=Best Buy (BBY) reported earnings on Tue 29 Aug 2017 (b/o)

Best Buy beats by $0.06, beats on revs; guides Q3 above consensus; raises FY18 guidance

• Reports Q2 (Jul) earnings of $0.69 per share, $0.06 better than the Capital IQ Consensus of $0.63; revenues rose 4.8% year/year to $8.94 bln vs the $8.67 bln Capital IQ Consensus, driven bycomparable sales growth of 5.4% vs. +1.5-2.5% guidance, partially offset by the loss of revenue from 11 large format and 42 Best Buy Mobile store closures. From a merchandising perspective, comparable sales growth in computing, wearables, smart home, mobile phones and appliances was partially offset by declines in tablets. Consumer electronics comps +2.5%; computing and mobile +6.7%; entertainment +15.4%; appliances +5.8%; services +1.5%
• Domestic online revenue of $1.1 billion increased 31.2% on a comparable basis primarily due to higher conversion rates and increased traffic. As a percentage of total Domestic revenue, online revenue increased 260 basis points to 13.2% versus 10.6% last year.
• Domestic GAAP and non-GAAP gross profit rates were flat versus last year at 24.0% as improved margin rates across multiple categories, particularly in appliances, tablets and home theater, were offset by (1) margin pressure in the mobile category; (2) the negative impact of higher sales in the lower-margin wearables category; and (3) an ~10-basis point negative impact from lapping the $11 million Q2 FY17 periodic profit sharing benefit from our service plan portfolio.
• Co issues upside guidance for Q3, sees EPS of $0.75-0.80, excluding non-recurring items, vs. $0.65 Capital IQ Consensus Estimate; sees Q3 revs of $9.3-9.4 bln vs. $9 bln Capital IQ Consensus Estimate; comps +4.5-5.5%.
• Co issues upside guidance for FY18, sees FY18 revs +4% to ~$40.98 bln vs. $40.5 bln Capital IQ Consensus Estimate. "Today we are raising our topline guidance and are now expecting full year FY18 revenue growth of ~4.0% versus our previous outlook of 2.5%. On the profitability side, we are now expecting full year non-GAAP operating income growth3 of 4.0% to 9.0% versus our previous outlook of 3.5% to 8.5% growth. This updated guidance reflects stronger-than-originally-expected second half revenue performance with profitability roughly in line with our previous expectations. The increased topline expectations are being driven by the anticipation of continued positive industry and consumer momentum, coupled with the impact of product launches. From a profitability perspective, while our original full year guidance anticipated an increased level of investments for FY18, we have made strategic decisions to proactively make additional Q3 and Q4 investments to continue to drive our Best Buy 2020 strategy forward." In Q2 FY18, the company repurchased 7.3 million shares for a total of $398 million.