Best Buy Q4 Adj. Profit Tops View, Boosts Dividend 21%

(RTTNews) - Consumer electronics retailer Best Buy Co., Inc. (BBY) reported Tuesday a profit for the fourth quarter that surged 77 percent from last year, reflecting improved margins and revenue growth. Adjusted earnings per share from continuing operations topped analysts' expectations, while quarterly revenues missed their estimates.

The company noted that a compelling merchandise assortment and strong multi-channel execution drove these better-than-expected results as it capitalized on the product cycles in large screen televisions and mobile phones.

Separately, the company announced plans to return excess capital to shareholders including a special, one-time dividend, an 21 percent increase in regular quarterly dividend and the resumption of share repurchase program.

"In the fourth quarter, our teams delivered positive comparable sales, improved profitability and continued progress in our Renew Blue transformation. This resulted in a 1.3% increase in revenue to $14.2 billion and a 23% increase in non-GAAP diluted EPS to $1.48 versus $1.20 last year, primarily driven by growth in the Domestic segment," President and CEO Hubert Joly said.

The company said it completed the sale of its Five Star business in China on February 13, 2015, and the results of the business until January 31, 2015 is reported in discontinued operations.

The Richfield, Minnesota-based retailer, which is also known as the 'big blue box' because of the prominent design on Best Buy stores, reported net earnings of $519 million or $1.46 per share for the fourth quarter, sharply higher than $293 million or $0.83 per share in the prior-year quarter.

Net earnings from continuing operations for the quarter surged to $524 million or $1.47 per share from $300 million or $0.85 per share last year.

Excluding charges, adjusted earnings from continuing operations was $526 million or $1.48 per share, compared to $424 million or $1.20 per share for the year-ago quarter.

On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $1.35 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the quarter increased to $14.21 billion from $14.03 billion in the same quarter last year. Twenty-one Wall Street analysts expected revenue of $14.35 billion for the quarter.

Best Buy reported that its total comparable store sales increased 2 percent on top of 1.3 percent drop last year.

Best Buy's domestic revenues increased 3.2 percent to $12.70 billion, with comparable store sales growth of 2.8 percent. Comparable online sales increased 9.7 percent to $1.72 billion.

International revenues declined 12.4 percent to $1.51 billion, with comparable store sales drop of 4 percent, due to industry declines in Canada, and loss of revenue from store closures in Canada.

Operating margin for the quarter improved 250 basis points to 5.7 percent from last year's 3.2 percent, as gross profit margin expanded 110 basis points and selling, general and administrative expenses as a percentage of total revenues improved 50 basis points.

Providing an update on the renew blue cost reduction initiatives, the company said annualized renew blue cost reductions have reached $1.02 billion at the end of the fourth quarter. In fiscal 2016, the company is launching Phase Two of the initiative with a target of about $400 million in annualized operating income improvement over three years.

Separately, the company's Board of Directors authorized a plan to return excess capital to shareholders through a special, one-time dividend of $0.51 per share, or about $180 million, and a 21 percent increase in the regular quarterly cash dividend to $0.23 per share, both payable on April 14 to shareholders of record as of the close of business on March 24, 2015.

Further, the company also announced the resumption of share repurchases under the existing $5 billion authorization, with the intent to repurchase $1 billion worth of shares over the next three years.

The company said the special dividend, regular dividend increase and share repurchases will be funded through existing cash and cash equivalents on the balance sheet and future cash flow generation.

Looking ahead, the company said first quarter and second enterprise revenue and comparable sales growth, excluding the estimated impact of installment billing, is expected to be in the range of flat to negative low-single digits.

The company added that it expects the financial impact of the investments and economic pressures to begin in the first quarter and continue throughout the year in fiscal 2016.

BBY closed Monday's regular trading session at $38.63, up $0.43 on a volume of 6.45 million shares. In the past 52-week period, the stock has been trading in a range of $23.87 to $40.03.