Best Buy Co., Inc. (BBY, Financial) seemed to have a happy holiday after all. The company witnessed a 1.3% increase in revenue for the fourth quarter ended December 2014. The revenue earned was reported to be $14.2 billion, an increase of 1.3%. The mobile phones and LED TV division fared better than the other electronic segments. Reflecting the high profits, the company has decided to increase the shareholders dividend. Quarterly dividend also has been increased 21%. The largest U.S. consumer electronics chain has decided to buy back shares around $1 billion value over the next three years. This phenomenon has not been witnessed ever since 2012.
Looking back into its history
Best Buy, the American MNC, has its headquarters in Minnesota. Founded in 1966, the company is known for its value-based consumer electronics. Richard M. Schulz, the founder, opened the chain under the name of "Sound of Music." Over the years, it was renamed as Best Buy Superstores and then Best Buy Co., Inc. Some of the company's renowned brands include Dynex, RocketFish, Init, Insignia, etc. The electronic giant received many awards like "Specialty Retailer of the Decade," one of the Top 10 of "America's Most Generous Corporations" and Company of the Year in 2004.
Financial status of Best Buy
In the early 2010s, Best Buy reported a drop in its revenue and sales. The main reason behind this was consumers' preference for online shopping. The second quarter ended June 2014 witnessed a 4% decrease in sales. The quarter was the tenth consecutive quarter in which Best Buy reported a drop in sales. Best Buy then focused most of its marketing efforts on digital platforms of advertising rather than traditional means like TV, newspaper, etc. Ever since, Best Buy has observed an increase in its quarterly sales and revenue.
A quick glance at the final quarter highlights
The company's shares increased 1.2% on Tuesday's afternoon trading time. Net income increased 77% to $519 million. It reported earnings of $1.48 per share from continuing operations during the fourth quarter, beating the average analysts’ expectations of $1.35 per share as earnings. Analysts also expected Best Buy to make $14.35 billion as revenue for the quarter. However, the revenue of $14.21 billion reported in the quarter missed analysts' expectations. Selling, distribution and administrative expenses decreased to $2.22 billion. The company spent $550 million last fiscal year on capital expenditure. This year, Best Buy plans on spending a higher amount to the tune of $650-700 million. Shareholders will receive a one-time payment of $0.51 dividend per share.
Best Buy's total same-store sales showed a rise of 2% in the same quarter. Analysts estimated the rise to be 1.9%, according to a poll by Consensus Metrix. These statistics are exclusive of the company's China business. The China's business is expected to be sold to China's real estate company Zhejiang Jiayuan Group. By doing so, all efforts will be concentrated on operations in North America. Stock closed at $39.18 on Tuesday, reporting an increase of 1.42%.
Along with the increase in the earnings, the company also reported a decrease in the sales of tablets. CEO Hubert Joly said that the company was gaining share, mainly in the segment of mobile phones and LED TV. The tablet sales witnessed a drop in tablet sales due to the decline registered in the material industry.
Best Buy also decided to implement cost-cutting measures that will be structural and gradual over a period of three years. Around $400 million will be saved in operating costs, under Joly's management. One good thing is that employees won't be laid off as a result of the cost-cutting efforts. Joly said that the company's attention will now be concentrated on their best-performing divisions. The company also promises to reduce time for delivery. Joly has proved to be a good CEO ever since he stepped on the CEO's seat in 2012. Stock of Best Buy has doubled ever since 2012 and that is a very good sign of growth for the consumer electronic company.
Last word
Best Buy is on its growth trajectory and will surely report better quarters moving ahead. Let’s stay tuned and keep an eye on the financial playbook of the retailer.
