UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | ||
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OctoberOR
| |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 1-9595
BEST BUY CO., INC.
(Exact name of registrant as specified in its charter)
Minnesota | 41-0907483 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
7601 Penn Avenue South | ||
Richfield, Minnesota | 55423 | |
(Address of principal executive offices) | (Zip Code) |
(612) 291-1000
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of exchange on which registered |
Common Stock, $0.10 par value per share | BBY | New York Stock Exchange |
Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, (as defined” and “emerging growth company” in Rule 12b-2 of the Exchange Act).
Large Accelerated Filer | Accelerated Filer | Non-accelerated Filer | |||
Smaller Reporting Company | |||||
Emerging |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YesThe registrant had 292,326,497221,264,454 shares of common stock outstanding as of November 28, 2017.December 2, 2022.
BEST BUY CO., INC.
FORM 10-Q FOR THE QUARTER ENDED
OCTOBERTABLE OF CONTENTS
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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed ConsolidatedConsolidated Balance Sheets
$ in millions, except per share and share amounts (unaudited)
October 29, 2022 | January 29, 2022 | October 30, 2021 | |||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 932 | $ | 2,936 | $ | 3,465 | |||||
Receivables, net | 1,050 | 1,042 | 1,016 | ||||||||
Merchandise inventories | 7,294 | 5,965 | 8,553 | ||||||||
Other current assets | 646 | 596 | 486 | ||||||||
Total current assets | 9,922 | 10,539 | 13,520 | ||||||||
Property and equipment, net | 2,373 | 2,250 | 2,256 | ||||||||
Operating lease assets | 2,799 | 2,654 | 2,688 | ||||||||
Goodwill | 1,383 | 1,384 | 986 | ||||||||
Other assets | 544 | 677 | 652 | ||||||||
Total assets | $ | 17,021 | $ | 17,504 | $ | 20,102 | |||||
Liabilities and equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 7,056 | $ | 6,803 | $ | 8,405 | |||||
Unredeemed gift card liabilities | 273 | 316 | 306 | ||||||||
Deferred revenue | 1,080 | 1,103 | 977 | ||||||||
Accrued compensation and related expenses | 363 | 845 | 703 | ||||||||
Accrued liabilities | 744 | 946 | 895 | ||||||||
Current portion of operating lease liabilities | 638 | 648 | 645 | ||||||||
Current portion of long-term debt | 16 | 13 | 15 | ||||||||
Total current liabilities | 10,170 | 10,674 | 11,946 | ||||||||
Long-term operating lease liabilities | 2,216 | 2,061 | 2,102 | ||||||||
Long-term debt | 1,142 | 1,216 | 1,223 | ||||||||
Long-term liabilities | 500 | 533 | 553 | ||||||||
Contingencies (Note 11) |
|
|
| ||||||||
Equity | |||||||||||
Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none | - | - | - | ||||||||
Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 225.2 million, 227.4 million and 243.8 million shares, respectively | 22 | 23 | 24 | ||||||||
Additional paid-in capital | 61 | - | - | ||||||||
Retained earnings | 2,597 | 2,668 | 3,917 | ||||||||
Accumulated other comprehensive income | 313 | 329 | 337 | ||||||||
Total equity | 2,993 | 3,020 | 4,278 | ||||||||
Total liabilities and equity | $ | 17,021 | $ | 17,504 | $ | 20,102 |
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
Assets | |||||||||||
Current assets | |||||||||||
Cash and cash equivalents | $ | 1,103 | $ | 2,240 | $ | 1,341 | |||||
Short-term investments | 2,237 | 1,681 | 1,777 | ||||||||
Receivables, net | 971 | 1,347 | 1,174 | ||||||||
Merchandise inventories | 6,663 | 4,864 | 6,331 | ||||||||
Other current assets | 431 | 384 | 398 | ||||||||
Total current assets | 11,405 | 10,516 | 11,021 | ||||||||
Property and equipment, net | 2,352 | 2,293 | 2,298 | ||||||||
Goodwill | 425 | 425 | 425 | ||||||||
Other assets | 603 | 622 | 798 | ||||||||
Total assets | $ | 14,785 | $ | 13,856 | $ | 14,542 | |||||
Liabilities and equity | |||||||||||
Current liabilities | |||||||||||
Accounts payable | $ | 6,587 | $ | 4,984 | $ | 6,233 | |||||
Unredeemed gift card liabilities | 375 | 427 | 377 | ||||||||
Deferred revenue | 426 | 418 | 380 | ||||||||
Accrued compensation and related expenses | 331 | 358 | 308 | ||||||||
Accrued liabilities | 808 | 865 | 782 | ||||||||
Accrued income taxes | 80 | 26 | 43 | ||||||||
Current portion of long-term debt | 545 | 44 | 43 | ||||||||
Total current liabilities | 9,152 | 7,122 | 8,166 | ||||||||
Long-term liabilities | 697 | 704 | 791 | ||||||||
Long-term debt | 784 | 1,321 | 1,324 | ||||||||
Equity | |||||||||||
Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none | — | — | — | ||||||||
Common stock, $0.10 par value: Authorized — 1.0 billion shares; Issued and outstanding — 296,000,000, 311,000,000 and 313,000,000 shares, respectively | 30 | 31 | 31 | ||||||||
Retained earnings | 3,818 | 4,399 | 3,953 | ||||||||
Accumulated other comprehensive income | 304 | 279 | 277 | ||||||||
Total equity | 4,152 | 4,709 | 4,261 | ||||||||
Total liabilities and equity | $ | 14,785 | $ | 13,856 | $ | 14,542 |
NOTE: The Consolidated Balance Sheet as of January 28, 2017,29, 2022, has been condensed from the audited consolidated financial statements.
See Notes to Condensed Consolidated Financial Statements.Statements.
Condensed Consolidated Statements of Earnings
$ and shares in millions, except per share amounts (unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Revenue | $ | 10,587 | $ | 11,910 | $ | 31,563 | $ | 35,396 | |||||||
Cost of sales | 8,255 | 9,108 | 24,591 | 27,069 | |||||||||||
Gross profit | 2,332 | 2,802 | 6,972 | 8,327 | |||||||||||
Selling, general and administrative expenses | 1,941 | 2,133 | 5,713 | 6,130 | |||||||||||
Restructuring charges | 26 | (1) | 61 | (39) | |||||||||||
Operating income | 365 | 670 | 1,198 | 2,236 | |||||||||||
Other income (expense): | |||||||||||||||
Investment income and other | 4 | 1 | 2 | 7 | |||||||||||
Interest expense | (10) | (7) | (23) | (19) | |||||||||||
Earnings before income tax expense and equity in income (loss) of affiliates | 359 | 664 | 1,177 | 2,224 | |||||||||||
Income tax expense | 84 | 166 | 252 | 402 | |||||||||||
Equity in income (loss) of affiliates | 2 | 1 | (1) | 6 | |||||||||||
Net earnings | $ | 277 | $ | 499 | $ | 924 | $ | 1,828 | |||||||
Basic earnings per share | $ | 1.23 | $ | 2.02 | $ | 4.09 | $ | 7.31 | |||||||
Diluted earnings per share | $ | 1.22 | $ | 2.00 | $ | 4.07 | $ | 7.23 | |||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 225.5 | 246.4 | 225.9 | 249.9 | |||||||||||
Diluted | 226.2 | 249.1 | 226.9 | 252.9 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Revenue | $ | 9,320 | $ | 8,945 | $ | 26,788 | $ | 25,921 | |||||||
Cost of goods sold | 7,040 | 6,742 | 20,333 | 19,511 | |||||||||||
Gross profit | 2,280 | 2,203 | 6,455 | 6,410 | |||||||||||
Selling, general and administrative expenses | 1,932 | 1,890 | 5,484 | 5,407 | |||||||||||
Restructuring charges | (2 | ) | 1 | — | 30 | ||||||||||
Operating income | 350 | 312 | 971 | 973 | |||||||||||
Other income (expense) | |||||||||||||||
Gain on sale of investments | — | — | — | 2 | |||||||||||
Investment income and other | 12 | 8 | 30 | 22 | |||||||||||
Interest expense | (20 | ) | (16 | ) | (57 | ) | (54 | ) | |||||||
Earnings from continuing operations before income tax expense | 342 | 304 | 944 | 943 | |||||||||||
Income tax expense | 104 | 112 | 309 | 343 | |||||||||||
Net earnings from continuing operations | 238 | 192 | 635 | 600 | |||||||||||
Gain from discontinued operations (Note 2), net of tax expense of $0, $0, $0 and $7, respectively | 1 | 2 | 1 | 21 | |||||||||||
Net earnings | $ | 239 | $ | 194 | $ | 636 | $ | 621 | |||||||
Basic earnings per share | |||||||||||||||
Continuing operations | $ | 0.80 | $ | 0.61 | $ | 2.09 | $ | 1.87 | |||||||
Discontinued operations | — | — | — | 0.07 | |||||||||||
Basic earnings per share | $ | 0.80 | $ | 0.61 | $ | 2.09 | $ | 1.94 | |||||||
Diluted earnings per share | |||||||||||||||
Continuing operations | $ | 0.78 | $ | 0.60 | $ | 2.05 | $ | 1.85 | |||||||
Discontinued operations | — | 0.01 | — | 0.07 | |||||||||||
Diluted earnings per share | $ | 0.78 | $ | 0.61 | $ | 2.05 | $ | 1.92 | |||||||
Dividends declared per common share | $ | 0.34 | $ | 0.28 | $ | 1.02 | $ | 1.29 | |||||||
Weighted-average common shares outstanding | |||||||||||||||
Basic | 299.1 | 316.2 | 304.1 | 320.2 | |||||||||||
Diluted | 305.4 | 320.0 | 310.6 | 323.6 |
See Notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of Comprehensive Income
$ in millions (unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Net earnings | $ | 277 | $ | 499 | $ | 924 | $ | 1,828 | |||||||
Foreign currency translation adjustments, net of tax | (15) | 2 | (16) | 9 | |||||||||||
Comprehensive income | $ | 262 | $ | 501 | $ | 908 | $ | 1,837 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Net earnings | $ | 239 | $ | 194 | $ | 636 | $ | 621 | |||||||
Foreign currency translation adjustments | (17 | ) | (19 | ) | 25 | 6 | |||||||||
Comprehensive income | $ | 222 | $ | 175 | $ | 661 | $ | 627 |
See Notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of Cash Flows
$ in millions (unaudited)
Nine Months Ended | |||||||
October 29, 2022 | October 30, 2021 | ||||||
Operating activities | |||||||
Net earnings | $ | 924 | $ | 1,828 | |||
Adjustments to reconcile net earnings to total cash provided by (used in) operating activities: | |||||||
Depreciation and amortization | 679 | 644 | |||||
Restructuring charges | 61 | (39) | |||||
Stock-based compensation | 98 | 105 | |||||
Deferred income taxes | 10 | (16) | |||||
Other, net | 9 | 3 | |||||
Changes in operating assets and liabilities, net of acquired assets and liabilities: | |||||||
Receivables | (14) | 43 | |||||
Merchandise inventories | (1,365) | (2,924) | |||||
Other assets | (1) | (12) | |||||
Accounts payable | 224 | 1,387 | |||||
Income taxes | 28 | (172) | |||||
Other liabilities | (761) | 214 | |||||
Total cash provided by (used in) operating activities | (108) | 1,061 | |||||
Investing activities | |||||||
Additions to property and equipment | (696) | (548) | |||||
Purchases of investments | (46) | (221) | |||||
Sales of investments | 5 | 64 | |||||
Other, net | 1 | (2) | |||||
Total cash used in investing activities | (736) | (707) | |||||
Financing activities | |||||||
Repurchase of common stock | (465) | (1,728) | |||||
Issuance of common stock | 15 | 28 | |||||
Dividends paid | (595) | (522) | |||||
Repayments of debt | (13) | (123) | |||||
Other, net | - | (2) | |||||
Total cash used in financing activities | (1,058) | (2,347) | |||||
Effect of exchange rate changes on cash and cash equivalents | (10) | 6 | |||||
Decrease in cash, cash equivalents and restricted cash | (1,912) | (1,987) | |||||
Cash, cash equivalents and restricted cash at beginning of period | 3,205 | 5,625 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 1,293 | $ | 3,638 |
Nine Months Ended | |||||||
October 28, 2017 | October 29, 2016 | ||||||
Operating activities | |||||||
Net earnings | $ | 636 | $ | 621 | |||
Adjustments to reconcile net earnings to total cash provided by operating activities: | |||||||
Depreciation | 500 | 491 | |||||
Restructuring charges | — | 30 | |||||
Stock-based compensation | 97 | 82 | |||||
Deferred income taxes | 4 | 28 | |||||
Other, net | (5 | ) | (22 | ) | |||
Changes in operating assets and liabilities: | |||||||
Receivables | 413 | 79 | |||||
Merchandise inventories | (1,811 | ) | (1,369 | ) | |||
Other assets | (36 | ) | (18 | ) | |||
Accounts payable | 1,530 | 1,801 | |||||
Other liabilities | (187 | ) | (192 | ) | |||
Income taxes | 62 | (124 | ) | ||||
Total cash provided by operating activities | 1,203 | 1,407 | |||||
Investing activities | |||||||
Additions to property and equipment | (489 | ) | (445 | ) | |||
Purchases of investments | (4,047 | ) | (2,149 | ) | |||
Sales of investments | 3,518 | 1,685 | |||||
Proceeds from property disposition | 2 | 56 | |||||
Other, net | — | 5 | |||||
Total cash used in investing activities | (1,016 | ) | (848 | ) | |||
Financing activities | |||||||
Repurchase of common stock | (1,138 | ) | (472 | ) | |||
Repayments of debt | (31 | ) | (384 | ) | |||
Dividends paid | (310 | ) | (417 | ) | |||
Issuance of common stock | 145 | 66 | |||||
Other, net | (1 | ) | 8 | ||||
Total cash used in financing activities | (1,335 | ) | (1,199 | ) | |||
Effect of exchange rate changes on cash | 15 | 13 | |||||
Decrease in cash, cash equivalents and restricted cash | (1,133 | ) | (627 | ) | |||
Cash, cash equivalents and restricted cash at beginning of period | 2,433 | 2,161 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 1,300 | $ | 1,534 |
See Notes to Condensed Consolidated Financial Statements.
Condensed Consolidated Statements of ChangeChanges in Shareholders' Equity
$ and shares in millions, except per share amounts (unaudited)
Common Shares | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||
Balances at July 30, 2022 | 225.1 | $ | 22 | $ | 20 | $ | 2,522 | $ | 328 | $ | 2,892 | ||||||||||||
Net earnings, three months ended October 29, 2022 | - | - | - | 277 | - | 277 | |||||||||||||||||
Other comprehensive loss: | |||||||||||||||||||||||
Foreign currency translation adjustments, net of tax | - | - | - | - | (15) | (15) | |||||||||||||||||
Stock-based compensation | - | - | 33 | - | - | 33 | |||||||||||||||||
Issuance of common stock | 0.1 | - | 5 | - | - | 5 | |||||||||||||||||
Common stock dividends, $0.88 per share | - | - | 3 | (202) | - | (199) | |||||||||||||||||
Balances at October 29, 2022 | 225.2 | $ | 22 | $ | 61 | $ | 2,597 | $ | 313 | $ | 2,993 | ||||||||||||
Balances at January 29, 2022 | 227.4 | $ | 23 | $ | - | $ | 2,668 | $ | 329 | $ | 3,020 | ||||||||||||
Net earnings, nine months ended October 29, 2022 | - | - | - | 924 | - | 924 | |||||||||||||||||
Other comprehensive loss: | |||||||||||||||||||||||
Foreign currency translation adjustments, net of tax | - | - | - | - | (16) | (16) | |||||||||||||||||
Stock-based compensation | - | - | 98 | - | - | 98 | |||||||||||||||||
Issuance of common stock | 2.4 | - | 15 | - | - | 15 | |||||||||||||||||
Common stock dividends, $2.64 per share | - | - | 10 | (606) | - | (596) | |||||||||||||||||
Repurchase of common stock | (4.6) | (1) | (62) | (389) | - | (452) | |||||||||||||||||
Balances at October 29, 2022 | 225.2 | $ | 22 | $ | 61 | $ | 2,597 | $ | 313 | $ | 2,993 | ||||||||||||
Balances at July 31, 2021 | 247.3 | $ | 25 | $ | - | $ | 3,975 | $ | 335 | $ | 4,335 | ||||||||||||
Net earnings, three months ended October 30, 2021 | - | - | - | 499 | - | 499 | |||||||||||||||||
Other comprehensive income: | |||||||||||||||||||||||
Foreign currency translation adjustments, net of tax | - | - | - | - | 2 | 2 | |||||||||||||||||
Stock-based compensation | - | - | 34 | - | - | 34 | |||||||||||||||||
Issuance of common stock | 0.2 | - | 6 | - | - | 6 | |||||||||||||||||
Common stock dividends, $0.70 per share | - | - | 3 | (175) | - | (172) | |||||||||||||||||
Repurchase of common stock | (3.7) | (1) | (43) | (382) | - | (426) | |||||||||||||||||
Balances at October 30, 2021 | 243.8 | $ | 24 | $ | - | $ | 3,917 | $ | 337 | $ | 4,278 | ||||||||||||
Balances at January 30, 2021 | 256.9 | $ | 26 | $ | - | $ | 4,233 | $ | 328 | $ | 4,587 | ||||||||||||
Net earnings, nine months ended October 30, 2021 | - | - | - | 1,828 | - | 1,828 | |||||||||||||||||
Other comprehensive income: | |||||||||||||||||||||||
Foreign currency translation adjustments, net of tax | - | - | - | - | 9 | 9 | |||||||||||||||||
Stock-based compensation | - | - | 105 | - | - | 105 | |||||||||||||||||
Issuance of common stock | 2.7 | - | 28 | - | - | 28 | |||||||||||||||||
Common stock dividends, $2.10 per share | - | - | 11 | (533) | - | (522) | |||||||||||||||||
Repurchase of common stock | (15.8) | (2) | (144) | (1,611) | - | (1,757) | |||||||||||||||||
Balances at October 30, 2021 | 243.8 | $ | 24 | $ | - | $ | 3,917 | $ | 337 | $ | 4,278 |
Common Shares | Common Stock | Prepaid Share Repurchase | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Total | ||||||||||||||||||||
Balances at January 28, 2017 | 311 | $ | 31 | $ | — | $ | — | $ | 4,399 | $ | 279 | $ | 4,709 | |||||||||||||
Adoption of ASU 2016-09 | — | — | — | 10 | (12 | ) | — | (2 | ) | |||||||||||||||||
Net earnings, nine months ended October 28, 2017 | — | — | — | — | 636 | — | 636 | |||||||||||||||||||
Other comprehensive income, net of tax | ||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | 25 | 25 | |||||||||||||||||||
Stock-based compensation | — | — | — | 97 | — | — | 97 | |||||||||||||||||||
Restricted stock vested and stock options exercised | 7 | 1 | — | 137 | — | — | 138 | |||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | 7 | — | — | 7 | |||||||||||||||||||
Common stock dividends, $1.02 per share | — | — | — | — | (311 | ) | — | (311 | ) | |||||||||||||||||
Repurchase of common stock | (22 | ) | (2 | ) | — | (251 | ) | (894 | ) | — | (1,147 | ) | ||||||||||||||
Balances at October 28, 2017 | 296 | $ | 30 | $ | — | $ | — | $ | 3,818 | $ | 304 | $ | 4,152 | |||||||||||||
Balances at January 30, 2016 | 324 | $ | 32 | $ | (55 | ) | $ | — | $ | 4,130 | $ | 271 | $ | 4,378 | ||||||||||||
Net earnings, nine months ended October 29, 2016 | — | — | — | — | 621 | — | 621 | |||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | — | 6 | 6 | |||||||||||||||||||
Stock-based compensation | — | — | — | 82 | — | — | 82 | |||||||||||||||||||
Restricted stock vested and stock options exercised | 5 | 1 | — | 59 | — | — | 60 | |||||||||||||||||||
Settlement of accelerated share repurchase | — | — | 55 | — | — | — | 55 | |||||||||||||||||||
Issuance of common stock under employee stock purchase plan | — | — | — | 7 | — | — | 7 | |||||||||||||||||||
Tax loss from stock options exercised, restricted stock vesting and employee stock purchase plan | — | — | — | (3 | ) | — | — | (3 | ) | |||||||||||||||||
Common stock dividends, $1.29 per share | — | — | — | — | (417 | ) | — | (417 | ) | |||||||||||||||||
Repurchase of common stock | (16 | ) | (2 | ) | — | (145 | ) | (381 | ) | — | (528 | ) | ||||||||||||||
Balances at October 29, 2016 | 313 | $ | 31 | $ | — | $ | — | $ | 3,953 | $ | 277 | $ | 4,261 |
See Notes to Condensed Consolidated Financial Statements.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1.Basis of Presentation
Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in these Notes to Condensed Consolidated Financial Statements refers to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries.
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United StatesU.S. (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements.
Historically, we have generated a higherlarge proportion of our revenue and earnings in the fiscal fourth fiscal quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico.season. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. The interim financial statements and the related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017.29, 2022. The first
In preparing the accompanying condensed consolidated financial statements, we evaluated the period from October 29, 2017,2022, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified for this period.
Total Cash, Cash Equivalents and supersedes most current revenue recognition guidance. It introduces a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of riskRestricted Cash
Cash, cash equivalents and rewards under current guidance. It also requires significantly expanded disclosures regarding revenues.
October 29, 2016 Reported | ASU 2016-09 Adjustment | ASU 2016-15 Adjustment | ASU 2016-18 Adjustment | October 29, 2016 Adjusted | |||||||||||||||
Operating activities | |||||||||||||||||||
Other, net | $ | (34 | ) | $ | 12 | $ | — | $ | — | $ | (22 | ) | |||||||
Changes in operating assets and liabilities: | |||||||||||||||||||
Receivables | 80 | — | (1 | ) | — | 79 | |||||||||||||
Merchandise inventories | (1,370 | ) | — | 1 | — | (1,369 | ) | ||||||||||||
Total cash provided by operating activities | 1,395 | 12 | — | — | 1,407 | ||||||||||||||
Investing activities | |||||||||||||||||||
Change in restricted assets | (8 | ) | — | — | 8 | — | |||||||||||||
Total cash used in investing activities | (856 | ) | — | — | 8 | (848 | ) | ||||||||||||
Financing activities | |||||||||||||||||||
Other, net | 20 | (12 | ) | — | — | 8 | |||||||||||||
Total cash used in financing activities | (1,187 | ) | (12 | ) | — | — | (1,199 | ) | |||||||||||
Decrease in cash, cash equivalents and restricted cash | (635 | ) | — | — | 8 | (627 | ) | ||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | 1,976 | — | — | 185 | 2,161 | ||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 1,341 | $ | — | $ | — | $ | 193 | $ | 1,534 |
October 29, 2022 | January 29, 2022 | October 30, 2021 | |||||||||
Cash and cash equivalents | $ | 932 | $ | 2,936 | $ | 3,465 | |||||
Restricted cash included in Other current assets | 361 | 269 | 173 | ||||||||
Total cash, cash equivalents and restricted cash | $ | 1,293 | $ | 3,205 | $ | 3,638 |
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
Cash and cash equivalents | $ | 1,103 | $ | 2,240 | $ | 1,341 | |||||
Restricted cash included in Other current assets | 197 | 193 | 193 | ||||||||
Total cash, cash equivalents and restricted cash | $ | 1,300 | $ | 2,433 | $ | 1,534 |
Amounts included in restricted cash are pledged as collateral orprimarily restricted to use for general liability insuranceproduct protection plans provided under our Best Buy Totaltech membership offering and workers' compensation insurance.
2. Restructuring
Restructuring charges were as follows ($ in millions):
Three Months Ended | Nine Months Ended | ||||||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||||||
Fiscal 2023 Resource Optimization Initiative | $ | 25 | $ | - | $ | 59 | $ | - | |||||||||||
Mexico Exit and Strategic Realignment(1) | 1 | (1) | 2 | (45) | |||||||||||||||
Total | $ | 26 | $ | (1) | $ | 61 | $ | (45) |
(1)Includes ($6) million related to inventory markdowns recorded in Cost of Sales on our Condensed Consolidated Statements of Earnings for the nine months ended October 30, 2021.
Fiscal 2023 Resource Optimization Initiative
In light of ongoing changes in business trends, during the second quarter of fiscal 2023, we commenced an enterprise-wide initiative to better align our spending with critical strategies and operations, as well as to optimize our cost structure. Charges incurred for the periods presented are primarily comprised of employee termination benefits within our Domestic segment. We currently expect to incur additional charges through the remainder of fiscal 2023, primarily within our Domestic segment, of approximately $15 million to $30 million related to this initiative.
All charges incurred related to this plan were from continuing operations and were presented within Restructuring charges on our Condensed Consolidated Statements of Earnings.
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Gain from discontinued operations before income tax expense | $ | 1 | $ | 2 | $ | 1 | $ | 28 | |||||||
Income tax expense | — | — | — | 7 | |||||||||||
Net gain from discontinued operations | $ | 1 | $ | 2 | $ | 1 | $ | 21 |
Restructuring accrual activity within our Domestic segment related to the fiscal 2023 resource optimization initiative described above was as follows ($ in millions):
Termination Benefits | |||
Balance at January 29, 2022 | $ | - | |
Charges | 62 | ||
Cash payments | (28) | ||
Adjustments(1) | (3) | ||
Balance at October 29, 2022 | $ | 31 |
(1)Represents higher-than-expected employee retention.
Mexico Exit and Strategic Realignment
In the third quarter of fiscal 2021, we made the decision to exit our operations in Mexico and began taking other actions to more broadly align our organizational structure in support of our strategy.
Charges incurred in our International segment primarily related to our decision to exit our operations in Mexico. All of our former stores in Mexico were closed as of the first quarter of fiscal 2022.
Charges incurred in our Domestic segment primarily related to actions taken to align our organizational structure in support of our strategy. During the nine months ended October 30, 2021, we recorded a $44 million credit primarily due to a reduction in expected termination benefits resulting from adjustments to previously planned organizational changes and higher-than-expected employee retention.
All charges incurred related to this plan were from continuing operations and were presented as follows ($ in millions):
Statement of | Three Months Ended October 30, 2021 | Nine Months Ended October 30, 2021 | |||||||||||||||||||||||||
Earnings Location | Domestic | International | Total | Domestic | International | Total | |||||||||||||||||||||
Inventory markdowns | Cost of sales | $ | - | $ | - | $ | - | $ | - | $ | (6) | $ | (6) | ||||||||||||||
Asset impairments | Restructuring charges | - | (1) | (1) | - | 6 | 6 | ||||||||||||||||||||
Termination benefits | Restructuring charges | - | - | - | (44) | (1) | (45) | ||||||||||||||||||||
$ | - | $ | (1) | $ | (1) | $ | (44) | $ | (1) | $ | (45) |
Statement of | Cumulative Amount as of October 29, 2022 | ||||||||||||||
Earnings Location | Domestic | International | Total | ||||||||||||
Inventory markdowns | Cost of sales | $ | - | $ | 17 | $ | 17 | ||||||||
Asset impairments(1) | Restructuring charges | 10 | 63 | 73 | |||||||||||
Termination benefits | Restructuring charges | 83 | 20 | 103 | |||||||||||
Currency translation adjustment | Restructuring charges | - | 39 | 39 | |||||||||||
Other(2) | Restructuring charges | - | 6 | 6 | |||||||||||
$ | 93 | $ | 145 | $ | 238 |
(1)Remaining net carrying value approximates fair value and was immaterial as of October 29, 2022.
(2)Other charges are primarily comprised of contract termination costs.
We do not expect to incur material future restructuring charges related to the exit from Mexico or strategic realignment initiatives described above, and no material liability remains as of October 29, 2022.
3. Goodwill and Intangible Assets
Goodwill
Goodwill balances by reportable segment were as follows ($ in millions):
October 29, 2022 | January 29, 2022 | October 30, 2021 | |||||||||||||||||||||
Gross Carrying Amount | Cumulative Impairment | Gross Carrying Amount | Cumulative Impairment | Gross Carrying Amount | Cumulative Impairment | ||||||||||||||||||
Domestic | $ | 1,450 | $ | (67) | $ | 1,451 | $ | (67) | $ | 1,053 | $ | (67) | |||||||||||
International | 608 | (608) | 608 | (608) | 608 | (608) | |||||||||||||||||
Total | $ | 2,058 | $ | (675) | $ | 2,059 | $ | (675) | $ | 1,661 | $ | (675) |
No impairment charges were recorded during the periods presented.
Definite-Lived Intangible Assets
We have definite-lived intangible assets that are recorded within Other assets on our Condensed Consolidated Balance Sheets as follows ($ in millions):
October 29, 2022 | January 29, 2022 | October 30, 2021 | Weighted-Average | ||||||||||||||||||||||||
Gross Carrying | Accumulated | Gross Carrying | Accumulated | Gross Carrying | Accumulated | Useful Life Remaining as of October 29, 2022 (in years) | |||||||||||||||||||||
Customer relationships | $ | 360 | $ | 222 | $ | 360 | $ | 180 | $ | 339 | $ | 165 | 8.0 | ||||||||||||||
Tradenames | 108 | 52 | 108 | 38 | 81 | 34 | 5.4 | ||||||||||||||||||||
Developed technology | 64 | 48 | 64 | 39 | 56 | 36 | 2.6 | ||||||||||||||||||||
Total | $ | 532 | $ | 322 | $ | 532 | $ | 257 | $ | 476 | $ | 235 | 6.9 |
Amortization expense was as follows ($ in millions):
Statement of | Three Months Ended | Nine Months Ended | ||||||||||||||||||||
Earnings Location | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||||||||
Amortization expense | SG&A | $ | 21 | $ | 20 | $ | 65 | $ | 60 |
Amortization expense expected to be recognized in future periods is as follows ($ in millions):
Amortization Expense | |||||||||||||||||||||||||||||
Remainder of fiscal 2023 | $ | 21 | |||||||||||||||||||||||||||
Fiscal 2024 | 61 | ||||||||||||||||||||||||||||
Fiscal 2025 | 21 | ||||||||||||||||||||||||||||
Fiscal 2026 | 21 | ||||||||||||||||||||||||||||
Fiscal 2027 | 18 | ||||||||||||||||||||||||||||
Fiscal 2028 | 12 | ||||||||||||||||||||||||||||
Thereafter | 56 |
4. Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price)measurements are reported in the principal or most advantageous market for the asset or liability in an orderly transaction between market participantsone of three levels based on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:
Recurring Fair Value on a Recurring Basis
Financial assets and liabilities that were accounted for at fair value on a recurring basis at
Fair Value at | ||||||||||||||||||
Balance Sheet Location(1) | Fair Value Hierarchy | October 29, 2022 | January 29, 2022 | October 30, 2021 | ||||||||||||||
Assets | ||||||||||||||||||
Money market funds(2) | Cash and cash equivalents | Level 1 | $ | 76 | $ | 548 | $ | 313 | ||||||||||
Time deposits(3) | Cash and cash equivalents | Level 2 | 25 | 278 | 625 | |||||||||||||
Money market funds(2) | Other current assets | Level 1 | 176 | - | - | |||||||||||||
Marketable securities that fund deferred compensation(4) | Other assets | Level 1 | 44 | 54 | 54 | |||||||||||||
Interest rate swap derivative instruments(5) | Other assets | Level 2 | - | 50 | 58 | |||||||||||||
Liabilities | ||||||||||||||||||
Interest rate swap derivative instruments(5) | Long-term liabilities | Level 2 | 27 | - | - |
Fair Value Hierarchy | Fair Value at | ||||||||||||
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||||
ASSETS | |||||||||||||
Cash and cash equivalents | |||||||||||||
Money market funds | Level 1 | $ | 84 | $ | 290 | $ | 97 | ||||||
Time deposits | Level 2 | — | 15 | 11 | |||||||||
Short-term investments | |||||||||||||
Commercial paper | Level 2 | 588 | 349 | 250 | |||||||||
Time deposits | Level 2 | 1,649 | 1,332 | 1,527 | |||||||||
Other current assets | |||||||||||||
Money market funds | Level 1 | 8 | 7 | 3 | |||||||||
Commercial paper | Level 2 | 60 | 60 | 60 | |||||||||
Foreign currency derivative instruments | Level 2 | 5 | 2 | 5 | |||||||||
Interest rate swap derivative instruments | Level 2 | 3 | — | — | |||||||||
Time deposits | Level 2 | 100 | 100 | 100 | |||||||||
Other assets | |||||||||||||
Marketable securities that fund deferred compensation | Level 1 | 98 | 96 | 96 | |||||||||
Interest rate swap derivative instruments | Level 2 | — | 13 | 13 | |||||||||
LIABILITIES | |||||||||||||
Accrued liabilities | |||||||||||||
Foreign currency derivative instruments | Level 2 | 5 | 3 | 3 | |||||||||
Long-term liabilities | |||||||||||||
Interest rate swap derivative instruments | Level 2 | 3 | — | — |
(1)Balance sheet location is determined by length to maturity at date of fiscal 2017, our remaining investments in auction rate securities ("ARS"), which were classified as Level 3, were calledpurchase.
(2)Valued at par, which resulted in proceeds of $2 million and no realized gain or loss. Other than as described, there were no changes in the beginning and ending balances of items measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) for the periods presented.
(3)Valued at face value plus accrued interest at period end, which approximates fair value,value.
(4)Valued using the performance of mutual funds that trade with sufficient frequency and are classified as Level 2.
(5)Valued using readily observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates. Our foreign currency derivative instruments were classified as Level 2 as theseinputs. These instruments are custom, over-the-counter contracts with various bank counterparties that are not traded inon an active market.
Impairments | Remaining Net Carrying Value(1) | ||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||||||||
Property and equipment (non-restructuring) | $ | 2 | $ | 8 | $ | 8 | $ | 16 | $ | — | $ | — | |||||||||||
Property and equipment (restructuring)(2) | — | 1 | — | 8 | — | — | |||||||||||||||||
Total | $ | 2 | $ | 9 | $ | 8 | $ | 24 | $ | — | $ | — |
Fair Value of Financial Instruments
The fair values of cash, restricted cash, receivables, accounts payable, short-term debt and other payables approximated their carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. Fair values for other investmentsinstruments held at cost are not readily available, but we estimate that the carrying values for these investments approximate their fair value. See Note 6,
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
Goodwill | $ | 425 | $ | 425 | $ | 425 | |||||
Intangible assets included in Other assets | 18 | 18 | 18 |
Long-term debt is presented at carrying amount of goodwill and cumulative goodwill impairment ($ in millions):
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||||||||||||||
Gross Carrying Amount | Cumulative Impairment | Gross Carrying Amount | Cumulative Impairment | Gross Carrying Amount | Cumulative Impairment | ||||||||||||||||||
Goodwill | $ | 1,100 | $ | 675 | $ | 1,100 | $ | 675 | $ | 1,100 | $ | 675 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Renew Blue Phase 2 | $ | — | $ | 1 | $ | — | $ | 26 | |||||||
Canadian brand consolidation | (2 | ) | (2 | ) | (3 | ) | (1 | ) | |||||||
Renew Blue(1) | — | 1 | 3 | 4 | |||||||||||
Other restructuring activities(2) | — | 1 | — | 1 | |||||||||||
Total restructuring charges | $ | (2 | ) | $ | 1 | $ | — | $ | 30 |
Domestic | |||||||||||||||||||
Three Months Ended | Nine Months Ended | Cumulative Amount | |||||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | October 28, 2017 | |||||||||||||||
Property and equipment impairments | $ | — | $ | 1 | $ | — | $ | 8 | $ | 8 | |||||||||
Termination benefits | — | — | — | 18 | 18 | ||||||||||||||
Total restructuring charges | $ | — | $ | 1 | $ | — | $ | 26 | $ | 26 |
Termination Benefits | |||
Balances at January 30, 2016 | $ | — | |
Charges | 19 | ||
Cash payments | (16 | ) | |
Adjustments(1) | (2 | ) | |
Balances at October 29, 2016 | $ | 1 |
International | |||||||||||||||||||
Three Months Ended | Nine Months Ended | Cumulative Amount | |||||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | October 28, 2017 | |||||||||||||||
Inventory write-downs | $ | — | $ | — | $ | — | $ | — | $ | 3 | |||||||||
Property and equipment impairments | — | — | — | — | 30 | ||||||||||||||
Tradename impairment | — | — | — | — | 40 | ||||||||||||||
Termination benefits | — | — | — | — | 25 | ||||||||||||||
Facility closure and other costs | (2 | ) | (2 | ) | (3 | ) | (1 | ) | 102 | ||||||||||
Total restructuring charges | $ | (2 | ) | $ | (2 | ) | $ | (3 | ) | $ | (1 | ) | $ | 200 |
Termination Benefits | Facility Closure and Other Costs | Total | |||||||||
Balances at January 28, 2017 | $ | — | $ | 34 | $ | 34 | |||||
Cash payments | — | (14 | ) | (14 | ) | ||||||
Adjustments(1) | — | (3 | ) | (3 | ) | ||||||
Changes in foreign currency exchange rates | — | 1 | 1 | ||||||||
Balances at October 28, 2017 | $ | — | $ | 18 | $ | 18 | |||||
Balances at January 30, 2016 | $ | 2 | $ | 64 | $ | 66 | |||||
Charges | — | 1 | 1 | ||||||||
Cash payments | (2 | ) | (29 | ) | (31 | ) | |||||
Adjustments(1) | — | (2 | ) | (2 | ) | ||||||
Changes in foreign currency exchange rates | — | 3 | 3 | ||||||||
Balances at October 29, 2016 | $ | — | $ | 37 | $ | 37 |
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
2018 Notes | $ | 500 | $ | 500 | $ | 500 | |||||
2021 Notes | 650 | 650 | 650 | ||||||||
Interest rate swap valuation adjustments | — | 13 | 13 | ||||||||
Subtotal | 1,150 | 1,163 | 1,163 | ||||||||
Debt discounts and issuance costs | (3 | ) | (5 | ) | (5 | ) | |||||
Financing lease obligations | 158 | 177 | 180 | ||||||||
Capital lease obligations | 24 | 30 | 29 | ||||||||
Total long-term debt | 1,329 | 1,365 | 1,367 | ||||||||
Less: current portion | 545 | 44 | 43 | ||||||||
Total long-term debt, less current portion | $ | 784 | $ | 1,321 | $ | 1,324 |
October 29, 2022 | January 29, 2022 | October 30, 2021 | |||||||||||||||||||||||||
Fair Value | Carrying Value | Fair Value | Carrying Value | Fair Value | Carrying Value | ||||||||||||||||||||||
Long-term debt(1) | $ | 925 | $ | 1,123 | $ | 1,205 | $ | 1,200 | $ | 1,257 | $ | 1,208 |
(1)Excluded debt facilities, debt instrumentsdiscounts, issuance costs and otherfinance lease obligations.
5. Derivative Instruments
We manage our economic and transaction exposure to certain risks through the use of foreign currency and interest rate swap derivative instruments. Our objective in holding derivatives is to reduce the volatility of net earnings, cash flows and net asset value associated with changes in foreign currency exchange rates and interest rates. We do not hold derivative instruments for trading or speculative purposes. We have no derivatives that have credit risk-related contingent features, and we mitigate our credit risk by engaging with major financial institutions as our counterparties.
Our derivative instruments are not designated as hedging relationships,net investment hedges and therefore, we record gains and lossesinterest rate swaps are recorded on these contracts directly to net earnings.
Notional amounts of our derivative instruments were as follows ($ in millions):
Contract Type | October 29, 2022 | January 29, 2022 | October 30, 2021 | ||||||||||
Derivatives designated as net investment hedges | $ | 118 | $ | 155 | $ | 125 | |||||||
Derivatives designated as interest rate swaps | 500 | 500 | 500 | ||||||||||
No hedge designation (foreign exchange contracts) | 112 | 68 | 106 | ||||||||||
Total | $ | 730 | $ | 723 | $ | 731 | |||||||
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||
Derivatives designated as net investment hedges(1) | $ | 3 | $ | 5 | $ | 2 | $ | 2 | $ | 4 | $ | 3 | |||||||||||
Derivatives designated as interest rate swaps(2) | 3 | 3 | 13 | — | 13 | — | |||||||||||||||||
No hedge designation (foreign exchange forward contracts)(1) | 2 | — | — | 1 | 1 | — | |||||||||||||||||
Total | $ | 8 | $ | 8 | $ | 15 | $ | 3 | $ | 18 | $ | 3 |
Effects of derivative instruments by contract type on other comprehensive income ("OCI") andour derivatives on our Condensed Consolidated Statements of Earnings for the
Gain (Loss) Recognized | |||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||
Statement of Earnings Location | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | |||||||||||||||
Interest rate swap contracts | Interest expense | $ | (45) | $ | (21) | $ | (76) | $ | (33) | ||||||||||
Adjustments to carrying value of long-term debt | Interest expense | 45 | 21 | 76 | 33 | ||||||||||||||
Total | $ | - | $ | - | $ | - | $ | - |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Derivatives designated as net investment hedges | |||||||||||||||
Pre-tax gain (loss) recognized in OCI | $ | 8 | $ | 6 | $ | (3 | ) | $ | (10 | ) | |||||
Derivatives designated as interest rate swaps | |||||||||||||||
Gain (loss) recognized within Interest expense | |||||||||||||||
Interest rate swap gain | $ | 16 | $ | 14 | $ | 13 | $ | 12 | |||||||
Long-term debt loss | (16 | ) | (14 | ) | (13 | ) | (12 | ) | |||||||
Net impact | $ | — | $ | — | $ | — | $ | — | |||||||
No hedge designation (foreign exchange forward contracts) | |||||||||||||||
Gain (loss) recognized within Selling, general and administrative expenses | $ | 2 | $ | 1 | $ | (1 | ) | $ | (2 | ) |
6. Debt
Short-Term Debt
U.S. Revolving Credit Facility
We have a $1.25 billion, five year senior unsecured revolving credit facility agreement (the “Five-Year Facility Agreement”) with a syndicate of banks. The following table presentsFive-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in May 2026. There were no borrowings outstanding under the notional amountsFive-Year Facility Agreement as of our derivative instruments at October 28, 2017, January 28, 2017, and October 29, 20162022, January 29, 2022, or October 30, 2021.
Long-Term Debt
Long-term debt consisted of the following ($ in millions):
October 29, 2022 | January 29, 2022 | October 30, 2021 | ||||||||||
Notes, 4.45%, due October 1, 2028 | $ | 500 | $ | 500 | $ | 500 | ||||||
Notes, 1.95%, due October 1, 2030 | 650 | 650 | 650 | |||||||||
Interest rate swap valuation adjustments | (27) | 50 | 58 | |||||||||
Subtotal | 1,123 | 1,200 | 1,208 | |||||||||
Debt discounts and issuance costs | (9) | (11) | (11) | |||||||||
Finance lease obligations | 44 | 40 | 41 | |||||||||
Total long-term debt | 1,158 | 1,229 | 1,238 | |||||||||
Less current portion | 16 | 13 | 15 | |||||||||
Total long-term debt, less current portion | $ | 1,142 | $ | 1,216 | $ | 1,223 |
See Note 4, Fair Value Measurements, for the fair value of long-term debt.
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
Derivatives designated as net investment hedges | $ | 240 | $ | 205 | $ | 203 | |||||
Derivatives designated as interest rate swaps | 1,150 | 750 | 750 | ||||||||
No hedge designation (foreign exchange forward contracts) | 64 | 43 | 59 | ||||||||
Total | $ | 1,454 | $ | 998 | $ | 1,012 |
7. Revenue
We generate substantially all of our revenue from contracts with customers for the sale of products and services. Contract balances primarily consist of receivables and liabilities related to product merchandise not yet delivered to customers, unfulfilled membership benefits and services not yet completed, unredeemed gift cards and options that provide a material right to customers, such as our customer loyalty programs. Contract balances were as follows ($ in millions):
October 29, 2022 | January 29, 2022 | October 30, 2021 | |||||||||
Receivables, net(1) | $ | 654 | $ | 591 | $ | 638 | |||||
Short-term contract liabilities included in: | |||||||||||
Unredeemed gift card liabilities | 273 | 316 | 306 | ||||||||
Deferred revenue | 1,080 | 1,103 | 977 | ||||||||
Accrued liabilities | 77 | 83 | 88 |
(1)Receivables are recorded net of allowances for doubtful accounts of $20 million, $31 million and $24 million as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively.
During the first nine months of fiscal 2023 and fiscal 2022, $1,251 million and $1,001 million of revenue was recognized, respectively, that was included in the contract liabilities at the beginning of the respective periods.
See Note 12, Segments, for information on our revenue by reportable segment and product category.
8. Earnings per Share
We compute our basic earnings per share based on the weighted-average number of common shares outstanding and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued. Potentially dilutive securities include stock options, nonvested share awards and shares issuable under our employee stock purchase plan. Nonvested market-based share awards and nonvested performance-based share awards are included in the average diluted shares outstanding for each period, if established market or performance criteria have been met at the end of the respective periods.
Reconciliations of the numerators and denominators of basic and diluted earnings per share from continuing operations for the three
Three Months Ended | Nine Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Numerator | |||||||||||||||
Net earnings | $ | 277 | $ | 499 | $ | 924 | $ | 1,828 | |||||||
Denominator | |||||||||||||||
Weighted-average common shares outstanding | 225.5 | 246.4 | 225.9 | 249.9 | |||||||||||
Dilutive effect of stock compensation plan awards | 0.7 | 2.7 | 1.0 | 3.0 | |||||||||||
Weighted-average common shares outstanding, assuming dilution | 226.2 | 249.1 | 226.9 | 252.9 | |||||||||||
Potential shares which were anti-dilutive and excluded from weighted-average share computations | 2.3 | - | 2.3 | - | |||||||||||
Basic earnings per share | $ | 1.23 | $ | 2.02 | $ | 4.09 | $ | 7.31 | |||||||
Diluted earnings per share | $ | 1.22 | $ | 2.00 | $ | 4.07 | $ | 7.23 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Numerator | |||||||||||||||
Net earnings from continuing operations | $ | 238 | $ | 192 | $ | 635 | $ | 600 | |||||||
Denominator | |||||||||||||||
Weighted-average common shares outstanding | 299.1 | 316.2 | 304.1 | 320.2 | |||||||||||
Dilutive effect of stock compensation plan awards | 6.3 | 3.8 | 6.5 | 3.4 | |||||||||||
Weighted-average common shares outstanding, assuming dilution | 305.4 | 320.0 | 310.6 | 323.6 | |||||||||||
Net earnings per share from continuing operations | |||||||||||||||
Basic | $ | 0.80 | $ | 0.61 | $ | 2.09 | $ | 1.87 | |||||||
Diluted | $ | 0.78 | $ | 0.60 | $ | 2.05 | $ | 1.85 |
9. Repurchase of weighted-average common shares outstanding, assuming dilution, excluded options to purchase zero shares and 6.3 million shares of common stock for the
On February 28, 2017, and October 29, 2016, respectively, and options to purchase zero shares and 6.9 million shares of common stock for the nine months ended October 28, 2017, and October 29, 2016, respectively. These amounts were excluded as the options’ exercise prices were greater than the average market price of2022, our common stock for the periods presented, and, therefore, the effect would be anti-dilutive (i.e., including such options would result in higher earnings per share).
Foreign Currency Translation | |||
Balances at July 29, 2017 | $ | 321 | |
Foreign currency translation adjustments | (17 | ) | |
Balances at October 28, 2017 | $ | 304 | |
Balances at January 28, 2017 | $ | 279 | |
Foreign currency translation adjustments | 25 | ||
Balances at October 28, 2017 | $ | 304 | |
Balances at July 30, 2016 | $ | 296 | |
Foreign currency translation adjustments | (19 | ) | |
Balances at October 29, 2016 | $ | 277 | |
Balances at January 30, 2016 | $ | 271 | |
Foreign currency translation adjustments | 6 | ||
Balances at October 29, 2016 | $ | 277 |
Information regarding the shares we repurchased during the
Three Months Ended | Nine Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Total cost of shares repurchased | $ | - | $ | 426 | $ | 452 | $ | 1,757 | |||||||
Average price per share | $ | - | $ | 115.94 | $ | 96.83 | $ | 111.33 | |||||||
Number of shares repurchased | - | 3.7 | 4.6 | 15.8 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Total cost of shares repurchased | |||||||||||||||
Open market(1) | $ | 366 | $ | 206 | $ | 1,147 | $ | 483 | |||||||
Settlement of January 2016 ASR(2) | — | — | — | 45 | |||||||||||
Total | $ | 366 | $ | 206 | $ | 1,147 | $ | 528 | |||||||
Average price per share | |||||||||||||||
Open market | $ | 57.14 | $ | 37.67 | $ | 52.35 | $ | 33.52 | |||||||
Settlement of January 2016 ASR(2) | $ | — | $ | — | $ | — | $ | 28.55 | |||||||
Average | $ | 57.14 | $ | 37.67 | $ | 52.35 | $ | 33.03 | |||||||
Number of shares repurchased and retired | |||||||||||||||
Open market(1) | 6.4 | 5.5 | 21.9 | 14.4 | |||||||||||
Settlement of January 2016 ASR(2) | — | — | — | 1.6 | |||||||||||
Total | 6.4 | 5.5 | 21.9 | 16.0 |
As of October 29, 2022, $4.7 billion shares remained available for additional purchases underof the February 2017$5.0 billion share repurchase program as of October 28, 2017.authorization was available. Between the end of the third quarter of fiscal 20182023 on October 29, 2022, and November 30, 2017,December 2, 2022, we repurchased an incremental 4.54.4 million shares of our common stock at a cost of $256$322 million. Repurchased shares
10. Income Taxes
Unrecognized Tax Benefits
Our income tax returns are retiredroutinely examined by domestic and constitute authorized but unissued shares.
Inflation Reduction Act of 2022
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and its districts and territories) and International (which is comprised of all operations within Canada and Mexico). Our CODM has ultimate responsibility for enterprise decisions. Our CODM determines, in particular, resource allocation for, and monitors performanceseveral tax incentives to promote clean energy. Based on our current analysis of the provisions, we do not believe this legislation will have a material impact on our consolidated enterprise, the Domestic segment and the International segment. The Domestic segment managers and International segment managers have responsibility for operating decisions, allocating resources and assessing performance within their respective segments. Our CODM relies on internal management reporting that analyzes enterprise results to the net earnings level and segment results to the operating income level.
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Domestic | $ | 8,491 | $ | 8,192 | $ | 24,675 | $ | 23,910 | |||||||
International | 829 | 753 | 2,113 | 2,011 | |||||||||||
Total revenue | $ | 9,320 | $ | 8,945 | $ | 26,788 | $ | 25,921 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Domestic | $ | 345 | $ | 298 | $ | 959 | $ | 959 | |||||||
International | 5 | 14 | 12 | 14 | |||||||||||
Total operating income | 350 | 312 | 971 | 973 | |||||||||||
Other income (expense) | |||||||||||||||
Gain on sale of investments | — | — | — | 2 | |||||||||||
Investment income and other | 12 | 8 | 30 | 22 | |||||||||||
Interest expense | (20 | ) | (16 | ) | (57 | ) | (54 | ) | |||||||
Earnings from continuing operations before income tax expense | $ | 342 | $ | 304 | $ | 944 | $ | 943 |
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
Domestic | $ | 13,140 | $ | 12,496 | $ | 13,115 | |||||
International | 1,645 | 1,360 | 1,427 | ||||||||
Total assets | $ | 14,785 | $ | 13,856 | $ | 14,542 |
11. Contingencies
We are involved in a number of legal proceedings. Where appropriate, we have made accruals with respect to these matters, which are reflected inon our Condensed Consolidated Financial Statements. However, there are cases where liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. We provide disclosure of matters where we believe it is reasonably possible the impact may be material to our Condensed Consolidated Financial Statements.
12. Segments
Reportable segment and on behalf of all others similarly situated v. Best Buy Co., Inc., et al.
Three Months Ended | Nine Months Ended | ||||||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||||||
Revenue by reportable segment | |||||||||||||||||||
Domestic | $ | 9,800 | $ | 10,985 | $ | 29,263 | $ | 32,837 | |||||||||||
International | 787 | 925 | 2,300 | 2,559 | |||||||||||||||
Total revenue | $ | 10,587 | $ | 11,910 | $ | 31,563 | $ | 35,396 | |||||||||||
Revenue by product category | |||||||||||||||||||
Domestic: | |||||||||||||||||||
Computing and Mobile Phones | $ | 4,337 | $ | 4,901 | $ | 12,586 | $ | 14,460 | |||||||||||
Consumer Electronics | 2,889 | 3,346 | 8,630 | 9,964 | |||||||||||||||
Appliances | 1,469 | 1,628 | 4,717 | 4,864 | |||||||||||||||
Entertainment | 500 | 527 | 1,581 | 1,755 | |||||||||||||||
Services | 533 | 541 | 1,538 | 1,667 | |||||||||||||||
Other | 72 | 42 | 211 | 127 | |||||||||||||||
Total Domestic revenue | $ | 9,800 | $ | 10,985 | $ | 29,263 | $ | 32,837 | |||||||||||
International: | |||||||||||||||||||
Computing and Mobile Phones | $ | 389 | $ | 462 | $ | 1,060 | $ | 1,230 | |||||||||||
Consumer Electronics | 220 | 253 | 657 | 720 | |||||||||||||||
Appliances | 74 | 87 | 249 | 260 | |||||||||||||||
Entertainment | 46 | 54 | 154 | 176 | |||||||||||||||
Services | 43 | 54 | 134 | 128 | |||||||||||||||
Other | 15 | 15 | 46 | 45 | |||||||||||||||
Total International revenue | $ | 787 | $ | 925 | $ | 2,300 | $ | 2,559 |
Operating income by reportable segment and the officers namedreconciliation to consolidated earnings before income tax expense and equity in the complaint violated Sections 10(b) and 20Aincome (loss) of the Exchange Act and Rule 10b-5 under the Exchange Actaffiliates was as follows ($ in connection with press releases and other statements relating to our fiscal 2011 earnings guidance that had been made available to the public. Additionally,millions):
Three Months Ended | Nine Months Ended | ||||||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||||||
Domestic | $ | 332 | $ | 609 | $ | 1,104 | $ | 2,100 | |||||||||||
International | 33 | 61 | 94 | 136 | |||||||||||||||
Total operating income | 365 | 670 | 1,198 | 2,236 | |||||||||||||||
Other income (expense): | |||||||||||||||||||
Investment income and other | 4 | 1 | 2 | 7 | |||||||||||||||
Interest expense | (10) | (7) | (23) | (19) | |||||||||||||||
Earnings before income tax expense and equity in income (loss) of affiliates | $ | 359 | $ | 664 | $ | 1,177 | $ | 2,224 |
Assets by reportable segment were as follows ($ in March 2011, a similar purported class action was filed by a single shareholder, Rene LeBlanc, against us and certain of our executive officers in the same court. In July 2011, after consolidation of the IBEW Local 98 Pension Fund and Rene LeBlanc actions, a consolidated complaint captioned, IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al., was filed and served. We filed a motion to dismiss the consolidated complaint in September 2011, and in March 2012, subsequent to the end of fiscal 2012, the court issued a decision dismissing the action with prejudice. In April 2012, the plaintiffs filed a motion to alter or amend the court's decision on our motion to dismiss. In October 2012, the court granted plaintiff's motion to alter or amend the court's decision on our motion to dismiss in part by vacating such decision and giving plaintiff leave to file an amended complaint, which plaintiff did in October 2012. We filed a motion to dismiss the amended complaint in November 2012 and all responsive pleadings were filed in December 2012. A hearing was held on April 26, 2013. On August 5, 2013, the court issued an order granting our motion to dismiss in part and, contrary to its March 2012 order, denying the motion to dismiss in part, holding that certain of the statements alleged to have been made were not forward-looking statements and therefore were not subject to the “safe-harbor” provisions of the Private Securities Litigation Reform Act. Plaintiffs moved to certify the purported class. By Order filed August 6, 2014, the court certified a class of persons or entities who acquired Best Buy common stock between 10:00 a.m. EDT on September 14, 2010, and December 13, 2010, and who were damaged by the alleged violations of law. The 8th Circuit Court of Appeals granted our request for interlocutory appeal. On April 12, 2016, the 8th Circuit held the trial court misapplied the law and reversed the class certification order. IBEW petitioned the 8th Circuit for a rehearing en banc, which was denied on June 1, 2016. In October 2016, IBEW advised the trial court it will not seek review by the Supreme Court. On June 23, 2017, the trial court denied plaintiff's request to file a new Motion for Class Certification. On October 30, 2017, plaintiffs filed with the trial court a motion for leave to file a second amended class action complaint which Best Buy opposed in a filing on November 6, 2017. That motion is pending. We continue to believe that the remaining individual plaintiff's allegations are without merit and intend to vigorously defend our company in this matter.millions):
October 29, 2022 | January 29, 2022 | October 30, 2021 | |||||||||||||
Domestic | $ | 15,695 | $ | 16,016 | $ | 18,518 | |||||||||
International | 1,326 | 1,488 | 1,584 | ||||||||||||
Total assets | $ | 17,021 | $ | 17,504 | $ | 20,102 |
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in the following refers to Best Buy Co., Inc. and its consolidated subsidiaries. Any references to our website addresses do not constitute incorporation by reference of the information contained on the websites.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations and liquidity are discussed in order of magnitude. Our MD&A is presented in the following sections:
Overview
We are a leading providerdriven by our purpose to enrich lives through technology and our vision to personalize and humanize technology solutions for every stage of life. We accomplish this by leveraging our combination of technology products, services and solutions. We offer these products and servicesa human touch to customers whomeet our customers’ everyday needs, whether they come to us online, visit our stores engage with Geek Squad agents or use our websites or mobile applications. invite us into their homes.
We have operations in the U.S., Canada and Mexico. We operate two reportable segments: Domestic and International. The Domestic segment is comprised of our operations in all operations withinstates, districts and territories of the U.S. and its districtsour Best Buy Health business. All of our former stores in Mexico were closed as of the end of the first quarter of fiscal 2022, and territories. Theour International segment is now comprised of all our operations in Canada and Mexico.
Our fiscal year ends on the Saturday nearest the end of January. Fiscal 2018 will include 53 weeks with the additional week included in the fourth quarter and fiscal 2017 included 52 weeks. Our business, like that of many retailers, is seasonal. A higherlarge proportion of our revenue and earnings is generated in the fiscal fourth fiscal quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico ("Holiday").
Comparable Sales
Throughout this MD&A, we refer to comparable sales. OurComparable sales is a metric used by management to evaluate the performance of our existing stores, websites and call centers by measuring the change in net sales for a particular period over the comparable prior-period of equivalent length. Comparable sales calculation comparesincludes revenue from stores, websites and call centers operating for at least 14 full months, as well as revenue related to certain othermonths. Revenue from online sales is included in comparable sales channels forand represents sales initiated on a particular periodwebsite or app, regardless of whether customers choose to the corresponding periodpick up product in the prior year. Relocated stores, as well as remodeled, expanded and downsized stores closed more than 14 days, are excludedstore, curbside, at an alternative pick-up location or take delivery direct to their homes. Revenue from the comparable sales calculation until at least 14 full months after reopening. Acquisitions areacquisitions is included in the comparable sales calculation beginning with the first full quarter following the first anniversary of the date of the acquisition. The calculationComparable sales also includes credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable. Revenue from stores closed more than 14 days, including but not limited to relocated, remodeled, expanded and downsized stores, or stores impacted by natural disasters, is excluded from comparable sales until at least 14 full months after reopening. Comparable sales excludes the impact of revenue from discontinued operations and the effect of fluctuations in foreign currency exchange rates (applicable to our International segment only). All periods presented apply this methodology consistently.
On November 2, 2021, we acquired all outstanding shares of Current Health Ltd. (“Current Health”). On November 4, 2021, we acquired all outstanding shares of Two Peaks, LLC d/b/a Yardbird Furniture (“Yardbird”). Consistent with our comparable sales policy, the results of Current Health and Yardbird are excluded from our comparable sales calculation until the first quarter of fiscal 2024.
We believe comparable sales is a meaningful supplemental metric for investors to evaluate revenue performance resulting from growth in existing stores, websites and call centers versus the portion resulting from opening new stores or closing existing stores. The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as other retailers'retailers’ methods.
Non-GAAP Financial Measures
This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the United States ("GAAP"U.S. (“GAAP”), as well as certain adjusted or non-GAAP financial measures, such as constant currency, non-GAAP operating income, non-GAAP effective tax rate non-GAAP net earnings from continuing operations,and non-GAAP diluted earnings per share ("EPS"(“EPS”) from continuing operations and non-GAAP debt to earnings before interest, income taxes, depreciation, amortization and rent ("EBITDAR") ratio.. We believe that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide moreadditional useful information to assist investors infor evaluating current period performance and in assessing future performance. For these reasons, our internal management reporting, also includesincluding budgets and forecasts, and financial targets used for short-term incentives are based on non-GAAP financial measures. Generally, our non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and intangible impairments, andprice-fixing settlements, gains orand losses on investments.certain investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when we believe thisdoing so provides greater clarity to management and our investors. We provide reconciliations of the most comparable financial measures presented in accordance with GAAP to presented non-GAAP financial measures that enable investors to understand the adjustments made in arriving at the non-GAAP financial measures and to evaluate performance using the same metrics as management. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Non-GAAP financial measures as presented herein may not be comparable tocalculated differently from similarly titled measures used by other companies.
In our discussions of the operating results of our Consolidatedconsolidated business and our International segment, we sometimes refer to the impact of changes in foreign currency exchange rates or the impact of foreign currency exchange rate fluctuations, which are references to the differences between the foreign currency exchange rates we use to convert the International segment’s operating results from local currencies into U.S. dollars for reporting purposes. We also may use the term "constant currency",“constant currency,” which represents results adjusted to exclude foreign currency impacts. We calculate those impacts as the difference between the current period results translated using the current period currency exchange rates and using the comparable prior period currency exchange rates. We believe the disclosure of revenue changes in constant currency provides useful supplementary information to investors in light of significant fluctuations in currency rates and our inability to report comparable store sales for the International segment from the first quarter of fiscal 2016 through the third quarter of fiscal 2017 as a result of the Canadian brand consolidation.
Refer to the
Non-GAAP Financial Measures section below forBusiness Strategy Update
We believe one of our creditworthiness. Furthermore, we believe that our non-GAAP debt to EBITDAR ratiogreatest strengths is important for understanding our financial position and provides meaningful additional information about our ability to service our long-term debtadapt to rapidly changing and other fixed obligations andchallenging environments, whether due to fund our future growth.changes in technology, macroeconomic trends or a pandemic. We also believe our non-GAAP debt to EBITDAR ratio is relevant because it enables investors to compare our indebtedness toare currently operating in a challenging consumer electronics industry. As previously stated, we assumed that of retailers who own, rather than lease, their stores. Our decision to own or lease real estate is based on an assessment of our financial liquidity, our capital structure, our desire to own or to lease the location, the owner’s desire to own or to lease the location and the alternative that resultssales in the highest returnconsumer electronics industry would be lower this year following two years of elevated growth driven by unusually strong demand for technology products and services and fueled partly by stimulus dollars during the pandemic. In addition, we expected to see some impact on our shareholders.
Throughout the third quarter of fiscal 2018,2023, we were committed to balancing our Consolidated revenue increased 4.2%near-term response to $9.3 billion with Consolidated comparable sales growth of 4.4% comparedcurrent conditions and managing well what is in our control, while also advancing our strategic initiatives and investing in areas important for our long-term growth. This includes managing our inventory levels and actively assessing further actions to last year. Diluted earnings per share increased 30.0% to $0.78 compared to $0.60 last year.
At the same time, strategically, we are positioning ourselves to be completed by the end of fiscal 2021. During the third quarter of fiscal 2018, we achieved $50 million towards our new goal, for a total thus far of $100 million.
We remain confident in our strategy and excited about our future. We fundamentally believe that technology is more important than ever in our everyday lives, and as a result of the past few years, consumers have even more technology devices in their homes that will need to position us well for long-term value creation. Additionally,be updated, upgraded and supported over time. As our vendor partners continue to innovate and the world becomes increasingly more digital in the nine months ended October 28, 2017,all aspects, we returned approximately $1.5 billionwill be there to help customers in cash to our shareholders through both dividendsstores, online, virtually and stock repurchases. We plan to spend approximately $2.0 billion on share repurchases this fiscal year, aheaddirectly in their homes.
Results of Operations
Consolidated Results
Selected consolidated financial statements. No such events were identified for the periods presented.
Three Months Ended | Nine Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Revenue | $ | 10,587 | $ | 11,910 | $ | 31,563 | $ | 35,396 | |||||||
Revenue % change | (11.1) | % | 0.5 | % | (10.8) | % | 16.7 | % | |||||||
Comparable sales % change | (10.4) | % | 1.6 | % | (10.2) | % | 17.5 | % | |||||||
Gross profit | $ | 2,332 | $ | 2,802 | $ | 6,972 | $ | 8,327 | |||||||
Gross profit as a % of revenue(1) | 22.0 | % | 23.5 | % | 22.1 | % | 23.5 | % | |||||||
SG&A | $ | 1,941 | $ | 2,133 | $ | 5,713 | $ | 6,130 | |||||||
SG&A as a % of revenue(1) | 18.3 | % | 17.9 | % | 18.1 | % | 17.3 | % | |||||||
Restructuring charges | $ | 26 | $ | (1) | $ | 61 | $ | (39) | |||||||
Operating income | $ | 365 | $ | 670 | $ | 1,198 | $ | 2,236 | |||||||
Operating income as a % of revenue | 3.4 | % | 5.6 | % | 3.8 | % | 6.3 | % | |||||||
Net earnings | $ | 277 | $ | 499 | $ | 924 | $ | 1,828 | |||||||
Diluted earnings per share | $ | 1.22 | $ | 2.00 | $ | 4.07 | $ | 7.23 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Revenue | $ | 9,320 | $ | 8,945 | $ | 26,788 | $ | 25,921 | |||||||
Revenue % growth | 4.2 | % | 1.4 | % | 3.3 | % | 0.1 | % | |||||||
Comparable sales % gain(1) | 4.4 | % | 1.8 | % | 3.8 | % | 0.8 | % | |||||||
Gross profit | $ | 2,280 | $ | 2,203 | $ | 6,455 | $ | 6,410 | |||||||
Gross profit as a % of revenue(2) | 24.5 | % | 24.6 | % | 24.1 | % | 24.7 | % | |||||||
SG&A | $ | 1,932 | $ | 1,890 | $ | 5,484 | $ | 5,407 | |||||||
SG&A as a % of revenue(2) | 20.7 | % | 21.1 | % | 20.5 | % | 20.9 | % | |||||||
Restructuring charges | $ | (2 | ) | $ | 1 | $ | — | $ | 30 | ||||||
Operating income | $ | 350 | $ | 312 | $ | 971 | $ | 973 | |||||||
Operating income as a % of revenue | 3.8 | % | 3.5 | % | 3.6 | % | 3.8 | % | |||||||
Net earnings from continuing operations | $ | 238 | $ | 192 | $ | 635 | $ | 600 | |||||||
Earnings from discontinued operations, net of tax | $ | 1 | $ | 2 | $ | 1 | $ | 21 | |||||||
Net earnings | $ | 239 | $ | 194 | $ | 636 | $ | 621 | |||||||
Diluted earnings per share from continuing operations | $ | 0.78 | $ | 0.60 | $ | 2.05 | $ | 1.85 | |||||||
Diluted earnings per share | $ | 0.78 | $ | 0.61 | $ | 2.05 | $ | 1.92 |
(1)Because retailers vary in how they record costs of operating their supply chain between cost of sales |
Three Months Ended | Nine Months Ended | ||||
October 28, 2017 | October 28, 2017 | ||||
Comparable sales impact | 4.2 | % | 3.7 | % | |
Non-comparable sales impact(1) | (0.4 | )% | (0.5 | )% | |
Foreign currency exchange rate fluctuation impact | 0.4 | % | 0.1 | % | |
Total revenue increase | 4.2 | % | 3.3 | % |
In the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017, driven by our International segment. The gross profit rate decrease in theand first nine months of fiscal 2018 was2023, we generated $10.6 billion and $31.6 billion in revenue and our comparable sales decreased 10.4% and 10.2%, respectively, as we lapped strong comparable sales over the past two years, which were driven by the timing of government stimulus payments, temporary store closures due to the COVID-19 pandemic and heightened demand for stay-at-home focused purchases. In addition, we faced macroeconomic pressures in the current year, including high inflation, that have resulted in overall softness in customer demand within the consumer electronics industry.
Revenue, gross profit rate, SG&A and operating income rate changes in the third quarter and first nine months of fiscal 2023 were primarily driven by our Domestic segment. For further discussion of each segment’s gross profit rate changes, see
Income Tax Expense
Income tax expense decreased in the third quarter of fiscal 2018 compared2023, primarily due to the third quarter of fiscal 2017, driven by our Domestic segment. The SG&A ratea decrease in the first nine months of fiscal 2018 comparedpre-tax earnings. Our effective tax rate (“ETR”) decreased to the first nine months of fiscal 2017 was also driven by our Domestic segment. For further discussion of each segment’s SG&A rate changes, see
Income tax expense decreased in the first nine months of fiscal 2018 compared to the first nine months of fiscal 2017. This decrease in operating income was2023, primarily due to thea decrease in our Domestic segment gross profit rate,pre-tax earnings, partially offset by a decrease in our Domestic segment SG&A rate and a decrease in our
Our tax provision for interim periods is determined using an estimate of our annual effective tax rate,ETR, adjusted for discrete items, if any, that are taken into account in the relevant period. We update our estimate of the annual effective tax rateETR each quarter and we make a cumulative adjustment if our estimated tax rate changes. Our quarterly tax provision and our quarterly estimate of our annual effective tax rateETR are subject to variation due to several factors, including our ability to accurately forecast our pre-tax and taxable income and loss by jurisdiction, tax audit developments, recognition of excess tax benefits or deficiencies related to stock-based compensation, foreign currency gains (losses), changes in laws or regulations, and expenses or losses for which tax benefits are not recognized. Our effective tax rateETR can be more or less volatile based on the amount of pre-tax income.earnings. For example, the impact of discrete items and non-deductible losses on our effective tax rateETR is greater when our pre-tax earnings are lower.
On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income is lower.
Segment Performance Summary
Domestic
Selected financial data for the Domestic segment was as follows ($ in millions):
Three Months Ended | Nine Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Revenue | $ | 9,800 | $ | 10,985 | $ | 29,263 | $ | 32,837 | |||||||
Revenue % change | (10.8) | % | 1.2 | % | (10.9) | % | 17.7 | % | |||||||
Comparable sales % change(1) | (10.5) | % | 2.0 | % | (10.6) | % | 18.3 | % | |||||||
Gross profit | $ | 2,148 | $ | 2,571 | $ | 6,427 | $ | 7,703 | |||||||
Gross profit as a % of revenue | 21.9 | % | 23.4 | % | 22.0 | % | 23.5 | % | |||||||
SG&A | $ | 1,791 | $ | 1,962 | $ | 5,264 | $ | 5,647 | |||||||
SG&A as a % of revenue | 18.3 | % | 17.9 | % | 18.0 | % | 17.2 | % | |||||||
Restructuring charges | $ | 25 | $ | - | $ | 59 | $ | (44) | |||||||
Operating income | $ | 332 | $ | 609 | $ | 1,104 | $ | 2,100 | |||||||
Operating income as a % of revenue | 3.4 | % | 5.5 | % | 3.8 | % | 6.4 | % | |||||||
Selected Online Revenue Data | |||||||||||||||
Total online revenue | $ | 3,037 | $ | 3,436 | $ | 9,070 | $ | 10,518 | |||||||
Online revenue as a % of total segment revenue | 31.0 | % | 31.3 | % | 31.0 | % | 32.0 | % | |||||||
Comparable online sales % change(1) | (11.6) | % | (10.1) | % | (13.8) | % | (12.5) | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Revenue | $ | 8,491 | $ | 8,192 | $ | 24,675 | $ | 23,910 | |||||||
Revenue % growth | 3.6 | % | 1.3 | % | 3.2 | % | 0.2 | % | |||||||
Comparable sales % gain(1) | 4.5 | % | 1.8 | % | 3.8 | % | 0.8 | % | |||||||
Gross profit | $ | 2,096 | $ | 2,020 | $ | 5,952 | $ | 5,901 | |||||||
Gross profit as a % of revenue | 24.7 | % | 24.7 | % | 24.1 | % | 24.7 | % | |||||||
SG&A | $ | 1,751 | $ | 1,720 | $ | 4,993 | $ | 4,915 | |||||||
SG&A as a % of revenue | 20.6 | % | 21.0 | % | 20.2 | % | 20.6 | % | |||||||
Restructuring charges | $ | — | $ | 2 | $ | — | $ | 27 | |||||||
Operating income | $ | 345 | $ | 298 | $ | 959 | $ | 959 | |||||||
Operating income as a % of revenue | 4.1 | % | 3.6 | % | 3.9 | % | 4.0 | % | |||||||
Selected Online Revenue Data | |||||||||||||||
Total online revenue | $ | 1,077 | $ | 881 | $ | 3,191 | $ | 2,548 | |||||||
Online revenue as a % of total segment revenue | 12.7 | % | 10.8 | % | 12.9 | % | 10.7 | % | |||||||
Comparable online sales % gain(1) | 22.3 | % | 24.1 | % | 25.3 | % | 23.9 | % |
(1)Online sales are included in the comparable sales calculation.
The components of the 3.6% and 3.2%decrease in revenue increase for the
Three Months Ended | Nine Months Ended | ||||
October 28, 2017 | October 28, 2017 | ||||
Comparable sales impact | 4.3 | % | 3.6 | % | |
Non-comparable sales impact(1) | (0.7 | )% | (0.4 | )% | |
Total revenue increase | 3.6 | % | 3.2 | % |
Domestic segment stores open at the beginning and end of the third quarters of fiscal 20182023 and 2017:fiscal 2022 were as follows:
Fiscal 2023 | Fiscal 2022 | ||||||||||||||||||||||||||||||
Total Stores at Beginning of Third Quarter | Stores Opened | Stores Closed | Total Stores at End of Third Quarter | Total Stores at Beginning of Third Quarter | Stores Opened | Stores Closed | Total Stores at End of Third Quarter | ||||||||||||||||||||||||
Best Buy | 930 | - | (5) | 925 | 947 | - | (9) | 938 | |||||||||||||||||||||||
Outlet Centers | 18 | 1 | - | 19 | 15 | 1 | - | 16 | |||||||||||||||||||||||
Pacific Sales | 21 | - | - | 21 | 21 | - | - | 21 | |||||||||||||||||||||||
Yardbird | 13 | 1 | - | 14 | - | - | - | - | |||||||||||||||||||||||
Total | 982 | 2 | (5) | 979 | 983 | 1 | (9) | 975 |
2018 | 2017 | ||||||||||||||||||||||
Total Stores at Beginning of Third Quarter | Stores Opened | Stores Closed | Total Stores at End of Third Quarter | Total Stores at Beginning of Third Quarter | Stores Opened | Stores Closed | Total Stores at End of Third Quarter | ||||||||||||||||
Best Buy | 1,024 | — | (16 | ) | 1,008 | 1,035 | — | (9 | ) | 1,026 | |||||||||||||
Best Buy Mobile | 292 | — | (5 | ) | 287 | 334 | — | (3 | ) | 331 | |||||||||||||
Pacific Sales | 28 | — | — | 28 | 28 | — | — | 28 | |||||||||||||||
Total Domestic segment stores | 1,344 | — | (21 | ) | 1,323 | 1,397 | — | (12 | ) | 1,385 |
We continuously monitor store performance.performance as part of a market-driven, omnichannel strategy. As we approach the expiration date of our store leases, we evaluate various options for each location, including whether a store should remain open.
Domestic segment revenue mix percentages and comparable sales percentage changes by revenue category in the third quarterswere as follows:
Revenue Mix | Comparable Sales | ||||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Computing and Mobile Phones | 44 | % | 45 | % | (11.4) | % | (2.4) | % | |||||||
Consumer Electronics | 30 | % | 30 | % | (12.8) | % | 5.5 | % | |||||||
Appliances | 15 | % | 15 | % | (9.6) | % | 10.9 | % | |||||||
Entertainment | 5 | % | 5 | % | (4.6) | % | 4.1 | % | |||||||
Services | 5 | % | 5 | % | (0.9) | % | (5.6) | % | |||||||
Other | 1 | % | - | % | 39.8 | % | N/A | ||||||||
Total | 100 | % | 100 | % | (10.5) | % | 2.0 | % |
Revenue Mix | Comparable Sales | ||||||||||
Three Months Ended | Three Months Ended | ||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||
Consumer Electronics | 31 | % | 31 | % | 3.5 | % | 4.9 | % | |||
Computing and Mobile Phones | 48 | % | 49 | % | 3.5 | % | 1.6 | % | |||
Entertainment | 6 | % | 6 | % | 4.1 | % | (9.4 | )% | |||
Appliances | 10 | % | 9 | % | 13.5 | % | 3.0 | % | |||
Services | 5 | % | 5 | % | 3.2 | % | (1.8 | )% | |||
Other | — | % | — | % | n/a | n/a | |||||
Total | 100 | % | 100 | % | 4.5 | % | 1.8 | % |
Notable comparable sales changes in our Domestic segment by revenue category:
Computing and Mobile Phones:
Consumer Electronics: The 12.8% comparable sales gaindecline was driven primarily by home theater.
Appliances: The 9.6% comparable sales decline was driven primarily by large appliances.
Entertainment: The 4.6% comparable sales decline was driven primarily by gaming hardware and drones.
Services:The 0.9% comparable sales gaindecline was driven primarily by large and small appliances.
Our gross profit rate of our Domestic segment was flat. Improved margin rates were offset by the $25 million periodic profit share revenue related to our service plan portfolio earneddecreased in the third quarter of fiscal 2017. The profit-share revenue included in2023, primarily due to lower product margin rates, including increased promotions, lower services margin rates, driven by the incremental customer benefits and associated costs from our non-comparable sales relatesBest Buy Totaltech membership offering compared to our extended warranty protection plans that are managedprevious Total Tech Support offer, and higher supply chain costs. These decreases were partially offset by a third party underwriter. We may be eligible to receivehigher profit-sharing payments, depending on the performance of the portfolio. When performance of the portfolio is strongrevenue from our private label and the claims cost to the third party underwriter declines, we are entitled to share in the excess premiums.
Our gross profit rate of our Domestic segment decreased in the first nine months of fiscal 20182023, primarily due to lower services margin rates, driven by the $183 million in non-recurring cathode ray tube ("CRT") settlement proceeds recorded in the first quarter of fiscal 2017, which wasincremental customer benefits and associated costs from our Best Buy Totaltech membership offering compared to our previous Total Tech Support offer, lower product margin rates, including increased promotions, and higher supply chain costs. These decreases were partially offset by improved margin rates across multiple categories.
Our SG&A decreased in the third quarter of fiscal 2018 SG&A rate of our Domestic segment decreased primarily due to sales leverage, noting that expenses increased due to increases in growth investments, higher advertising expenses and higher variable costs due to increased revenue.
The restructuring charges incurred in the firstthird quarter of fiscal 2017.
Our operating income rates decreased in the third quarter of fiscal 2018 Domestic segment operating income rate increased due to a lower SG&A rate.
International
Selected financial data for the International segment was as follows ($ in millions):
Three Months Ended | Nine Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Revenue | $ | 787 | $ | 925 | $ | 2,300 | $ | 2,559 | |||||||
Revenue % change | (14.9) | % | (7.8) | % | (10.1) | % | 5.2 | % | |||||||
Comparable sales % change | (9.3) | % | (3.0) | % | (5.2) | % | 7.7 | % | |||||||
Gross profit | $ | 184 | $ | 231 | $ | 545 | $ | 624 | |||||||
Gross profit as a % of revenue | 23.4 | % | 25.0 | % | 23.7 | % | 24.4 | % | |||||||
SG&A | $ | 150 | $ | 171 | $ | 449 | $ | 483 | |||||||
SG&A as a % of revenue | 19.1 | % | 18.5 | % | 19.5 | % | 18.9 | % | |||||||
Restructuring charges | $ | 1 | $ | (1) | $ | 2 | $ | 5 | |||||||
Operating income | $ | 33 | $ | 61 | $ | 94 | $ | 136 | |||||||
Operating income as a % of revenue | 4.2 | % | 6.6 | % | 4.1 | % | 5.3 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Revenue | $ | 829 | $ | 753 | $ | 2,113 | $ | 2,011 | |||||||
Revenue % growth (decline) | 10.1 | % | 3.3 | % | 5.1 | % | (1.8 | )% | |||||||
Comparable sales % gain(1) | 3.8 | % | n/a | 4.2 | % | n/a | |||||||||
Gross profit | $ | 184 | $ | 183 | $ | 503 | $ | 509 | |||||||
Gross profit as a % of revenue | 22.2 | % | 24.3 | % | 23.8 | % | 25.3 | % | |||||||
SG&A | $ | 181 | $ | 170 | $ | 491 | $ | 492 | |||||||
SG&A as a % of revenue | 21.8 | % | 22.6 | % | 23.2 | % | 24.5 | % | |||||||
Restructuring charges | $ | (2 | ) | $ | (1 | ) | $ | — | $ | 3 | |||||
Operating income | $ | 5 | $ | 14 | $ | 12 | $ | 14 | |||||||
Operating income as a % of revenue | 0.6 | % | 1.9 | % | 0.6 | % | 0.7 | % |
The components of the 10.1% and 5.1%decreases in revenue increase for the
Three Months Ended | Nine Months Ended | ||||
October 28, 2017 | October 28, 2017 | ||||
Comparable sales impact | 3.7 | % | 4.0 | % | |
Non-comparable sales impact(1) | 1.1 | % | 0.3 | % | |
Foreign currency exchange rate fluctuation impact | 5.3 | % | 0.8 | % | |
Total revenue increase | 10.1 | % | 5.1 | % |
International segment section above.
Fiscal 2023 | Fiscal 2022 | ||||||||||||||||||||||||||||||
Total Stores at Beginning of Third Quarter | Stores Opened | Stores Closed | Total Stores at End of Third Quarter | Total Stores at Beginning of Third Quarter | Stores Opened | Stores Closed | Total Stores at End of Third Quarter | ||||||||||||||||||||||||
Canada | |||||||||||||||||||||||||||||||
Best Buy | 127 | - | - | 127 | 129 | - | - | 129 | |||||||||||||||||||||||
Best Buy Mobile | 33 | - | - | 33 | 33 | - | - | 33 | |||||||||||||||||||||||
Total | 160 | - | - | 160 | 162 | - | - | 162 |
2018 | 2017 | ||||||||||||||||||||||
Total Stores at Beginning of Third Quarter | Stores Opened | Stores Closed | Total Stores at End of Third Quarter | Total Stores at Beginning of Third Quarter | Stores Opened | Stores Closed | Total Stores at End of Third Quarter | ||||||||||||||||
Canada | |||||||||||||||||||||||
Best Buy | 134 | — | — | 134 | 135 | — | — | 135 | |||||||||||||||
Best Buy Mobile | 53 | — | (1 | ) | 52 | 54 | — | (1 | ) | 53 | |||||||||||||
Mexico | |||||||||||||||||||||||
Best Buy | 22 | 1 | — | 23 | 18 | — | — | 18 | |||||||||||||||
Best Buy Express | 5 | — | — | 5 | 6 | — | (1 | ) | 5 | ||||||||||||||
Total International segment stores | 214 | 1 | (1 | ) | 214 | 213 | — | (2 | ) | 211 |
International segment'ssegment revenue mix percentages and comparable sales percentage changes by revenue category in the third quarters of fiscal 2018 and 2017:were as follows:
Revenue Mix | Comparable Sales | ||||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Computing and Mobile Phones | 49 | % | 50 | % | (9.9) | % | (6.7) | % | |||||||
Consumer Electronics | 28 | % | 27 | % | (7.4) | % | (0.8) | % | |||||||
Appliances | 9 | % | 9 | % | (10.2) | % | (1.8) | % | |||||||
Entertainment | 6 | % | 6 | % | (8.4) | % | 15.0 | % | |||||||
Services | 6 | % | 6 | % | (15.2) | % | (2.2) | % | |||||||
Other | 2 | % | 2 | % | 3.6 | % | 17.0 | % | |||||||
Total | 100 | % | 100 | % | (9.3) | % | (3.0) | % |
Revenue Mix | Comparable Sales | |||||||||
Three Months Ended | Three Months Ended | |||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016(1) | |||||||
Consumer Electronics | 27 | % | 28 | % | 4.5 | % | n/a | |||
Computing and Mobile Phones | 52 | % | 54 | % | 0.6 | % | n/a | |||
Entertainment | 6 | % | 6 | % | 7.8 | % | n/a | |||
Appliances | 8 | % | 5 | % | 49.0 | % | n/a | |||
Services | 5 | % | 6 | % | (15.1 | )% | n/a | |||
Other | 2 | % | 1 | % | n/a | n/a | ||||
Total | 100 | % | 100 | % | 3.8 | % | n/a |
Notable comparable sales changes in our International segment by revenue category:
Computing and Mobile Phones:
Consumer Electronics: The 7.4% comparable sales decline was driven primarily by technical support, partially offsethome theater.
Appliances: The 10.2% comparable sales decline was driven by gainslarge and small appliances.
Entertainment: The 8.4% comparable sales decline was driven primarily by gaming and virtual reality.
Services: The 15.2% comparable sales decline was driven primarily by warranty services.
Other: The 3.6% comparable sales growth was driven primarily by sporting goods.
The decrease in installation.
Our SG&A decreased in the higher-margin services category primarily driven by the launch of Canada's Total Tech Support offer.
Our operating income rates decreased in the third quarter of fiscal 2018 International segment operating income rate decreased due to a lower gross profit rate driven by lower sales in Canada in the higher-margin services category, partially offset by a lower SG&A rate due to leverage on our increased revenue.
Consolidated Non-GAAP Financial Measures
Reconciliations of operating income, effective tax rate net earnings and diluted earnings per share ("EPS") from continuing operations for the periods presentedEPS (GAAP financial measures) to non-GAAP operating income, non-GAAP effective tax rate non-GAAP net earnings and non-GAAP diluted earnings per share from continuing operations for the periods presentedEPS (non-GAAP financial measures) were as follows ($ in millions, except per share amounts):
Three Months Ended | Nine Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Operating income | $ | 365 | $ | 670 | $ | 1,198 | $ | 2,236 | |||||||
% of revenue | 3.4 | % | 5.6 | % | 3.8 | % | 6.3 | % | |||||||
Intangible asset amortization(1) | 21 | 20 | 65 | 60 | |||||||||||
Acquisition-related transaction costs(1) | - | 5 | - | 5 | |||||||||||
Restructuring charges(2) | 26 | (1) | 61 | (39) | |||||||||||
Restructuring - inventory markdowns(3) | - | - | - | (6) | |||||||||||
Non-GAAP operating income | $ | 412 | $ | 694 | $ | 1,324 | $ | 2,256 | |||||||
% of revenue | 3.9 | % | 5.8 | % | 4.2 | % | 6.4 | % | |||||||
Effective tax rate | 23.6 | % | 25.1 | % | 21.4 | % | 18.1 | % | |||||||
Intangible asset amortization(1) | 0.1 | % | (0.1) | % | 0.2 | % | 0.1 | % | |||||||
Restructuring charges(2) | 0.1 | % | - | % | 0.1 | % | (0.1) | % | |||||||
Non-GAAP effective tax rate | 23.8 | % | 25.0 | % | 21.7 | % | 18.1 | % | |||||||
Diluted EPS | $ | 1.22 | $ | 2.00 | $ | 4.07 | $ | 7.23 | |||||||
Intangible asset amortization(1) | 0.10 | 0.08 | 0.29 | 0.24 | |||||||||||
Acquisition-related transaction costs(1) | - | 0.02 | - | 0.02 | |||||||||||
Restructuring charges(2) | 0.11 | - | 0.27 | (0.15) | |||||||||||
Restructuring - inventory markdowns(3) | - | - | - | (0.03) | |||||||||||
Income tax impact of non-GAAP adjustments(4) | (0.05) | (0.02) | (0.14) | (0.02) | |||||||||||
Non-GAAP diluted EPS | $ | 1.38 | $ | 2.08 | $ | 4.49 | $ | 7.29 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016(1) | October 28, 2017 | October 29, 2016(1) | ||||||||||||
Operating income | $ | 350 | $ | 312 | $ | 971 | $ | 973 | |||||||
Net CRT/LCD settlements(2) | — | — | — | (161 | ) | ||||||||||
Other Canadian brand consolidation charges - SG&A(3) | — | — | — | 1 | |||||||||||
Restructuring charges(4) | (2 | ) | 1 | — | 30 | ||||||||||
Non-GAAP operating income | $ | 348 | $ | 313 | $ | 971 | $ | 843 | |||||||
Income tax expense | $ | 104 | $ | 112 | $ | 309 | $ | 343 | |||||||
Effective tax rate | 30.4 | % | 36.7 | % | 32.7 | % | 36.4 | % | |||||||
Income tax impact of non-GAAP adjustments(5) | — | — | 2 | (49 | ) | ||||||||||
Non-GAAP income tax expense | $ | 104 | $ | 112 | $ | 311 | $ | 294 | |||||||
Non-GAAP effective tax rate | 30.4 | % | 36.6 | % | 32.8 | % | 36.3 | % | |||||||
Net earnings from continuing operations | $ | 238 | $ | 192 | $ | 635 | $ | 600 | |||||||
Net CRT/LCD settlements(2) | — | — | — | (161 | ) | ||||||||||
Other Canadian brand consolidation charges - SG&A(3) | — | — | — | 1 | |||||||||||
Restructuring charges(4) | (2 | ) | 1 | — | 30 | ||||||||||
(Gain) loss on investments, net(6) | 1 | — | 6 | (2 | ) | ||||||||||
Income tax impact of non-GAAP adjustments(5) | — | — | (2 | ) | 49 | ||||||||||
Non-GAAP net earnings from continuing operations | $ | 237 | $ | 193 | $ | 639 | $ | 517 | |||||||
Diluted EPS from continuing operations | $ | 0.78 | $ | 0.60 | $ | 2.05 | $ | 1.85 | |||||||
Per share impact of net CRT/LCD settlements(2) | — | — | — | (0.50 | ) | ||||||||||
Per share impact of other Canadian brand consolidation charges - SG&A(3) | — | — | — | 0.01 | |||||||||||
Per share impact of restructuring charges(4) | — | — | — | 0.09 | |||||||||||
Per share impact of (gain) loss on investments, net (6) | — | — | 0.02 | (0.01 | ) | ||||||||||
Per share income tax impact of non-GAAP adjustments(5) | — | — | (0.01 | ) | 0.16 | ||||||||||
Non-GAAP diluted EPS from continuing operations | $ | 0.78 | $ | 0.60 | $ | 2.06 | $ | 1.60 |
(1)Represents charges associated with acquisitions, including: (1) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and developed technology; and (2) acquisition-related transaction and due diligence costs, primarily comprised of professional fees. (2)Represents charges primarily related to employee termination benefits in the Domestic segment for the periods ended October 29, 2022, associated with an enterprise-wide initiative that commenced in the second quarter of fiscal 2023 to better align our spending with critical strategies and operations, as well as to optimize our cost structure. Represents adjustments to previously planned organizational changes and higher-than-expected retention rates in the Domestic segment, and charges and subsequent adjustments associated with the exit from operations in Mexico in the International segment for the periods ended October 30, 2021. (3)Represents inventory markdown adjustments recorded within cost of sales associated with the exit from operations in Mexico. (4)The non-GAAP adjustments primarily relate to the U.S. and Mexico. As such, the income tax charge is calculated using the statutory tax rate of 24.5% for all U.S. non-GAAP items for all periods presented. There is no income tax charge for Mexico non-GAAP items, as there was no tax benefit recognized on these expenses in the calculation of GAAP income tax expense. Our non-GAAP |
Our non-GAAP effective tax rate decreased fromin the prior year periodthird quarter of fiscal 2023, primarily due to the recognition of excesslosses and certain deferred tax assets for which tax benefits related to stock-based compensation and the resolution of certain tax matterswere previously not recognized, as well as an increase in the current year period.
Our non-GAAP diluted EPS decreased in the third quarter and first nine months ended October 28, 2017,of fiscal 2023, primarily driven by the increasedecreases in non-GAAP operating income and the decrease in the non-GAAP effective tax rate drove the increase in both non-GAAP net earnings from continuing operations and non-GAAP diluted EPS from continuing operations. Non-GAAP diluted EPS from continuing operations also increased due to lower diluted weighted-average common shares outstanding driven by our share repurchases. Refer to the
Liquidity and Capital Resources
We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level of investment neededrequired to support our business strategies, the performance of our business, capital expenditures, credit facilities, and short-term borrowing arrangements and working capital management. CapitalWe modify our approach to managing these variables as changes in our operating environment arise. For example, capital expenditures and share repurchases
Cash and cash equivalents were as follows ($ in millions):
October 29, 2022 | January 29, 2022 | October 30, 2021 | |||||||||||||
Cash and cash equivalents | $ | 932 | $ | 2,936 | $ | 3,465 |
The following table summarizes ourdecrease in cash and cash equivalents from January 29, 2022, was primarily due to lower inventory turnover and short-term investments balances at October 28, 2017, January 28, 2017,the timing and October 29, 2016 ($volume of inventory purchases and payments, capital expenditures, dividend payments, share repurchases and higher incentive compensation payments in millions):
October 28, 2017 | January 28, 2017 | October 29, 2016 | |||||||||
Cash and cash equivalents | $ | 1,103 | $ | 2,240 | $ | 1,341 | |||||
Short-term investments | 2,237 | 1,681 | 1,777 | ||||||||
Total cash, cash equivalents and short-term investments | $ | 3,340 | $ | 3,921 | $ | 3,118 |
The decrease in cash and cash equivalents and short-term investments as well as cash generated from operations were sufficientOctober 30, 2021, was primarily due to fund share repurchases, capital expenditures, dividend payments, acquisitions and dividends duringhigher incentive compensation payments in fiscal 2023 as a result of strong fiscal 2022 results, partially offset by earnings.
Cash Flows
Cash flows were as follows ($ in millions):
Nine Months Ended | |||||||||||||||
October 29, 2022 | October 30, 2021 | ||||||||||||||
Total cash provided by (used in): | |||||||||||||||
Operating activities | $ | (108) | $ | 1,061 | |||||||||||
Investing activities | (736) | (707) | |||||||||||||
Financing activities | (1,058) | (2,347) | |||||||||||||
Effect of exchange rate changes on cash | (10) | 6 | |||||||||||||
Decrease in cash, cash equivalents and restricted cash | $ | (1,912) | $ | (1,987) |
Operating Activities
The increase in cash used in operating activities in the first nine months of fiscal 2018 without the need to utilize our credit facilities or other debt arrangements.
Nine Months Ended | |||||||
October 28, 2017 | October 29, 2016(1) | ||||||
Total cash provided by (used in): | |||||||
Operating activities | $ | 1,203 | $ | 1,407 | |||
Investing activities | (1,016 | ) | (848 | ) | |||
Financing activities | (1,335 | ) | (1,199 | ) | |||
Effect of exchange rate changes on cash | 15 | 13 | |||||
Decrease in cash, cash equivalents and restricted cash | $ | (1,133 | ) | $ | (627 | ) |
Investing activities
The increase in cash used in investing activities in the first nine months of fiscal 2023 was primarily duedriven by increased capital spending for initiatives to support our business, partially offset by a decrease in purchases of short-term investments and cash received in fiscal 2017 for the sale of a retail property in Shanghai, China related to the Five Star disposition. Refer to Note 2,
Financing activities
The increasedecrease in cash used in financing activities in the first nine months of fiscal 2023 was due to increased share repurchases, which was due to an increase in our share price and number of shares repurchased, and an increase in our regular quarterly dividend rate. On March 1, 2017, we announced our intent to increase our share repurchases to $3.0 billion over the next two years compared to the $1.0 billion over two years that had been announced in February 2016. We also increased our regular quarterly dividend from $0.28 per share to $0.34 per share. This was substantially offset by repayment of our 2016 Notes and payment of a special dividend in fiscal 2017 and proceeds from option exercises in fiscal 2018primarily driven by the increasedlower share price.
Sources of Liquidity
Funds generated by operating activities, available cash and cash equivalents, short-term investments, our credit facilities and other debt arrangements are our most significant sources of liquidity. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures, share repurchases, dividends and strategic initiatives, share repurchases and dividends.including business combinations. However, in the event our liquidity is insufficient, we may be required to limit our spending. There can be no assurance that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our existing credit facilities or obtain additional financing, if necessary, on favorable terms.
We have a $1.25 billion, five-yearfive year senior unsecured revolving credit facility agreement (the "Five-Year“Five-Year Facility Agreement"Agreement”) with a syndicate of banks thatbanks. The Five-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in June 2021. At October 28, 2017, we hadMay 2026. There were no borrowings outstanding under the Five-Year Facility Agreement. Refer to Note 5,
Our credit ratings and outlook as of December 2, 2022, remained unchanged from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, for further information on our Five-Year Facility Agreement.
Rating Agency | Rating | Outlook | |||||||||
Standard & Poor's | BBB+ | Stable | |||||||||
Moody's | |||||||||||
A3 | Stable |
Credit rating agencies review their ratings periodically, and, therefore, the credit rating assigned to us by each agency may be subject to revision at any time. Accordingly, we are not able to predict whether our current credit ratings will remain as disclosed above. Factors that can affect our credit ratings include changes in our operating performance, the economic environment, conditions in the retail and consumer electronics industries, our financial position and changes in our business strategy. If further changes in our credit ratings were to occur, they could impact, among other things, interest costs for certain of our credit facilities, our future borrowing costs, access to capital markets, vendor financing terms and future storenew-store leasing costs.
Restricted Cash
Our liquidity is also affected by restricted cash balances that are pledged as collateral orprimarily restricted to use for general liability insurancecover product protection plans provided under our Best Buy Totaltech membership offering and workers’ compensation insurance.self-insurance liabilities. Restricted cash, and cash equivalents related to our continuing operations, which areis included in Other current assets remained consistent at $197on our Condensed Consolidated Balance Sheets, was $361 million, $193$269 million and $193$173 million at October 28, 2017,29, 2022, January 28, 2017,29, 2022, and October 30, 2021, respectively. The increases in restricted cash from January 29, 2016, respectively.
Debt and Capital
As of October 28, 2017,29, 2022, we havehad $500 million principal amount of notes due AugustOctober 1, 2018 (the "2018 Notes")2028, and $650 million principal amount of notes due March 15, 2021 (the "2021 Notes").October 1, 2030. Refer to Note 5,
Share Repurchases and 2021 Notes. As we approach the due date for the 2018 Notes in the second quarter of fiscal 2019, we will continue to evaluate whether to fund the repayment through existing cash resources or issuance of new debt.
We repurchase our common stock and pay dividends pursuant to programs approved by our Board of Directors ("Board"(“Board”). The payment of cash dividends is also subject to customary legal and contractual restrictions. Our long-term capital allocation strategy is to first fund operations and investments in growth and then return excess cash over time to shareholders through dividends and share repurchases while maintaining investment gradeinvestment-grade credit metrics.
On March 1, 2017, we announced our intent to repurchase $3.0 billion of shares over the next two years. In order to execute this plan,February 28, 2022, our Board approved a new $5.0 billion share repurchase program, in February 2017. Thiswhich replaced the $5.0 billion share repurchase program supersedes the previous $5.0 billion authorization dated June 2011.authorized on February 16, 2021. There is no expiration date governing the period over which we can repurchase shares under this authorization. Share repurchases resumed in fiscal November 2023 after pausing during the February 2017 share repurchase program.second quarter of fiscal 2023. We planexpect to spend approximately $2.0$1 billion onin share repurchases in fiscal 2018, versus our original expectation2023.
Share repurchase and dividend activity was as follows ($ and shares in millions, except per share amounts):
Three Months Ended | Nine Months Ended | ||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Total cost of shares repurchased | $ | - | $ | 426 | $ | 452 | $ | 1,757 | |||||||
Average price per share | $ | - | $ | 115.94 | $ | 96.83 | $ | 111.33 | |||||||
Number of shares repurchased | - | 3.7 | 4.6 | 15.8 | |||||||||||
Regular quarterly cash dividend per share | $ | 0.88 | $ | 0.70 | $ | 2.64 | $ | 2.10 | |||||||
Cash dividends declared and paid | $ | 198 | $ | 172 | $ | 595 | $ | 522 |
The total cost of shares repurchased decreased in the February 2017 share repurchase program asthird quarter and first nine months of October 28, 2017. fiscal 2023, primarily due to decreases in the volume of repurchases. Cash dividends declared and paid increased in the third quarter and first nine months of fiscal 2023, primarily due to increases in the regular quarterly cash dividend per share.
Between the end of the third quarter of fiscal 20182023 on October 29, 2022, and November 30, 2017,December 2, 2022, we repurchased an incremental 4.54.4 million shares of our common stock at a cost of $256$322 million. Repurchased shares are retired and constitute authorized but unissued shares.
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016(1) | ||||||||||||
Total cost of shares repurchased | $ | 366 | $ | 206 | $ | 1,147 | $ | 528 | |||||||
Average price per share | $ | 57.14 | $ | 37.67 | $ | 52.35 | $ | 33.03 | |||||||
Number of shares repurchased and retired | 6.4 | 5.5 | 21.9 | 16.0 |
Three Months Ended | Nine Months Ended | ||||||||||||||
October 28, 2017 | October 29, 2016 | October 28, 2017 | October 29, 2016 | ||||||||||||
Regular quarterly cash dividends per share | $ | 0.34 | $ | 0.28 | $ | 1.02 | $ | 0.84 | |||||||
Special cash dividends per share (1) | — | — | — | 0.45 | |||||||||||
Total cash dividends per share | $ | 0.34 | $ | 0.28 | $ | 1.02 | $ | 1.29 | |||||||
Cash dividends declared and paid | $ | 102 | $ | 89 | $ | 310 | $ | 417 |
Other Financial Measures
Our current ratio, calculated as current assets divided by current liabilities, was 1.2 at the end1.0 as of the third quarterOctober 29, 2022, and January 29, 2022, and 1.1 as of fiscal 2018, compared to 1.5 at the end of fiscal 2017October 30, 2021. The decrease from October 30, 2021, was primarily driven by lower cash and 1.3 at the end of the third quarter of fiscal 2017. The third quarter of fiscal 2018 declined from the end of fiscal 2017 due primarily to the reclassification of our 2018 Notes to current liabilities and a decline in receivables attributed to higher sales at the end of fiscal 2017.
Our debt to earnings ratio, calculated as total debt (including current portion) divided by net earnings ratio was 1.1 atover the endtrailing twelve months increased to 0.7 as of the third quarter of fiscal 2018,October 29, 2022, compared to 1.1 at the end0.5 as of fiscal 2017January 29, 2022, and 1.3 at the end of the third quarter of fiscal 2017. The decrease at the end of the third quarter of fiscal 2018 compared to the end of the third quarter of fiscal 2017 wasOctober 30, 2021, primarily due to an increase inlower net earnings.
October 28, 2017(1) | January 28, 2017(1) | October 29, 2016(1) | |||||||||
Debt (including current portion) | $ | 1,329 | $ | 1,365 | $ | 1,367 | |||||
Capitalized operating lease obligations (5 times rental expense)(2) | 3,910 | 3,872 | 3,834 | ||||||||
Non-GAAP debt | $ | 5,239 | $ | 5,237 | $ | 5,201 | |||||
Net earnings from continuing operations | $ | 1,242 | $ | 1,207 | $ | 1,077 | |||||
Other income (expense) (including interest expense, net) | 35 | 38 | 51 | ||||||||
Income tax expense | 575 | 609 | 616 | ||||||||
Depreciation and amortization expense | 663 | 654 | 654 | ||||||||
Rental expense | 782 | 774 | 767 | ||||||||
Restructuring charges(3) | 9 | 39 | 42 | ||||||||
Non-GAAP EBITDAR | $ | 3,306 | $ | 3,321 | $ | 3,207 | |||||
Debt to net earnings ratio | 1.1 | 1.1 | 1.3 | ||||||||
Non-GAAP debt to EBITDAR ratio | 1.6 | 1.6 | 1.6 |
Off-Balance-Sheet Arrangements and Contractual Obligations
Our liquidity is not dependent on the use of off-balance-sheet financing arrangements other than in connection with our operating leases and our $1.25 billion in undrawn capacity on our credit facilities atFive-Year Facility Agreement as of October 28, 2017,29, 2022, which, if drawn upon, would be included as Short-termin either short-term or long-term debt inon our Condensed Consolidated Balance Sheets.
There has been no material change in our contractual obligations other than in the ordinary course of business since the end of fiscal 2017.2022. See our Annual Report on Form 10-K for the fiscal year ended January 28, 2017,29, 2022, for additional information regarding our off-balance-sheet arrangements and contractual obligations.
Significant Accounting Policies and Estimates
We describe our significant accounting policies in Note 1,
Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements,New Accounting Pronouncements
We do not expect any recently issued accounting pronouncements see Note 1,
Safe Harbor Statement Under the Private Securities Litigation Reform Act
Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements and may be identified by the use of words such as "anticipate," "assume," "believe," "estimate," "expect," "guidance," "intend," "outlook," "plan," "project"“anticipate,” “assume,” “believe,” “estimate,” “expect,” “guidance,” “intend,” “outlook,” “plan,” “project” and other words and terms of similar meaning. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, our operating model, new strategies and growth initiatives, the competitive environment, consumer behavior and other events. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended January 28, 2017
due to organized crime, petty theft or otherwise; fluctuations in housing prices, energy markets, and energy markets),jobless rates and those related to the conflict in Ukraine); supply chain issues; any material disruption in our relationship with or the services of third-party vendors, risks related to our exclusive brand products and risks associated with vendors that source products outside of the U.S.; the duration and scope of the COVID-19 pandemic and its resurgences and the impact on demand for our products and services; catastrophic events, health crises and pandemics; susceptibility of our products to technological advancements, product life cycles and launches; conditions in the industries and categories in which we operate,operate; changes in consumer preferences, or confidence,spending and debt; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers); our ability to attract and retain qualified employees; changes in consumer spendingmarket compensation rates; our expansion strategies; our focus on services as a strategic priority; our reliance on key vendors and debt levels, themobile network carriers (including product availability); our ability to maintain positive brand perception and recognition; our company transformation; our mix of products and services offered for sale inservices; our physical stores and online, product availability,ability to effectively manage strategic ventures, alliances or acquisitions; our ability to effectively manage our real estate portfolio; trade restrictions or changes in the costs of imports competitive initiatives(including existing or new tariffs or duties and changes in the amount of competitors (including pricing actions and promotional activities), strategic and business decisions ofany such tariffs or duties); our vendors (including actions that could impact promotional support, product margin and/or supply), the success of new product launches, the impact of pricing investments and promotional activity, weather, natural or man-made disasters, attacksreliance on our data systems,information technology systems; our dependence on internet and telecommunications access and capabilities; our ability to prevent or reacteffectively respond to a disaster recovery situation,cyber-attack, privacy or security breach; product safety and quality concerns; changes to labor or employment laws or regulations; risks arising from statutory, regulatory and legal developments (including tax statutes and regulations); risks arising from our international activities (including those related to the conflict in lawUkraine or regulations,fluctuations in foreign currency exchange rates); failure to effectively manage our costs; our dependence on cash flows and net earnings generated during the fourth fiscal quarter; pricing investments and promotional activity; economic or regulatory developments that might affect our ability to provide attractive promotional financing; constraints in the capital markets; changes in tax rates, changes in taxable income in each jurisdiction, tax audit developments and resolution of other discrete tax matters,to our vendor credit terms; changes in our stock pricecredit ratings; and the impact on excess tax benefitsgeneral economic uncertainty in key global markets and worsening of global economic conditions or deficiencies related to stock-based compensation, our ability to manage our property portfolio, the impactlow levels of labor markets, our ability to retain qualified employees and management, failure to achieve anticipated expense and cost reductions, disruptions in our supply chain, the costs of procuring goods we sell, failure to achieve anticipated revenue and profitability increases from operational and restructuring changes (including investments in our multi-channel capabilities), inability to secure or maintain favorable vendor terms, failure to accurately predict the duration over which we will incur costs, development of new businesses, failure to complete or achieve anticipated benefits of announced transactions and our ability to protect information relating to our employees and customers.economic growth. We caution that the foregoing list of important factors is not complete. Any forward-looking statements speak only as of the date they are made and we assume no obligation to update any forward-looking statement that we may make.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
As disclosed in our Annual Report on Form 10-K for the fiscal 2017,year ended January 29, 2022, in addition to the risks inherent in our operations, we are exposed to certain market risks.
Interest Rate Risk
We are exposed to changes in short-term market interest rates and these changes in rates will impact our net interest expense. Our cash, cash equivalents and short-term investmentsrestricted cash generate interest income that will vary based on changes in short-term interest rates. In addition, we have swapped a portion of our fixed-rate debt to a floating-ratefloating rate such that the interest rate expense on this debt will vary with short-term interest rates. Refer to Note 5,
As of October 28, 2017,29, 2022, we had $3.3$1.3 billion of cash, cash equivalents and short-term investmentsrestricted cash and $1.2$0.5 billion of debt that has been swapped to floating rate. Therefore, we hadrate, and therefore the net cash and short-term investments of $2.1 billion generating income, which isbalance exposed to interest rate changes. changes was $0.8 billion. As of October 28, 2017,29, 2022, a 50 basis50-basis point increase in short-term interest rates would leadhave led to an estimated $11$4 million reduction in net interest expense, and conversely a 50 basis50-basis point decrease in short-term interest rates would leadhave led to an estimated $11$4 million increase in net interest expense.
Foreign Currency Exchange Rate Risk
We have market risk arising from changes in foreign currency exchange rates related to operations in our International segment operations. On a limited basis, we utilize foreign exchange forward contractssegment. Refer to manage foreign currency exposureNote 1, Summary of Significant Accounting Policies, of the Notes to certain forecast inventory purchases, recognized receivable and payable balances and our investmentConsolidated Financial Statements included in our Canadian operations. Our primary
In the third quarter and first nine months of net earnings and cash flows, as well as net asset value associated with changes infiscal 2023, foreign currency exchange rates. Our foreign currency risk management strategy includes both hedging instruments and derivatives that are not designated as hedging instruments, which generally have terms of up to 12 months. The aggregate notional amount related to our foreign exchange forward contracts outstanding at October 28, 2017, was $304 million. The net fair value recorded on our Condensed Consolidated Balance Sheets at October 28, 2017, related to our foreign exchange forward contracts was zero. The amount recorded in our Condensed Consolidated Statements of Earnings from continuing operations related to all contracts settled and outstanding was a gain of $2 million forrate fluctuations were primarily driven by the three months ended October 28, 2017, and a loss of $1 million for the nine months ended October 28, 2017.
Item 4.Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’sU.S. Securities and Exchange Commission’s (“SEC”) rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), to allow timely decisions regarding required disclosure. We have established a Disclosure Committee, consisting of certain members of management, to assist in this evaluation. The Disclosure Committee meets on a regular quarterly basis and otherwise as needed.more often if necessary.
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act), at
OctoberThere waswere no changechanges in internal control over financial reporting during the fiscal quarter ended
PART II — OTHER INFORMATION
Item 1.Legal Proceedings
For a description ofinformation about our legal proceedings, see Note 12,
Item 6.Exhibits
Fiscal Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program(1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program(1) | ||||||||||
July 30, 2017 through August 26, 2017 | 1,891,131 | $ | 60.50 | 1,891,131 | $ | 4,143,000,000 | ||||||||
August 27, 2017 through September 30, 2017 | 1,831,093 | $ | 55.16 | 1,831,093 | $ | 4,042,000,000 | ||||||||
October 1, 2017 through October 28, 2017 | 2,680,203 | $ | 56.13 | 2,680,203 | $ | 3,891,000,000 | ||||||||
Total | 6,402,427 | $ | 57.14 | 6,402,427 |
101 | ||
The following financial information from our Quarterly Report on Form 10-Q for the third quarter of fiscal |
104 | The |
(1)The certifications in Exhibit 32.1 and Exhibit 32.2 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K under the Securities Act of 1933, as amended, the registrant has not filed as exhibits to this Quarterly Report on Form 10-Q certain instruments with respect to long-term debt under which the amount of securities authorized does not exceed 10% of the total assets of the registrant. The registrant hereby agrees to furnish copies of all such instruments to the SEC upon request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BEST BUY CO., INC. | |||
(Registrant) | |||
Date: December | By: | ||
/s/ CORIE BARRY | |||
Corie Barry | |||
Chief Executive Officer | |||
Date: December 6, 2022 | By: | /s/ MATTHEW BILUNAS | |
Matthew Bilunas | |||
Chief Financial Officer | |||
Date: December | By: | /s/ MATHEW R. WATSON | |
Mathew R. Watson | |||
Senior Vice President, Finance – Controller and Chief Accounting Officer |