Best Buy Co., Inc.

Q3 2022 Earnings Conference Call


spk_0: ladies and gentlemen thank you for standing by welcome to the best buys que three f y twenty twenty two earnings conference call at this time operatives internalising only mode later we will conduct the question and answer session at that time if you have a question he will need to press store one on your phone if you choose to be taken out of the question to please press start to as a reminder this call is being recorded for playback will be available by approximately eleven am eastern time today if you need assistance on the call it any time please press store zero and an operator will assist you have another in the conference overdue molly o'brien vice president of investor relations
spk_1: thank you and good morning everyone joining me on the call to they quarry barrier ceo and met balloon us are fearful during the call today we will be discussing both gop a non gaap financial measures a reconciliation of these non gaap financial measures to the most directly comparable got financial measures and an explanation of why did not get financial measures are useful can be found in the mornings earnings release which is available on our website and to stop us by dot com some of the statement we will make today are considered forward looking within the meaning of the private securities litigation reform act of nineteen ninety five least statements may address the financial condition business initiatives growth plans investments and expected performance with the company and are subject to risk and uncertainties that could cause actual results to differ materially from such forward looking statements please refer to the company's current earnings release and are most recent ten k and subsequent ten queue for more information on these risks and uncertainties the company undertakes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise after the date of this call i will now out when the call over to korea good morning everyone and thank you for joining us today we are reporting record que three financial result of eleven point nine billion dollars in sales and non gap deluded earnings per share of two dollars and eight cents which is up one percent over last year and up eighty four percent compared to two years ago against a still evolving backdrop our leaders continue to drive new ways of operating in our employees continue to do amazing things to support our customers technology needs and knowledgeable fast and convenient ways or army channel capabilities and our ability to inspire am support across all of technology in a way no one else can mean we are are uniquely positioned to seize the opportunity in this environment and in the future we continue to capitalize on strong customer demand as more people sustainably work entertain cook and connected home and domestic comparable failed growth with up two percent on top of twenty three percent last year from a merchandising perspective the biggest contributors to are comparable sales growth in the quarter were appliances home theater and mobile phones product availability continue to improve throughout the quarter we are pockets of constraints in areas like appliances gaming and mobile phones similar to last quarter however we do not believe that materially limited our overall sales growth while we have faced and continue to face supply chain challenges including delays and higher cost we are proactively navigating a situation that we have been dealing with for several quarters as our industry has been facing disruptions and supply constraints since early in the pandemic our merchant demand planning and supply chain team mates strategic sourcing and inventory decisions early in the year to set us up well heading into holiday and we are resourcefully adapting to the constantly evolving environment with action like pulling up product slow adopting store based on availability and acquiring additional alternative transportation we have deep longstanding relationship with our transportation and logistics vendors and they have been incredibly supportive as we navigate in addition to a quote partnerships with our product vendors we have a great deal of visibility into and can influence the status of product in the supply chain process we have varying degrees of inventory and supply chain challenges every holiday season and this year will be no different but we enter que for with fifteen percent more inventory year over year and feel confident in our ability to serve our customers throughout the holiday as expected we did experience a more promotional environment for many of our products when compared to last year when compared to two years ago we still far left promotional environment during que three from a failed channel perspective results were similar to last quarter customers are returning to stores and they are also choosing to interact with of digitally and buy a phone and shot at much higher rates than creepy endemic online sales were thirty one percent of domestic revenue compared to sixteen percent and que three of fiscal twenty go by more than two billion dollars during that time or app thought nineteen percent increase in unique visitors vs last year and own and chat failed continued to climb vs last year and two years ago we continue to be an industry leader in fact and convenient product that they meant for our customers during the third quarter we reach our fastest small product delivery times ever compared to last year same day delivery was up four hundred percent and we nearly doubled the percent of products delivered within one day based on a third party analysis of competitor wet fights we are the leader in one day or less published shipping time across a sample of higher volume zip code and higher demand items in addition the partnering with a diversified set up delivery partners we also buffalo you term for you delivery capability as we now have more than four hundred store we're doing employee deliveries with almost sixty percent of our customers living within ten miles of an employee delivery location we also have an industry leading in store pickup experience we are by far the broadest assortment of c e products available for pickup and the process is incredibly fast and que three more than ninety percent of online orders that were available for product pick up are ready and less than thirty minutes of the order being placed customers clearly for value and coming to our stores to pick up their products as the percent of online sales picked up at our stores remained high at forty two percent even with our fact home delivery options with one third of our store pickup customers choosing are convenient curbside option and our customer mps for order pick up and que three with up vs last year and two years ago in fact in the last year thirty one percent of all are purchasing customers bought online and picked up and store at least one be strong toothy the results and or market leading army colonel capabilities are due to are amazing associates across the company and the investment decisions we have made in the last several years and supply chain store operations are people and technology clearly our business has changed dramatically in the last two years with digital failed more than doubled pre pandemic levels and phone chat and in home filled growing customers are starting their research and shopping online and then branching out from there to all forms of digital and physical shopping depending on their specific needs doors are crucial to our custom or experience and they need to be even more efficient and must keep pace with greater customer expectations for example we know customers sometimes seek out in person help to answer questions and other times they would rather use digital tools to learn about products or pick up their orders in our stores we have made the right investment decisions to position as a leader and omni channel retailing while we're proud of our progress there are even more opportunity the of us and it is more important than ever to build on our position of strength and truly become a customer trust company this means we put the customer at the heart of all we do buy into the painting there now need listening learning and applying the insights to create long term relationships and seamless experiences that led us to launched best buy total tech last month total tax is a bold new membership program leveraging our strength across merchandising the film and installation tech support and product repair unique capabilities that customers value and no one else can match our membership program offers product is cows and periodic access to hard to get inventory free delivery an installation free technical support free product protection and many other benefits let me provide a tangible example of how the offer can come to life a total tech member purchases sixty five inch tv and gets a one hundred fifty dollar member discount she gets the tv delivered and mounted on the ball in her living room the next month she buys a new i phone for her daughter as long as he keeps up her membership she gets two years of product protection on the tv she bought in two years of apple care plucked protection for the phone a few weeks later she can't get her laptop to connect to a printer so she hop from a dedicated chat line with geek squad who fixes the problem by reloading into her computer so
spk_2: she can get on with the productive day of working from home
spk_1: i remember she received all the benefits for one hundred ninety nine dollars per year and you can see not only do members received significant savings they can also be confident that whatever their technology needs are we will be there to help the goal is to create an experience that make that inconceivable for members to purchase their attack from anyone else driving a larger share of consumer electronics spend to best buy we successfully rolled out the program nationally and online and converted more than three million former tech support members it is very early as we just launched last month but so far we continue to see behaviors that we intend to drive and that we saw in the pilot including more frequent interaction and higher incremental spend the non members given the breadth of the author it is it is resonating well across all customer demographics and our new members or skewing younger than our former total tech support membership program yeah number across all channels are higher than for nonmembers as well and importantly our employees believe in and love articulating the value of membership to our customers as we discussed in previous calls we're in the midst of multiple store pilots and task of course we're always piloting concepts but right now we are very focused on piloting interesting to build a framework that will move up from a retailer that focused foremost on it stores to a true army channel one that provides equal focus on all the way to
spk_3: customers stop with us
spk_1: oh provide a few updates on our progress we launched phase one about virtual door pilot last month for this we built out a physical store in one of our distribution centers with merchandising and products that is staffed with dedicated associates including bender provided expert labour it has no physical customers instead customers interact with our experts by a chat audio oh video and screen sharing depending on their preference and are able to see live demos displays and physical products it is early and we have not ruled out all the product categories yet but initial results are suing much higher conversion rates as well as higher average order value that we see with historical chat interactions in charlotte we have made significant progress rolling up the market pilot designed to leverage all our efforts in a portfolio strategy across doors for film it services an outlet lockers or digital lap and both in store and in home consultation labor we launched our new outlet featuring all product categories in addition to a new services help model and remodeled eight doors and and youth and we are continuing to see strong results from our experience will store pilot and plan to roll out aspects of the more broadly and stores across the country as we enter next year be they're not the only pilot happening and us they aren't the only pilots that will influence where we go with the company from northern california to houston to the bronx we are assessing new format and learning our way to the right physical model
spk_2: at the same time we are piloting and a balding or labour modeled in other markets to meet our customers changing shopping behaviors that means leveraging technology and story that don't have as much labor and developing a much more flexible work force this is the workforce that can not only provide expert help or cross product category both in store and virtually but also fly
spk_1: the to other activities like kurt by the film and and it empowers employees to flexibly pick up shift at other stores or at or distribution centers i also want to highlight a unique ability to both inspire him support our customers to a consultation energy quite services we have almost three thousand consultants and designers to provide free consultation across customers homes in stores and virtually bees consultations represent one of our highest mps experiences consistently over a the importantly they also lead to longer term and stickier customer relationships as more than eighty five percent of customers who use the program stated they intend to continue shopping with their consultant turning to the product support we provide as many of you likely know when something goes wrong with your products or delivery or installation it is a highly unplanned and often emotional event not surprisingly our customer research tells us that customers value quick response time and demand transparency faster pair time and quality were parents from a try
spk_3: did provider
spk_1: our geek squad has an industry leading set of capabilities that garner market leading mps and also dr additional revenue for best buy in the moment and overtime around twenty percent of our phone and computer repair customers purchase additional products the day they received the repair additionally our data so that customers to our own or computer a parents are far more likely to make a purchase in the following twelve months over time we have also been a balding or partnerships with our vendors in response to change in customer shopping behavior our in store vendor experiences are crucial to our customer experience and remain a significant source that competitive advantage we have extended many of these in store experiences to digital experiences our vendors partner with us to provide expert training and tools for consultants and designers and importantly our vendors are increasingly sending failed leads from their own website to our consultants and designers we are also leveraging are unique geek squad capabilities to strengthen and expand our partnership with our vendors were already the nation's largest physical destination for apple authorized repair services including same day i phone repairs attracting new customers as one third abuse apple the pair customers are new a reengage
spk_2: customers for back by
spk_1: in october we launched samsung authorized phone repair service nationally roughly thirty percent of our stores will offer same day install repairs completed by samsung certified geek squad agents using samsung parts diagnostics and tools phone repair is a universal need for customers and if expansion get back by the capability to repair the overwhelming majority of own in the marketplace in addition we are also starting to leverage or industry leading and convenient by on online pick up and store experience in partnership with our vendors customers purging select items on samsung dot com now have the option to pick up their products at their local best buy store and shoppers purchasing insignia to seba and pioneer fire tv
spk_2: on amazon dot com can pick up their tb is at their local back by stores
spk_1: for many about vendors we use our considerable supply chain expertise to transport their product often from the country of origin toward distribution centers in addition to helping our vendors it allows us to increase our level of visibility into incoming inventory and to garner greater scale and finally we have been investing in our longstanding advertising business this building new capabilities to help vendors affected we reach our customers that by relevance customer relationships and first party data have grown along with customers technology needs and our ability to meet those needs these are all great example of value we can provide to or vendor partners that many other retailers cannot in addition to focusing our performance on our corsi an appliance categories we are continuing to expand or thurman and newark categories where we can leverage our ability to commercialize new technology for example we created a robust online experience an assortment for electric transportation and during que three are sales in the category more than doubled as a result we are expanding our online assortment of electric bikes by four times and also plan to throw them and physical stores early next year and because customers are looking to us to complete their solutions we have been expanding our assortment and categories like outdoor living as more and more consumers look to make over or upgrade their outdoor living spaces different includes products like patio furniture grill fire pits and electric motors just to name a few in fact earlier this month we acquired yard bird a leading direct to consumer company that specializes in premium sustainable outdoor furniture including dining sets mound feeding fire tables and accessories we are excited about the opportunity to you their expertise and merchandising and supply chain to scale this business both online and and physical locations across the nation we also made an exciting acquisition recently in the help me let me take a second to reiterate our overall health strategy and how the acquisition fit our best buy health druggie focuses on three areas that start with our strength strengthen retail and build the connecting patience to position the first focused area is the consumer health category for customers want to be healthier sleep better or need to monitor a chronic condition like diabetes or heart disease for example you can see the built out in a row pathway on her website the second area is active aging which includes device based emergency response and other services for generation a who wish to live independently in their home this opportunity showed up prominently in our physical stores the third focused area is virtual care best buys role and virtual care is to enable people in their home to conduct seamlessly with their health care providers the trend to this type of cure is increasing accelerated in large measure by the pandemic to more fully meet that growing customer demand and accelerate our work with new and innovative services we acquired a company called current health current health and developed a market leading remote patient monitoring platform that allows position to monitor and connect with patients in their home their platform and ft a cleared wearable medical device that monitors vital find a home hub which integrate to hundreds of other monitoring devices and integration to the patience electronic health record with their remote monitoring platform combined with the scale expertise and connection to the home at best buy has we will be able to create a holistic care ecosystem that shows up for customers across all their healthcare needs to be clear even though the healthcare industry the balding quickly the in many ways as a result of the pandemic impacts it adopt new ways of doing things at a much slower pace than other industries like retail virtual care is a truly nathan space with significant opportunity but it will take time and investment to developer offerings and scale as you can see technology development are driving or initiative across the company we need technology tools and capabilities to help us as we transform and all the way we operate and serve our customers that is why we continue to devote significant resources to technology investment for example we are leveraging or investment in electronic finally able to bury nimbly highlight best buy total tech member pricing for customers shopping in our stores we also just launched the ability for electronic finally able to provide important messaging regarding product availability for that customers would usually be able to see if the product isn't stock in that store or it another store nearby or when it could be delivered and install technology was instrumental in recently launching the first of many new communication enhancements to improve our award winning appliance customer experience metro delivery customers but utilize the appointment tracker page on the day of their delivery can now see how many stops away their driver is at any given time it may seem like a small enhancement
spk_2: already we can see significant customer engagement with the page another step toward our goal to make customers feel confident and in control throughout the research purchase but dormant and use of their large product
spk_1: technology with also crucial and our recent launching of next day delivery of appliances and large tb which we are piloting first for in store and online customers and are minneapolis and baltimore market next month we're launching a new capability leveraging qr codes for high velocity products that are locked up particularly and areas of high shrink instead of waiting for an associate to unlock the product the customer can scan the qr code and then proceed to check out to pay and pick up the product and we recently implemented enhancements toward digital platform improving flexibility across our workforce by seamlessly giving employees the ability to pick up open shifts at nearby locations in addition to their home location these examples are a small token of the work or digital and technology teams are doing to improve the customer and employee experience and of course we are also continuing to make significant investments in fundamental technology capabilities like data and analytics and broader cloud migration in order to drive scale efficiency and effectiveness i would like to take a moment to extend my gratitude to our people over the past twenty one months they have flexibly dealt with rapidly changing store operations as we responded to impacts of the pandemic they create safe environments for customers and worked tirelessly to provide excellent service even and situation where customers resisted following safety guidelines and in some cases where disrespectful in addition we have increased the level of pilots and tests in the field as we evolve are operating now this is introduced a great deal of chains we know that change is exciting but we acknowledge it can also be challenging i am truly grateful for and impressed by are associated dedication resourcefulness and flat out determination and i'm thrilled to say that are in store and pf and que three increased vs last year and vs two years ago before the pandemic despite all of these disruption now i would like to briefly touched on our you see effort and how we are working across the company to have a positive impact on our planet earlier this month we announced that we are a founding member of the reef to zero initiative that aims to accelerate climate action within the retail industry best by participation build on our existing efforts to reduce our carbon footprint we are proud of our progress in reducing emissions sixty one percent since two thousand and nine and we have pledged to be carbon new
spk_4: troll by twenty forty
spk_1: we have also taken on a more specific focus on the circular economy within our operations and with our customers and que three we collected and responsibly recycled more than forty eight million pounds of consumer electronics keeping products and commodities out of landfills to help our customers with more sustainably last quarter we pooled more than five million energy starts certified product's helping our customers reduce their carbon footprint and save on utility bills we'll for kept more than six hundred thousand devices in youth longer and out of landfills by leveraging our customer trade and program geek squad repair services and best buy outlet beaver initiative our customers and vendors value and capabilities no one else has at our scale and breath in summary we have delivered remarkable year to date results and i am so proud of the execution of all our team we're looking forward to a strong holiday season and believe we are extremely well positioned with both protect customers want and fast and convenient way to get it we launched some of our black friday deals in mid october that included a price guarantee for all customers and this past friday started black friday early by making almost all of our black friday deals available during the holiday season we are promising free next day delivery of thousands of item and of course store pickup weather indoor or curbside will be a great and convenient option for our customers to get their products building on that as we think about next year and beyond we are mindful of just how much the consumer has changed and how enduring that change will be terms like whole nothing and virtual care have been invented to describe what all about know so well that where we work entertain receive health care and connect has changed in our homes are no central to our lives more than ever before the penetration of technology associated with this way of living has been and continues to be sizable and we are already thinks shorter upgrade cycle as technology evolves and we constantly optimize our home but demand for convenience and experience on the customers terms has exponentially driven change our hypothesis has consistently been that true omni channel retailing would create differentiated experiences that allow us to see mostly and conveniently engage and retain customers as such we have continuously invested in these exterior as and notably we never defined omni channel as being stores and online instead we included are unique and powerful service virtual and in home capabilities we are certain that technology will continue to play a more dominant role in consumers leiden given are on the kennel capabilities the what we have today and the ones we're building for the future we are fully confident that we will capitalize on a much larger more broadly defined consumer electronics category and be able to better serve a customer who will be using an operating much of that the
spk_5: more frequently
spk_1: we plan to hold an investor of that next march to share more detail on our initiative provider thought that our financial model going forward and introduced longer term financial target
spk_2: i will now turn the call over done that for more color on our financial results
spk_6: good morning everyone we are once again reporting strong financial results that continue to support our believe that technology plays and even more important role in everyone's lives and we are uniquely positioned to serve them despite lapping extraordinary twenty three percent comparable sales girl from last year we were once again able to generate positive comparable sales growth in each fiscal month of the third quarter compared to our guidance enterprise revenue of eleven point nine billion dollars exceeded the high end of our revenue outlook of eleven point six billion dollars to him by the better than expected comparable sales growth of one point six percent or non gap gross profit rate and as you expense were essentially in line with our expectations
spk_4: compared to last year and a prize revenue grew fifty seven million dollars and are non gap deluded earnings per share of two dollars and eight cents increased two cents
spk_6: a lower share count resulted in a twelve cents per share benefit on a yearly basis or non gap operating income rate of five point eight percent decrease thirty basis points as we invested in the launch of our new total tech membership when comparing result against two years ago where the third quarter of our fiscal twenty total revenue grew more than twenty percent additionally our domestic store channel revenue was approximately flat vs two years ago while online revenue grew almost one hundred and fifty percent in that timeframe as a result of the higher revenue and our ability to a job just to a new customer shopping behavior or enterprise non gap operating income rate was a hundred and sixty basis points higher this quarter and the comparable quarter from two years ago let me now sure more details specific to our third quarter in our domestic segment revenue increased one point two percent to almost eleven billion dollars this increase was driven by a comparable sales increase of two percent which was partially offset by the loss of revenue from store closures in the past year as corey shared the biggest contributors to the can't feel growth and the quarter were appliances home theater and mobile phones after delivering a significant growth for after delivering significant growth for the past several quarters and lapping of forty six percent cop in the third quarter last year computing comparable sales were down slightly on a your your bases but still up nearly one billion dollars from two years ago in addition or services comparable sales declined five point six percent this quarter this is primarily the result of our new total tech membership which includes benefits that were previously standalone revenue generating services such as warranty and installation and our international segment revenue decreased seven point eight percent to nine hundred and twenty five million dollars
spk_4: this decrease was driven by the loss of approximately ninety million dollars in revenue from exiting mexico and a comparable sales decline of three percent in canada
spk_6: partially offsetting these items with the benefit of approximately four hundred and fifty basic points from foreign currency turning know the gross profit but domestic gross profit rate decreased sixty basis points to twenty three point four percent as expected a decrease was due to one more profit margin rates which were primarily driven by lapping lower levels of promotions product damages and returns compared to last year as well as higher inventory shrink and to lower services margin rate which included great pressure from total tech
spk_4: britt the previous items were partially offset by higher profit sharing revenue from the company's private label and cobranded credit card arrangement
spk_6: the gross profit or a pressure from our new membership offering primarily relates to the incremental costs and benefits and associated costs compared to our previous total tech support offer corey mentioned like many others we saw increase transportation costs with it within our supply chain however this pressure was offset by reduced parcel expense since our mix of online sales was lower than last year international nine gap gross profit rate increased two hundred and forty basis points to twenty five percent the higher gross profit rate was driven by improved product market rates in canada and a loss of lower margin sales from the mexico exit moving next as you may domestic nine gap as seen teenage increased nine million dollars and improved twenty basis points vs last year as a percentage of revenue as expected higher advertising expense increase technology investments were partially offset by last year's forty million dollar donation to the best buy foundation and lower cent of compensation when comparing to two years ago domestic nine gap as she ate increased a hundred and fifty five million dollars and decreased two hundred thirty based point as a percentage of revenue largest drivers of the increase vs fiscal twenty or higher incentive compensation increase technology in advertising investments and additional variable cost due to the higher sales volume partially offsetting these items would lower store payroll expense moving to the balanchine we ended the quarter with three point five billion dollars in cash at the end of que three our inventory ballots was fifteen percent higher the last years comparable period and was thirteen percent higher than our que three ending him into a balance from two years ago the increased him into a represent our plans to support the current demand for technology as well as last year's unusually low inventory balance early this month we completed our acquisition of current health and yard bird which will be reflected on our castle statement and que for a combined purchase price of the to transactions with approximately four hundred and eighty five million dollars and they were funded with cash the current health acquisition was a larger cash outlay at approximately four hundred million dollars and is expected have a slightly negative impact on our cue for nine gap operating income we are not expecting either acquisition to have a material impact on our revenue performance this year during the quarter we returned to total of five hundred and seventy seven million dollars to shareholders to share purchases of four hundred and five million dollars and dividends one hundred and seventy two million dollars with a year to date share buybacks band of one point seven billion dollars we still expect to spend more than two point five billion dollars and share repurchases this here let me next year more color on our guidance for the fourth quarter which remained very similar to the implied guidance we provided last quarter we expect comparable sales go to be in the range of down to percent top one percent to last year which is on top of our twelve point six comparable sales growth in the fourth quarter of last year like other companies we continue to monitor the evolving impacts of the pandemic and supply chain pressures driven by global demand we are confident in our ability to navigate the ever changing environment i'm a gross profit ray perspective we are planning for a non gap rate that is approximate thirty basis points below last year's rate due to the estimated impact of our new total tech offer which we expect to be partially offset by a more favorable product mix i'm a non gap as seen a standpoint we're playing dollars to increase approximately eight percent compared to last year the largest drivers of sc ne increase are expected to be technology investments increased advertising help investments and higher compensation in addition inside the compensation in addition we are planning on increase spend compared to our previous alec restore labor and calls center support this holiday season to better support the customer experience turning to our for your alec we expect the following enterprise revenue in the range of fifty one point eight billion dollars to fifty two point three billion dollars compared to our previous guide or fifty one billion dollars to fifty two billion dollars comparable sales growth of ten point five percent to eleven point five percent compared to previous guide of nine posts sent to eleven percent and a non gap gross profit rate slightly higher than last year er es una we expect growth of approximately nine point five percent which compares to our prior outlook of nine percent respect or non gap effective tax rate to be approximately twenty percent and we expect capital expenditures to be in the range of eight hundred million dollars to eight hundred fifty million dollars and will now to the call over to the operators for questions
spk_0: thank you if you like to ask a question please ignore by pressing star one on your telephone keypad and he insists the time please let me yourself to one question if you're using the speaker phone please pick up your handset when posting your question again as star one to ask a question i first question comes from anthony some barca with loop capital markets
spk_7: oc morning thanks so much for taking my question are and congrats on a on a great corner particular your ability to camp the comp against that really tough comparison your year i'm so are you know having that you know what he meant to stand struggling with that you know you simply called out shrink ah as a gross margin had me know this one of you just cried a little bit more are color around that thanks
spk_1: yeah absolutely anthony i think you've probably seen in the media that across read hell we are definitely seeing more and more particularly organize organized retail crime and incidence of shrink and in our location and you know i think you've heard other retailers talk about it and we certainly have seen it as well i well start with our priority has always been and will remain the safety of our people whether that's the pandemic whether that is unruly customers whether that is outright theft which is a great deal of what we're seeing right now and this a real issue that hurts and
spk_2: scares real people we're doing a number of things to protect our people at our customers we are as we talked about the prepared remarks and finding ways where we can lock a product but still make that a good customer experience am in some instances where hiring security we're working with our vendors on creative ways weekend states the products were working with trade organization
spk_1: but you can you can see that pressure in our financial the more importantly frankly you can see that pressure with our associates this is that the traumatizing at birth of the and and is unacceptable were doing everything we can to try to create as safe as possible environments
spk_7: got a good luck with the how they selling season
spk_8: thank you anthony
spk_0: thank you are next i think of something happened with morgan stanley
spk_9: i've actually had a padlock on for coming and that men are thanks for taking the time i wanted to ask on your cue for guide on on the top one it implies pretty big deceleration on on the non that comp stat are you think a slowdown in the man i'm with her some pulled forward you think and holiday purchasing and que three america maybe some conservative than dogs and there any detail you can get
spk_6: cyril take that this is matt we know we're projecting que ver comes to be up one percent down to percent compared to last year under the guidance range of gave a slightly up from the implied guidance range from last quarter as a reminder in august we we materially raised are sealed guidance for the back half of the year from the expeditions we have that we started the year we still feel really confident about our him into her levels and are positioning for the holiday in so i'd say the to for a little more unique of of a period of time it's a place where are categories leverage by many retailers over the holidays are getting season you know i would also say that some sales probably got pulled into october summer last year as a lot of the narrative in the media and supply chain constraints where our consumers so during the first three weeks of last year as well the gaming console release released which provided a bit of a lift in were also very mindful of lapping the stimulus dollars that came in january as we as we talk the last year we saw strong results in october the filled moderated then they started to pick back up in january and last thing i'd say lucky for is super bowl actually or majority of the businesses shifting into que one of next year and we're starting the the november
spk_10: about flattish failed so
spk_6: you know we're we're still encouraged by the the holiday the man that the consumers very strong stone so we're excited and thing or well opposition
spk_9: that's very helpful and maybe a quick follow up just on your domestic forces international segment obviously domestic had a decelerated consent international actually picked up i'm into porky tell us anything about kind of the relative contribution the a fact
spk_6: i would expect their contribution the relatively the same and in que three and as well as as on a to your bases are pretty similar to the to the us they actually did stronger sailed and que three lesser than than than than the domestic business so well to the the us pretty consistent in a lot of the same drivers for the us is or similar internationally as well
spk_9: on it thanks the much
spk_0: thank you and i say shinkansen chris for workers were tp morgan
spk_11: thanks thanks and thanks and good morning so i guess our focus and a little bit on the on the gross margin and the adoption of total tax just curious on that impact in the third quarter as you think about the fourth quarter down thirty be point expected so the total as a bigger number than that was just curious how much of that is sort of diminishment of warranty sales vs mormon accounting phenomenon that years recognizing the benefit of total time over an extended period of time yale vs prior
spk_6: yeah a good morning yeah the total tech impact essentially is due to just been enhanced benefits for that offering versus the told tech support offering as we talked about last quarter of it's the it's really that that additional benefits that drives more of the more short term pressure on to gross margin or eight there is a little bit of revenue recognition difference between told tech support in total tax it with told tech support a bit more was recognized on the first couple months total tech is more us more spread out across the entire tire year of some more of that pressure it's coming from that but it also note that he had the whole a goal of total tackles actually drive more sales and and driver product sales and that will take a little bit of times you start to ramp up the program so that wall will help help offset some of the the pressure you see from the cannibalization of the services business
spk_11: and and just as a quick fall upon the on the last question to give a sense or an estimate of perhaps how much january actually benefited from stimulus as we think about the sequencing of the current quarter
spk_6: yeah minute we we settle lawsuits stimulus is really hard to break out it's really did have a benefit we could we can see the business change in january from from the previous month so we know it did have an impact it's it's really hard to break it out specifically
spk_11: gotta understood have a great holiday season
spk_0: thank you
spk_12: thank you i next session comes from least with bank of america i think you i'm so here there are some other big box retailers and have gotten more i invested in helping customers eight and place that you talked about i you and the prepared remarks clearly there's a bigger focus on technology connected health on at best buy how are you working on increasing costs more awareness
spk_2: like what is the marketing look like for this particular initiative
spk_1: yeah thanks for the question as we have been really focused on this idea that hack could be instrumental in helping people aged more comfortably in their homes for quite a while it started with our purchase of great call a few years ago and part of the reason that we brought great call on board as they had massive it experience in dealing with an aging population and specifically to your question targeting the right messages to the right people which is not a targeting aging population that those are targeting caregivers who may be looking for some of the product and so you you've seen as over time we as dallas a relationship with a a r p back in march twenty two many as one of our values we as a lot of actually in the speed and direct mail and direct targeting because for the populations that we're looking at your those are some of the most effective means that we have and then over time i think you're going to see some of our more broad based at best buy messaging really pointing to the fact that we have a variety of solution that can help people aged in their homes it's not always just that devices and that care rappers sometimes it's thing blake at at peace accord a way to connect with someone on the other side really simply and easily or a device or you know that a camera on a security system where i can easily lock my door without having to get up or i can keep an eye on that aging loved one and i think already feeling he will continue to see us run the gamut are both very targeted messages to the
spk_12: population that we really want to inform all the way to the kind of more broad based solution driven messages about what we could help you do to care for a loved one
spk_1: and i'm just a follow up on how are all tech could potentially plan for that and if there any key performance indicators you can highlight they're looking at online on total heck is he track their i had the opportunity there what's interesting about total attack in the aging in place scenario is that it is more important than ever that your technology works for you if you're relying on it for your safety or if you're a caregiver if you're relying on it for the safety of others and the support wrapper around all of the things that were talking about and health is incredibly important and it also whoa will help i'm obviously the population weathered the caregiver again or the person being cared for add more devices feel comfortable adding devices we can go to your own help you in photos and then we can keep them up and running and i think that's really important in terms of the in they keep your eyes that will look at it
spk_2: it's really true across total tax were looking for things like increased frequency of interactions and that may be everything from browsing on the website all the way to coming in the store and making an actual purchase were looking for sticking with of that consumer mean they're more willing to combat to death by bigger share of wallet
spk_13: more more purchase behavior with back by over the longer term and that will be to whether we're talking about eating and place or whether we're talking about the other aspects of total pack and then obviously we're going to look for customer satisfaction and engagement with the brand and really trying to almost surprise and delight and you know over deliver where we weekend for these paying members
spk_0: ray thank you
spk_14: he that things that
spk_7: thank you honey session concerned by an that oppenheimer
spk_14: good morning and i of rats
spk_15: thank you
spk_6: to the question i have this with regard to promotions she called out here are in the third quarter you hire promotions is is is somewhat of a headwind to to gross margins be the most me the point that new person i can be super sub human was prepared damage and then i don't think give the guidance for to fear within the the down pretty disappointed grows more jump into the metro promotions are you to course i have is your was you look what's helping out with promotions and maybe more colorado there's great color on kind of who who was driving these promotions and then where do you think we're we're going are we heading back to pre pandemic levels were due for see promotion like to be remaining more subdued as we go forward the morning bryant the i think in two three we've talked about how we expected promotional a the increase in we certainly saw that especially in places where him and tories starting to become a little or freeing up and inaudibly in computing we didn't call it out in queue for and queue for product murder rates are expected to be a little better more from up product mix mixing out of things like gaming consoles and computing
spk_16: at this point you know a promotion algae we don't really see it as a as a good guy or a bad guy in queue for as you'd imagine queue for is very promotional competitive every year until right now it's last year we were very focused on that as well this year we will continue to look said that we don't expect that on a yearly basis to be necessarily more or less promotional noggin against to you
spk_7: years ago certainly we would expect it to be a little less commercial and we saw two years ago where it had is something that will going to have to monitor that's one of the color of so things that we're evaluating for next year clearly as inventory becomes more free you could imagine that promotional it is going to start to increase in categories more one is a time as we get into next year and so
spk_6: likely starting the year with of them or personality but when i really gotta make sure but i but i would expect that to start to turn over over the next number of quarters no it's very helpful second quick followed by could just with regard to some appliances keep seals driver here and into three lot of talk about higher higher prices and appliances of the course i have as to what extent was inflation in that category actually incremental seals driver for you yeah specifically to appliances that is one of the areas where it's been pretty well noted that prices have gone up and so we're in that frog everywhere in most cases we've blow those prices on to the consumers of those prices haven't pursued prices have increased that that the say that that happens in all circumstances in a lot of categories
spk_1: where are you still want to make sure you're very competitive with your pricing even if costs to go up your you're actually you're actually being thoughtful about answering them in the best way possible i think generally you look at our a peas
spk_17: inflation inflation a causal good going up the still the smaller part of those where we would see the be increases right now still a bigger part of the be increases would be just premium mix of our business right now versus the inflation as was so it is a little higher generally overall and we saw the first half of the year but still not that big as an actor days
spk_0: fees and right i think this is why in this space we continue to really invest in the experience because our ability to deliver on some about more premium
spk_18: items in the assortment is is really distinctive in different and so that the investment in this is great example be investment inexperience it's not to for today but it's so that we continue to represent the premium side of the business over the longer term my personal become a thank you
spk_6: thank you thank you how next question consume great malik with evercore isi i think some and a two part question one was a long understand a little bit more about the as in dollar growth in the fourth quarter how much of that is do the acquisitions or the particular membership investment and how much that is just the inflation or normal growth and
spk_11: to date because you poor as you ne essentially with this for star with the idea there are businesses very different that it has been over the last year to over two years ago that the way customers are shopping the channel the shopping is very different in there's a lot more volume coming through generally have comfortable years ago so you'll look at
spk_6: a year by year difference we're still seeing continued investment in technology and health being of the driver of that as she a increase or advertising is also an area where it's up your rear and that is included in that is the total tech launch that we've talked about were actually also increasing our store and call center labour to the
spk_1: the great customer experience last year during queue for is probably we would say by running a light from from where he wanted to be so we've made the decision to invest a little bit more from a customer experience bam point and well and said a politician was a flat on your your bases in the back half of this year is going to be flat depression key for that is actually pressure on que for versus the of fight about a good guy and que three so those are what's driving virtually any of your basement a lot of what we're doing is really focused on investing as we talked about to make sure our customer experience in the right spot and were actually in a position or so well for the future
spk_18: and maybe have to flip it around little bit inventory up i guess fifteen percent year on year and i'd and still thirteen percent forces twenty nineteen house or we think about that growth and him and some reverses a top that that looks like and all the planets and the fourth quarter at least and your and your plan yeah i'm it as a when you look at versus a two year sales volume increase and mean that they mentor it's much more line we actually when we look at or a mentor a look at how many days of supply we have outstanding and we're in that very normal range of the the supply this point other still pockets and constraint in areas like gaming consoles and things like that but
spk_19: we feel really good about it on a to your bases it it's seemingly it's in line for us if we look forward to the sales and great i was it underscored something that hadn't had prepared remarks we were unduly late last year in inventory and that's why we're going back to the to your like to years that growth of right in that yeah thirteen percent rains and then inventory to your in that same range
spk_20: so i just think that you're not a great indicator because i think everyone would look at we certainly were looking for my laughter
spk_6: i guess i get she would not more it has the business the seasonality of the operating margins are fundamentally changed now but the growth of services total attack i'm or is that still on an anomaly thanks
spk_1: nine minute mark
spk_2: but look like the rest of the year
spk_18: yeah i think what you what you seen from us of this this year last year as a little unique each quarter but the see what you seen as actually improve operating margin rates and each of the first three quarters more up more than what we've seen you look going into your stack it's much it's much different in the first three quarters i think generally
spk_0: technology is important for all our lives regardless of holiday season seasons are starting to spread out across the are so deputy margins have on a relative to your bases been improving the first three quarters and quite honestly the volumes in queue for it's very important for us to make sure we have the right expand profile to support the customers
spk_21: i'll be wearing arab than one that's what my little bit a color and again that within his remarks but this will be the first full quarter of total cat to and so you'll start to see that go through into next year as you get into those other quarter so that that makes it a little different that you're comparing key for threat because the everything that that and in the rest of that i mean art or all would actually be a little bit more even business throughout the year ultimately like that can drop evergreen on it
spk_1: thank you are in a session comes from cape mccain the goldman sachs i thanks to morning thanks for taking our question and i just had to questions on all the pilots that you mentioned and to prepare comments are such a virtual store how are you thinking about this longer term do you think it will be a concept for you just need one or is it something that rules out and will always be integrated into the c and then a flexible labour model i know it's early and also in a pilot stage that has helped you at all and finding workers and this tight labor market how do you think about potential savings from the finished s both are with virtual store obviously really early and that are really just getting our legs under a so it's hard for me to say whether or not there's more than one the nice part is you should be able to get very good scale from one location in a model like that's right because you can flex oblique you people and you can move them thrill at your own speed and you can do this across all the departments in that kind of fake story that virtual so i don't think this is going to be about a ton of versatile store throughout the network i think it's going to be about scale with few locations that can provide some interesting use cases because truthfully if not just about the customer youth cases where they might find the virtual store door whether doing digital shopping it also could be about employee use cases where i might be in you know that that car installation area and may not have the expertise but i couldn't right in feel one of our installation are auto attack experts who could help you in the moment even as an employee a give you a lot of confidence there to so i think what we want to find out right now it's what are the youth cases how often as a being used am and then ultimately what does that customer experience look like but like weaker than that prepared remarks we'd like what we're seeing early am and will be the
spk_2: how how far you can stretch this that kind of one asset that we have right now
spk_1: in terms of flexible labour absolutely it is helpful for us in this environment and it's helpful on a couple level one the customer shopping behavior patterns and they continue to change and they contained week to week depending on how important that the like speed is as an example like the week before christmas in store pickup curbside will become very important asset and with the more flexible model i can move employees and employers can opt into being moved to different areas in the store that means they can pick up more hours or potentially more flexible hours the other thing that hasn't been brought to light as much as there still are many people calling in sick which
spk_0: we want if they're not feeling well we want them to stay home a model like this allows you to much more flexibly cover for those call off so it's not just about hiring and retention it's actually about how can i move the the labour around the store in the most flexible way and then the last thing i would say as we have more employees than ever in the history the company
spk_18: either skilled in multiple areas in the store
spk_6: and that isn't just about us flexibly leveraging that labour that it's about them opting in to potentially schedule and even in some cases pay grades that meet whatever you know they want to try to accomplish in their lives and that's that's really for the employee that more positive side of the flexible arrangement and ultimately adding more confident in their capabilities in their interactions with customers that's why we tend to be higher and yes correlate very highly with multiple skillset
spk_22: thank you thank you
spk_6: thank you next question concerns says percent with wedbush securities around morning my first questions around in the pedal tech offering and how we think about that in two thousand and twenty three be thinking about twenty third to be sponsored gross margin pressure through at least the her half of the year and we think that additional sales contribution building to two thousand and twenty two yeah you know it is you can imagine we're not in the position to guide for next year or more we talked about as the more benefits included in total tax early are causing a near term you know pressure on the business or some of those and will continue on a lot of what we're still trying to do is understand the incremental it either usage the freak
spk_2: when see all those things go into understanding what what the overall increment the to go to the business in addition to that in criminal field their products were sold the process of evaluating so am i would imagine to be a continued pressured heading into next year exactly how much we're still trying to evaluate
spk_1: it thank you and then my fall question is i only thing with the markets growth rate potential the next year so you the fact that package more one in every consumer lives in his mark in one that likely continue growing in the near term or or there pressure point because the decide on the yeah ah you your comparison with computing and other areas such a surgeon growth from a pandemic
spk_0: yeah the think so something we're evaluating over the woods what market go look like of the next few years who pursuing on the position the guide next year from the sales perspective either you're right camping there's a me some big quarters next year we are be grew twenty seven percent by the first half of last year so we very much could see some bumping as court

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