Best Buy (BBY) Rallies On Q4 Earnings Beat, Guides For FY19

The lower operating profit rate can be attributed to higher SG&A expenses that stemmed from a rise in incentive compensation expense at stores and for corporate employees due to strength witnessed throughout the year. Further, ongoing investments in business growth also led to a rise in SG&A expenses.

International segment revenues climbed 20.3% to $1,376 million, primarily on the back of a 9.9% rise in comparable sales growth both in Canada and Mexico, a favorable foreign currency impact of 580 bps and nearly $45 million contribution from the additional week.

The segment’s adjusted gross profit grew 9.6% to $308 million in the reported quarter and adjusted gross margin contracted 220 bps to 22.4%. Adjusted operating profit came in at $85 million, up 4.9% from $81 million reported in the year-ago quarter. Adjusted operating income margin came in at 6.2%, down 90 bps.

Other Financial Details

Best Buy ended fiscal 2018 with cash and cash equivalents of $1,101 million, long-term debt of $809 million and total equity of $3,612 million. In the fiscal fourth quarter, the company returned about $965 million to shareholders via buybacks of $866 million and dividends of $99 million.

Concurrent to the earnings release, the company raised its quarterly dividend rate by 32% to 45 cents per share. It also approved a share repurchase plan worth nearly $1.5 billion for fiscal 2019. This represents an updated two-year buyback plan of $3.5 billion, following the $3 billion plan announced at the start of fiscal 2018.

Guidance

Following the solid close to fiscal 2018, Bets Buy provided an encouraging view for the first quarter and fiscal 2019. For fiscal 2019, management forecasts Enterprise revenues of $41-42 billion, with comps growth of nearly flat to up 2%. The company anticipates adjusted operating income rate of about 4.5%, flat with the fiscal 2018 level. Meanwhile, the company expects an effective tax rate of nearly 25% and earnings per share in the range of $4.80-$5, reflecting growth of about 9-13% from fiscal 2018.

For first-quarter fiscal 2019, management anticipates Enterprise revenues between $8.65 billion and $8.75 billion, and a comparable sales increase of 1.5-2.5%. Management also projects adjusted earnings in the band of 68-73 cents a share.
  
Also, in the fiscal first quarter, the company expects domestic comparable sales to rise in the range of 1.5-2.5%, while international comparable sales are estimated in the band of flat to up 3%.

Further, the company updated its fiscal 2021 adjusted earnings per share target to $5.50-$5.75, reflecting the benefits of the new tax reform.

Interested in the Retail Space? Check These

Some better-ranked stocks from the retail space are Conn’s, Inc. CONN with a Zacks Rank #1 (Strong Buy), and Aaron’s, Inc. AAN and American Eagle Outfitters, Inc. AEO, both carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Conn’s has surged 68.2% in the last six months. Moreover, it has a long-term earnings growth rate of 23%.

Aaron’s shares surged 22.7% in the last three months. Also, it delivered an average earnings beat of 9.6% in the trailing four quarters.

American Eagle delivered an average beat of 2.6% in the last four quarters and has a long-term earnings growth rate of 5.5%.

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