Best Buy announced results for the 2017 first quarter ended April 30, 2016, as compared to the first quarter ended May 2, 2015.
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The company reported GAAP diluted earnings from continuing operations of $0.69, an increase from $0.10 in Q1 FY16. Non-GAAP diluted earnings per share from continuing operations were $0.44, an increase of 19% from $0.37 in Q1 FY16.
Domestic revenue of $7.8 billion decreased 0.8% versus last year. This decrease was primarily driven by the loss of revenue from 13 large format and 24 Best Buy Mobile store closures. Comparable sales were essentially flat against a backdrop where the NPD-reported categories were down 1.9%.2
From a merchandising perspective, comparable sales growth in health & wearables, home theater, major appliances and computing was offset by declines in mobile phones, tablets and gaming. As expected, television sales related to the shift of the Super Bowl into Q1 FY17 positively impacted the Domestic segment by approximately 70 basis points.
The company also saw continued revenue declines in services due to investments in services pricing and the reduction of frequency of claims on extended warranties which has reduced repair revenue.
Domestic online revenue of $832 million increased 23.9% on a comparable basis primarily due to higher conversion rates and increased traffic. As a percentage of total Domestic revenue, online revenue increased 210 basis points to 10.6% versus 8.5% last year.
Domestic gross profit rate was 25.4% versus 23.9% last year. On a non-GAAP basis, gross profit rate was 23.0% versus 22.9% last year. Both the GAAP and non-GAAP gross profit rates increased 10 basis points primarily due to a prior-year reserve on non-iconic phone inventory which did not recur this year; and improved rates primarily driven by company's more disciplined promotional strategy across product categories.
These increases were partially offset by company's investments in services pricing. The GAAP gross profit rate was also positively impacted by $183 million in CRT settlement proceeds.
Domestic SG&A expenses were $1.59 billion, or 20.3% of revenue, versus $1.58 billion, or 20.1% of revenue, last year. On a non-GAAP basis, SG&A expenses were $1.56 billion, or 19.9% of revenue, versus $1.56 billion, or 19.8% of revenue, last year.
Non-GAAP SG&A was flat as investments in the business were offset by the flow-through of Renew Blue Phase 2 cost reductions. GAAP SG&A increased year over year due primarily to $22 million in legal fees and costs associated with the CRT settlement proceeds.
International revenue of $614 million declined 8.1%. This decline was primarily driven by approximately 690 basis points of negative foreign currency impact; and the loss of revenue associated with closed stores as part of the Canadian brand consolidation. On a constant currency basis, International revenue declined 1.2%.
International gross profit rate was 25.9% versus 21.6% last year. On a non-GAAP basis, gross profit rate was 25.9% versus 22.8% last year.
Both the GAAP and non-GAAP gross profit rates increased 310 basis points primarily driven by a higher year-over-year gross profit rate in Canada as the company lapped the significant disruption and corresponding increased promotional activity related to the brand consolidation in Q1 FY16; and received a higher periodic profit sharing payment in the services business.
The GAAP gross profit rate increase was also impacted by the prior year impact of COGS restructuring charges.
International SG&A expenses were $157 million, or 25.6% of revenue, versus $182 million, or 27.2% of revenue, last year. On a non-GAAP basis, SG&A expenses were $156 million, or 25.4% of revenue, versus $179 million, or 26.8% of revenue, last year.
This $23 million, or 140-basis point, decrease in GAAP and non-GAAP SG&A was primarily driven by the elimination of expenses associated with closed stores as part of the Canadian brand consolidation and the positive impact of foreign exchange rates. GAAP SG&A decreased an additional $2 million due primarily to lower Canadian brand consolidation charges. ■