Best Buy domestic holiday comps -0.9%; lowers Q4 profit guidance (raises Q4 non-GAAP operating income headwind guidance)
Domestic revenue of $9.75 billion declined 1.5% versus last year. The decline was primarily driven by a comparable store sales decline of 0.9% (Q4 comp consensus is +1%). Comparable store sales were negatively impacted by our continuing rationalization of non-core businesses. Excluding this impact, the company estimates Domestic comparable store sales would have declined ~ 0.7%.
Domestic online revenue was $1.32 billion and comparable online sales increased 23.5% due to: (1) intense executional focus; (2) a higher average order value; (3) increased traffic; and (4) improved inventory availability supported by our ship-from-store and online distribution center expansion initiatives. From a merchandising perspective, growth in computing, appliances and gaming was more than offset by declines in other categories, including digital imaging, movies and MP3 players.
International revenue of $1.70 billion declined 8.0% versus last year. The decline was primarily driven by: (1) the negative impact of foreign currency exchange rate fluctuations; and (2) the loss of revenue from 35 large format stores closures in Canada and China. These declines were partially offset by a slight increase in comparable store sales in China and Canada.
In defense of our market share, and from a financial perspective, we made a significantly greater-than-expected year-over-year investment in pricing in the holiday period as Hubert previously discussed, and are projecting to continue to invest through the end of the quarter. In addition to this earnings impact for the fourth quarter, our Q3 FY14 earnings release quantified an additional impact that was estimated in the range of negative 60 to 70 basis points as a percentage of revenue versus last year's fourth quarter (Q4 FY13) non-GAAP operating income rate of 5.7%. This range was comprised of the following: (1) the negative impact of pricing investments; (2) the negative impact of our $150 to $200 million in FY14 incremental Renew Blue SG&A investments; (3) the temporary negative impact of our mobile warranty costs; and (4) the negative impact of the economics of our new credit card agreement; all substantially offset by the positive impact of our $505 million in annualized Renew Blue cost savings. Now as a result of all of these impacts, partially offset by substantially better-than-expected "non-Renew Blue" cost reductions, we expect our fourth quarter non-GAAP operating income rate to be 175 to 185 basis points lower than last year's (Q4 FY13) 5.7% non-GAAP operating income rate, excluding the impact of such items as restructuring charges and asset impairments."
"When we entered the holiday season, we said that price competitiveness was table stakes and an intensely promotional holiday season is what unfolded... our holiday revenues were negatively impacted by a number of factors, including: (1) the aggressive promotional activity in the retail industry during the holiday period, which we believe did not result in higher industry demand and had a deflationary impact on our revenue; (2) supply constraints for key products; (3) significant store traffic declines between "Power Week" and Christmas; and (4) a disappointing mobile phone market."
Domestic online revenue was $1.32 billion and comparable online sales increased 23.5% due to: (1) intense executional focus; (2) a higher average order value; (3) increased traffic; and (4) improved inventory availability supported by our ship-from-store and online distribution center expansion initiatives. From a merchandising perspective, growth in computing, appliances and gaming was more than offset by declines in other categories, including digital imaging, movies and MP3 players.
International revenue of $1.70 billion declined 8.0% versus last year. The decline was primarily driven by: (1) the negative impact of foreign currency exchange rate fluctuations; and (2) the loss of revenue from 35 large format stores closures in Canada and China. These declines were partially offset by a slight increase in comparable store sales in China and Canada.
In defense of our market share, and from a financial perspective, we made a significantly greater-than-expected year-over-year investment in pricing in the holiday period as Hubert previously discussed, and are projecting to continue to invest through the end of the quarter. In addition to this earnings impact for the fourth quarter, our Q3 FY14 earnings release quantified an additional impact that was estimated in the range of negative 60 to 70 basis points as a percentage of revenue versus last year's fourth quarter (Q4 FY13) non-GAAP operating income rate of 5.7%. This range was comprised of the following: (1) the negative impact of pricing investments; (2) the negative impact of our $150 to $200 million in FY14 incremental Renew Blue SG&A investments; (3) the temporary negative impact of our mobile warranty costs; and (4) the negative impact of the economics of our new credit card agreement; all substantially offset by the positive impact of our $505 million in annualized Renew Blue cost savings. Now as a result of all of these impacts, partially offset by substantially better-than-expected "non-Renew Blue" cost reductions, we expect our fourth quarter non-GAAP operating income rate to be 175 to 185 basis points lower than last year's (Q4 FY13) 5.7% non-GAAP operating income rate, excluding the impact of such items as restructuring charges and asset impairments."
"When we entered the holiday season, we said that price competitiveness was table stakes and an intensely promotional holiday season is what unfolded... our holiday revenues were negatively impacted by a number of factors, including: (1) the aggressive promotional activity in the retail industry during the holiday period, which we believe did not result in higher industry demand and had a deflationary impact on our revenue; (2) supply constraints for key products; (3) significant store traffic declines between "Power Week" and Christmas; and (4) a disappointing mobile phone market."