Best Buy shattered Wall Street expectations for its 2018 fiscal year Q4 with 9 percent growth to $15.3 billion. The giant retailer ended its 2018 fiscal year (ended February 3, 2018) with $42.1 billion in revenue, up from $39.4 billion. Online sales were the big driver, up nearly 22 percent for the year. For 2019, Best Buy is predicting 1.5 percent to 2.5 percent growth. Wall Street was expecting growth about half that level for the quarter.
“We are excited to report strong results for the fourth quarter and the year,” says Hubert Joly, Best Buy chairman and CEO. “We are especially proud of our 9.0 percent comparable sales growth in the quarter, which brings our annual comparable sales growth to 5.6 percent for the year. Customers are responding very positively to our Best Buy 2020 strategy.”
Best Buy’s CFO, Corie Barry, attributed the strong growth to the healthy economy and better product. The company’s domestic revenue was $14.0 billion for the quarter, up 13.4 percent. From a merchandising perspective, the company generated comparable sales growth across most of its categories, with the largest drivers being mobile phones, gaming, appliances, smart home, wearables and home theater. Domestic online revenue of $2.8 billion increased 17.9 percent.
Best Buy Profit = 22.3%
Best Buy’s domestic gross profit rate of 22.3 percent was flat, with rate pressure in mobile phones, and other lower margin products taking the blame. The news was good for investors in the company, which is the No. 2 company on the CE Pro 100. In Q4 FY18, Best Buy returned a total of $965 million to shareholders through share repurchases of $866 million and dividends of $99 million. In FY18, the company returned a total of $2.4 billion to shareholders through share repurchases of $2.0 billion and dividends of $409 million.
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Finally, the company took a one-time hit during the quarter due to the new Tax Cuts and Jobs Act. While Best Buy’s overall tax rate will fall from 35 percent to 21 percent, the company had a provisional income tax expense of $283 million in Q4. About $74 million of that was due to the new law’s one-time mandatory repatriation tax on earning from foreign subsidiaries.
One other profit boost in 2019 will come from the shutdown of 250 of Best Buy's standalone mobile stores in the U.S. The company noted that the stores contributed less than 1 percent to its bottom line in 2018.