BEST BUY CO., INC. Unless the context otherwise requires, the use of the terms "Best Buy ," "we," "us" and "our" refers toBest Buy Co., Inc. and its consolidated subsidiaries. Any references to our website addresses do not constitute incorporation by reference of the information contained on the websites. Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations and liquidity are discussed in order of magnitude. Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the fiscal year endedJanuary 29, 2022 (including the information presented therein under Risk Factors), as well as our other reports on Forms 10-Q and 8-K and other publicly available information. All amounts herein are unaudited. 13 --------------------------------------------------------------------------------
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Overview
We are driven by our purpose to enrich lives through technology and our vision
to personalize and humanize technology solutions for every stage of life. We
accomplish this by leveraging our combination of technology and a human touch to
meet our customers' everyday needs, whether they come to us online, visit our
stores or invite us into their homes.
We have two reportable segments: Domestic and International. The Domestic
segment is comprised of our operations in all states, districts and territories
of the U.S. and our Best Buy Health business. All of our former stores in Mexico
were closed as of the end of the first quarter of fiscal 2022, and our
International segment is now comprised of all our operations in Canada .
Our fiscal year ends on the Saturday nearest the end of January. Our business,
like that of many retailers, is seasonal. A large proportion of our revenue and
earnings is generated in the fiscal fourth quarter, which includes the majority
of the holiday shopping season.
Comparable Sales
Throughout this MD&A, we refer to comparable sales. Comparable sales is a metric used by management to evaluate the performance of our existing stores, websites and call centers by measuring the change in net sales for a particular period over the comparable prior-period of equivalent length. Comparable sales includes revenue from stores, websites and call centers operating for at least 14 full months. Revenue from online sales is included in comparable sales and represents sales initiated on a website or app, regardless of whether customers choose to pick up product in store, curbside, at an alternative pick-up location or take delivery direct to their homes. Revenue from acquisitions is included in comparable sales beginning with the first full quarter following the first anniversary of the date of the acquisition. Comparable sales also includes credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable. Revenue from stores closed more than 14 days, including but not limited to relocated, remodeled, expanded and downsized stores, or stores impacted by natural disasters, is excluded from comparable sales until at least 14 full months after reopening. Comparable sales excludes the impact of revenue from discontinued operations and the effect of fluctuations in foreign currency exchange rates (applicable to our International segment only). All periods presented apply this methodology consistently.
On
OnNovember 2, 2021 , we acquired all outstanding shares ofCurrent Health Ltd. ("Current Health "). OnNovember 4, 2021 , we acquired all outstanding shares ofTwo Peaks, LLC d/b/aYardbird Furniture ("Yardbird"). Consistent with our comparable sales policy, the results ofCurrent Health and Yardbird are excluded from our comparable sales calculation until the first quarter of fiscal 2024. We believe comparable sales is a meaningful supplemental metric for investors to evaluate revenue performance resulting from growth in existing stores, websites and call centers versus the portion resulting from opening new stores or closing existing stores. The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as other retailers' methods.
Non-GAAP Financial Measures
This MD&A includes financial information prepared in accordance with accounting principles generally accepted in theU.S. ("GAAP"), as well as certain adjusted or non-GAAP financial measures, such as constant currency, non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted earnings per share ("EPS"). We believe that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, our internal management reporting also includes non-GAAP financial measures. Generally, our non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and intangible impairments, price-fixing settlements, gains and losses on certain investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when we believe doing so provides greater clarity to management and our investors. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Non-GAAP financial measures as presented herein may not be comparable to similarly titled measures used by other companies. In our discussions of the operating results of our consolidated business and our International segment, we sometimes refer to the impact of changes in foreign currency exchange rates or the impact of foreign currency exchange rate fluctuations, which are references to the differences between the foreign currency exchange rates we use to convert the International segment's operating results from local currencies intoU.S. dollars for reporting purposes. We also may use the term "constant currency," which represents results adjusted to exclude foreign currency impacts. We calculate those impacts as the difference between the current period results translated using the current period currency exchange rates and using the comparable prior period currency exchange rates. We believe the disclosure of revenue changes in constant currency provides useful supplementary information to investors in light of significant fluctuations in currency rates. 14
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Refer to the Non-GAAP Financial Measures section below for detailed reconciliations of items impacting non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted EPS in the presented periods.
Business Strategy Update
Our teams have shown a strong ability to develop and execute plans to adapt to the changing environment over the past two years and to the more recent macro-economic conditions. Throughout the first quarter of fiscal 2023, our teams navigated the uncertain macro environment and drove higher customer satisfaction scores while keeping energy and excitement going around the initiatives that we believe will drive longer-term opportunities. We grew ourBest Buy Totaltech membership, increased momentum in our Health business, launched new product categories and reached our fastest ever first quarter average online sales delivery speed. As previously stated, we expect our fiscal 2023 financial results to look different as the prior year included stimulus and other government support, our industry experienced unusually strong demand over the last two years, and we expect to leverage our position of strength to continue to invest in our future. In addition, we have previously stated that we expected promotional activity to increase and supply chain expenses to be a pressure. Therefore, the drivers of our first quarter fiscal 2023 financial results were largely as we expected. Macro conditions worsened since we provided guidance in early March, including higher inflation and the war inUkraine , which resulted in our sales being lower than our expectations and supply chain costs higher than we planned. Our investment in Totaltech at approximately 100 basis points of gross margin pressure was in line with our expectations and profit-sharing revenue from our private label and co-branded credit card arrangement was higher than anticipated. Even with the expected slowdown this year, we continue to be in a fundamentally stronger position than we were before the pandemic from both a revenue and operating income rate perspective. We are confident in the strength of our business and excited about what lies ahead. We believe we have a compelling value creation opportunity and are investing now, as we have successfully invested ahead of change in our past, to ensure we are ready to meet the needs of our customers and retain our unique position in our industry. We firmly believe that technology is more relevant today than ever. Every aspect of our lives has changed with technology, and we know how to make it human, in our customers' homes, right for their lives. From our expertly curated assortment to in-home consultations, all the way to tech support when our customers' tech is not working the way they want, or trade-in and recycling when customers want to upgrade, we believe we have an ability to inspire and support customers in ways no one else can.
Results of Operations
Consolidated Results
Selected consolidated financial data was as follows ($ in millions, except per
share amounts):
Three Months Ended
April 30, 2022 May 1, 2021
Revenue $ 10,647 $ 11,637
Revenue % change (8.5) % 35.9 %
Comparable sales % change (8.0) % 37.2 %
Gross profit $ 2,353 $ 2,715
Gross profit as a % of revenue(1) 22.1 % 23.3 %
SG&A $ 1,890 $ 1,988
SG&A as a % of revenue(1) 17.8 % 17.1 %
Restructuring charges $ 1 $ (42)
Operating income $ 462 $ 769
Operating income as a % of revenue 4.3 % 6.6 %
Net earnings $ 341 $ 595 Diluted earnings per share
(1)Because retailers vary in how they record costs of operating their supply chain between cost of sales and SG&A, our gross profit rate and SG&A rate may not be comparable to other retailers' corresponding rates. For additional information regarding costs classified in cost of sales and SG&A, refer to Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year endedJanuary 29, 2022 . In the first quarter of fiscal 2023, we generated$10.6 billion in revenue and our comparable sales decreased 8.0% as we lapped strong comparable sales last year, which were driven by the timing of government stimulus payments, temporary store closures due to the COVID-19 pandemic and heightened demand for stay-at-home focused purchases. In addition, our gross profit rate was impacted by our Totaltech membership offering and increased promotional activity and supply chain expenses. Our performance resulted in an operating income rate reduction of 230 basis points compared to the first quarter of fiscal 2022.
Revenue, gross profit, SG&A and operating income rate changes in the first quarter of fiscal 2023 were primarily driven by our Domestic segment. For further discussion of each segment's rate changes, see Segment Performance Summary, below.
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Income Tax Expense
Income tax expense decreased in the first quarter of fiscal 2023, primarily due
to a decrease in pre-tax earnings, partially offset by a decrease in the tax
benefit from stock-based compensation. Our effective tax rate ("ETR") increased
to 24.4% in the first quarter of fiscal 2023 compared to 22.4% in the first
quarter of fiscal 2022, primarily due to decreased tax benefits from stock-based
compensation and federal tax credits and an increase in losses for which tax
benefits were not recognized, partially offset by the impact of lower pre-tax
earnings.
Our tax provision for interim periods is determined using an estimate of our
annual ETR, adjusted for discrete items, if any, that are taken into account in
the relevant period. We update our estimate of the annual ETR each quarter and
we make a cumulative adjustment if our estimated tax rate changes. Our quarterly
tax provision and our quarterly estimate of our annual ETR are subject to
variation due to several factors, including our ability to accurately forecast
our pre-tax and taxable income and loss by jurisdiction, tax audit developments,
recognition of excess tax benefits or deficiencies related to stock-based
compensation, foreign currency gains (losses), changes in laws or regulations,
and expenses or losses for which tax benefits are not recognized. Our ETR can be
more or less volatile based on the amount of pre-tax earnings. For example, the
impact of discrete items and non-deductible losses on our ETR is greater when
our pre-tax earnings are lower.
Segment Performance Summary
Domestic Segment
Selected financial data for the Domestic segment was as follows ($ in millions):
Three Months Ended
April 30, 2022 May 1, 2021
Revenue $ 9,894 $ 10,841
Revenue % change (8.7) % 37.0 %
Comparable sales % change(1) (8.5) % 37.9 %
Gross profit $ 2,170 $ 2,526
Gross profit as a % of revenue 21.9 % 23.3 %
SG&A $ 1,741 $ 1,836
SG&A as a % of revenue 17.6 % 16.9 %
Restructuring charges $ - $ (44)
Operating income $ 429 $ 734
Operating income as a % of revenue 4.3 % 6.8 %
Selected Online Revenue Data
Total online revenue $ 3,059 $ 3,596
Online revenue as a % of total segment revenue 30.9 % 33.2 % Comparable online sales % change(1) (14.9) %
7.6 %
(1)Online sales are included in the comparable sales calculation.
The decrease in revenue in the first quarter of fiscal 2023 was primarily driven by a comparable sales decline across most of our product categories. Online revenue of$3.1 billion decreased 14.9% on a comparable basis in the first quarter of fiscal 2023. These decreases in revenue were primarily due to the reasons described above.
Domestic segment stores open at the beginning and end of the first quarters of fiscal 2023 and fiscal 2022 were as follows:
Fiscal 2023 Fiscal 2022
Total Stores at Total Stores Total Stores at Total Stores
Beginning of Stores Stores at End of Beginning of Stores Stores at End of
First Quarter Opened Closed First Quarter First Quarter Opened Closed First Quarter
Best Buy 938 - (7) 931 956 1 (11) 946
Outlet Centers 16 - - 16 14 - - 14
Pacific Sales 21 - - 21 21 - - 21
Yardbird 9 - - 9 - - - -
Total 984 - (7) 977 991 1 (11) 981
We continuously monitor store performance as part of a market-driven,
omnichannel strategy. As we approach the expiration of leases, we evaluate
various options for each location, including whether a store should remain open.
We currently expect to close approximately 20 to 30 Best Buy stores annually
through fiscal 2025, consistent with prior-year trends. We also expect to
increase the number of Outlet Centers to approximately 30 by the end of fiscal
2023.
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Domestic segment revenue mix percentages and comparable sales percentage changes by revenue category were as follows:
Revenue Mix Comparable Sales
Three Months Ended Three Months Ended
April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021
Computing and Mobile
Phones 43 % 44 % (10.5) % 27.3 %
Consumer Electronics 29 % 30 % (9.7) % 45.9 %
Appliances 16 % 15 % 2.9 % 66.6 %
Entertainment 6 % 6 % (13.6) % 32.1 %
Services 5 % 5 % (12.4) % 33.2 %
Other 1 % - % 26.0 % N/A
Total 100 % 100 % (8.5) % 37.9 %
Notable comparable sales changes by revenue category were as follows:
?Computing and Mobile Phones: The 10.5% comparable sales decline was driven primarily by computing, tablets and wearables.
?Consumer Electronics: The 9.7% comparable sales decline was driven primarily by home theater and digital imaging.
?Appliances: The 2.9% comparable sales growth was driven primarily by large appliances.
?Entertainment: The 13.6% comparable sales decline was driven primarily by gaming.
?Services: The 12.4% comparable sales decline was driven primarily by the launch of our Totaltech membership offering that includes benefits that were previously stand-alone revenue-generating services, such as warranty. Our gross profit rate decreased in the first quarter of fiscal 2023, primarily due to lower services margin rates, which resulted in approximately 100 basis points of margin pressure on a weighted basis. Our Totaltech membership offering was the primary driver of the lower services margin rates, which is primarily due to incremental benefits, and associated costs, compared to our previous Total Tech Support offer. Lower product margin rates, including increased promotions, and higher supply chain costs also contributed to the decrease in our gross profit rate. These decreases were partially offset by higher profit-sharing revenue from our private label and co-branded credit card arrangement.
Our SG&A decreased in the first quarter of fiscal 2023, primarily due to lower incentive compensation expense, partially offset by higher advertising and increased expense in support of our health initiatives.
Our operating income rate decreased in the first quarter of fiscal 2023,
primarily due to the unfavorable gross profit rate and decreased leverage from
lower sales volume on our fixed expenses, which resulted in an unfavorable SG&A
rate.
International Segment
Selected financial data for the International segment was as follows ($ in
millions):
Three Months Ended
April 30, 2022 May 1, 2021
Revenue $ 753 $ 796
Revenue % change (5.3) % 23.0 %
Comparable sales % change (1.4) % 27.8 %
Gross profit $ 183 $ 189
Gross profit as a % of revenue 24.3 % 23.7 %
SG&A $ 149 $ 152
SG&A as a % of revenue 19.8 % 19.1 %
Restructuring charges $ 1 $ 2
Operating income $ 33 $ 35 Operating income as a % of revenue 4.4 % 4.4 %
The decrease in revenue in the first quarter of fiscal 2023 was primarily driven by lower revenue inMexico as a result of our decision in fiscal 2021 to exit operations and a comparable sales decline of 1.4%. 17 -------------------------------------------------------------------------------- Table of
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International segment stores open at the beginning and end of the first quarters of fiscal 2023 and fiscal 2022 were as follows:
Fiscal 2023 Fiscal 2022
Total Stores at Total Stores Total Stores at Total Stores
Beginning of First Stores Stores at End of Beginning of Stores Stores at End of
Quarter Opened Closed First Quarter First Quarter Opened Closed First Quarter
Canada
Best Buy 127 - - 127 131 - (1) 130
Best Buy Mobile 33 - - 33 33 - - 33
Mexico
Best Buy - - - - 4 - (4) -
Total 160 - - 160 168 - (5) 163
International segment revenue mix percentages and comparable sales percentage changes by revenue category were as follows:
Revenue Mix Comparable Sales
Three Months Ended Three Months Ended
April 30, 2022 May 1, 2021 April 30, 2022 May 1, 2021
Computing and Mobile
Phones 46 % 50 % (7.9) % 36.5 %
Consumer Electronics 28 % 27 % 3.8 % 23.9 %
Appliances 9 % 9 % 9.4 % 28.9 %
Entertainment 8 % 8 % (7.5) % 12.2 %
Services 7 % 4 % 31.4 % 7.8 %
Other 2 % 2 % (3.9) % 7.6 %
Total 100 % 100 % (1.4) % 27.8 %
Notable comparable sales changes by revenue category were as follows:
?Computing and Mobile Phones: The 7.9% comparable sales decline was driven primarily by computing, partially offset by comparable sales growth in mobile phones.
?Consumer Electronics: The 3.8% comparable sales growth was driven primarily by headphones and portable speakers and home theater.
?Appliances: The 9.4% comparable sales growth was driven by both small and large appliances.
?Entertainment: The 7.5% comparable sales decline was driven primarily by gaming, partially offset by comparable sales growth in virtual reality.
?Services: The 31.4% comparable sales growth was driven primarily by warranty services.
The increase in our gross profit rate in the first quarter of fiscal 2023 was primarily driven by a larger percentage of revenue from the higher margin services category inCanada , partially offset by a$6 million benefit in the first quarter of fiscal 2022 associated with more-favorable-than-expected inventory markdowns related to our decision to exit operations inMexico .
Our SG&A decreased in the first quarter of fiscal 2023, primarily due to lower
expenses as a result of our decision to exit operations in
Our operating income rate remained flat in the first quarter of fiscal 2023, as
the increase in gross profit rate was offset by the decreased leverage from
lower sales volume on our fixed expenses, which resulted in an unfavorable SG&A
rate.
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Consolidated Non-GAAP Financial Measures
Reconciliations of operating income, effective tax rate and diluted EPS (GAAP
financial measures) to non-GAAP operating income, non-GAAP effective tax rate
and non-GAAP diluted EPS (non-GAAP financial measures) were as follows ($ in
millions, except per share amounts):
Three Months Ended
April 30, 2022 May 1, 2021
Operating income $ 462 $ 769
% of revenue 4.3 % 6.6 %
Intangible asset amortization(1) 22 20
Restructuring charges(2) 1 (42)
Restructuring - inventory markdowns(3) - (6)
Non-GAAP operating income $ 485 $ 741
% of revenue 4.6 % 6.4 %
Effective tax rate 24.4 % 22.4 %
Restructuring charges(2) - % 0.1 %
Non-GAAP effective tax rate 24.4 % 22.5 %
Diluted EPS $ 1.49 $ 2.32
Intangible asset amortization(1) 0.10 0.08
Restructuring charges(2) - (0.17)
Restructuring - inventory markdowns(3) - (0.02)
Income tax impact of non-GAAP adjustments(4) (0.02) 0.02
Non-GAAP diluted EPS $ 1.57 $ 2.23
(1)Represents the non-cash amortization of definite-lived intangible assets
associated with acquisitions, including customer relationships, tradenames and
developed technology.
(2)Represents charges and subsequent adjustments related to actions taken in the
Domestic segment to better align our organizational structure with our strategic
focus and the exit from operations in Mexico in the International segment.
(3)Represents inventory markdown adjustments recorded within cost of sales
associated with the exit from operations in Mexico .
(4)The non-GAAP adjustments primarily relate to the U.S. , UK and Mexico . As
such, the income tax charge is calculated using the statutory tax rate of 24.5%
for all U.S. non-GAAP items for all periods presented. There is no income tax
charge for UK and Mexico non-GAAP items, as there was no tax benefit recognized
on these expenses in the calculation of GAAP income tax expense.
Our non-GAAP operating income rate decreased in the first quarter of fiscal 2022, primarily driven by a lower gross profit rate in our Domestic segment.
Our non-GAAP effective tax rate increased in the first quarter of fiscal 2023, primarily due to decreased tax benefits from stock-based compensation and federal tax credits and an increase in losses for which tax benefits were not recognized, partially offset by the impact of lower pre-tax earnings.
Our non-GAAP diluted EPS decreased in the first quarter of fiscal 2023, primarily driven by the decrease in non-GAAP operating income.
Liquidity and Capital Resources
We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level of investment required to support our business strategies, the performance of our business, capital expenditures, credit facilities, short-term borrowing arrangements and working capital management. We modify our approach to managing these variables as changes in our operating environment arise. For example, capital expenditures and share repurchases are a component of our cash flow and capital management strategy, which, to a large extent, we can adjust in response to economic and other changes in our business environment. We have a disciplined approach to capital allocation, which focuses on investing in key priorities that support our strategy.
Cash, cash equivalents and short-term investments were as follows ($ in millions):
April 30, 2022 January 29, 2022 May 1, 2021
Cash and cash equivalents $ 640 $ 2,936 $ 4,278
Short-term investments - - 60
Total cash, cash equivalents
and short-term investments $ 640 $
2,936
The decrease in cash and cash equivalents fromJanuary 29, 2022 , was primarily due to the timing and volume of inventory purchases and payments, and higher incentive compensation payments, share repurchases, capital expenditures and dividend payments. 19
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The decrease in cash, cash equivalents and short-term investments fromMay 1, 2021 , was primarily due to increases in share repurchases, capital expenditures, dividend payments and acquisitions. The decrease was partially offset by positive cash flows from operations, primarily driven by earnings.
Cash Flows
Cash flows were as follows ($ in millions):
Three Months Ended
April 30, 2022 May 1, 2021
Total cash provided by (used
in):
Operating activities $ (1,384) $ 105
Investing activities (213) (253)
Financing activities (650) (1,089)
Effect of exchange rate changes
on cash 2 5
Decrease in cash, cash equivalents and
restricted cash $ (2,245) $ (1,232)
Operating Activities
The increase in cash used in operating activities in the first quarter of fiscal
2023 was primarily driven by lower inventory turnover and the timing and volume
of inventory purchases and payments, reflecting an earlier build of inventory in
the first quarter of fiscal 2023, which resulted in a higher proportion of
inventory purchases having been paid for, compared to the first quarter of
fiscal 2022. The increase in cash used in operating activities was also due to
higher incentive compensation payments as a result of strong fiscal 2022 results
and lower earnings in the current-year period.
Investing Activities
The decrease in cash used in investing activities in the first quarter of fiscal
2023 was primarily driven by a decrease in purchases of short-term investments,
partially offset by increased capital spending for initiatives to support our
business.
Financing Activities
The decrease in cash used in financing activities in the first quarter of fiscal
2023 was primarily driven by lower share repurchases.
Sources of Liquidity
Funds generated by operating activities, available cash and cash equivalents,
our credit facilities and other debt arrangements are our most significant
sources of liquidity. We believe our sources of liquidity will be sufficient to
fund operations and anticipated capital expenditures, share repurchases,
dividends and strategic initiatives, including business combinations. However,
in the event our liquidity is insufficient, we may be required to limit our
spending. There can be no assurance that we will continue to generate cash flows
at or above current levels or that we will be able to maintain our ability to
borrow under our existing credit facilities or obtain additional financing, if
necessary, on favorable terms.
On May 18, 2021 , we entered into a $1.25 billion five year senior unsecured
revolving credit facility agreement (the "Five-Year Facility Agreement") with a
syndicate of banks. The Five-Year Facility Agreement replaced the previous $1.25
billion senior unsecured revolving credit facility (the "Previous Facility")
with a syndicate of banks, which was originally scheduled to expire in April
2023 , but was terminated on May 18, 2021 . The Five-Year Facility Agreement
permits borrowings of up to $1.25 billion and expires in May 2026 . There were no
borrowings outstanding under the Five-Year Facility Agreement as of April 30,
2022 , or January 29, 2022 , or the Previous Facility as of May 1, 2021 .
Our credit ratings and outlook as of May 31, 2022 , remained unchanged from those
disclosed in our Annual Report on Form 10-K for the fiscal year ended January
29, 2022 , and are summarized below.
Rating Agency Rating Outlook
Standard & Poor> BBB+ Stable
Moody> A3 Stable
Credit rating agencies review their ratings periodically, and, therefore, the
credit rating assigned to us by each agency may be subject to revision at any
time. Factors that can affect our credit ratings include changes in our
operating performance, the economic environment, conditions in the retail and
consumer electronics industries, our financial position and changes in our
business strategy. If changes in our credit ratings were to occur, they could
impact, among other things, interest costs for certain of our credit facilities,
our future borrowing costs, access to capital markets, vendor financing terms
and future new-store leasing costs.
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Restricted Cash
Our liquidity is also affected by restricted cash balances that are primarily
restricted to cover product protection plans provided under our Totaltech
membership offering and self-insurance liabilities. Restricted cash, which is
included in Other current assets on our Condensed Consolidated Balance Sheets,
was $320 million , $269 million and $115 million at April 30, 2022 ,
January 29, 2022 , and May 1, 2021 , respectively. The increases from
January 29, 2022 , and May 1, 2021 , were primarily due to the national launch of
our Totaltech membership offering in October 2021 and growth in the membership
base.
Debt and Capital
As of April 30, 2022 , we had $500 million principal amount of notes due October
1, 2028 , and $650 million principal amount of notes due October 1, 2030 . Refer
to Note 6, Debt, of the Notes to Condensed Consolidated Financial Statements,
included in this Quarterly Report on Form 10-Q, and Note 8, Debt, of the Notes
to Consolidated Financial Statements included in our Annual Report on Form 10-K
for the fiscal year ended January 29, 2022 , for additional information about our
outstanding debt.
Share Repurchases and Dividends
We repurchase our common stock and pay dividends pursuant to programs approved
by our Board of Directors ("Board"). The payment of cash dividends is also
subject to customary legal and contractual restrictions. Our long-term capital
allocation strategy is to first fund operations and investments in growth and
then return excess cash over time to shareholders through dividends and share
repurchases while maintaining investment-grade credit metrics.
On February 28, 2022 , our Board approved a new $5.0 billion share repurchase
program, which replaced the $5.0 billion share repurchase program authorized on
February 16, 2021 . There is no expiration date governing the period over which
we can repurchase shares under this authorization. On May 24, 2022 , we
reaffirmed our plans to spend approximately $1.5 billion on share repurchases in
fiscal 2023.
Share repurchase and dividend activity was as follows ($ and shares in millions,
except per share amounts):
Three Months Ended
April 30, 2022 May 1, 2021
Total cost of shares repurchased $ 442 $ 915
Average price per share $ 97.18 $ 108.69
Number of shares repurchased 4.5 8.4
Regular quarterly cash dividend per share $ 0.88
199 $ 175
The total cost of shares repurchased decreased in fiscal 2023, primarily due to
the decrease in planned repurchases. Cash dividends declared and paid increased
in fiscal 2023, primarily due to the increase in the regular quarterly cash
dividend per share.
Other Financial Measures
Our current ratio, calculated as current assets divided by current liabilities, was 1.0 as ofApril 30, 2022 , andJanuary 29, 2022 , and 1.2 as ofMay 1, 2021 . The decrease fromMay 1, 2021 , was primarily driven by lower cash and cash equivalents. Our debt to earnings ratio, calculated as total debt (including current portion) divided by net earnings over the trailing twelve months remained relatively unchanged at 0.5 as ofApril 30, 2022 , andJanuary 29, 2022 , and 0.6 as ofMay 1, 2021 .
Off-Balance-Sheet Arrangements and Contractual Obligations
Our liquidity is not dependent on the use of off-balance-sheet financing arrangements other than in connection with our$1.25 billion in undrawn capacity on our Five-Year Facility Agreement as ofApril 30, 2022 , which, if drawn upon, would be included in either short-term or long-term debt on our Condensed Consolidated Balance Sheets. There has been no material change in our contractual obligations other than in the ordinary course of business since the end of fiscal 2022. See our Annual Report on Form 10-K for the fiscal year endedJanuary 29, 2022 , for additional information regarding our off-balance-sheet arrangements and contractual obligations.
Significant Accounting Policies and Estimates
We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, and our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year endedJanuary 29, 2022 . There have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2022. 21 -------------------------------------------------------------------------------- Table of
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New Accounting Pronouncements
We do not expect any recently issued accounting pronouncements to have a material effect on our financial statements.
Safe Harbor Statement Under the Private Securities Litigation Reform Act
Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
provide a "safe harbor" for forward-looking statements to encourage companies to
provide prospective information about their companies. With the exception of
historical information, the matters discussed in this Quarterly Report on Form
10-Q are forward-looking statements and may be identified by the use of words
such as "anticipate," "assume," "believe," "estimate," "expect," "guidance,"
"intend," "outlook," "plan," "project" and other words and terms of similar
meaning. Such statements reflect our current views and estimates with respect to
future market conditions, company performance and financial results, operational
investments, business prospects, new strategies, the competitive environment and
other events. These statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from the potential results
discussed in such forward-looking statements. Readers should review Item 1A,
Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended
January 29, 2022 , for a description of important factors that could cause our
actual results to differ materially from those contemplated by the
forward-looking statements made in this Quarterly Report on Form 10-Q. Among the
factors that could cause actual results and outcomes to differ materially from
those contained in such forward-looking statements are the following: the
duration and scope of the COVID-19 pandemic and its resurgences and the impact
on demand for our products and services; levels of consumer confidence;
interruptions and other supply chain issues; any material disruption in our
relationship with or the services of third-party vendors, risks related to our
exclusive brand products and risks associated with vendors that source products
outside of the U.S. ; macroeconomic pressures in the markets in which we operate
(including but not limited to the effects of COVID-19, increased levels of
inventory loss due to organized crime, petty theft or otherwise, fluctuations in
housing prices, energy markets, and jobless rates and those related to the
conflict in Ukraine ); future outbreaks, catastrophic events, health crises and
pandemics; susceptibility of our products to technological advancements, product
life cycles and launches; conditions in the industries and categories in which
we operate; changes in consumer preferences, spending and debt; competition
(including from multi-channel retailers, e-commerce business, technology service
providers, traditional store-based retailers, vendors and mobile network
carriers); our ability to attract and retain qualified employees; changes in
market compensation rates; our expansion strategies; our focus on services as a
strategic priority; our reliance on key vendors and mobile network carriers
(including product availability); our ability to maintain positive brand
perception and recognition; our company transformation; our mix of products and
services; our ability to effectively manage strategic ventures, alliances or
acquisitions; our ability to effectively manage our real estate portfolio; trade
restrictions or changes in the costs of imports (including existing or new
tariffs or duties and changes in the amount of any such tariffs or duties); our
reliance on our information technology systems; our dependence on internet and
telecommunications access and capabilities; our ability to prevent or
effectively respond to a cyber-attack, privacy or security breach; product
safety and quality concerns; changes to labor or employment laws or regulations;
risks arising from statutory, regulatory and legal developments (including tax
statutes and regulations); risks arising from our international activities
(including those related to the conflict in Ukraine ); failure to effectively
manage our costs; our dependence on cash flows and net earnings generated during
the fourth fiscal quarter; pricing investments and promotional activity;
economic or regulatory developments that might affect our ability to provide
attractive promotional financing; constraints in the capital markets; changes to
our vendor credit terms; changes in our credit ratings; and general economic
uncertainty in key global markets and worsening of global economic conditions or
low levels of economic growth. We caution that the foregoing list of important
factors is not complete. Any forward-looking statements speak only as of the
date they are made and we assume no obligation to update any forward-looking
statement that we may make.
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