BEST BUY CO INC, 10-Q filed on 6/4/2021
Quarterly Report
v3.21.1
Document Information Statement - shares
3 Months Ended
May 01, 2021
Jun. 02, 2021
Document Information [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date May 01, 2021  
Document Fiscal Year Focus 2021  
Current Fiscal Year End Date --01-29  
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, $0.10 par value per share  
Trading Symbol BBY  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   250,472,993
Document Fiscal Period Focus Q1  
Entity Central Index Key 0000764478  
Amendment Flag false  
v3.21.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
May 01, 2021
Jan. 30, 2021
May 02, 2020
Current assets      
Cash and cash equivalents $ 4,278 $ 5,494 $ 3,919
Short-term investments 60    
Receivables, net 850 1,061 749
Merchandise inventories 5,721 5,612 3,993
Other current assets 359 373 335
Total current assets 11,268 12,540 8,996
Property and equipment, net 2,233 2,260 2,291
Operating lease assets 2,563 2,612 2,631
Goodwill 986 986 986
Other assets 655 669 701
Total assets 17,705 19,067 15,605
Current liabilities      
Accounts payable 6,360 6,979 4,428
Accrued compensation and related expenses 493 725 213
Accrued liabilities 978 972 769
Short-term debt 110 110 1,250
Current portion of operating lease liabilities 654 693 683
Current portion of long-term debt 15 14 673
Total current liabilities 9,641 10,521 8,804
Long-term liabilities 694 694 694
Long-term operating lease liabilities 1,983 2,012 2,076
Long-term debt 1,229 1,253 621
Contingencies (Note 11)
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 – 250.4 million, 256.9 million and 257.6 million shares, respectively 25 26 26
Additional paid-in capital 33   15
Retained earnings 3,762 4,233 3,126
Accumulated other comprehensive income 338 328 243
Total equity 4,158 4,587 3,410
Total liabilities and equity 17,705 19,067 15,605
Gift Card [Member]      
Current liabilities      
Short-term contract liabilities 297 317 257
Deferred Revenue [Member]      
Current liabilities      
Short-term contract liabilities $ 734 $ 711 $ 531
v3.21.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
May 01, 2021
Jan. 30, 2021
May 02, 2020
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 250,400,000 256,900,000 257,600,000
Common stock, outstanding shares 250,400,000 256,900,000 257,600,000
v3.21.1
Condensed Consolidated Statements of Earnings - USD ($)
shares in Millions, $ in Millions
3 Months Ended
May 01, 2021
May 02, 2020
Condensed Consolidated Statements of Earnings [Abstract]    
Revenue $ 11,637 $ 8,562
Cost of sales 8,922 6,597
Gross profit 2,715 1,965
Selling, general and administrative expenses 1,988 1,735
Restructuring charges (42) 1
Operating income 769 229
Other income (expense):    
Investment income and other 3 6
Interest expense (6) (17)
Earnings before income tax expense and equity in income of affiliates 766 218
Income tax expense 172 59
Equity in income of affiliates 1  
Net earnings $ 595 $ 159
Basic earnings per share $ 2.35 $ 0.61
Diluted earnings per share $ 2.32 $ 0.61
Weighted-average common shares outstanding    
Basic 253.1 258.3
Diluted 256.7 260.4
v3.21.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended
May 01, 2021
May 02, 2020
Condensed Consolidated Statements of Comprehensive Income [Abstract]    
Net earnings $ 595 $ 159
Foreign currency translation adjustments, net of tax 10 (52)
Comprehensive income $ 605 $ 107
v3.21.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
3 Months Ended
May 01, 2021
May 02, 2020
Operating activities    
Net earnings $ 595 $ 159
Adjustments to reconcile net earnings to total cash provided by operating activities:    
Depreciation and amortization 216 207
Restructuring charges (42) 1
Stock-based compensation 37 15
Other, net 6 20
Changes in operating assets and liabilities:    
Receivables 210 383
Merchandise inventories (90) 1,136
Other assets (6) (12)
Accounts payable (630) (816)
Income taxes 113 31
Other liabilities (304) (297)
Total cash provided by operating activities 105 827
Investing activities    
Additions to property and equipment (161) (178)
Purchases of investments (90) (5)
Other, net (2) 4
Total cash used in investing activities (253) (179)
Financing activities    
Repurchase of common stock (927) (62)
Dividends paid (175) (141)
Borrowings of debt   1,250
Other, net 13 2
Total cash provided by (used in) financing activities (1,089) 1,049
Effect of exchange rate changes on cash and cash equivalents 5 (18)
Increase (decrease) in cash, cash equivalents and restricted cash (1,232) 1,679
Cash, cash equivalents and restricted cash at beginning of period 5,625 2,355
Cash, cash equivalents and restricted cash at end of period $ 4,393 $ 4,034
v3.21.1
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
Balances at Feb. 01, 2020 $ 26   $ 3,158 $ 295 $ 3,479
Balances (in shares) at Feb. 01, 2020 256.5        
Net earnings     159   159
Other comprehensive income:          
Foreign currency translation adjustments, net of tax       (52) (52)
Stock-based compensation   $ 15     15
Issuance of common stock   6     6
Issuance of common stock (in shares) 1.7        
Common stock dividends   2 (143)   (141)
Repurchase of common stock   (8) (48)   (56)
Repurchase of common stock (in shares) (0.6)        
Balances at May. 02, 2020 $ 26 15 3,126 243 3,410
Balances (in shares) at May. 02, 2020 257.6        
Balances at Jan. 30, 2021 $ 26   4,233 328 4,587
Balances (in shares) at Jan. 30, 2021 256.9        
Net earnings     595   595
Other comprehensive income:          
Foreign currency translation adjustments, net of tax       10 10
Stock-based compensation   37     37
Issuance of common stock   19     19
Issuance of common stock (in shares) 1.9        
Common stock dividends   3 (178)   (175)
Repurchase of common stock $ (1) (26) (888)   (915)
Repurchase of common stock (in shares) (8.4)        
Balances at May. 01, 2021 $ 25 $ 33 $ 3,762 $ 338 $ 4,158
Balances (in shares) at May. 01, 2021 250.4        
v3.21.1
Basis of Presentation
3 Months Ended
May 01, 2021
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.

During the third quarter of fiscal 2021, we made the decision to exit our operations in Mexico. All stores in Mexico were closed as of the end of the first quarter of fiscal 2022 and our International segment will be comprised of operations in Canada going forward. Refer to Note 2, Restructuring, for additional information.

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, on March 22, 2020, 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. We also temporarily suspended in-home delivery, repair and consultation services from March 22, 2020, through April 27, 2020, after implementing new safety guidelines. As of June 22, 2020, almost all of our stores were open for shopping and remained open through the first quarter of fiscal 2022. We continue to offer contactless curbside pick-up and in-store consultations for customers who prefer to shop that way.

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 January 30, 2021. The first three months of fiscal 2022 and fiscal 2021 included 13 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 May 1, 2021, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. Other than the refinancing of our $1.25 billion five year senior unsecured revolving credit facility described in Note 5, Debt, no such events were identified for the reported periods.

Total Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash reported on our Condensed Consolidated Balance Sheets is reconciled to the total shown on our Condensed Consolidated Statements of Cash Flows as follows ($ in millions):

May 1, 2021

January 30, 2021

May 2, 2020

Cash and cash equivalents

$

4,278 

$

5,494 

$

3,919 

Restricted cash included in Other current assets

115 

131 

115 

Total cash, cash equivalents and restricted cash

$

4,393 

$

5,625 

$

4,034 

Amounts included in restricted cash are primarily restricted to use for workers’ compensation and general liability insurance claims.
v3.21.1
Restructuring
3 Months Ended
May 01, 2021
Restructuring [Abstract]  
Restructuring 2. Restructuring

Restructuring charges were as follows ($ in millions):

Three Months Ended

May 1, 2021

May 2, 2020

Mexico Exit and Strategic Realignment(1)

$

(48)

$

-

Fiscal 2020 U.S. Retail Operating Model Changes

-

1 

Total

$

(48)

$

1 

(1)Includes ($6) million related to inventory markdowns recorded in Cost of sales on our Condensed Consolidated Statements of Earnings for the three months ended May 1, 2021.

Mexico Exit and Strategic Realignment

The COVID-19 pandemic has had significant impacts on, for example, the economic conditions of the markets in which we operate, customer shopping behaviors, the role of technology in peoples’ lives and the way we meet their needs. In light of these changes, we are adapting our Building the New Blue Strategy to ensure that our focus and resources are closely aligned with the opportunities we see in front of us. As a result, in the third quarter of fiscal 2021, we made the decision to exit our operations in Mexico and began taking other actions to more broadly align our organizational structure in support of our strategy.

Charges incurred in our International segment primarily related to our decision to exit our operations in Mexico. As of May 1, 2021, all stores are closed and we do not expect to incur material future restructuring charges related to the exit.

Charges incurred in our Domestic segment primarily related to actions taken to align our organizational structure in support of our strategy. During the first quarter of fiscal 2022, we recorded a $44 million credit primarily due to a reduction in expected termination benefits resulting from adjustments to previously planned organizational changes and higher-than-expected employee retention.

As we continue to evolve our Building the New Blue Strategy, it is possible that we will incur material future restructuring costs, but we are unable to forecast the timing and magnitude of such costs.

All charges incurred related to the exit from Mexico and strategic realignment described above were from continuing operations and were presented as follows ($ in millions):

Statement of

Three Months Ended May 1, 2021

Earnings Location

Domestic

International

Total

Inventory markdowns

Cost of sales

$

-

$

(6)

$

(6)

Asset impairments

Restructuring charges

-

3 

3 

Termination benefits

Restructuring charges

(44)

(1)

(45)

$

(44)

$

(4)

$

(48)

Statement of

Cumulative Amount as of May 1, 2021

Earnings Location

Domestic

International

Total

Inventory markdowns

Cost of sales

$

-

$

17 

$

17 

Asset impairments(1)

Restructuring charges

10 

60 

70 

Termination benefits

Restructuring charges

79 

19 

98 

Currency translation adjustment

Restructuring charges

-

39 

39 

Other(2)

Restructuring charges

-

5 

5 

$

89 

$

140 

$

229 

(1)Remaining net carrying value approximates fair value and was immaterial as of May 1, 2021.

(2)Other charges are primarily comprised of contract termination costs.

Restructuring accrual activity related to the exit from Mexico and strategic realignment described above was as follows ($ in millions):

Termination Benefits

Domestic

International

Total

Balances at January 30, 2021

$

104 

$

20 

$

124 

Cash payments

(39)

(12)

(51)

Adjustments(1)

(44)

(1)

(45)

Changes in foreign currency exchange rates

-

(1)

(1)

Balances at May 1, 2021

$

21 

$

6 

$

27 

(1)Represents adjustments to previously planned organizational changes in our Domestic segment and higher-than-expected employee retention in both our Domestic and International segments.

Fiscal 2020 U.S. Retail Operating Model Changes

In the second quarter of fiscal 2020, we made changes primarily related to our U.S. retail operating model to increase organization effectiveness and create a more seamless customer experience across all channels. All charges incurred were related to termination benefits within our Domestic segment and were presented within Restructuring charges from continuing operations on our Condensed Consolidated Statements of Earnings. As of May 1, 2021, the cumulative amount of charges incurred was $41 million and no material liability remains.
v3.21.1
Fair Value Measurements
3 Months Ended
May 01, 2021
Fair Value Measurements [Abstract]  
Fair Value Measurements 3. 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

May 1, 2021

January 30, 2021

May 2, 2020

Assets

Money market funds(2)

Cash and cash equivalents

Level 1

$

1,063 

$

1,575 

$

1,153 

Time deposits(3)

Cash and cash equivalents

Level 2

639 

865 

465 

Time deposits(3)

Short-term investments

Level 2

60 

-

-

Time deposits(3)

Other current assets

Level 2

65 

65 

101 

Interest rate swap derivative instruments(4)

Other current assets

Level 2

-

-

11 

Interest rate swap derivative instruments(4)

Other assets

Level 2

65 

91 

107 

Marketable securities that fund deferred compensation(5)

Other assets

Level 1

53 

53 

45 

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

(2)Valued at quoted market prices in active markets for same (Level 1) or similar (Level 2) instruments.

(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 7, 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):

May 1, 2021

January 30, 2021

May 2, 2020

Fair Value

Carrying Value

Fair Value

Carrying Value

Fair Value

Carrying Value

Long-term debt(1)

$

1,260

$

1,215 

$

1,331 

$

1,241 

$

1,315 

$

1,268 

(1)Excludes debt discounts, issuance costs and finance lease obligations.

 
v3.21.1
Goodwill and Intangible Assets
3 Months Ended
May 01, 2021
Goodwill and Intangible Assets [Abstract]  
Goodwill and Intangible Assets 4. Goodwill and Intangible Assets

Goodwill

Balances related to goodwill remained unchanged as of May 1, 2021, January 30, 2021, and May 2, 2020, as follows ($ in millions):

Gross Carrying Amount

Cumulative Impairment

Domestic

$

1,053 

$

(67)

International

608 

(608)

Total

$

1,661 

$

(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.

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):

May 1, 2021

January 30, 2021

May 2, 2020

Weighted-Average

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization

Useful Life Remaining as of May 1, 2021

(in years)

Customer relationships

$

339 

$

138 

$

339 

$

124 

$

339 

$

83 

6.5

Tradenames

81 

27 

81 

24 

81 

13 

4.7

Developed technology

56 

30 

56 

27 

56 

18 

2.3

Total

$

476 

$

195 

$

476 

$

175 

$

476 

$

114 

5.8

Amortization expense was as follows ($ in millions):

Statement of

Three Months Ended

Earnings Location

May 1, 2021

May 2, 2020

Amortization expense

SG&A

$

20 

$

19 

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