfig sold $782,000 worth of shares at an average price of $82.31, while two executive vice presidents were selling in the fall/winter of 2022. In late November, founder Richard Schulze’s foundation sold $30 million in shares, reversing a buy of $20 million share a little over 6 months earlier in May.
Best Buy Co. Stock Analysis and Price Target
Based on forecasts from 20 analysts, the average target price for Best Buy Co Inc stock is predicted to be USD 82.54 over the next 12 months. The average analyst ratings for Best Buy Co Inc is Buy. Stock Target Advisor’s analysis of the stock is Slightly Bullish, based on 6 positive signals and 5 negative signals. Best Buy Co Inc’s stock price was last seen at USD 75.77. The stock price has fallen by -7.93% over the past week, -13.17% over the past month, and -19.90% over the past year.
2024 Guidance
For FY2024, BBY forecasted revenue to be between $43.8 billion and $45.2 billion, a decline of -3.9%. However, with an extra week in 2024 that will add $700 million in revenue, the decline would be -5.4%. Management also guided for SSS to decline by -3% to -6% for the year versus the -1.8% decline expected by analysts.
Adjusted EPS is projected to come in between $5.70 and $6.50, a decline of -13.8% compared to FY2023. The company expects 2023 to be the bottom in tech product demand, and it anticipates an upgrade cycle could begin later this year or at worst pushed back a year or two, with product innovation driving consumers’ demand. The company is also transforming its model by closing an average of 15-20 large-format stores, adjusting assortments in its stores, and dedicating more space to warehousing items for digital sales. It also plans to open more outlet stores and test smaller store formats.
Bottom line
Best Buy’s Q4 performance was better than expected. Despite the highly promotional environment, it was able to keep gross margins pretty much intact and cut costs to keep pace with sales declines. While the future guidance for FY2024 indicates a decline, the company anticipates an upgrade cycle could begin later this year or in the coming years. Best Buy’s transformation plans also indicate it is adapting to a rapidly changing retail landscape. The Q4 report and future guidance suggest that Best Buy is moving in the right direction to stay competitive.
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