[caption id="attachment_95436" align="aligncenter" width="700"] Source: Company reports/Coresight Research[/caption]   2Q20 Results Best Buy reported fiscal 2Q20 Revenues of $9.54 billion, up 1.7% year over year and in line with the consensus estimate. Enterprise comps increased 1.6% (following a 6.2% comp increase in the year-ago quarter), missing the 2.1% consensus estimate. Domestic comps increased 1.9%, while international comps declined 1.9%. Adjusted EPS was $1.08, up 18.7% year over year and beating the $0.99 consensus estimate. GAAP EPS was $0.89, compared with $0.86 in the year-ago quarter. Segment Results Domestic

• Domestic revenues were $8.82 billion, an increase of 2.1% year over year, driven by the 1.9% increase in comps plus revenue from the acquisition of GreatCall in October 2018, partially offset by revenue lost from the closure of 13 large-format stores the past year.
• The largest comp growth drivers were appliances, wearables and tablets, partially offset by declines in the gaming and home theater category.
• Domestic online revenue was $1.42 billion, up 17.3% year over year, primarily due to higher average order values and increased traffic. Online revenue amounted to 16.1% of total domestic revenue versus 14.0% in the year-ago quarter.

International

• International revenues were $715 million, a decrease of 3.4% year over year, owing to a 1.9% decline in comps year over year, driven by Canada, plus approximately 120 basis points (bps) lost to foreign currency exchange rates.

Details from the Quarter

• Management commented that Best Buy delivered improved profitability, driven by gross-margin expansion and continued disciplined expense management.
• The company reported continued progress on its “Building the New Blue” strategy and expanded its presence in the health and wellness category through an expanded assortment and two acquisitions.
• During Q2, the company launched a new collection of connected fitness products from several exercise companies, including Hydrow, ProForm, Hyperice and NordicTrack, as well as connected bikes and rowing machines and a popular recovery system. The collection is now available on the company’s website and coming to more than 100 stores by the end of the year. Employees and in-home advisors will offer training to help customers discover, understand and purchase the equipment, while Best Buy and Geek Squad manage delivery and installation.
• Membership in the company’s Total Tech Support program grew in the quarter, and the company added in-home advisors and continued to transform its supply chain to improve speed of delivery.
• Best Buy plans to hold an investor day on September 25.

China Tariff Update The first effective date for a tariff increase is September 1, and the most-affected categories for Best Buy are televisions, smart watches and headphones. The second effective date is December 15, and the most-affected categories are computing, mobile phones and gaming consoles. Management commented that many of its vendors are migrating manufacturing out of China. Best Buy is also taking action to mitigate the impact of the tariffs, including: importing products ahead of the tariff implementation, changing vendor and SKU assortment, adjusting promotional and pricing strategies, making other sourcing changes and employing other strategies in partnership with vendors. Outlook Best Buy updated guidance due to the following factors:

1. A revised estimate on the impact of tariffs on goods from China, including the increase to 30% for goods on List 3 and 15% for goods on List 4.
2. Better-than-expected earnings in Q2.
3. Uncertainty regarding consumer purchases in the second half of the year.

Updated fiscal 2020 guidance:

• Total company revenues of $43.1-43.6 billion (up 1-2%) versus $42.9-43.9 billion previously.
• Total company comp growth of 0.5-2.5% versus 0.7-1.7% previously.
• Adjusted EPS of $5.45-5.65 (up 5-8%) versus $5.45-5.65 previously.

Fiscal 3Q20 guidance:

• Total company revenues of $9.65-9.75 billion (up 1-2%).
• Total company comp growth of 0.5-1.5%.
• Adjusted EPS of $1.00-1.05 (up 8-13%).