Best Buy (NYSE: BBY) - North American retailer, which operates in the US and Canada. The main activity of the company is the sale of household appliances and various related products..
About company
The business retailer is divided into two parts.
Inner segment. Includes all operations, that Best Buy does in the US. In the US, the company operates under three brands:
- Best Buy Stores - Basic Format, sale of household appliances.
- Best Buy Outlet Centers - sale of discounted, refurbished and used goods.
- Pacific Sales - sale of high-quality home appliances.
International segment. Includes all operations, which the retailer conducts in Canada:
- Best Buy Stores - Basic Format, sale of household appliances.
- Best Buy Mobile - sales of mobile phones.
Additionally, the domestic and international segments are divided into six areas of sales of household appliances:
- Computers and mobile phones.
- Small household appliances.
- Large home appliances.
- Entertainment: games, films, toys, virtual reality devices, quadcopters, drones and more.
- Services: consultations, delivery, design, medical services, installation, repair, setup and technical support.
- Other: Drinks, snacks, furniture, children's and sports goods.
Number of Best Buy Stores
| Format | In the United States | In Canada |
|---|---|---|
| Best Buy Stores | 946 | 130 |
| Best Buy Outlet Centers | 14 | 0 |
| Pacific Sales | 21 | 0 |
| Best Buy Mobile | 0 | 33 |
Best Buy results, billion dollars
| Revenue | Share in overall results | |
|---|---|---|
| Computers and mobile phones | 5,138 | 43,4% |
| Small household appliances | 3,630 | 30,6% |
| Large home appliances | 1,791 | 15,1% |
| Entertainment | 0,617 | 5,2% |
| Services | 0,610 | 5,2% |
| Other | 0,063 | 0,5% |
Online business Best Buy
In addition to offline business, the retailer is engaged in the development of digital sales.. For ten years, their share in the company's overall performance has grown by 4 times - from 7,2 to 30%. In 2020, it was the results of the online segment that allowed Best Buy to offset the losses from the coronavirus offline.
Even though 2020 digital sales figures will be difficult for a retailer to replicate this year, management expects a decline in the share of online business in total results from 43 to 30%. This segment of the company has great prospects until 2026 thanks to two growth drivers: American e-commerce market, according to forecasts, will increase during this time by 30%, while Best Buy outperforms the market.
Dividends
Strong financial results in 2020 enabled Best Buy to share its success with shareholders: in the fourth quarter, the company resumed its share buyback program and increased its quarterly dividend in 2021 by 27% - to 0,7 $.
results
COVID-19 has brought significant changes to the buying behavior of customers and highlighted the importance of Best Buy's omnichannel business strategy. In 2020, the company managed to show worthy results: she quickly moved to digital sales channels, who grew up in 2,5 times - up to 18.674 billion dollars.
Financial results for the last 5 years, billion dollars
| Revenue | EBITDA | Net profit | net debt | |
|---|---|---|---|---|
| 2016 | 39,403 | 2,508 | 1,228 | −0,88 |
| 2017 | 42,151 | 2,526 | 1 | 0,254 |
| 2018 | 42,879 | 2,67 | 1,464 | −0,592 |
| 2019 | 43,638 | 2,821 | 1,541 | −0,958 |
| 2020 | 47,262 | 3,23 | 1,798 | −4,227 |
| 1п2021 | 23,486 | 1,996 | 1,329 | −2,973 |
Best Buy Profitability vs. Benchmarks
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|---|
| Best Buy | 100% | 162,9% | 273,7% | 230,6% | 343,5% | 453,6% |
| S&P 500 | 100% | 120% | 151,7% | 148,2% | 180,4% | 211,5% |
| S&P 500 Retailing Group | 100% | 120,1% | 174,5% | 186,3% | 219,5% | 316% |
Arguments for
Strong business model. Offline development- and online segments allows Best Buy to show sustainable financial results even in times of crisis.
Debt load. As of 2 quarter of 2021 retailer has negative net debt.
New formats. Best Buy is testing various pilot projects: these are shops with an area 15, 25 and 35 thousand square feet, new outlet store and ultra-small stores.
Growth of the American e-commerce market. According to forecasts, from 2020 to 2025, this market will grow by another third, to $563 billion.
Arguments against
Reducing the number of stores. Since 2013, the Best Buy chain has decreased by 36%, which does not prevent the company from increasing its financial results from year to year.
Consensus forecast. According to analysts, Best Buy has limited upside potential.
What's the bottom line?
An important point in Best Buy's investment case is the situation around COVID-19. If the pandemic continues and the US and Canada impose new restrictions, then investors will need to pay attention to the company, because its business is better prepared for these tests in comparison with companies from other sectors.
On the other hand, if damage, created by the coronavirus, with each new wave, everything will decrease, then the dynamics of Best Buy quotes, probably, will be worse compared to affected sectors: the company's capitalization has more than doubled since March 2020 lows and exceeded by 30% dock meanings.
