BEST BUY CO INC, 10-Q filed on 8/31/2020
Quarterly Report
v3.20.2
Document Information Statement - shares
6 Months Ended
Aug. 01, 2020
Aug. 27, 2020
Document Information [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Aug. 01, 2020  
Document Fiscal Year Focus 2020  
Current Fiscal Year End Date --02-01  
Document Transition Report false  
Entity File Number 1-9595  
Entity Registrant Name BEST BUY CO., INC.  
Entity Incorporation, State or Country Code MN  
Entity Address, Address Line One 7601 Penn Avenue South  
Entity Address, City or Town Richfield  
Entity Address, State or Province MN  
Entity Tax Identification Number 41-0907483  
Entity Address, Postal Zip Code 55423  
City Area Code 612  
Local Phone Number 291-1000  
Title of 12(b) Security Common Stock, $0.10 par value per share  
Trading Symbol BBY  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   258,832,143
Document Fiscal Period Focus Q2  
Entity Central Index Key 0000764478  
Amendment Flag false  
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Aug. 01, 2020
Feb. 01, 2020
Aug. 03, 2019
Current assets      
Cash and cash equivalents $ 5,305 $ 2,229 $ 1,289
Short-term investments     320
Receivables, net 906 1,149 966
Merchandise inventories 4,136 5,174 5,208
Other current assets 336 305 409
Total current assets 10,683 8,857 8,192
Property and equipment, net 2,277 2,328 2,361
Operating lease assets 2,770 2,709 2,774
Goodwill 986 984 965
Other assets 696 713 686
Total assets 17,412 15,591 14,978
Current liabilities      
Accounts payable 6,613 5,288 5,045
Unredeemed gift card liabilities 267 281 264
Deferred revenue 699 501 468
Accrued compensation and related expenses 253 410 343
Accrued liabilities 893 906 799
Current portion of operating lease liabilities 674 660 643
Current portion of long-term debt 681 14 14
Total current liabilities 10,080 8,060 7,576
Long-term liabilities 716 657 640
Long-term operating lease liabilities 2,206 2,138 2,230
Long-term debt 632 1,257 1,247
Contingencies (Note 10)
Equity      
Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none
Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 258 million, 256 million and 265 million shares, respectively 26 26 26
Additional paid-in capital 83    
Retained earnings 3,413 3,158 2,965
Accumulated other comprehensive income 256 295 294
Total equity 3,778 3,479 3,285
Total liabilities and equity $ 17,412 $ 15,591 $ 14,978
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Aug. 01, 2020
Feb. 01, 2020
Aug. 03, 2019
Condensed Consolidated Balance Sheets [Abstract]      
Preferred stock, par value (in dollars per share) $ 1.00 $ 1.00 $ 1.00
Preferred stock, authorized shares 400,000 400,000 400,000
Preferred stock, issued shares 0 0 0
Preferred stock, outstanding shares 0 0 0
Common stock, par value (in dollars per share) $ 0.10 $ 0.10 $ 0.10
Common stock, authorized shares 1,000,000,000.0 1,000,000,000.0 1,000,000,000.0
Common stock, issued shares 258,000,000 256,000,000 265,000,000
Common stock, outstanding shares 258,000,000 256,000,000 265,000,000
v3.20.2
Condensed Consolidated Statements of Earnings - USD ($)
shares in Millions, $ in Millions
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Aug. 01, 2020
Aug. 03, 2019
Condensed Consolidated Statements of Earnings [Abstract]        
Revenue $ 9,910 $ 9,536 $ 18,472 $ 18,678
Cost of sales 7,640 7,253 14,237 14,226
Gross profit 2,270 2,283 4,235 4,452
Selling, general and administrative expenses 1,702 1,922 3,437 3,757
Restructuring charges   48 1 48
Operating income 568 313 797 647
Other income (expense):        
Investment income and other 8 10 14 24
Interest expense (15) (16) (32) (34)
Earnings before income tax expense 561 307 779 637
Income tax expense 129 69 188 134
Net earnings $ 432 $ 238 $ 591 $ 503
Basic earnings per share $ 1.67 $ 0.89 $ 2.28 $ 1.88
Diluted earnings per share $ 1.65 $ 0.89 $ 2.26 $ 1.86
Weighted-average common shares outstanding        
Basic 259.5 267.1 259.0 267.4
Diluted 262.1 269.4 261.4 270.9
v3.20.2
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Aug. 01, 2020
Aug. 03, 2019
Condensed Consolidated Statements of Comprehensive Income [Abstract]        
Net earnings $ 432 $ 238 $ 591 $ 503
Foreign currency translation adjustments, net of tax 17 5 (35)  
Cash flow hedges (4)   (4)  
Comprehensive income $ 445 $ 243 $ 552 $ 503
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Operating activities    
Net earnings $ 591 $ 503
Adjustments to reconcile net earnings to total cash provided by operating activities:    
Depreciation and amortization 414 401
Restructuring charges 1 48
Stock-based compensation 65 74
Deferred income taxes 13 10
Other, net 9 9
Changes in operating assets and liabilities, net of acquired assets and liabilities:    
Receivables 232 57
Merchandise inventories 1,014 199
Other assets (17) (29)
Accounts payable 1,343 (213)
Income taxes 108 (191)
Other liabilities 15 (243)
Total cash provided by operating activities 3,788 625
Investing activities    
Additions to property and equipment (340) (385)
Purchases of investments (46) (319)
Acquisitions, net of cash acquired   (125)
Other, net 3 1
Total cash used in investing activities (383) (828)
Financing activities    
Repurchase of common stock (62) (328)
Issuance of common stock 22 27
Dividends paid (284) (267)
Borrowings of debt 1,250  
Repayments of debt (1,257) (8)
Other, net (1)  
Total cash used in financing activities (332) (576)
Effect of exchange rate changes on cash and cash equivalents (6) (1)
Increase (decrease) in cash, cash equivalents and restricted cash 3,067 (780)
Cash, cash equivalents and restricted cash at beginning of period 2,355 2,184
Cash, cash equivalents and restricted cash at end of period $ 5,422 $ 1,404
v3.20.2
Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($)
shares in Millions, $ in Millions
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total
Increase (Decrease) in Shareholders' Equity          
Cumulative effect of new accounting principle in period of adoption | Accounting Standards Update 2016-02 [Member]     $ (22)   $ (22)
Balances at Feb. 02, 2019 $ 27   2,985 $ 294 3,306
Balances (in shares) at Feb. 02, 2019 266        
Increase (Decrease) in Shareholders' Equity          
Net earnings     503   503
Other comprehensive loss, net of tax:          
Stock-based compensation   $ 74     74
Issuance of common stock   27     27
Issuance of common stock (in shares) 4        
Common stock dividends   4 (271)   (267)
Repurchase of common stock $ (1) (105) (230)   (336)
Repurchase of common stock (in shares) (5)        
Balances at Aug. 03, 2019 $ 26   2,965 294 3,285
Balances (in shares) at Aug. 03, 2019 265        
Increase (Decrease) in Shareholders' Equity          
Cumulative effect of new accounting principle in period of adoption | Accounting Standards Update 2016-02 [Member]     (3)   (3)
Balances at May. 04, 2019 $ 27   3,038 289 3,354
Balances (in shares) at May. 04, 2019 267        
Increase (Decrease) in Shareholders' Equity          
Net earnings     238   238
Other comprehensive loss, net of tax:          
Foreign currency translation adjustments, net of tax       5 5
Stock-based compensation   38     38
Issuance of common stock   16     16
Issuance of common stock (in shares) 2        
Common stock dividends   2 (135)   (133)
Repurchase of common stock $ (1) (56) (173)   (230)
Repurchase of common stock (in shares) (4)        
Balances at Aug. 03, 2019 $ 26   2,965 294 3,285
Balances (in shares) at Aug. 03, 2019 265        
Balances at Feb. 01, 2020 $ 26   3,158 295 3,479
Balances (in shares) at Feb. 01, 2020 256        
Increase (Decrease) in Shareholders' Equity          
Net earnings     591   591
Other comprehensive loss, net of tax:          
Foreign currency translation adjustments, net of tax       (35) (35)
Cash flow hedges       (4) (4)
Stock-based compensation   65     65
Issuance of common stock   22     22
Issuance of common stock (in shares) 3        
Common stock dividends   4 (288)   (284)
Repurchase of common stock   (8) (48)   (56)
Repurchase of common stock (in shares) (1)        
Balances at Aug. 01, 2020 $ 26 83 3,413 256 3,778
Balances (in shares) at Aug. 01, 2020 258        
Balances at May. 02, 2020 $ 26 15 3,126 243 3,410
Balances (in shares) at May. 02, 2020 257        
Increase (Decrease) in Shareholders' Equity          
Net earnings     432   432
Other comprehensive loss, net of tax:          
Foreign currency translation adjustments, net of tax       17 17
Cash flow hedges       (4) (4)
Stock-based compensation   50     50
Issuance of common stock   16     16
Issuance of common stock (in shares) 1        
Common stock dividends   2 (145)   (143)
Balances at Aug. 01, 2020 $ 26 $ 83 $ 3,413 $ 256 $ 3,778
Balances (in shares) at Aug. 01, 2020 258        
v3.20.2
Condensed Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Aug. 01, 2020
Aug. 03, 2019
Condensed Consolidated Statements of Changes in Shareholders' Equity [Abstract]        
Dividends declared per common share $ 0.55 $ 0.50 $ 1.10 $ 1.00
v3.20.2
Basis of Presentation
6 Months Ended
Aug. 01, 2020
Basis of Presentation [Abstract]  
Basis of Presentation 1. Basis of Presentation

Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in these Notes to Condensed Consolidated Financial Statements refers to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries.

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United States (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements.

Historically, we have generated a large proportion of our revenue and earnings in the fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. The interim financial statements and the related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended February 1, 2020. The first six months of fiscal 2021 and fiscal 2020 included 26 weeks.

In order to align our fiscal reporting periods and comply with statutory filing requirements, we consolidate the financial results of our Mexico operations on a one-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our condensed consolidated financial statements. No such events were identified for the reported periods.

In preparing the accompanying condensed consolidated financial statements, we evaluated the period from August 1, 2020, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified for the reported periods.

COVID-19

In March 2020, the World Health Organization declared the outbreak of novel coronavirus disease ("COVID-19") as a pandemic. Except where otherwise directed by state and local authorities, we made the decision for the health and safety of our customers and employees to move our stores to a contactless, curbside-only operating model in the fiscal first quarter. We also temporarily suspended in-home delivery, repair and consultation services. At the beginning of the fiscal second quarter, we started welcoming customers back into our stores by offering an in-store consultation service to customers, by appointment only. On June 15, 2020, we began allowing customers to shop without an appointment at more than 800 stores across the U.S. As of June 22, 2020, almost all of our stores were open for shopping. We continue to offer contactless curbside pickup and in-store consultations for customers who prefer to shop that way.

In light of the uncertainty surrounding the impact of COVID-19 and to maximize liquidity, we suspended all share repurchases. We also executed a short-term draw on the full amount of our $1.25 billion five year senior unsecured revolving credit facility (the “Facility”) on March 19, 2020, that remained outstanding until July 27, 2020, when the Facility was repaid in full. See Note 4, Debt, for additional information on the Facility.

On March 27, 2020, in response to the COVID-19 pandemic, the U.S. Congress enacted the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which among other things, contains provisions for deferral of the employer portion of social security taxes incurred through the end of calendar 2020 and an employee retention credit, a refundable payroll credit for 50% of wages and health benefits paid to employees not providing services due to the COVID-19 pandemic. As a result of the CARES Act, we are deferring qualified payroll taxes and claimed the employee retention credit, which was treated as a government subsidy to offset related operating expenses. Based on our analysis of the CARES Act, we reduced our SG&A expenses for the three and six months ended August 1, 2020, by $12 million and $81 million, respectively, for employee retention credits.

The COVID-19 pandemic remains a rapidly evolving situation. The extent of the impact of COVID-19 on our business and financial results will depend on future developments, including the duration and spread of the outbreak within the markets in which we operate, government stimulus efforts, the economic impacts of sustained high unemployment levels, ongoing shut-downs that vary by industry and the related impacts on consumer confidence and spending, all of which are highly uncertain.

Total Cash, Cash Equivalents and Restricted Cash

The reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets to the totals shown within the Condensed Consolidated Statements of Cash Flows was as follows ($ in millions):

August 1, 2020

February 1, 2020

August 3, 2019

Cash and cash equivalents

$

5,305 

$

2,229 

$

1,289 

Restricted cash included in Other current assets

117 

126 

115 

Total cash, cash equivalents and restricted cash

$

5,422 

$

2,355 

$

1,404 

Amounts included in restricted cash are pledged as collateral or restricted to use for workers’ compensation and general liability insurance claims.

 
v3.20.2
Fair Value Measurements
6 Months Ended
Aug. 01, 2020
Fair Value Measurements [Abstract]  
Fair Value Measurements 2. Fair Value Measurements

Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data).

Recurring Fair Value Measurements

Financial assets and liabilities accounted for at fair value were as follows ($ in millions):

Fair Value at

Balance Sheet Location(1)

Fair Value Hierarchy

August 1, 2020

February 1, 2020

August 3, 2019

Assets

Money market funds(2)

Cash and cash equivalents

Level 1

$

1,729 

$

524 

$

375 

Commercial paper(2)

Cash and cash equivalents

Level 2

-

75 

-

Time deposits(3)

Cash and cash equivalents

Level 2

390 

185 

-

Commercial paper(2)

Short-term investments

Level 2

-

-

99 

Time deposits(3)

Short-term investments

Level 2

-

-

221 

Money market funds(2)

Other current assets

Level 1

7 

16 

10 

Time deposits(3)

Other current assets

Level 2

101 

101 

102 

Foreign currency derivative instruments(4)

Other current assets

Level 2

1 

1 

-

Interest rate swap derivative instruments(4)

Other current assets

Level 2

18 

-

-

Marketable securities that fund deferred compensation(5)

Other assets

Level 1

49 

48 

47 

Interest rate swap derivative instruments(4)

Other assets

Level 2

115 

89 

78 

Liabilities

Cash flow hedge derivative instruments(4)

Accrued liabilities

Level 2

4 

-

-

(1)Balance sheet location is determined by the length to maturity from the current period-end date.

(2)Valued at quoted market prices.

(3)Valued at face value plus accrued interest, which approximates fair value.

(4)Valued using readily observable market inputs. These instruments are custom, over-the-counter contracts with various bank counterparties that are not traded on an active market. See Note 6, Derivative Instruments, for additional information.

(5)Valued using select mutual fund performance that trade with sufficient frequency and volume to obtain pricing information on an ongoing basis.

Fair Value of Financial Instruments

The fair values of cash, receivables, accounts payable and other payables approximated their carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. Fair values for other investments held at cost are not readily available, but we estimate that the carrying values for these investments approximate their fair values.

Long-term debt is presented at carrying value on our Condensed Consolidated Balance Sheets. If our long-term debt were recorded at fair value, it would be classified as Level 2 in the fair value hierarchy. Long-term debt balances were as follows ($ in millions):

August 1, 2020

February 1, 2020

August 3, 2019

Fair Value

Carrying Value

Fair Value

Carrying Value

Fair Value

Carrying Value

Long-term debt(1)

$

1,386 

$

1,283 

$

1,322 

$

1,239 

$

1,295 

$

1,228 

(1)Includes the current portion of long-term debt and excludes debt discounts, issuance costs and finance lease obligations.

 
v3.20.2
Goodwill and Intangible Assets
6 Months Ended
Aug. 01, 2020
Goodwill and Intangible Assets [Abstract]  
Goodwill and Intangible Assets 3. Goodwill and Intangible Assets

Goodwill

Balances related to goodwill were as follows ($ in millions):

August 1, 2020

February 1, 2020

August 3, 2019

Gross Carrying
Amount

Cumulative
Impairment

Gross Carrying
Amount

Cumulative
Impairment

Gross Carrying
Amount

Cumulative
Impairment

Domestic

$

1,053 

$

(67)

$

1,051 

$

(67)

$

1,032 

$

(67)

International

608 

(608)

608 

(608)

608 

(608)

Total

$

1,661 

$

(675)

$

1,659 

$

(675)

$

1,640 

$

(675)

No impairment charges were recorded during the fiscal periods presented.

Indefinite-Lived Intangible Assets

In the first quarter of fiscal 2021, we made the decision to phase out our Pacific Sales tradename in our U.S. Best Buy stores over the coming years. Consequently, we reclassified the tradename from an indefinite-lived intangible asset to a definite-lived intangible asset and have no indefinite-lived intangible assets remaining as of August 1, 2020. The carrying value of the tradename was $18 million as of February 1, 2020, and August 3, 2019, respectively, and was recorded within Other assets on our Condensed Consolidated Balance Sheets.

Definite-Lived Intangible Assets

We have definite-lived intangible assets which are recorded within Other assets on our Condensed Consolidated Balance Sheets as follows ($ in millions):

August 1, 2020

February 1, 2020

August 3, 2019

Weighted-Average

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization

Useful Life Remaining as of August 1, 2020

(in years)

Customer relationships

$

339 

$

97 

$

339 

$

70 

$

341 

$

42 

6.8

Tradenames

81 

17 

63 

10 

63 

7 

5.3

Developed technology

56 

21 

56 

15 

52 

9 

3.1

Total

$

476 

$

135 

$

458 

$

95 

$

456 

$

58 

6.1

Amortization expense was as follows ($ in millions):

Three Months Ended

Six Months Ended

Statement of Earnings Location

August 1, 2020

August 3, 2019

August 1, 2020

August 3, 2019

Amortization expense

SG&A

$

20 

$

18 

$

40 

$

35 

Amortization expense expected to be recognized in future periods is as follows ($ in millions):

Amortization Expense

Remainder of fiscal 2021

$

41 

Fiscal 2022

80 

Fiscal 2023

79 

Fiscal 2024

54 

Fiscal 2025

16 

Fiscal 2026