BBY - Earnings call transcript Q4 2018

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Best Buy's Q4 Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

As a reminder, this call is being recorded for playback and will be available by approximately 11:00 a.m. today. Time Eastern turn Vice now call to over I of the Investor O'Brien, President Relations. Mollie will conference Please go ahead.

Mollie O'Brien

Good morning, and thank you.

are update to morning's provided financial call. circumstances measures events. on Private not release, to Joining GAAP to financial any GAAP Act Corie be the XXXX. This and today and as be be business forward-looking measures can revise contain investments for such statements but this results non-GAAP morning. arise of SEC me condition, call current initiatives, are reflect These Hubert issued The the release and with call plans, within prospects non-GAAP facilitate risks these statements. an address the read business both Today's and meaningful the include and conjunction Joly, earnings uncertainties why date may year-over-year useful measures growth our that impact to information after financial obligation of forward-looking release these call financial and on the earning non-GAAP measures reconciliation events Today's undertakes results operational this measures certain should Reform this to our and considered in which financial earnings conference no certain uncertainties. for are in be CEO also materially Barry, a cause of that conference of morning's most comparisons, and on should could is CFO. company's risks A the more statements or meaning to the directly the our company and filings forward-looking differ the financial to These the that or to, considered measures actual Please these refer call to period. website, must release from superior Securities exclude are release comparable with subject found and Litigation investors.bestbuy.com. we the available going earnings explanation conference for the in press conjunction Chairman of substitute statements company non-GAAP financial and of of operations, of

reminder, is we includes weeks in over call will million and XX-week to compared Hubert. calculations. I are quarter week $X.XX the EPS. $XXX a As approximately excluded fourth approximately today comparable our quarter. last XX year's the the diluted sales from estimate extra of reporting week to turn We The non-GAAP was extra now revenue

Hubert Joly

continue begin performance, then call fiscal we Blue a to joining details and morning, you for then of financial our Building fiscal for the today of everyone, outlook. to additional Good I and our on review XXXX Best us. The our preview Corie of thank implement provide annual I quarter turn will as with priorities New Buy XXXX fourth will a and results strategy. XXXX: quarterly over our and our

last So, non-GAAP of which quarter year. up XX% results. The combination growth factors. These are EPS are strong diluted a today results Enterprise to sales reporting very of of a $X.XX, better-than-expected comparable and compared of we and is the strong are fourth comps X%

environment, confidence combined of strength our and exit certain with and product First, the a availability; from or we fourth, the better healthy continued category; macro strategy a as of gaming decline second, strong execution consumer in third, competitive benefited conditions; positive competitors. favorable

elaborate. our very are me XXXX Buy to responding Best Customers Let positively strategy.

our Scores improve share and continuing market Promoter material the in gaining Net company across are a fashion. to We

the by parallel products. life of to is a a commercialize This technology. front enrich effective success comes customers plan spectrum key the our lives peoples' very the where engagement quarter and Specifically, line, of to a fourth a to faster XX% enhanced on then satisfy store during XX-day desire increased of company, by enabled to the their of in broad proficiency domestic truly buy delivery, online we through new the supported compelling. of were driver mission This on making technology in we to partner the the was our their level our associates, in to where particularly promotional pick for that comparable In who found and understand more of progress streamline to trying accomplish total also experience with ability connect our impressed XX% what to quarter, am the our up sales associates online, strength our continued further buying powerful and will are We're an the Online that and mobilization process, and with customers, this, efficient have demonstrate in needs. customers. continued and I across sales. find ability stores a to they're vendors solution way

in availability and factor growth. our product earlier, a this year better much As was was driving strong I mentioned

product additionally, growth in and standpoint, to a decline income of that point in You XX%, income recalls rate. XX% dollars had stock in having a customers. categories. availability much year, invested operating vendors we by product and constraints grew last deliberately on This available more may profitability recall was for XX-basis which and we better product availability year, multiple the across From both across operating we product industry. And the revenue led

by XX% Let on me break the Enterprise. segment, this down of which over the Domestic for makes focusing you

the due both to more QX At year; with segment, the a grew XX%. to due we efficiencies this result by incentive business, delivered first second, store This and in the reform lower result of tax impacted was XX,XXX and made of savings. growth items. by than in and by the employees SG&A tax offset revenue more strong in slightly level, while investment So, EPS other rate we flat the very performance our expenses, to expenses the corporate This than discrete the a expenses and grew as our non-GAAP SG&A for profit increase gross Domestic compensation a EPS rate rate. is positively cost have partially

was fiscal We by what materially comparable non-GAAP by basis non-GAAP results, XXXX repurchases to result better our to EPS a X.X%, expected performance and We our than year. when began XX%, shareholders Turning XX rate our $X.X our increased our strong. year income are which points, expanded returned operating we and the full in grew our we share sales dividends. via billion

proof XXXX Net improve made key against And that employee significant to continued drive turnover share we with our strategy employee and We We our market reduced engagement. gains, customers. overall progress and resonating is increased Scores Promoter initiatives. Best Buy store

our In-Home Advisor nationally pilot. Support and launched we September, our Total significantly program expanded last new example, For Tech

upgrade chain began We continued and and the other transformation to the our to stores supply online, experience necessary capabilities and enable in systems strategy. key of and our in we the investing

great these And very customers for to results. energy of The in company I so, inspiring. I that serving delivering our thank level and see want their work associates is to enthusiastically dedication the across

continued ahead, XXXX Now of looking the Buy Best is focus strategy. our implementation our on

the believe of a to continue We grow we ahead have company. material us opportunity to

also shift. chain mindset like real not from our areas that there channel In pressures We continues has be context, and wages, changed. supply know to

of has of technology. The course, and, strategy not playing to Buy XXXX strategy enrich lives Best purpose in our the changed. are is to We we win outlined September through

we by plan and out. grow continuing the the key and how are fulfill cost that expanding what needed, while take and September, our last we As to to sell we evolving we company building sell enablers outlined purpose

Let me highlight fiscal a along XXXX of priorities our few these lines.

do we program we to and up as XXXX, add advisors jobs. Advisor their our In-Home ramp fiscal help in the them related tools that continue will and improve First, systems

Second, Support coming launch planning nationwide program we of our Total a are spring. Tech this

The began We a for in-home The all and need discounts often no As provide like Support customer needs is extended matter services This have of a product. reminder, and a they to the and that it. new now of testing programs. year. last the and available on year phone. per We is customers' service in-store other support is Total not limited to support together. Squad price on are work where all offering this support specific of their services when technology XX/X to Tech believe includes bought customers Geek online, $XXX warranty we technology, is

the we site associates understand proficiency to needs. will of we process and Fourth, continue Online to able develop to or for and our their our customers. deeply and service address to intelligently need will shoppers navigate buying and online their our ability be customer selection. seamlessly continue narrow Third, product the streamline to quickly

continue their capability, building search functionality or to to pickup, quiet in the success laptop convenient enhancing natural they language sturdy orders. our the in-store we with and customers customers what standpoint, further with simply multi-channel typing be need ways can will for dishwasher from for students, by on get best phrases find so like test Fifth, we new camera. example, For

to associate example, pickup ready they from they For a wait and at backroom. lockers the customers the large and on new feature their to are the tell solutions. appliance, allows their piloting it won't store we major they so us have pick for also bring counter TV are for them that testing mobile to we when arrive up to when are way And have pickup curbside can an product we or our on app

customer as addition, a continue digital well personalization to of points across in initiatives. solutions assistance range such as and invest a In explore voice we will of as variety touch

we sell and evolve supply in we cost are across a in enablers stores, business initiatives sell, technology, what Now investing projects. and September as how to expand range new described we successfully we of take-out chain,

Enterprise easy our management our and effective to a our power times tools times transactions. services continuing experience that experience the digital for a associates of are access way Geek for like centers. customer In mobile in the tools, Advisors to wait seamless, our Squad build stores, reducing number us For streamlining tech organization new video our to a and offering building we capability. more to help app and and services and including usage more are customer help the out investments the example, to Tech phone our we relationship-based relationship the processing to customers for we are will provide last the across towards quick knowledge new customer approach checkout chat customer offer. points with paves We're more designed therefore, also customer call and, In-Home get customers ability a building we This relieve pain began experts, complex year Total and management orders Support platform technology from for significantly expanding a long,

We as In-Home continue invest Advisor areas appliances, and specialty in labor to smart also home. such in will

started for bandwidth growth strategic our to relates and chain, continue last it expand year our that investments we long-term will we speed. As supply the are designed to

investments. course, Of priorities fund our also to that initiatives increase pressures include offset fiscal XXXX productivity and

of QX profit by million in in established reductions optimization of be cost target to annualized fiscal XXXX and productivity gross end is fiscal current XXXX. Our $XXX additional completed the

for profit towards overrides in accurate the gross price systems fourth through optimization, During largest in quarter, material approximately and This $XXX driven was $XXX far portion goal better making primarily A quarter pricing. the processes million. stores. and in by achieved million that stores, income in being fourth the $XXX to more million our our clearance the matching in we price erosion a thus resulted of on price improvements return decrease total a significant flowed by portion achieved of the statement with new the fewer

in Best Now Buy we announced strategy to intent to continuously U.S. optimize Mobile our business, of remaining XX. stores our yesterday as close our part effective May stand-alone our XXX the a

Let words few me this. say about a

to before for First, expertise the as as more to these associates are employees retain the last even we we stores for very we a was them We're big-box work and excited category remain launched. the and phone the then in us of to margins our the than than has closing stores? maximum their growth online. the and of matured, stores to higher for XXXX opportunities the stores. committed We this opening work of will category. phone it big-box grow have in our high. Fast more in We simply and we done these have number decade these grateful years, and were over forward hard and a mobile the our value stand-alone are was the believe rapid period have ago cost a margins our mobile of about range mobile and we Back is began operations within company. stand-alone iPhone Why stores stores in several business that compressed phone business makes sense

compare and this experiences this easier up We to makes customer it a dedicated big-box Apple, like phone. of with by are superior there. our for include experience In we're and we research Samsung, last Verizon year AT&T, and XXXX adding vendor began building excited stores and now and year. manufacturers The the and set plans we're customer a associated Sprint more purchase carriers Mobile these work support of goal, of then hundreds

So, we innovation help. by operating driven rich environment needs summary, opportunity in for are in and an customer

the market love. build leader evolve customers the are unique we We to opportunities sell what and and how we share expand with companies that sell

we're into on As to XXXX, comparable X.X% are continue $X.XX of XX-week which highly top company $X, or to at will on we an we to a be fiscal sales X.X%, increase all income XX-week comparable up to year and propel basis. comparable of provide operating outlook, expecting to to a motivated flat rate a Corie delivered increase the detailed of last head forward. XX% is high on level, more to EPS in to flat we XX% but X%, of compared an X% approximately an non-GAAP last which is of XXXX; basis; a to fiscal the XX% year

fiscal to $X.XX increasing provided and to reform. $X.XX the result our update CFO, QX we as revenue of our to for more guidance. And to call tax our now and fiscal a on like operating to details I'd for in over target for Barry, Corie $X.XX turn year, September from relates premature our are would a it it our the for range our targets performance EPS XXXX range be XXXX, that fiscal target we to while income XXXX $X.XX to As

Corie Barry

Thank you, Hubert. morning, everyone. Good

tax versus fourth our per additional $X.XX GAAP versus the you provide Enterprise earnings number about with year results was share non-GAAP non-GAAP Before The foreign three, the the and associates; following items we of quarter donation the tax GAAP expectations context revaluation excludes Foundation. $X.XX. lower on store share per our earnings four, earnings net One, I our versus quarter, reform. Buy I bonuses to hourly unremitted share versus related tax the rate; diluted our of like primarily talk one-time a last to two, deferred and diluted shared results. per last a to the at statutory of Best repatriation asset on subsidiaries; of payment to charitable corporate non-GAAP would appreciation

January due month share quarter, of Domestic of A the reform tax to for share Best initial was lower lower-than-expected expectations and a restructuring we of a also revenue three tax associated stand-alone the charges our with and due both rate tax exceeded tax close expectations U.S. last stores. of earnings lower billion $X.XX our our exceeded expectations versus revenue. expectations International flow-through per diluted items Mobile by shared Enterprise resolution also and to the $X.XX segments addition, rate per $XX.X of categories. remaining to Non-GAAP the the with the intent non-GAAP we the nearly revenue In all changes. rate incurred our Buy higher-than-expected benefit higher our result and and the of Versus provided our you was mainly driven tax in and product the

$X.XX merchandising remarks. $X.XX share provide profit the rate corporate last gross share the non-GAAP employees additional a the increased week, were due by expectations. increased in This change from rate did $X.XX which primarily with Domestic leverage incremental of share talk approximately to $XXX versus our gaming, exceeding home phones, $XX this benefit billion. non-GAAP with from or a the fourth to was $XXX Enterprise of higher per offset during revenue X% largest expectations, $XX.X and increased both a results my included extra segment, year. line I benefit flow-through the From homes, on on In the comparable approximately an incentive smart will categories, the profit gain from earnings diluted for of share the stores I extra and tax a net estimated to our was revenue partially $X.XX. the the million drivers rate revenue benefit year. approximately our versus about plan generated Enterprise with extra XX% increase share and benefit wearables XX-week perspective, sales primarily driven was $X.XX increase by $X.XX our impact across SG&A in per driven from now XX loss to and from we we original higher SG&A of most and the compensation incentive million later compensation large-format of were not the XX.X% lower primarily which week. the share quarter driven revenue per periodic a increase the These services the being closed comparable gains our year. past from our field sales appliances, While and theater. a mobile This lower sales XX% billion, per revenue, details sharing count growth by negative per offset basis, portfolio will by week. higher largely by of last from

currency iPhone basis, XXX order revenue QX we from to of rates the year driven category shift not by and approximately the which recall. were by million to XX% on increased primarily relates phones, basis X.X% online billion and growth million from of into X. to in was later week. billion Also had as Domestic $X.X due Samsung was approximately Canada the of This Note, a our comparable Mexico, extra points last mobile of we both of growth call QX positively we due increase of of $XX it As to average revenue foreign positive impacted the last mentioned approximately International a due $XXX and sales impact, to revenue quarter, and of sell due Domestic was XX.X%. primarily $X.X to comparable able higher increased revenue the values. sales conversion XX.X% on higher launch

Canada's gross of XX now XX.X% was Turning a due to The basis lower earlier impact Hubert rate certain International to points profit category a flat primarily profit, gross profit Canada the rate to, gross lower products services launch category, in XX.X%, optimization gross Domestic in by year-over-year sharing Canada. in the profit the The mobile the profit point to lower in the year. higher-margin decreased rate rate due due rate to of the lower decreased offset basis profit XXX one, primarily to sales XX-basis support of and driven that benefit. and gross margin category; a impact sharing offer, mixing rate from periodic point in profit negative revenue a total mentioned points tech to Enterprise XX.X% three, last long-term XX-basis the benefit. The impact lower theater the into model; recurring periodic pressure helped approximate an from home profit phone approximate two, lower-margin gross decrease negative a

at used Turning metrics or billion of billion both extra million plans, $X.X was expense flat to more year. little expenses to beginning SG&A XX.X% the higher driven had XX.X% higher of which higher on rate higher revenue, on cost were compensation, from revenue the costs $XXX of by of primarily expense incentive partially the investments, a billion impact due to like and were These dollar SG&A XX.X% or by our the perspective to due would retail flow-through which year. or QX and spend incentive corporate $X.X results. million $X.X year. the SG&A, on increase established of increased versus offset I magnitude due versus time impact revenue was it Enterprise our and performance non-GAAP Domestic to non-GAAP of last week, variable reductions. a the $XXX of targeted The a compensation last the The increased revenue. increases was the was basis

income, a of approximately non-GAAP single-digit reminder, guidance exceeded. the and significantly both year we low we in of As growth an which started growth with revenue operating annual X.X%

of over both been year, course QX incentive the lower-than-expected reversed Our performance. full corporate goals impact quarter, $XXX even year, the which not performance of to expected our a the and reverse increase International on had amounts increase the last due accrued of non-GAAP aligns XX.X% though was related million. on certain $XX was This full were has disproportionate an In expense to SG&A year had revenue, primarily negative expenses certain driven within year expectations. the payment metrics. This effect, fourth year, performance. million of ended based quarter expense rate sales by full certain had the exchange accrued decrease with by point the as XXX-basis the week. extra additional of annual for our the in From impact metrics rates foreign we we was performance, year flow the leverage. over that and year with previous and the exceeded quarter metrics we expectations of negative a fourth line course did primarily cash The perspective, or accrue for the driven for

On X%, was the and inventory our were up balance balance receivables our XX%. payables down our sheet, was X%, down

would Our owned last if roughly and have year flat receivables inventory would been week. included an extra also have position

to allocation, approach As it has capital not changed. relates our

to maintaining investments growth, repurchases, is including flow time acquisitions, to to strategy through over in cash credit and and free investment-grade return shareholders share Our dividends metrics. excess while and potential operations fund then

for payout between improved performance take corporate measures one-time the brought that following our and we ratio $XXX of quarter, part-time we context and our to and We employees, In employees the In to by store benefit employees, both tax about the associates store dividend our non-GAAP associates. shareholders. our reform, business fourth bonuses to community, the full-time eligible plan target taken and and and $X,XXX XX%. XX% the strategy, to a paid have non-bonus our savings continue overall

contribution million to $XX Foundation. the a Best made Buy We also charitable

related we necessary includes enablers This and in guidance. systems, our are our the in both to investing Going costs strategies. propel and forward, annual reflected are the people

for our specialty $XXX at employee to million million fiscal plan we investments, million raising our invest continue in from in the to XXXX benefit labor of will we $XXX capital we XX our Investor guidance shared to XXXX weeks our fiscal For like expectations to dividend versus our $X.X programs. XX% This weeks expenditure in $XXX I systems support Day increased of full year has improvements buyback people, $XXX share to our to $XXX and morning, plan we about as fiscal that would a are billion. we fiscal talk plans to our XX million. announced million which, to XXXX. In and by increased XXXX now invest reminder,

in We to XX%. of Enterprise represents approximately income of $XX would are assumptions expecting XX% as following: XX-week of basis fiscal Enterprise X.X%, This the the approximately a a a which of non-GAAP the of $X.XX, tax XX% of XX%. $XX comparable of effective And increase operating billion the $X.XX on a guidance. diluted on accelerating Enterprise number result an reflected increase like sales XXXX's in Enterprise compared tax is to billion; to XX-week an range revenue EPS to X% reform; I of our income range X%; fiscal of investments we to are flat basis. to in out non-GAAP rate call flat XXXX despite up rate non-GAAP we are to to when expecting a finally, annual rate

and The profit and million approximately efficiencies. reductions ongoing ongoing and particular, a pressures by This be of expected add labor, specialty well profit as pressure and transportation pressure negative of is new And a approximately to business. cost small-format to XX supply a in impact On the rate over $XX store Domestic initiatives the are revenue, on with XXXX partially recognizing revenue related basis million increased flat to QX particular, business, lower basis rate. guidance. revenue of align Mobile depreciation gross specifically expect the talk due closures gross compensation with Tech capital negatively national year QX strategic full we to chain Buy profit reset will by including are the we reflects Domestic combination about Support slightly rollout fiscal impact Total supply of to increased to the offset of approximately our performance XX term XX of our returns our finally, basis, on The profit in in points the to also income. to investments, points chain approximately quarter investments costs, guidance Our like gross impact from share our positive $XXX Domestic in higher in as incentive part each lower Best our would offering membership. as the XXXX estimated rollout our will in to our to fiscal The of expense business. I investments expectations. targets in operating have

of that weighted of approximately being revenue a XX% the the following: XX%; XX.X%; XXX guidance reflects X.X%; our from and diluted calendar of non-GAAP shares. following per effective We total tax growth growth sales diluted $XXX a average Enterprise QX million sales impacts. the to $X.XX, estimate share driver Please note week income of International to growth timing as X%; extra in shift comparable versus the comparable to to XX% operations QX X.X%; flat from rate billion expecting count with billion; that of XXXX. are share earnings Bowl, the range continuing of sales million were to impacts pulled comparable related to $X.XX QX of non-GAAP of biggest approximately negative in to into an increase We the $X.XX fiscal forward Domestic X.X% XXXX $X.XX and fiscal the Super sales revenue, in of X.X%

approximately basis points transportation are as profit expected mentioned, supply well gross add investments XX I of to pressure. as higher rate chain, As increased in just costs

in last legal approximately we lower will for will into profit of saw We I have lapping over Domestic call million the And rate pressure expect we the year. settlement the quarter. $X gross to a turn to continue the operator International received now profit to due first questions. gross QX

Operator

first you. ahead. from go And ahead Fassler Thank Matt question Please Sachs. Goldman our go with we'll of

Matthew J. Fassler

much, question so congratulations print. terrific and first and relates on My Thanks question a primary gross margin. to

spoke store what talk you rate. means? gross erosion Can lower that driver as of Domestic about a about You price margin

Corie Barry

Absolutely, Sure. Matt.

to kind matching at of we overrides But talking the move three inventory the broke decisions price we lot pricing. that to and price nature how like price most competitive is above buckets value about how clearance and matching and the sense it matching, talked level when garner better through looking decisions actually that more Essentially, return clearance store and the beyond built that, stores, science merchandise, around a moves we when on would it the of at, So, erosion, scenes, store about the often price made accurate price that to for as in in are that it to clearance or things We out given we of it. when the about at reasons, that are you clearance like fast it make level we're and obviously possible. up into overrides you items. what behind match makes price as as talked we're and so various more

these to So, what in corporate together help an these about it's both and these example field we've that this and a to lot to and both then science build is our being try talked out. efficiencies. of processes of about pull efforts build really cost cross-functional field And excellent employees the working try before

Matthew J. Fassler

about this than the like execution sounds it is So, about environment. more

Corie Barry

You've right way That's up. frame it exactly it. got to the

Matthew J. Fassler

contributors follow-up to which last on you XXXX? performance relative in quick compares extent to a be do year, smaller than just expect you to comp or be much And a the that tough guiding categories subdued challenged to more by XXXX posted sales, you're

Corie Barry

a of this are year the a in little a happening got still device year only a half Remember, some there. that left We'll but we just a we major the so year also year, year filling bit that have disproportionately had that of product we the the this there by sure. last from of hole Remember, was for is things couple into about that year. prior. a that, hole We've in of lack lapped real QX this Note storages benefited

QX. a that year, last out. year product and, gaming this we particular, have We to which going we thing same next reminder, aren't specifically in Switch had the was lap We out called called the And which launched, availability in good specifically year. as other

to going full that we're year cycle. lapping this now be gaming so And

expect of were the so that And next just of into those a we as by bit the they head what you'd decelerate nature year. big growth to were, drivers

Matthew J. Fassler

Corie. much, so Thanks

Operator

go our Ciccarelli Capital RBC go Markets. we'll from next Scot with question And of ahead. ahead Please

Scot Ciccarelli

Two morning questions. guys. Good

easy better size is call-back impact hindsight, on year's product last an one. you First, the With shortages? hopefully can of this the

Hubert Joly

Yeah.

year we in was QX think I that recall last general, about had shortages. and but $XXX talked it around primarily included also with the about phones, appliances activities million a in figure

from this so this. And benefiting we're year, anniversarying

be in availability, meet better across demand. able In deliberately addition customer to as channels, product our so to this, better to we invested in-stock

And so the factors combination really quite the two were it's that helpful. of

Scot Ciccarelli

Okay.

I best in your gauge $XXX year, company you good share of a this Hubert, some comp up past guess past you business? gaining your question, and positioned in terms this then, a premium throws guys a lot kind longer-term still that's a but before of company payer, of growth this So, market. time bigger Does that think trajectory cash, as thinking million. And how very you've kind flat growth the you're But like off of the characterized – kind put in I a an of to guys dividend growth have about just year. a reassess long of industry had slow of

Hubert Joly

I said September. we very with are today consistent saying is what So, what think in we

is innovation the the on to be take the help that we're opportunities. We have product for able And and customers. of environment enablers the rich of and we're that opportunity increasing part uniquely positioned think to all advantage an growth these capture need we where of building to there

So, rate, to where and more focus have Renew building moat on a company. terms fiscal for income we'll Blue, Buy the certainly XXXX we've revenue in Best compared in and operating growth outlook of a XXXX, provided

it's EPS benefit way on and for updating XXXX in numbers four after September. the more initially a we really to able upgraded we We've We're us months and payer we operating after dividend we're us Initially, sure. maintaining our growth-oriented see So, company not going said of not We're becoming this opportunities. months – years, we're – target of tax September, because the We of revenue to finding because you're premature, fiscal direction. in be the you're premium reform. us, the last these two the think five build that or one it's today believe to give income time said status.

yes, focus think status customers of win, like of of not to company customers a well return So, evolving of with positions that from we the allocation a premium the us, that's things them like very material extraordinary performance. of growing and company us, capital from the and – we the But, went on like the didn't we're today based dividend results the strong growth a on to capital for changing I'd us it standpoint. does We're gradually a they on basis (XX:XX) company I upgrade. love strategy playing now the that our us, want that customers.

So, Scot. that's would I summarize how it,

Scot Ciccarelli

a Got it. guys. lot, Thanks

Hubert Joly

Thank you.

Operator

question we'll ahead. Brian And our go from with Please go ahead of next Oppenheimer. Nagel

Brian Nagel

Hi, good morning.

Hubert Joly

Good morning, Brian.

Brian Nagel

nice really year. a on Congratulations and quarter

Hubert Joly

you. Thank

Brian Nagel

question. to, is, I thanks Corie, say, results, bottom your sales sales we we probe where as XXXX I upside The then how (XX:XX) out, even look the actual the plan beyond, in to investments guess the all fourth compensation into so to so the my the say, should the SG&A. Thanks. question about, there make point there detail on Or incentive And any – actually I have you're said think impact break your or, want we maybe look to way in – given is to guess, the for the leverage model I compensation. to making? line? on to so its the the incentive could at a as one of just way quarter? further better,

Corie Barry

Sure.

line, impact was a we comp based set, expected here at incentive on thought first on of at back have let the a for set to genuinely year, called that basis, top the QX, a QX about part annual on higher with metrics. we we guidance. start that see beginning a And we second line we the at question. take you, I'll And of the the reminded But essentially point. of flat So, out we comp bottom for XX-week These performance plans incentive year. me that we flat in step one are on could the the QX. And beginning

QX. specifically happened had quarter, a fourth the were that on there relates to three that it disproportionate As things impact

talked I the as that we come had already it, didn't as remember, fourth out in planned sure the and last throughout year. you and First, year, I'm quarter about so reversed expense accrued we

for three, well. itself, would came a ways. in outperformed would we whole in quarter known amounts have that we'd better different for accruing year going fourth expected. just, Second, was have been then of quarter than that Obviously, this to perform earlier And the fourth expense in been quarter, lot meant than the many as accrued the of in and metrics year. the we all higher quarters if fourth And year way in was included

those increase when to so fourth comp the $XXX million stack you put perspective, about things And to year. year-over-year But million. up, four in the of for $XXX in was impact just quarter north that the was incentive our whole

the sure some sharing will being than this disproportionate receive to impacts that associates, had said, That or with to some our clear really on performance I the we're excited payout. You accrual to of I'm fourth the people this quarter. and XX,XXX able want be more received – see make can that crystal portion

the leverage the said leverage said that growth going I initiatives To When to point Hubert is, of to we're of of flows some and of very aim we are I for or to extent sure that to depending flattish kind going the for to your initiatives to second we income different reinvest it line what pick across we going how set need up our where top that then line So, make we're do want our rate, us. operating in well. and clearly. comes maintain for some top Investor do on really we but and to business points point on accelerate Day, think launch

stability how not strategic can and in that on it's growth get question that as and that to about relative exactly a income leverage. easy bit equation initiatives It's deliver legs maybe volatile rate. math little multitude as so in rates. general then the of toward financial you a we And just perspective but how from income the do we of get talked when a driving in that progression the Obviously, operating overall under we for op flat up a we're the a a quarter-to-quarter, of can quickly

Hubert Joly

this road, very to standpoint And important going belief outsized the that I investment significant the the growth for invest our maybe pile long-term And on a winners is the And is we thesis from a losers. moat where build capabilities, in ourselves win play have. basic that return – to if an the there's space are to space a for the we in build we so time versus and it's think success is fashion. be position very down I in

perspective, we to to we growth, increasing on winners going are we capital in. short and return about, you difference So, return share in know and EPS the the we're is of that losers, the shareholders basis to with what be want the also and hope the positioning I that view term, think ourselves for providing growth, I be we're of the an long-term success camp between there again excited the

Brian Nagel

you. again. Thank helpful. Congratulations it. Got Very

Corie Barry

you, Thank Brian.

Operator

Your next Please Lasser of question UBS. line of ahead. the comes Michael from go

Michael Louis Lasser

morning. lot a Good Thanks my taking for question.

clock, you a if flattish. to So, implied comp were an guiding we year of roll the ago back around

but this the upside can you a cycles environment of might did product because you. that point? share of did the assuming the question, cycles that spending it that side And a from category business, talk Thank overall does the was year, frame from year? for product part to some you health than consumer of do about you were or at the think maybe maybe perspective as pick you performance? a You this Or better overall spending, gained is just might important how that more what And north potential X.X%. fade product category drive much of What up. for from product Switch more

Hubert Joly

to ability downs. performance so unique cycles, not the with confidence is It's it's Yeah. driving is not product, we the of Yes, because gaming, context a ups innovation where product Michael. in opportunity new want exception which particular use particular convey – have product key there's this we Thank a have you to always is commercialize and to this and technology. love increased good. thought. we consumer What the I much, a

technology the overly calendar think our positive. is, our market for negative, estimate result in overall so XXXX was strategy and but not products execution. driving it's the than flattish, better I we What's

performance. customer of life can and them what address Our we the along course, positioning we the in truly quality trying in execution, of gap our yes, this then customers to us. company is is needs positioning and also From standpoint, always the their that happened what Equally help do they're year. provide uniqueness look – as way, And is do what think retail, really at in and is, is important of you was the product driving what to support what a achieve for gaming increasing have last the a the helpful.

the issues. had last So, fourth year, we the in quarter, availability product

increasingly, certainly we're QX again. build moat, want it's once convey to and trying I performance. introductions, happen this is So, product year it But you've but positioning will be doesn't won't the total and strategic that's really new to our that boosting this – helpful. happen there that, anniversaried And that

products Now every underneath evolve. this, year will the booming

So, this year we've had gaming.

Home positioning. uniqueness helpful. add? this of ride has appliances will will on of you strategic emphasis the these again, has want things waves. it's and helpful, home smart some the details been these Corie, to But fluctuate been and think I any

Corie Barry

launches. our multiple times. and has categories in that Computing rotating thing would gained that of come the of has out we've has been gaming called you positioning. hold that when add for we last a at there's see have just we've that bear, Home went you what four things under underlies think back think as I underlines and looked categories spike the after called quarters, of quarter it's is we are after that home, These explicit. The come been I drivers it excellent share only that those course, if And category have I brought up. in is, and we've would each that, saying and very But have to mix and of up reflective very is and gaming, Smart product not shopping theater Hubert out been terms experience. for been performance. quarter was products the data just of that evidence the it (XX:XX) that strategy that quarter of taking the feeling

Hubert Joly

Okay?

Michael Louis Lasser

you. Thank

Hubert Joly

Thank you.

Operator

go And ahead. your question Binder Jefferies. comes of next the from Please Dan line of

Daniel Thomas Binder

Hi. you. question It's quarter. Dan – way Thank was My great Binder. a the congratulations by on

Corie Barry

Thank you.

Daniel Thomas Binder

why, us us, when we've gross around rollout you margin was be sales from Canada? can International think pressure give of was margins the give been did you do the business, is? what U.S., erosion? impact understand a seeing gross you you centered that as benefit the the specifically? you won't it what a it the the on finally, services the significant in and And sense rollout, services question My as the starting could How in maybe us help much point, of And with that

Hubert Joly

So, a from add a customer and Corie question will I'll on basis. your profit color answering then with start standpoint,

Advisor The recognizing that. our initiative but how some response there really can and in approach relationship to needs Corie? one, benefit flywheel part but their where So, a trying customers, build, demand the like this Tech number we exciting. will that in building Support in with decided In-Home all in framed. exciting consultative this We Total service characterized own standpoint, Support, like of support complements this. U.S. we'll Corie the an of what is in ongoing this and attached also address Total It this the response, I been the the so some it's relationships. across one. is increase out a product sign. mechanics of a offering the through service to customer response upfront initiative, a its building end-to-end with spring we've no to way and a a the equally The as customers like But roll the We customers' with unlocking the the revenue on sales, profitability. think, clear of to is a customer fact is as is In-Home gradually of profit home is here be the Advisor, customer we the we're what's approach in the happening Tech to P&L, of see portfolio. as help go initiatives. is From consultative

Corie Barry

Dan. to my I'll this best right, parse All do apart.

business, In other things called Let on me start product services the with and half the walk. out we International. gross compression about half about profit the International is that

offer. various a one that Total that back, not it. rolled And so take a set pretty one a U.S. version all, ultimately, We've this bit. I'm we in little up Canada, Support said about go the But the to wide different step you to U.S. test. in up is with with Tech remember, talked in as pay be Hubert monthly-pay it's attributes remarks, has going prepared front our and so few we in version going a tested to an annual in in And XXX breadth we're the versions that here for plan stores, here clear, the

what plan, and we've just even we seen different here Canada. different slightly a than it's So, results U.S. saw the in in

demand. is here Hubert's the like the that the The a model all to point, it's in like and customer We that model. change so As of is experience, recurring relationship hanging. customer revenue we

that point that revenue over recognize up often they going right, you're So, value get you front, front, amortize purchases but incur and more expense at someone to is the up time.

that really people on more that about out-years. the creates so the bit of as accretive little what the first stay becomes But it time, it into year, over like much a And plan imbalance. is we

question to in but the three bringing because the out-years, revenue about strategy amortization impact, two you over longer-term one want how to you We their support to that have that get time. to start years And across not this over it's we a then time. we year it's lift, and customers as is it into all want. they about time model want think hear start life, give your out do accretive and and why much them to build And becomes nice model what with so devices that we as over

Daniel Thomas Binder

Thanks.

Operator

next We'll David Schick, Consumer David Schick Research. open. line from Please is go of your our go question Edge ahead. ahead with

David A. Schick

you hear Can okay? there. Hi me

Corie Barry

Yeah.

Hubert Joly

Yeah. Good morning, David.

David A. Schick

Thanks could great. is you general more and want wave would where Hubert same, minus. and better But on beginning much to in the we else? involved the I smart just Okay, are there's as question. for And about lead more services? for in lift, longer technology. I'm sort go everybody about XK or early TVs this commercializing this and the realize in said that. plus and very getting Or not items, be sure back so I but the going might quarter, growth. any to which to something characterize as what's discrete of position of to just home It answer, you understand the adopters

Hubert Joly

David. Yeah. you, Thank

keeps The distinguish going by growth. market that overall market, in is our homes up. seeing. lives, and enabled this driven me pervasive. more Let our innovation of items are technology the technology our then The more In general, in technology we're is number and

with so there. standpoint. role a What hardware market play market not overall flattish. adopters overall our tell can really from what actually revenue is early near it. measure we course, But in driving much the a Of do we but difficult happening The seems that, to as is is as

vendors of with So, played on one share technology. introduction this. it's definition Buy mass our take XK TV channel. the at will market theater Best and teams a segment, key the of question the how take we two I I the years role surrender home there some And or was point, working do advantage then If about remember have to a ago of debate the

and surrender. the going continued stores, paraphrase seeing way online, get will of merchandise to market I'm both never politician, customers, we So, support And we're a what we to the to because we are innovation able famous continuing is that are in the share.

of up up true. went And we able a And standpoint lot fans, to if so smart it's people gradually down. then it's do notion category, take or category take we good advantage have this. which focus We then But of then And gain so of and TV and us, is computing early just cycles on fast be an the continuous not customer down. over who high-touch a and the segment, category that's how so tablets there's home it's call like there a a or you a time. need tech not quickly news are share innovation, from these help the can sometime and that's the The with adopters. us, technology we

advantage helps the of I hope pursuing a we're basis. that's core on because So, we customers to and to is take have our – it the expand help strategy still assets that business

David A. Schick

you. Thank helpful. Very

Operator

will we And ahead... go

Mollie O'Brien

Next question, please?

Operator

ahead from MoffettNathanson. Melich with our Greg ahead. question go Please of We'll next go

Gregory Scott Melich

Hi. that. Thanks. – like congrats, and to first, I'd a is executing love great quarter huge

Corie Barry

you. Thank

Gregory Scott Melich

the in all million way that the at what's Is about with top-line tax reform, speak, now doing. business going are margin you're some rough going say, maybe tax the flat or maybe the $XXX roughly given the guidance tax thinking On it's rate $XX to the And acceleration? estimates million gains what And keeping, when much that it, going back be about, your you're that how just of you that so it investment, are is things XX%. year given million, to my margin, $XXX I given of a the think want savings to – look to half used a statement? CapEx here income growth the we about from to into frame fair for then versus

Hubert Joly

Greg. you, Thank Yeah.

the I think tax ballpark. is annual the your in savings characterization of absolutely

how exciting, a is every from of think, of not benefit that that, we're stakeholders we're I terms this. able we one using providing our to breakdown. What In have are is

customer in investments that. to the investing the We're talent in are clearly as I able we're key exciting experience invest the comparable in shareholders and continue are OI benefits particularly and a skills in in space, accelerating to on We'll are is find So, labor. benefiting we specialty the flat and a well. while then, investments, continue this that so employees additional all is of rate. investing winning to the of clearly, – What basis, maintain, in we'll about talked We've company. our of we our enablers course,

a How these of investments. much lot what is investments-related deteriorate we're country of the course, OI so income rate. throughout of savings need operating our was the how that the to debate actually able investments, we throughout And would accelerate In Because case, tax of it the and, efficiencies business the rate. we're return do driving maintain the possible? and from the actually

detailed So, breakdown. providing we're not a

that I want the of had flat OI rate But the think some in despite of acceleration we're this maintaining investments, were highlight to accelerated correct. is the what investments. you rate. I We're deteriorating phase estimates a of OI not

Gregory Scott Melich

Got it. Thanks.

Hubert Joly

you. Thank

Operator

comes ahead. of question the next Feldman go Group. of Your Telsey Joseph from line Please

Joseph Isaac Feldman

quarter. Yeah. morning the Hi, again on congratulations good and strong guys,

Corie Barry

Thank you.

Hubert Joly

you. Thank

Joseph Isaac Feldman

of it but the initiatives the on or comparison. little slow Wanted else big there you I business. about is because there? it in ask Or ideas online growth you're And online to was good the just And new anything seeing just touched of know a couple just the quarter, if it a I know bit. did was another business. annual compared rate, was the to I wondering

more into those little bit be dive great. you in maybe If could a just detail, that'd

Corie Barry

Yeah.

online falls of see start. a bit. growth of to has quarter of pretty quarter continued top-line that just quarter larger of what just percent business a business, size of back terms is And march XX% So, percent our But in The to business, number massively typically in quarter. to the the I'll of that The is a the the this steady seasonality online you growth. from QX our in seasonality business. perspective,

meaningfully do of is to from that gave it's natural just using better whatever what's out what pushing experience love was key they in is their and driver of website? it just people means they search traffic and business. you is is that come And of there you a So, your we not the customers. around that heads. – do to seasonality you're that's language thing we really actually the to the in examples converting bounce the do the call last And traffic someone to much for like there so the changed. once which is bit It's that anything conversion away search the we important that website wasn't more capability, the search what more the that is why little your website. do is a minute us, that, They want to kind And

that because You list important what's more they're likelihood to then a dishwasher that's seems closest at huge It's faster you. that that that can the being to exactly to the end language concern, looking day able match nuanced. someone on those on answers search seems really the for And flow the their actually the a of natural for purchase. because request, address and give of it quiet to get they're deal product going while up very with your to basic, that you pick through the cues natural assorted language I

visit And you gave through so someone taking to and that about website experience as when possible all are – us. examples end-to-end as the a we the comes away real customer friction much

Hubert Joly

full our quickly we conclude store, add on of year, nice rate to from the very getting would and comp if stores overall excluding this are market Number of and the the that company. matters what or with investors both two, us probably for QX. basis, four-wall pickup at the you One, believe online. Let we're you is to and rate share (XX:XX) XX%, two for ship and growth so the things. in three growth three, Number me year in-store do a a full QX in math,

Joseph Isaac Feldman

you, That's great. Good quarter. Thank guys. luck with this

Hubert Joly

you. Thank

Operator

And line your final question go the will ahead. of Christopher of from JPMorgan. Please come Horvers

Christopher Horvers

morning phenomenal good and Thanks, quarter.

Corie Barry

you. Thank

Hubert Joly

you. Thank

Christopher Horvers

thinking I questions. had two In

one- in you conservative about quarter if to guiding of terms as their and think the back I Galaxy and a the know on in I of half there So, Buy more guide, two-year Switch quarter strength But was outlook. I on to pretty the the the Best likes be recall, very sharp and you're deceleration first think a basis.

a Are follow-up, you the efforts a quarter? that X% talk about fourth of something can you. benefit it? that the And the in So, store, out we price you slowdowns from that Thank will after gross erosion three year then of seeing you as at quarters until margin as sharp rationale? the into first this lap continue look Is sort seems the new. that

Corie Barry

Sure.

So, I will try those. to handle

the volatile you actually quarter slow, very year, In into nicely, terms strong. deceleration quite Chris. ended up It a was of teed quite started QX, last

that we timing, And phase Super of flat-out it, I'm had $XXX out thoughtful the And QX. things so exact script. anything Bowl about million also said pushed pushed quarter. out seeing into is million that to $XXX the is less we about we're and more it's iPhone as QX. the associated in I One try moment, this in with had into shift about called and the This then revenue the you that you

means disproportionately example, QX shift in that and then taken QX. that So, the Super those things of revenue would in were have Bowl heavy actually were out

So, those real million isn't that two about the are just those $XXX comparable between that's and two quarters. between

in second remember out, launched The year called is March. you gaming, you have to Switch it last

timing out bit to going of the always And that different. the little are lapping so is obviously, also called and we then the launch just Galaxy a start you which –

last So, the availability the year last – of would we came eased issues into QX. QX product in that out are I some biggest general had thing those we and then as thing the is call

same I would about out, had we sure you pressures. don't so that I make operating some that income And call have of that also QX. the just rate you in talked lap

legal that be for that you shift adjust and flat we operating the year-over-year If it settlement Bowl that on QX income our would had, guide. Super rate roughly

saw want pretty quarter. second about we and income erosion, make on Bowl I'm working while. revenue straight We store on year. as into sure the on clear part last think large a for through nearly benefit We'll of impact forward, overall out little question QX. this out been that said the have that flowed of have going that, amount to much that price moving of the not operating the your as but bit To has of a week of And that so some a I QX teams back actually disproportionate the both a that Super I

Hubert Joly

Very attention, to a is the I this true sure want do I are time delivering kind words. thank for and at who It's our the conscious support that your see of company. time. all I'm want to of your amazing performance you ahead. I to of job an make for opportunities exciting customers. We good. associates our your good giving credit

guys day. good Have Thank a you. You rock.

Operator

Thank your participation. today's And this you concludes call. for

now have may a disconnect and You your lines, wonderful day.

Best Buy (BBY) 1 Mar 182018 Q4 Earnings call transcript