Best Buy sales fall below views; dividend raised

Andrew Cummings
March 1, 2017

Best Buy shares slipped more than 8 percent before the market opened on Wednesday, as the electronics retailer reported fiscal fourth-quarter revenue and a first-quarter forecast that missed Wall Street's expectations. The FactSet consensus is for sales of $8.47 billion, and a same-store sales increase of 0.6% Best Buy stock is up 33.6% for the past year, while the S&P 500 index is up 19.5% for the period.

Net revenue fell 1 percent to $13.48 billion, missing the average analyst estimate of $13.62 billion, according to Thomson Reuters I/B/E/S.

Best Buy's shares fell 9.4 percent to $40 at 7:08 early trading in NY. Adjusted for one-time issues, the company reported earnings per share of $1.95, which was higher than the $1.67 analysts were expecting.

In order to execute the two-year $3 billion share repurchase plan, the board of directors approved a new $5 billion share repurchase authorization for the company's common stock, superseding the existing authorization dated June 2011 which had $2.2 billion in purchases remaining.

Domestic revenue of $12.3 billion decreased 1.4 percent, mainly driven by a comparable sales decline of 0.9 percent. Sales totaled $13.48 billion, down from $13.62 billion previous year, and below the $13.62 billion FactSet consensus. In the United States, same-store sales fell by 0.9% in the quarter and rose by 0.2% for the year.

Our strong bottom-line performance in the fourth quarter was driven by a disciplined promotional strategy, continued optimization of merchandise margins and strong expense management. Sales in gaming were also weaker than expected. Enterprise revenue is expected in the range of $8.2 billion to $8.3 billion. On a 52-week basis, the company targets approximately flat revenue and operating income.

Best Buy also announced that it was increasing its quarterly dividend by 21% to $0.34 a share, and starting a $3 billion share buyback program that will be completed over the next two years. Best Buy Domestic online revenue surged 17.5% on a comparable basis primarily due to increased traffic and higher conversion rates.

For the full year, Best Buy's guidance was in-line with analysts' view.

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