(Updated - February 29, 2024 8:54 AM EST)
Best Buy (NYSE:BBY) reported a stronger-than-expected finish to its fiscal year, with fourth-quarter earnings and revenue surpassing analyst estimates. The company's shares surged 3.54% as investors responded positively to the news.
For the fourth quarter, the electronics retailer posted adjusted earnings per share (EPS) of $2.72, exceeding the consensus estimate of $2.52. Revenue for the quarter was also higher than expected at $14.65 billion, compared to the analyst forecast of $14.56 billion. Despite a challenging consumer electronics sales environment, the company's revenue showed resilience, declining only 0.9% from the same quarter last year, which included an extra week of sales.
Best Buy's CEO, Corie Barry, attributed the company's robust performance to strong operational execution and a focus on customer experience, which led to growth in its paid membership base and improvements in services and delivery. The company's domestic gross profit rate improved to 20.4% from 19.8% last year, primarily due to better financial performance from membership offerings and health initiatives.
Looking ahead, Best Buy provided guidance for fiscal year 2025, projecting an EPS range of $5.75 to $6.20, with the midpoint falling slightly below the analyst consensus of $6.13. The company anticipates revenue to be between $41.3 billion and $42.6 billion, with the midpoint just below the consensus estimate of $42.344 billion. For the first quarter of FY25, Best Buy expects comparable sales to decline by approximately 5%, with a non-GAAP operating income rate of around 3.4%, consistent with the first quarter of the previous fiscal year.
CFO Matt Bilunas expressed confidence in the company's ability to expand its gross profit rate in FY25, citing benefits from changes to the membership program and managing profit share from its credit card arrangement. Bilunas also noted that the high end of the EPS guidance assumes non-GAAP SG&A expenses will be similar to FY24.
In the fourth quarter, Best Buy also returned $268 million to shareholders through dividends and share repurchases and announced a 2% increase in the regular quarterly dividend to $0.94 per share. The company is also embarking on a restructuring initiative to optimize customer experience and align resources with its strategy, expecting to incur additional charges in FY25 related to this effort.
Investors cheered the news, with Best Buy's stock price reflecting optimism as the company navigates the evolving consumer electronics landscape with a focus on customer experiences and operational efficiency.
Following the report, analysts at Goldman Sachs said the fourth quarter EPS beat was due to better-than-expected margins. The firm maintained a Buy rating on BBY with a 12-month price target of $81.
"We expect a positive reaction to the better-than-expected 4Q results and FY25 guidance that implies adj. EBIT margin will be flat y/y at the midpoint on a 52-week basis (the 53rd week was a ~15 bps tailwind to adj. EBIT margin in FY24)," said analysts at Goldman Sachs. "On the conference call, we will be looking for commentary regarding quarter-to-date trends; expectations for consumer demand in FY25; promotional levels; wallet shifts between categories; inventory availability; the state of the supply chain; inflation headwinds; and margin expectations."