Bidness Etc - Best Buy To Enhance Shareholders' Rewards Amid Surge In Earnings

Company will reward shareholders by providing healthy dividends and initiating first buyback program since 2012

The largest electronic retailer in the world, Best Buy (NYSE: BBY), plans to enhance rewards for its shareholders after the earnings surged in the fourth quarter of financial year 2015. The company also plans to introduce cost-cutting measures, as it expects sales to decline this fiscal year.

Best Buy will reward its shareholders by providing healthy dividends and initiating its first buyback program since 2012. It will provide a special dividend per share of $0.51 ($180 million) and increase quarter DPS by 21% to $0.23. The company paid $0.19 DPS on 31st December 2014 for 4QFY15. Now it will give additional $0.04 DPS. The consumer electronics chain will also buy back shares worth $1 billion in next three years.

Shares of Best Buy were 3% up in pre-market trading on Tuesday.

“The announcement (of shareholder rewards) demonstrates our commitment to returning excess capital to our shareholders, while preserving our strong balance sheet and our ability to continue to invest in the growth of our business,” said President and CEO of Best Buy, Hubert Joly, in a statement today.

Last month, Best Buy said that its sales will either be flat or decline slightly in the first half of 2015 due to feeble computers’ demand and deflation, which resulted in a 14% decline in shares. To counter the effects of expected issues, Best Buy has decided to initiate its second phase of the cost-cutting scheme in FY16 and intends to save operational cost by $400 million.

Mr. Joly, who took a chief executive seat in 2012, has been striving to make operations more efficient. Although, he wasn’t fully successful in raising the revenues level, he has managed to increase same-store sales growth in two consecutive quarters. However, the company foresees a decline in same-stores' sale in the first half of FY16.

Selling, general and administrative costs plunged 1.77% to $2.22 in 4QFY15. In 4QFY15, the earnings of the company climbed due to strong holiday seasons' sale of mobile phones and home-theatre systems in the US. Revenue from domestic market mounted 2.8% year-on-year, mostly due to its online operations. Since Best Buy believes that consumers only visit retail stores for product testing and buy products online, it has been investing in online operations.

The electronics retailer reported that its earnings jumped 77.13% to $519 million ($1.46 per share) in 4QFY15, compared to $293 million ($0.83 per share) in 4QFY14. Adjusted earnings per share were $1.48. Revenues climbed 1.3% to $14.2 billion in the same period.

Best Buy thrashed $1.35 EPS estimates but missed revenues predictions of $13.35 billion, as the analysts included revenues of its closed operations in China during the quarter.