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Best Buy Q4 tops Street; to refresh every store ‘in some fashion’

best buy outlet
Buy Buy expects to add a few additional outlets centers in 2024.

Best Buy reported better-than-expected fourth quarter results as growth in gaming sales and services, including paid memberships, helped offset continuing weakness in consumer electronics and appliances. 

On the company’s earnings call, CEO Corie Barry said she expects the coming year to be one of increasing “industry stabilization.” 

“We remain confident that our industry will grow again after two years of declines,” she told analysts. “It’s simply a matter of the timing.”

As to the reasons for its optimism, Barry said the company believes that much of the growth during the pandemic was incremental, creating a larger installed base of technology products in consumers' homes. It also expects to see the benefit of the natural upgrade and replacement cycles for the tech bought early in the pandemic kick in this year and into the next few years.

Store Upgrades

Barry also told analysts that Best Buy’s capital investments for fiscal '25 are concentrated more on existing store updates and refreshes and less on major remodels or store openings. 

“We plan to touch every single store in the chain in some fashion, improving both our merchandising and ease of shopping for customers,” she said. “This includes improving and livening the merchandising presentation given the shift to digital shopping and corresponding lower need to hold as much inventory on the sales floor It also includes rightsizing a number of categories to ensure we're leveraging the space in the center of our stores in the most exciting, relevant, and efficient way possible.

The company also plans to a few additional outlet centers and new formats to continue to test two “important” concepts, including open small locations in a couple of outstate markets where it has no prior physical presence and its online sales penetration is low. 

“Second, we will test our ability to close a large-format store and open a small-format store nearby, thereby maximizing physical store retention through convenience,” Barry said on the call.

Best Buy's net income fell to $460 million, or $2.12 a share, in the quarter ended Feb. 3, from $495 million, or $2.23 a share, in the year-ago period. Adjusted earnings were $2.72 a share, topping Street estimates of $2.52.

Gross margin improved to 20.5% from 20.0%, as an increase in the U.S. gross profit rate to 20.4% from 19.8% offset a decline in international to 21% from 21.7%.

Total revenue slipped 0.6% to $14.65 billion, ahead of estimates $14.56 billion. Same-store sales declined 4.8%  

In the U.S., revenue fell 0.9% to $13.4 billion and same-store sales were down 5.1%.  The larges drivers of the comp decline were home theater, appliances, mobile phones and tablets, the company said, 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 was flat to last year at 38.0%. International, revenue rose 2.7% but same-store sales fell 1.4%.

“In the fourth quarter and throughout FY24, we demonstrated strong operational execution as we navigated a pressured consumer electronics sales environment,” stated  Barry in the earnings release. "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.

Barrie noted that the company grew its paid membership base and drove customer experience improvements in many areas of our business, particularly in services and delivery.  

"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," she said.

Looking ahead, Best Buy expects fiscal 2025 adjusted earnings of $5.75 to $6.20 per share and revenue of $41.3 billion to $42.6 billion. Analysts had expected  earnings per share of $6.16 and revenue of $42.33 billion.

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