Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Best Buy Co. Inc., profitability ratios
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
- Gross profit margin
- The gross profit margin exhibited a gradual decline over the observed period, starting at 23.96% in early 2017 and decreasing to 22.49% by early 2022. This consistent downward trend suggests increasing cost of goods sold or pricing pressure impacting the company's core profitability at the gross level.
- Operating profit margin
- In contrast to the gross margin, the operating profit margin showed a generally positive trajectory. It decreased slightly from 4.71% in 2017 to 4.37% in 2018 but then steadily increased each year thereafter, reaching 5.87% in 2022. This improvement indicates enhanced operational efficiency or better expense management, partially offsetting the decline in gross margins.
- Net profit margin
- The net profit margin followed a somewhat volatile yet upward trend. It dropped from 3.12% in 2017 to 2.37% in 2018, then increased steadily to 4.74% in 2022. The net margin enhancement reflects improvements at the bottom-line level, potentially aided by factors such as improved operational control, lower interest expenses, or tax benefits.
- Return on equity (ROE)
- ROE showed a remarkable increase across the timeline, beginning at 26.08% in 2017 and surging to a notable 81.26% by 2022. After an initial rise to approximately 44% in 2019 and 2020, ROE dipped slightly in 2021 before the significant jump the following year. This pattern could be indicative of enhanced profitability, leverage, or capital structure optimization leading to higher shareholder returns.
- Return on assets (ROA)
- ROA experienced fluctuations but ultimately improved from 8.86% in 2017 to 14.02% in 2022. After dipping to 7.66% in 2018, it rebounded with a peak at 11.35% in 2019, followed by a slight decline and eventual rise, suggesting better utilization of assets to generate earnings over time.
Return on Sales
Return on Investment
Gross Profit Margin
Best Buy Co. Inc., gross profit margin calculation, comparison to benchmarks
| Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Gross profit | 11,640) | 10,573) | 10,048) | 9,961) | 9,876) | 9,440) | |
| Revenue | 51,761) | 47,262) | 43,638) | 42,879) | 42,151) | 39,403) | |
| Profitability Ratio | |||||||
| Gross profit margin1 | 22.49% | 22.37% | 23.03% | 23.23% | 23.43% | 23.96% | |
| Benchmarks | |||||||
| Gross Profit Margin, Competitors2 | |||||||
| Amazon.com Inc. | 43.81% | 42.03% | 39.57% | — | — | — | |
| Home Depot Inc. | 33.63% | 33.95% | 34.09% | — | — | — | |
| Lowe’s Cos. Inc. | 33.30% | 33.01% | 31.80% | — | — | — | |
| TJX Cos. Inc. | 28.50% | 23.66% | 28.46% | — | — | — | |
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
1 2022 Calculation
Gross profit margin = 100 × Gross profit ÷ Revenue
= 100 × 11,640 ÷ 51,761 = 22.49%
2 Click competitor name to see calculations.
- Revenue
- There is a consistent upward trend in revenue over the six-year period. Starting at approximately $39.4 billion in early 2017, revenue increases each year, reaching about $51.8 billion by early 2022. This represents a substantial growth in sales volume or pricing over time.
- Gross Profit
- Gross profit also shows a steady increase alongside revenue. It rises from $9.44 billion in 2017 to $11.64 billion in 2022. This growth in gross profit indicates that the company is generating higher absolute profitability from its core operations as sales grow.
- Gross Profit Margin
- Despite the growth in gross profit and revenue, the gross profit margin percentage exhibits a slight downward trend initially, declining from 23.96% in 2017 to 22.37% in 2021. There is a minor increase in 2022 to 22.49%, but overall the margin remains lower than the starting point. This suggests increasing cost pressures or changes in product mix that slightly reduce profitability per dollar of revenue.
- Summary
- Overall, the financial data indicates solid revenue growth with corresponding gains in gross profit in absolute terms. However, the company faces marginal compression in gross profit margin percentage, implying some challenges in controlling costs or maintaining pricing power. The slight improvement in margin in the most recent year may hint at initial improvements in operational efficiency or pricing strategy.
Operating Profit Margin
Best Buy Co. Inc., operating profit margin calculation, comparison to benchmarks
| Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Operating income | 3,039) | 2,391) | 2,009) | 1,900) | 1,843) | 1,854) | |
| Revenue | 51,761) | 47,262) | 43,638) | 42,879) | 42,151) | 39,403) | |
| Profitability Ratio | |||||||
| Operating profit margin1 | 5.87% | 5.06% | 4.60% | 4.43% | 4.37% | 4.71% | |
| Benchmarks | |||||||
| Operating Profit Margin, Competitors2 | |||||||
| Amazon.com Inc. | 2.38% | 5.30% | 5.93% | — | — | — | |
| Home Depot Inc. | 15.24% | 13.84% | 14.37% | — | — | — | |
| Lowe’s Cos. Inc. | 12.56% | 10.77% | 8.75% | — | — | — | |
| TJX Cos. Inc. | 9.79% | 1.81% | 10.59% | — | — | — | |
| Operating Profit Margin, Sector | |||||||
| Consumer Discretionary Distribution & Retail | 6.44% | 7.38% | 8.11% | — | — | — | |
| Operating Profit Margin, Industry | |||||||
| Consumer Discretionary | 8.47% | 8.79% | 6.48% | — | — | — | |
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
1 2022 Calculation
Operating profit margin = 100 × Operating income ÷ Revenue
= 100 × 3,039 ÷ 51,761 = 5.87%
2 Click competitor name to see calculations.
- Revenue
- Revenue showed a consistent upward trajectory over the six-year period, increasing from approximately $39.4 billion in 2017 to $51.8 billion in 2022. This represents a steady growth, with incremental annual increases evident each year. The growth rate appears to accelerate slightly in the later years, particularly from 2020 to 2022.
- Operating Income
- Operating income followed a generally positive trend, rising from $1.854 billion in 2017 to $3.039 billion in 2022. While there was minor fluctuation between 2017 and 2018, overall operating income grew steadily year-over-year. The most notable increase occurred between 2021 and 2022, suggesting improved operational efficiency or scaling benefits during this period.
- Operating Profit Margin
- The operating profit margin fluctuated somewhat in the initial years but showed a clear improvement over time. It started at 4.71% in 2017, dipped slightly in 2018 and 2019, then progressively increased from 4.6% in 2020 to 5.87% in 2022. This indicates an enhancing ability to convert revenue into profit, reflecting improved cost management or pricing strategies.
- Overall Insights
- The financial data indicates strong and consistent revenue growth alongside improving profitability margins. The increase in operating income at a rate higher than revenue growth in later years suggests enhanced operational leverage. The upward trend in operating profit margin further confirms growing operational efficiency. Together, these patterns depict a favorable financial performance trajectory over the six-year span.
Net Profit Margin
Best Buy Co. Inc., net profit margin calculation, comparison to benchmarks
| Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings | 2,454) | 1,798) | 1,541) | 1,464) | 1,000) | 1,228) | |
| Revenue | 51,761) | 47,262) | 43,638) | 42,879) | 42,151) | 39,403) | |
| Profitability Ratio | |||||||
| Net profit margin1 | 4.74% | 3.80% | 3.53% | 3.41% | 2.37% | 3.12% | |
| Benchmarks | |||||||
| Net Profit Margin, Competitors2 | |||||||
| Amazon.com Inc. | -0.53% | 7.10% | 5.53% | — | — | — | |
| Home Depot Inc. | 10.87% | 9.74% | 10.20% | — | — | — | |
| Lowe’s Cos. Inc. | 8.77% | 6.51% | 5.93% | — | — | — | |
| TJX Cos. Inc. | 6.76% | 0.28% | 7.84% | — | — | — | |
| Net Profit Margin, Sector | |||||||
| Consumer Discretionary Distribution & Retail | 3.14% | 7.21% | 6.58% | — | — | — | |
| Net Profit Margin, Industry | |||||||
| Consumer Discretionary | 5.15% | 9.20% | 5.24% | — | — | — | |
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
1 2022 Calculation
Net profit margin = 100 × Net earnings ÷ Revenue
= 100 × 2,454 ÷ 51,761 = 4.74%
2 Click competitor name to see calculations.
- Net Earnings
- Net earnings demonstrated a generally upward trajectory over the observed period. Starting at 1,228 million US dollars in early 2017, there was a decline to 1,000 million US dollars in early 2018. Subsequently, net earnings increased steadily each year, reaching 2,454 million US dollars by early 2022. This represents a significant overall growth, more than doubling from the initial value.
- Revenue
- Revenue also experienced a consistent increase throughout the years. Beginning at 39,403 million US dollars in early 2017, it grew each year, culminating in 51,761 million US dollars by early 2022. The rate of revenue growth, while steady, was more moderate compared to the growth rate of net earnings.
- Net Profit Margin
- The net profit margin fluctuated in the earlier years but presented an improving trend overall. Initially, it was 3.12% in early 2017, dropped to 2.37% in early 2018, and then showed a consistent improvement from 2019 onward. The margin increased from 3.41% in early 2019 to 4.74% in early 2022, indicating improved profitability relative to revenue over time.
- Overall Insights
- The data reflects an enhancement in financial performance marked by increasing revenue and an even stronger rise in net earnings. The improving net profit margin suggests efficient cost management or higher-margin sales contributing to better returns on the revenues generated. The recovery and growth in net earnings following the dip in 2018 highlight resilience and effective operational adjustments. By early 2022, both revenue growth and profitability reached their highest levels in the period presented.
Return on Equity (ROE)
Best Buy Co. Inc., ROE calculation, comparison to benchmarks
| Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings | 2,454) | 1,798) | 1,541) | 1,464) | 1,000) | 1,228) | |
| Total Best Buy Co., Inc. shareholders’ equity | 3,020) | 4,587) | 3,479) | 3,306) | 3,612) | 4,709) | |
| Profitability Ratio | |||||||
| ROE1 | 81.26% | 39.20% | 44.29% | 44.28% | 27.69% | 26.08% | |
| Benchmarks | |||||||
| ROE, Competitors2 | |||||||
| Amazon.com Inc. | -1.86% | 24.13% | 22.84% | — | — | — | |
| Home Depot Inc. | — | 390.00% | — | — | — | — | |
| Lowe’s Cos. Inc. | — | 406.05% | 217.09% | — | — | — | |
| TJX Cos. Inc. | 54.69% | 1.55% | 55.01% | — | — | — | |
| ROE, Sector | |||||||
| Consumer Discretionary Distribution & Retail | 17.48% | 35.05% | 40.86% | — | — | — | |
| ROE, Industry | |||||||
| Consumer Discretionary | 21.65% | 34.37% | 25.29% | — | — | — | |
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
1 2022 Calculation
ROE = 100 × Net earnings ÷ Total Best Buy Co., Inc. shareholders’ equity
= 100 × 2,454 ÷ 3,020 = 81.26%
2 Click competitor name to see calculations.
The analysis of the financial performance over the six-year period reveals several notable trends. Net earnings have generally shown an upward trajectory, increasing from $1,228 million in early 2017 to $2,454 million by early 2022. This growth, however, experienced a slight dip in 2018 before steadily rising each subsequent year.
In contrast, total shareholders’ equity displays a declining trend with some fluctuations. Starting at $4,709 million in 2017, equity decreased significantly by 2019 and fluctuated afterwards, reaching a low of $3,020 million in early 2022. Notably, there was a brief increase in 2021, which then dropped again the following year.
Return on equity (ROE) exhibits a marked increase over the years, rising from roughly 26% in 2017 to over 81% in 2022. This indicates a substantial improvement in the company’s efficiency at generating profits from shareholders’ equity. The ROE growth appears particularly sharp from 2021 to 2022, correlating with the peak in net earnings and the decrease in equity.
Overall, the data suggests that the company has enhanced its profitability and capital efficiency over the period, although the decline in shareholders’ equity may point to changes in financial structure or capital management strategies that warrant further investigation.
Return on Assets (ROA)
Best Buy Co. Inc., ROA calculation, comparison to benchmarks
| Jan 29, 2022 | Jan 30, 2021 | Feb 1, 2020 | Feb 2, 2019 | Feb 3, 2018 | Jan 28, 2017 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings | 2,454) | 1,798) | 1,541) | 1,464) | 1,000) | 1,228) | |
| Total assets | 17,504) | 19,067) | 15,591) | 12,901) | 13,049) | 13,856) | |
| Profitability Ratio | |||||||
| ROA1 | 14.02% | 9.43% | 9.88% | 11.35% | 7.66% | 8.86% | |
| Benchmarks | |||||||
| ROA, Competitors2 | |||||||
| Amazon.com Inc. | -0.59% | 7.93% | 6.64% | — | — | — | |
| Home Depot Inc. | 22.86% | 18.23% | 21.94% | — | — | — | |
| Lowe’s Cos. Inc. | 18.91% | 12.49% | 10.85% | — | — | — | |
| TJX Cos. Inc. | 11.53% | 0.29% | 13.55% | — | — | — | |
| ROA, Sector | |||||||
| Consumer Discretionary Distribution & Retail | 4.19% | 9.17% | 9.20% | — | — | — | |
| ROA, Industry | |||||||
| Consumer Discretionary | 4.94% | 8.07% | 4.42% | — | — | — | |
Based on: 10-K (reporting date: 2022-01-29), 10-K (reporting date: 2021-01-30), 10-K (reporting date: 2020-02-01), 10-K (reporting date: 2019-02-02), 10-K (reporting date: 2018-02-03), 10-K (reporting date: 2017-01-28).
1 2022 Calculation
ROA = 100 × Net earnings ÷ Total assets
= 100 × 2,454 ÷ 17,504 = 14.02%
2 Click competitor name to see calculations.
- Net Earnings
- Net earnings demonstrate an overall upward trend throughout the examined period. Starting at 1,228 million US dollars in the first year, earnings experienced a slight decline in the second year to 1,000 million. Subsequently, there was consistent growth each year, reaching a peak of 2,454 million US dollars in the final year. This represents a doubling of net earnings from the beginning to the end of the period.
- Total Assets
- Total assets show fluctuations over the years. Initially, assets decreased from 13,856 million US dollars to 13,049 million and further to 12,901 million, indicating a contraction in asset base during the early years. In the following years, there was an expansion in total assets, reaching a high of 19,067 million in the penultimate year. However, the final year recorded a decrease to 17,504 million within the asset base, suggesting some asset divestiture or revaluation.
- Return on Assets (ROA)
- Return on assets exhibits variability but trends positively over the period examined. The ROA started at 8.86% and declined to 7.66% the next year. Following this dip, the ratio increased to 11.35%, then experienced a slight reduction to 9.88% and 9.43% in the subsequent years. The final year showed a significant improvement to 14.02%, marking the highest efficiency in asset utilization during the period.
- Summary Insights
- Overall, net earnings growth indicates improved profitability despite fluctuations in total assets. The initial contraction in assets might relate to strategic restructuring or efficiency gains, followed by asset growth reflecting investment or expansion. The ROA trend supports the interpretation of increasing asset efficiency, peaking significantly in the last year, which aligns with the highest net earnings recorded. This suggests that the company managed to enhance profitability while optimizing asset use, especially in the recent period.