BBY - Earnings call transcript Q2 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Best Buy’s Q2 Fiscal Year 2019 Earnings. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded for playback and will be available by approximately 11:00 a.m. today. Time Eastern now O’Brien, I’ll conference over call [Operator President turn of Mollie Vice Investor to Instructions] the Relations.

Mollie O’Brien

Good morning and thank you.

the and CFO. Joining Chairman on call Hubert are me Joly, and CEO; Corie our Barry, today our

in and can During the will most morning’s financial on measures. these we this explanation call directly non-GAAP financial be comparable reconciliation these are to measures non-GAAP Non-GAAP and of which both of an release, be A measures is financial website discussing our today, found GAAP useful the GAAP measures earning financial why available investors.bestbuy.com.

the make current that XX-K, statements now after investments such differ could and from performance actual of Reform statements Act Some uncertainties business address considered are of Litigation results release cause the uncertainties. to of and forward-looking expected statements. subject These statements XXXX. earnings arise call to conditions, risks undertakes more on The of or we’ll most for update Hubert. plans, call. our may Company and forward-looking this any meaning events within growth Company the and of to Securities that no cause the the are circumstances risks and Private materially these Please could to revise date will forward-looking refer obligation to the may information to the that the or I Company’s reflect financial today over recent turn initiatives,

Hubert Joly

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

EPS non-GAAP categories. to X.X% that was sales and Enterprise we broad-based to with channels, product our year. compared all performance delivered sales comparable for are up most is and quarter by comparable We $X.XX, report and second which positive grew of exceeded bottom XX% geographies We strong diluted top last results the top-line line expectations. our across The happy

strong the unique building. driven elevated favorable we are by how and responding which and operate by was the customers experience revenue Our environment to growth helped in we’re

encouraged continued We the are of Scores particularly market Net our with share our continued Promoter progress and gains.

take operating offset also saw basis ability by rate year, points business. our income investments with quarter helps X.X%, for by cost the fits second operating pressures this flat that non-GAAP XX in and We income our driven to out our guidance expand the rates drive to for

So, I want to our thank in delivering these results. associates for across Company work hard great all of the their

with pleased we’re financial of our So, performance. the strength

we We’re sell how what about as evolving also our entails Best the making and excited execute which we strategy expanding progress XXXX sell. we Buy we’re

connection starting few GreatCall touch are Let personnel. seniors. including to products one who connect user acquire connected specially-trained acquisition to can connected combined devices with GreatCall. intent consumers. provide the of our with easy our caregivers, range mobile month, a U.S. services aging me health a to for services These a simple emergency Earlier GreatCall, and leading provider provide for of announced services use this highlights, to offers we a dispatch concierge based and tailored agents family

Our five of for acquisition is GreatCall reasons. exciting

our strategy. First, with it line in right is

through human technology needs. a by as addressing service key to Company purpose Our is lives enrich

consumers on our health independent can needs last the highlighted meeting these with a life. help September them and to a and during focus we’ve Day aging decided we Investor live technology how expand into wellness, more One space of is

are their relates XX, homes, payers benefits and in years. XX live approximately age and not families, next seniors. also for people a expected the more grow seniors only within exciting XX% provide There especially space, it to this their for an the to of than number over by significant Second providers. reason, health longer million market population XX is as Helping but the fast-growing

revenue Third XXX,XXX GreatCall that and acquiring business than already strong culture paying that and recurring reason, serving expertise a well combination and opportunities a we annual in opportunities, their and aging capabilities, provides is with their assets, both with is attractive existing our $XXX population business They to subscribers management have and has the reason, we’re payers an including products, profitable, see more services, the value-creation than growing, more driving Best great significant revenue. million The return caregivers company. on in team established a Buy’s. and expertise a and Best have of and marketing, aligned opportunity Fourth Buy an with scale providers. consumer service their merchandising, commercial sales investment. they pursue

we can beachhead growth to point more this providing be Finally, believe Best health for in the a acquisition entry the Buy space, opportunities.

impact We ‘XX. to the and expect earnings and We as on the by invest the to our year in of year neutral this this close non-GAAP business transaction to earnings fiscal quarter. our we the be next anticipate end accretive third by

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about on our the excited Our standpoint, profit the was with rollout gross very in domestic last we with teams in From our retail program. are financial are expectations. engaged quarter. line the shared And the line sign-ups a expectation of impact and customer

their $XXX app. chat, covered, unlimited per and via specific As and Squad Geek believe new Support we as Buy plans. to that not service support have Members product need and bought their software work on customer that security internet receive when annual discounts palm is in-home be Tech protection where technology hands together. of and no Squad the Total or to should they for support services limited purchases a it, of members online year is all Geek the in get free technology AppleCare also the their with matter in-stores home reminder, All a Best

members advance capabilities our to believe continue will benefits over time. additional beginnings We the we in are the we And of rollout program. working offer terms current just the is we on as

product example products. their first and and our TV help that’s merchandising, is to great sales know you’ll leveraging for. all Edition else to that Fire have Total as asking how the Tech someone unique third highlight holiday of something partnership for think, is are us A be Support I to been be smart our part of membership season, will the customers purchase expertise TV marketing new able companies Amazon. a partnership we This launch this the commercialize assets which a you with gift A happy of technology is leading development of quarter

are on the Best As Amazon.com TVs in Best a seller. on a Buy stores reminder, only Buy available bestbuy.com third-party through and as

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to fact, for to row. in the JD according second appliance in Satisfaction Study, year the retailers announce I’m Power pleased Appliance Retailer ranked highest Best XXXX satisfaction amongst In Buy a customer that

the the increased program. of than at Another quarter. quarter launch XXX September the strength highlight the the In-Home Advisor last from the of the we’ve to of demand, second more number our of in at XXX of beginning of expansion year end advisors Based continued on nationwide is

that their the master in and Best Tech enhance as deeper our program mature of and advisors to and As longer In-Home free consultations Support help address the in-home as early customers goal full to the of expect that are their roles the provides sophisticated help continue systems further and them our across with to offer, with range program Like The sophistications long in their the consultation we a tools needs the Advisors our of reminder, is relationship-based is our the a experience journey are do Total improve over term. Buy services. and our skills, job. beginning initial we products and of and the more

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based data to and more course share believe drive total drive we are from As continuing how and the are deeper focused we more online we a to on of revenue are focused on market revenue, while And result, have, online. continuing relationships we build gain to on customers.

all on continuing growth revenue our ways the to with customers the to with are pleased experience and overall improve engage we our us. customer are across We progress making want the

is For store, experience, the in pickup online barcode mobile order the the online screen the app order pickup at in reducing when counter. to ready our amount spend the a home example, store improve of has to for ID time further display customer pickup buy an will

and related reviews. scanning process. getting and research to improving research product tags perform in stores example is Customers by information the Another

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and we we invest as people support sell in enablers our we’re chain. technology, XXXX range sell and expanding Buy to just implement So, outlined, of continuing we strategy I of across a supply as how Best evolving in and

area, drive invest knowledge speed increase service such relationship Specifically, capacity, capabilities, we’re to further and supply and management investing increase specialty chain in customer to labor, as are new we delivery management, continuing In efficiency. areas of platform. the enterprise our

new center in to distribution opened wholesale center Net home And the Promoter million growing this, a categories large leasing Scores. This and significant to in for as within the miles. TVs. XX consumers new appliances As our significantly old consumers Compared productivity and our result, center we of California. a we like with Compton, more delivery in improvements California, an large has XX capacity large seen Chino, we’ve center were recently is example distribution cube

out and build efficient to also completely system delivery offset We’re facility faster metro a of West section square using to and this XXX,XXX our To facilitated online the pressures long-standing more help whole well our will increasing new investments area decreasing a as the order and Coast. we in business, continue on productivity local automated foot that cost. as diligence the

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

in approximately annualized During to bringing the million goal. million $XX the second quarter, $XXX cumulative total we towards achieved our reductions, additional

ahead. looking So,

X% our versus non-GAAP our and for to to $X. to in original to for are As earnings to now the XXXX of and half, $X.XX flat of our expect raising of year we of fiscal we comparable performance sales a strong updated $X.XX X.X% range We are EPS expectations our and original raising the guidance versus a result year $X.XX guidance expectations X.X% of first our full diluted guidance. sales the our half growth back of

QX. continue of for an flat further year operating We will to full expect income Corie on non-GAAP details the our and the rate for year. approximately provide X.X% outlook

and on next of flat as an past note year. quarters managing rather relationships to approximately than In in opportunities an the quarterly You’ll services about the performance. success long-term conclusion, are in real opportunities customer that we straight years, QX remain increase linear completely we business rate of value-creation the us, decline excited related ensuring enriching solve in expecting rate providing followed build the customer that the entails. to with margin result deeper front the lives needs not in for operating and two an that is several this focused technology the line Typical and solutions very the for we’re by profile and income QX

So, I of passion, how I the leadership, across appreciate want Company. hard much to ingenuity our talent, reiterate work associates the and

more call fiscal over Corie now, Barry XXXX turn the making details and You are I’d our for to all it on our like our possible. performance guidance. CFO, to And QX

Corie Barry

everyone. morning, Good

quarter of shared expected you like wearables per Enterprise non-GAAP I better the the we and versus top-line last billion, talk I of which year, expectations. multiple health last we revenue largest second them would and results delivered expectations with earnings categories, results Before saw versus than share of $X.XX, On our mobile about to our $X.X talk gaming, about quarter. drivers. across both being home phones exceeded We theater, with

driven rate Our will our favorable X.X% to expectations, our line spend. primarily gross higher second $X.X versus Enterprise with primarily last was benefit due diluted about driven by whereas lower rate talk now in net change SG&A and benefit results and was increased lower Enterprise billion, flow count to an through quarter expected the X.X%. slightly XX% non-GAAP revenue. the revenue $X.XX non-GAAP share tax increase per with income from due combined per profit year. the of effective the than EPS our comparable a $X.XX $X.XX. increased revenue $X.XX I or to higher rate share increase by of was to sales share This

shift. benefit comparable a from the calendar of XXX sales Our X.X% growth included basis-point

calendar As are year. and week comparable aligned reported fiscal we computed like-for-like week discussed are to more not XX-week on quarter, year’s our shifted following sales last last closely

was On XX.X% domestic in increased revenue comparable home phones online online tablet year, year. digital Domestic perspective, home. largest mobile billion computing, the XX.X% in basis, XX.X% year. on This revenue to increased XX year, X%, increase increase Best For of approximately $X.X have XXX by of a QX, of Domestic Buy calendar comparable positive XX primarily expect in was shift revenue of sales by the appliances, the drivers of by our in QX offset points. store a of large-format and XX% declines and our were driven points to negative quarter of theater, billion. the From expect smart of in we were our imaging past impact X.X% the the offset sales on traffic. $X.XX partially conversion and and sales These segment, primarily revenue comparable drivers and merchandising XX remainder loss our Mobile a from growth compared second gaming, the partially reported a basis by higher last revenue last driven to comparable In a closures top of growth approximately impact basis increased we category.

of take Let additional a minute this to a points on topic. couple me provide

believe said, making most and Hubert market revenue share gain continuing have, pleased with online. we As are the to are overall we our experience. recent improving on growth the on the progress We are data customer based we we

category patterns than Regarding category specifically, several with our a retail the consumer other than more is earlier add online comp would buying electronics customer that mature online moving I categories, online most.

you of for our investing and many been have on heavily As know, been have focused several we multi-channel years. capabilities

for last and online all pickup more fulfill stores buy in store have For been to now have the the XXXX. doubled customers annual and our offering XX since have domestic of and beginning than XX% our total example, of years, basis, the five we orders to product approximately option sales our they sales. shipping we been an our on online online years, are In

X.X%, of to sales driven million. positive our back our impact. large-format points with and increased basis store primarily the XX.X% foreign year, approximately associated Canada and in by comparable over International segment, revenue currency both new was driven growth sales In $XXX incremental Now, of This XX past openings Mexico, results. to Mexico revenue six QX by

gross pressure last mobile The XX.X%, primarily gross approximately Support due XX.X%. gross non-GAAP profit investments The both, points decreased decline points rate benefit these in from last profit and Turning in Canada, pressures the costs decreased was basis our of with were of higher a appliance XXX points expectations categories points optimization overall basis now transportation to basis versus lower rollout of of to the partially increases rate and Tech chain offer. supply line were gross our was as phones and which well category perspective, computing. gross The XX partially international profit we rates theater higher basis initiative. year. Both XX national smart the of XX.X% Domestic rate Enterprise rate the quarter included product each. rate higher expense were These profit rate, approximately to gross by of XX% phone as a by rate home pressure by lower profit driven margin home profit. year-over-year in primarily the in offset driven and Total to mobile in by The offset From shared XX categories.

variable $X.XX specialty billion increases expense, due appliances, compensation. Now investments specialty XX.X% increased year. of turning reductions were smart to or increased incentive labor million or of was such versus cost last lower costs SG&A due Domestic but labor or areas was The was include primarily to basis and These revenue In-Home approximately SG&A as last $XX revenue, which by which and billion XX.X% labor, higher Enterprise depreciation XX and in $X.XX $XX offset versus investments, The additional million to points include higher SG&A. XX% revenue. Advisor, increase decreased year. of $X.XX revenue home. growth dedicated billion partially

impact the industry. In retail addition, benefit the relation competitive to rising we investments across rates it in have wage of also includes and wage made

result exchange effective primarily of pressure year. a million flow new the we of primarily rate with XX.X% costs to with As was The share basis, returns or rates in line cost From SG&A associated variable and to ended our ongoing perspective, rate our revenue the revenue, $XXX lower On last a day, and was negative of tax quarter $X to million reduction reform. cash non-GAAP increasing a last decreased impact approximately due of or to we’ve in reductions International a in of was and increase dividends. tax XX.X% repurchases our with increased quarters of that are higher form revenue U.S. We $XXX ongoing are from foreign due we corporate rate, million as versus wage in rates. an XX.X% efficiencies. million the shareholders the XX.X% second and effective in tax a statutory year. the tax returned The investor combination initiative prior expectations. stated from business and $XXX on the balancing

As of plan it existing on $XXX relates of is expected to guidance. to our like million share acquisition our communicated to for plan the GreatCall fiscal to use year. we acquisition our would previously talk and QX GreatCall, to spend about purchase. billion cash not repurchases this I The $X.X annual impact not

As and year guidance are mentioned, first for revenue EPS and the our reflect raising year the our of outperformance full Hubert for half. back the half the expectations we in to

of when to increase would $XXX remind comparable assumptions to to like X.X% the this compared increase X.X%, of in operating For the of on in which of the to increase to million. approximately are expenditures of. fiscal approximately $X.XX is There revenue that an basis; X.X%; you a approximately of to EPS XX-week sales to and rate expecting XX.X% following: flat income annual $XX.X a billion represents year, tax in capital $X.XX, now XXXX’s guidance XX-week diluted of fiscal rate billion; we full on XX% non-GAAP basis; of income Enterprise $XX.X Enterprise I to XXXX our the of a range are non-GAAP rate XX%, effective an range non-GAAP XX% XX%

by slightly Best to income. with revenue our million, small-format expect Buy positive operating impact Mobile flat closures the continue on to impact negatively approximately store $XXX We to

returns specialty will increased lower of business, ongoing partially share and investments quarter particular offset related in in ongoing the initiatives revenue to pressures $XX fourth efficiency. in supply investments, cost Our chain, in from approximately including new depreciation and reductions capital a by and strategic and labor, combination million profit of the be

of from approximately costs investments the gross The profit to pressure supply are profit gross higher rate XX rate Tech expense XXXX Support increased points. target Also, as by pressure by XX expected align domestic Total chain to compensation the our basis at domestic reflects fourth beginning to higher reset is our approximately and in the the expected year the Specifically, rollout points. national transportation expectations. annual quarter incentive with XX basis performance our of to the we expense guidance lower

impact Finally, does of any our we pending guidance the from reflect GreatCall are not as close acquisition, the deal.

we expect fiscal earlier, to acquisition the non-GAAP the Hubert be As of our impact XXXX. in earnings neutral stated to

performance year. in the the expect composition terms rate saw year-over-year not we income quarter’s this the As and how pressure the at the other beginning QX of linear of of the we consistent with Hubert would rate is operating in in note more year. quarterly mentioned on than quarters also our the earlier, composition income operating unfolding that is I

of diluted additional effective Enterprise sales non-GAAP non-GAAP revenue of range of tax A $X.XX; our Our comparable count weighted XXX to third and QX comparable comments to our of X.X%; $X.XX growth shares. approximately quarter million diluted EPS a outlook rate specific approximately in share $X.X is average X.X% follows: few comparable X%; sales of to guidance. XX%; X.X%; income to sales the Domestic as billion; $X.X to of growth growth of billion to X% International X.X%

mentioned earlier, points. XX As by comparable impact negatively the calendar QX estimated I domestic sales approximately shift is basis to

increased to the expect pressure incur as the costs; of we Total including Support basis initiative. points costs our One, see approximately rollout over basis months; supply approximately of three, equally gross transportation merchandise well partially them pressures optimization the year-over-year profit we profit we pressured tend as as with impact repeat due investments XX from the to QX the these profit related chain, as in services gross following. XX higher rate and including discounts when as we well, We XX experienced from of while Tech two, members while better they immediately to margins and recognize gross join program offset revenue points

benefits when are do for we of collection QX in thus entered last QX in year of we and knew lapping much [ph] in occurred that not a as the margin As of year. merchandise expect unique plan expansion year, we this

to SG&A the labor specialty be expect investments and low competitive due including benefits. higher higher to depreciation in investments, growth and largely rate We This wages digits. in single particularly the expense is dollar

we compensation In incentive see the slightly last costs QX expected higher to year, incentive accruals addition, in due material compensation to expect timing of decline in before QX. year-over-year

the third to the a to like-for-like year, holiday year. results inventory closer will shift due the last end to to of On expect ending third season, quarter is quarter Finally, up a to calendar calendar over for this the basis, expected year. QX increase slightly the now ending call approximately be we balance of which QX XX% to the last just in questions. compared week with to an inventory operator turn balance our compared I

Operator

take first our UBS. Michael [Operator Lasser Instructions] question We’ll from

Michael Lasser

Good question. morning. of lot a Thanks for taking my

Hubert Joly

Good morning, Michael.

Michael Lasser

of And particular Should What expect how should becomes business, that that the is that gross like going affect comp look bigger going here? to piece accelerate? slope the margin to time? over rate services from of growth we the as a in that

Corie Barry

we’re to will Support of about, ongoing Total in the that over bit, then from as Obviously QX. and saw coming growth you stability business. potentially still the starting could the of the XX some of out traditional cutting more impact what but the growth And is was growth that most the deeper flow and we I’ll excited amortized for Obviously, that We the revenue that is about growth believe the growth to on and longer of takes were talked and margin offer, warranty the pleased were especially Tech transparently help as into reported think But trajectory business so add. ramp. trajectory to from the bit of profile. months, with topline Yes. services Tech our that can you I slope of add little and looking start a see business. Support Total a how that get Hubert but we’ve little we were the

still subscriptions going be going to And transparently they’re serving we particularly relationship end so, thought customers that particular. point. in harmful value developing but at But we with inline delve is we’re not at point this we and consumers not on warranty portfolio we’re us term, most we that like, in day deeper our on and certainly are this the at we’re services your to genuinely guide would customers, as as have on basis more recurring them. what’s is where of we longer a the the right specifically, business. time, in the to add see margin important and point value, the offer to existing To start that making we’re into more that over margins that with sure what relationship and really stickier That’s focused the the of

Hubert Joly

it service XXXX example In-Home the is is a Advisor strategy, going of Yes. I that and into translated not revenue. clear solutions the orientation, but Buy always as strong was services to comment on Best that program. -- And

relationship of focusing said needs Investor orientation The expansion our sale our and XX%, discussed the As and The today still on with of building of share the on our the is then free is our first as into in customer. you and the we XX%, and the visit know, all customers, opportunity Day. existing at as customer wallet really revenue. activities biggest which is and some of products around prospective call and in services I is broader the results it

much than this line revenue strategy we track the So, breakdown. in particular revenue, is services and while report bigger

Michael Lasser

I for one more And question Hubert, you. have

Given a the be point handoff in if cycle the not, the merchant to healthy why this achieved vast that channel different? is to from the And where results in this there this time [ph] channel? the mass the is the consumer quarter, is electronics category going specialty

Hubert Joly

you’re and in bit again, a cutting So, little out.

in to a Bear were the you like have other is retailers everybody’s in number mass channel. of is absolutely strong asking think handoff in category. mix. of the different mind of We the not. business The terms results to that whether of clear answer I including we intend about our noted, everyone else, business

headline on gain intension there compete we depending have continue and all can market is no high. note categories the of And be the their But, absolutely in. to quarter, that share we that we across category handoff. to So, number the a

We an and are experience. We point. of we not unique think and to this customer are elevated polite but that building sort nice,

are that we support about is and it’s special. very and excited and we that’s feel your working. is If something a help And very, technology for looking customer relationship, building

we on. idea to move goes we’re there we know at in and build I once we a sticky intention. all about That’s unique to excited very matures, deep not to not the this it that’s that what customer opportunities the customer So, technology experience all past, the And have at relationships. have and been the seeing; channel then has are mass very

Operator

And we’ll Goldman Matt next Sachs. with Fassler question our from take

Matt Fassler

of Are are you think innovation think on I’m that elements comments lot online a and there color a online. there opportunity within morning. could like about there a made and categories ongoing e-commerce maturation you the sure Thanks little of And Obviously, categories reignite is nuance I’d here? good lots more the you still rate the is rapid online? at that of your on that. growing

Hubert Joly

look and app, how digital by all of the see experience overall categories is our building our move One of oh referring I and Thank X so some delivery, continue things. my are doing over last we all higher you, this, is electronics the What other customers. excited to started the appreciate, a Matt. or site for great the is, number and than and at online say, customer be capabilities to categories. evolved the one things on in first are we consumer the was things. X of I we’re really we of To When penetration that years, to clear, very all as online, will you we’ve God, teams the

fact, business, online in In about XX% business. our of is our

doubled we’ve six billion the from to business, now ago we’ve $X So, billion. $X gone years

and for ship that doing XXXX. pickup started than pioneer. note been years mean, we’ve also we’ve been store more a in in-store I You’ll we from XX

Buy experience Best line and which be in angle in shopping experience, relationship with our to in of strategy, to shopping, to use our it’s shifting customer Geek improve our in the across help with So, teams, XXXX investing all research, build in services we whether with touch product. our whether customers you but a Squad, remotely bit technology the able broader it’s your is continue whether a is with to is we’re it’s the with points the the support to the

a So, having product game on seeing a console When well-known experience, commodity. products the it’s complex there the fly stores a and the will some and appreciate in basis, the shelf. hot then is category-by-category -- there conversation, products off a tends buying and It’s the is experiencing so really more customers that experience to when forth. so

broader in no? So, maturing, add, Okay. invest yes, category. a the it’s to Corie, I we’ll it’s but continue approach you’d to think anything like

Matt Fassler

for that back? bounce a an software against is of follow-up the very context, specific very declined there tough chain opportunity If within having and the that outperformed brief business category’s reaccelerated compare. in the drivers entertainment QX Any

Corie Barry

Yes.

secondarily, like some last strength index And gaming -- peripherals make some and One, over facets accessories was on couple particular there in what social that. to we a like as we are Fortnite there to continue some a consoles. that tend that before, on And as gaming quarter, talked saw, we and games, that where take strength little in games in of of gaming we saw about is see we accessories we compelling bit more a off, tend as consoles. experience. across So, strength unexpected the and particular to mentioned

saw we we in so, a little And category. even expected better than results that bit

Operator

from Scot Markets. And our with comes RBC Capital Ciccarelli question next

Scot Ciccarelli

guys. your latest price the you and about how see elasticity view categories in where specifically please you the risk? tariffs impact of on Good potential talk you the thoughts Can morning,

Hubert Joly

originally XX I’m the Not waves [indiscernible] surprisingly, tariff consumers, been China how very on the a impact appliances, the $XX a important are there billion, of tariffs. there’s in seen in with So, there over -- on our been billion than going when you’ve while of products context, and that rate select there the $XX China $XX reflect months, administration is XX%. the at dialogue doing to impact by several with And contemplated. that goals, increases to billion minimize is the difficult them in number with is then another the and followed the impact. increase, with results an negotiations. last and of Those electronics these plus starting in price is international consumer we say, We’ve these some less XX, trade guidance

and a It’s I lot ahead discretionary in appliances disruption situation think to completely to first So, it’s stress U.S. broken, had some look economy. is specifically the why half of on continue purchases as the because which the -- administration not impact decision, fridge minimize of consumer it’s appliance be with the we’re during measure, where that been your the the we is have dialogue the to easy reported tariffs U.S. year. a on close not going to the the

Scot Ciccarelli

of can degree pass terms you price price increases Are areas there of the to make think it there you’re forced velocity? that that up specific where in where to on you is kind elasticity the don’t in

Hubert Joly

Yes.

be increase. is to Specifically, -- rates When members. to profit gross particular product, the on say that is -- is then gross the say a the low, margin the XX% increase tariff in to on in is rate profit XX% material profit XX% rate let’s are linked impact There let’s going XX% essentially very going result price gross tightly products.

in XX%, On if the half. profit everything our rate cut along materially impact, is other pass hand, so is anytime the then let’s gross higher, we say

differentiator. key a that’s so, And

diversify tariffs, over the base. supply over time, Of and to negotiations, short to of course, or of vendors time, not observe are having usually the it’s term the course also related in our to ability but we the

undertaking. complex a it’s So,

this small know to much and to schools, Of businesses on I the and we workers, course, dialogue families, sensitive, is want the following very ongoing administration so continues the American are be as well, we impact forth. as and

Operator

And JPMorgan. from our question we’ll Horvers next take Chris with

Chris Horvers

Can parse share partnership ASP, versus you the a about whether Day that home as talk comp you’re growth bit the of of and quarter? the little seeing result there, a theater the the strength saw and sort lifted launch unit morning. you Amazon product? of the out that Good Maybe that Prime in Thanks. or not the

Corie Barry

what consumer interest strong in very see is So, good to strong What very leading the market like did growth, and we morning, category. we Chris. and

in most growth NPV, So, TVs per that QX. were Obviously, is we in see one things. up exciting the double-digit of what can

is were what while that to could excellent. we So, the Also, industry and ASPs units see down. were similar in up, the industry,

some size saw share saw of but share fact than strength, in we honestly the little saw from We less and on are gains of minimal TVs very lapping year. And just bit a last the industry decline, pretty significant we QX. in we

like we over positioning, that consumer share we’d our gains the adopting So, we’ve the And moderate we’re it. said, that expect is excited always time.

the cliff also said we them to off a to point. Hubert’s off wouldn’t to and drop expect We business completely

And seeing of and so, like our the is the the in very much it. positioning we consumer that we category like that excited, we like amount volume we’re within

Chris Horvers

then… And Understood.

Corie Barry

I’m question. sorry, your the part of

in what’s that actually that real more that’s evolution these you to make me differentiator the sure we’re this categories important specifically that’s Obviously, this, I and this can what’s like continuing partnerships interesting like can, Let way we hit think technologies in the skews. asked technology specific unique one showcase comment no I idea But else here. about think idea Amazon. I because on, not going on of

So, being skews one certainly going technology this we delivered, those else able the showcase really can. idea like while not to what you I’m to give no exactly that

Chris Horvers

think flattish, is comp end. It then, the quarter, looks fourth about think the sort And quarter. help of high us rates at the for I on your fourth based implied Understood. the like

in quarter you what and think sort can you ex just about fourth business thought underlying versus reflect what like talk you in the was So, really last what back shifts? look of the one time shift year will those

Corie Barry

Yes.

that week comp gets The a a X%, we up of it so QX, we’re little that imply in have tricky. range the QX. on basically to the flat remember and would seeing, based deltas in somewhere So, guide XXrd comp for

factored and And that is ago. bring our into year strength from that incredible within product year. prior, gaming, feel that particularly at availability what out out. those we continued as last we comping home, the comping very year. we some is computing, head instead with we we’re issues knew specifically due we year Those switch lapping to what home so, places four of years which QX smart pieces strong some very of last this in were And categories, consumer are And against theater, year, against looking appliances, that positioning we the Remember, would some year we’ve be last the we’re the called what to the about in this so the two we saw the we strength table.

Operator

Zack we’ll Wells And next question take Fadem our from Fargo.

Zack Fadem

here it demand And appliance trade you is was higher have like To in the quarter, changing anything that you clarify looks of with XX% up sales? on in U.S. category, versus that? prices, perhaps prices speak be the category seen on of unit or to the behavior the tariffs in any the but softening could signs the impact pricing favor could in down

Hubert Joly

it’s the this sub-segments, that believe the another share XX report, the It you’ve market double that represents digits seen very where to quarter low of particular, increase. We’re gain think longer reporting category. is in true comps I course pleased price We consecutive appliances. the certain of is comparable in positive in in

world. -- but the category, it’s quarter And about appliance of it’s maybe -- so, it’s the a so not end the -- total of

which with In macro terms forth. by and housing forth, factors the your appliances moves but renovations question and driven are is happening and so also what’s in new of housing so

watching tailwind discussed significant the as and competitive significant quarters landscape the competitive there from situation. we’re So, we’re sector, watching but change also the we in in the fact previous is a that

labor continued made the we’ve the driven in and principally made gains themselves category market so investments -- in made, continued And we’ve we’ve positive the specialty revenue the strength fluctuate the forth. because so, we are category. the driven and And believe chain the is situation which supply improvements share it’s by competitive proficiency, growth investments by

positive So, and continue this around move to as be forward. we we category upbeat

our leads stores to during in this, talked shiny the parent’s others the We with about in and aspects have appliances of Investor about as addition millennials sell Day, objects we have their house leaving them well. favorable invest all in the to finally and demographic which

We monitor point. this, but is this continue we at see to what this

Zack Fadem

pilot Tech rollout, test markets where Thanks, been customer margin initial markets? if there, your to the year, how And renewal the with pressure? to you’ve initial easing the rates could comment you’re your Hubert. seeing and compare That’s now you the adoption for seeing Total helpful. than And national a speak on any there gross for more of you’re you could on also Thanks. what trends

Hubert Joly

pilots, very we activities but testing, consistent consistent. during in though with a are the very the had we it’s sales even the So, level, options, whole highest at course the the of of were pilots U.S., range

when on at rate, point, renewal truly and not not indicative have expansion. we an this the is national did credit we card we as of of option terms file pilot part were the because piloting this the In rolled out as initially

indicated this. line So, we’re Canada. that. launched when read with to profit the is have think going the expectations of in we have the longer to have in I gross the as prepared And to in situation different seen on for And very the said much impact that we wait I we from had remarks, is

Operator

Greg our Melich MoffettNathanson. from take next with question we’ll And

Greg Melich

follow-up little then will term. question and one longer one Hi, thanks. I have really

term So, about one cash the would say the flow. is longer I

think, will cash used for acquisition. the be you Corie, mentioned I

the you want about Analyst do leverage going ratio structure to cash thinking changes next and you’re into versus Day, that we’re and now next business dividend -- run you’re year? As thinking year, much lots about how since buyback the the how

Corie Barry

Yes.

some guide at dividends. been that aggressive So, But, obviously, particular point that we’ve over the of last not going more of this down in clear couple I’m and balance balance. cash years, working with buybacks exact an cash the it’s here

especially not well as risk. of the to to suitable but guide business work as to you to that to But suitable that work continue going any that feel hand can us just we see is run kinds we’ll us this down large in that at unexpected And we not and acquisition we using help to GreatCall of head point. down. place as continue on a do We’re that for We’ll cash year the in. next that

just being clarity business, then payer of priority relates in. capital that’s we’ve that’s an means form capital the excess like repurchases. that our strategy for it acquisition cash with share our where at a said strategy, that to we’ve to Investor internally the priority As not consistent in that, in on the that, as using or dividend premium whether invest that we’re one remains is we’ll stayed next and the allocation finally of Day whether head we form provide a our what in to more shareholders, GreatCall. very but exactly next And And After going returning through forward. for year prior

Greg Melich

the ticket just then, been cetera. it. opposed transactions, a the understand follow-up pricing to or make-up a much have talk Got And Could of just there comp, growth how and mix X% to maybe understand, better, of of number it, the would help et it? as balance has is that tariffs comp lot of a a little of of been you us

Corie Barry

just in or increases across what channels, about that transactions rate in think our close take a our let actually it comps if me in increases back, our So, saw and in traffic, our the we step big you way. was broadly -- conversion increases

and everything. that’s channels that’s together, our we few what’s most quarters important meld we’ve that’s had last as consistent us, across relatively So, all to here. saw when what we And a been

few impacted been of specifically smaller the minimal laundry this tariffs, you’re or basically talking at In super they’ve about categories. terms point where is a

So, we’re consistent the More good what very is with this about to that it’s point. so, good drivers underlying nice growth. little excited remained the is and driver conversion a channel traffic, be slice; transaction across therefore pretty at have the not going tiny that

Operator

next Markets. Chukumba Capital Anthony question comes with our Loop from And

Anthony Chukumba

Good quarter very a tough and another morning congrats against comparison. strong on very

Hubert Joly

you. Thank

Anthony Chukumba

just I wanted GreatCall based touch to on the quickly acquisition.

of Assured Assured your that and I was Living? planning the two GreatCall why other then, the And maybe the did mentioned sort seen you do from with at happy with and the all are to You acquisition. started different the Assured some informed experience One, with In you. Living Living if results wondering of the GreatCall I words, that’s would to you I have integrate, the you’re perspectives. Thank business. Living opportunities two, how acquisition? scale GreatCall business Assured engrave to of guess, about how

Hubert Joly

me with the start second Let part.

initially be it will running as a business. because a different We GreatCall separate entity is

be both targeted is there. existing but would like a more integration you more particular have aggressively, we’ve number we it’s -- Jitterbug if we way, GreatCall in can to I forces, pursuing in stores expect, will we Best -- that it phones related task opportunities, long can do for and creation teams studied and feel, We as Buy our value been the there this of, put a way products, selling

that’s market. aging is course cases, this a small their payers with business. potentially We part well think seniors, after very separate integration, significant caregivers indicated. They So, targeted another opportunities. it’s going but the as points in today together solution and as to with business this going GreatCall’s material benefit have business promising of consumer of a in to to small be products. creation targeted I these is the a Most of on benefit, business working of for to And Assured have their Living be GreatCall, see a both Today, And both which and the idea of we go this good a there rests -- providers. homes we’re believe health in is demonstrate opportunity an across Living. we potential the as monitoring seniors Assured material, as in exciting in the in we value behaviors the ability

this So, in area, opportunity tracks think down big with small the parallel a road.

Anthony Chukumba

Got it.

related your just you’re a to hear of question but I’m even [indiscernible] follow-up market the about comment. going to to not one, but really more a give not glad mass share Minnesota away just so, And all market.

So, good hear. to

Hubert Joly

coming is practices. the still I’m been Frenchman local XX for years, from who’s How a learning Minnesota that in

Operator

And our Curtis America. next from question with comes Bank of Nagle

Curtis Nagle

for Good taking the question. morning. Thanks

a So, the theater. little follow on the wanted to home I growth in just up

that’s it in continued particularly OLED, it driving I the HDR, trade Is else commented, up a something guess, interest pickup, as what’s nice or caused So, was pickup? in it? units. or

Corie Barry

Yes.

I of a And talking things on. think while. them you’ve got about a been going couple for we’ve

of speed has adoption think I increased.

the larger technologies, new ready more very the for and secondarily, home points being that more those nice more in XK, in with And TVs. HDR, spaces of like have of so, coupled the with screen a idea particularly form have price with those range And are available fits higher that’s people sizes, then factor think and you those now. come combination incredibly combined two it’s to coming so that feels down now And adoption here. I a

budget. bit said of be why how just And great will my and feel important. think things sweet a of this price my sight I it a sweet uniquely a more the just XK, we home able those think I’m lot spot spot buying that to for in you more kind things. it, of between have between this point really of I what you now and size exactly pretty makes have money, able we is the for and hit again, But to behind the technology line see technology well HDR fits at sense it’s become being part of when because technologies look a that positioned, some important real to pieces, those

Curtis Nagle

sense. follow-up. makes quick That Okay. And a just then,

for Forgive already. the what’s for flow the expectation me, if you gave free year? the But, cash this out

Corie Barry

point just flow at of We expected why exactly right But that’s haven’t year. in we’re had where kind they are come. And you specifically. this guided now the is cash quarter we free be updating to now where we each

Operator

our And question with last Jaffray. from Keith we’ll Peter take Piper

Peter Keith

morning. quarter, bit. In-Home guys. Hi. little Good One, Thanks. a Advisor into just dig the Good to

the is give starting follow that to annualizing same see that update, you any working? you’re to And ramped us are on some that’s Could clearly an that the the categories that there outperformance a that able rollout? if You needle on, of now move be would up. IHA over-indexing to might store where sales, as

Corie Barry

we with to over-achingly Yes. IHAs. said you Peter, we’re you we guided going it in done IHA of and expand would, assured part with demand rest we’re business. said, that the to as the seeing be our seeing how strength continue about we’re can out in as we not the where exactly have both Obviously, we the of that in that associated we was marketplace. give -- part program But, always line revenue and

me things in call, categories nice that of In tend do very networking, nice see But, talked into broadly, is we and strength these actually about physically you before, things a want better smart to where in some as in things through. theater appliance home we space the home one into out come And I’ll to me idea of help can some can that where lead the somebody this strength, your is help we’ve also together, how work as of a well and what to measure terms figure homes. walk out figure I have as about how them. foray appliances to seen hardest someone

also what’s you so, that am have And there help who the helpful. not, in someone space, found to trying get you what’s I exactly when have, be to to what we’ve is with to

now, but into of use still, secondary kind see that. for like few we’re feel what categories. categories. and learning those around your than as the you building across arms different rooms stretching be is in as leading just our home run you a And of capabilities. some So, yet that said, I It’s the the a in of space, those you tend over time would categories do and more great those as we your we’re expect, like to to first -- or foray get And those on starting

Hubert Joly

Very good.

to this Company. do what And immense for appreciation the call, of and course for conclude shareholders work have customers you your for across in the on thank business your teams want interest our Buy we for day. As Best they for I we every continued

Thank you. a day. have great all You

Operator

conclude participation. does today’s you for call. And Thank that your conference

disconnect. now may You

Best Buy (BBY) 28 Aug 182019 Q2 Earnings call transcript