Best buy reports fourth quarter results
Minneapolis--(business wire)--best buy co., inc. (nyse: bby) today announced results for the 13-week fourth quarter ended january 29, 2022 (“q4 fy22”), as compared to the 13-week fourth quarter ended january 30, 2021 (“q4 fy21”). q4 fy22 q4 fy21 fy22 fy21 revenue ($ in millions) enterprise $ 16,365 $ 16,937 $ 51,761 $ 47,262 domestic segment $ 14,993 $ 15,400 $ 47,830 $ 43,293 international segment $ 1,372 $ 1,537 $ 3,931 $ 3,969 enterprise comparable sales % change1 (2.3 ) % 12.6 % 10.4 % 9.7 % domestic comparable sales % change1 (2.1 ) % 12.4 % 11.0 % 9.2 % domestic comparable online sales % change1 (11.2 ) % 89.3 % (12.0 ) % 144.4 % international comparable sales % change1 (3.8 ) % 14.9 % 3.3 % 15.0 % operating income gaap operating income as a % of revenue 4.9 % 6.1 % 5.9 % 5.1 % non-gaap operating income as a % of revenue 5.1 % 6.9 % 6.0 % 5.8 % diluted earnings per share ("eps") gaap diluted eps $ 2.62 $ 3.10 $ 9.84 $ 6.84 non-gaap diluted eps $ 2.73 $ 3.48 $ 10.01 $ 7.91 for gaap to non-gaap reconciliations of the measures referred to in the above table, please refer to the attached supporting schedule. “our teams showed remarkable execution and dedication to serving our customers throughout the important gift-giving season,” said corie barry, best buy ceo. “in q4, we drove improvement in year-over-year customer satisfaction metrics across almost all areas, particularly for in-store, online and chat experiences. and even with online sales at almost 40% of our domestic revenue, we reached our fastest holiday delivery times ever, shipping products to customer homes more than 25% faster than last year and two years ago. i am truly grateful for, and continue to be impressed by, our associates' dedication, resourcefulness and flat-out determination.” “q4 sales of $16.4 billion were impacted by more constrained inventory than expected, including some high-demand holiday items, and the temporary reduction in store hours in january due to omicron-induced staffing challenges,” continued barry. “we are deliberately investing in our future and furthering our competitive differentiation which, as expected, impacted our q4 profitability. the biggest areas of investment were our new membership program, technology and best buy health, all core to our future growth potential.” barry continued, “fy22 was another record year. in addition to record revenue and earnings, our leaders drove new ways of operating and our employees worked tirelessly to meet our customers’ technology needs with excellent service. from a financial perspective, our comparable sales growth was 10.4% on top of a very strong 9.7% last year, with revenue up $8.1 billion over the past two years. compared to last year, our gaap eps was up 44% to $9.84 and our non-gaap eps was up 27% to $10.01.” “in the past two years, our total cash provided by operating activities was $8.2 billion and we generated more than $6.5 billion in free cash flow,” said matt bilunas, best buy cfo. “in fy22, we returned $4.2 billion to shareholders in the form of share repurchases and dividends. today, we are announcing a 26% increase in our quarterly dividend to $0.88 per share and our plan to spend approximately $1.5 billion in share repurchases in fy23.” financial outlook “in fy23, we are leveraging our position of strength by continuing to invest in our future to deliver growth over the long term. while we expect sales growth and earnings to look different in fy23, our outlook for fy25 delivers strong revenue growth and operating income rate expansion well beyond fy22,” bilunas continued. “the two largest variables in our fy23 financial outlook on a year-over-year basis are the short-term industry decline as we lap high growth and government stimulus, and the investment in our new membership program, best buy totaltech, which we believe will drive longer-term value. as we look to fy25, we expect the consumer electronics industry will return to the level we saw this past year, which is much higher than pre-pandemic levels, and that totaltech, best buy health and other initiatives will drive meaningful growth.” in conjunction with today’s earnings release, the company is expected to host a combined earnings and investor update webcast at 8:00 a.m. eastern time during which members of the executive team will discuss quarterly results, share updates on strategic initiatives and provide more details on the following financial targets: fy23: revenue of $49.3 billion to $50.8 billion comparable sales decline of 1.0% to 4.0% enterprise non-gaap operating income rate2 of approximately 5.4% non-gaap effective income tax rate2 of approximately 24.5% share repurchases of approximately $1.5 billion non-gaap diluted eps2 of $8.85 to $9.15 fy25: enterprise revenue of $53.5 billion to $56.5 billion enterprise non-gaap operating income rate2 of 6.3% to 6.8% enterprise non-gaap operating income2 of $3.4 billion to $3.8 billion domestic segment q4 fy22 results domestic revenue domestic revenue of $14.99 billion decreased 2.6% versus last year. the decrease was primarily driven by a comparable sales decline of 2.1% and the loss of revenue from permanent store closures in the past year. from a merchandising perspective, the largest drivers of comparable sales growth on a weighted basis were appliances, virtual reality, home theater and headphones. these growth drivers were more than offset by declines in gaming, mobile phones, tablets and services. domestic online revenue of $5.91 billion decreased 11.2% on a comparable basis, and as a percentage of total domestic revenue, online revenue was approximately 39.4% versus 43.2% last year. domestic gross profit rate domestic gaap gross profit rate was 20.0% versus 20.9% last year. on a non-gaap basis, the gross profit rate was 20.0% versus 20.7% last year. the lower gaap and non-gaap gross profit rates were primarily driven by lower services margin rates, including pressure associated with the company’s new totaltech membership offering, which was partially offset by higher profit-sharing revenue from the company’s private label and co-branded credit card arrangement. the gaap gross profit rate in fy21 also included the benefit of a $21 million price-fixing settlement received in relation to products purchased and sold in prior fiscal years. domestic selling, general and administrative expenses (“sg&a”) domestic gaap sg&a was $2.30 billion, or 15.3% of revenue, versus $2.15 billion, or 14.0% of revenue, last year. on a non-gaap basis, sg&a was $2.27 billion, or 15.1% of revenue, versus $2.13 billion, or 13.8% of revenue, last year. both gaap and non-gaap sg&a increased primarily due to: (1) advertising expense; (2) technology investments; (3) store and call center labor; and (4) best buy health. international segment q4 fy22 results international revenue international revenue of $1.4 billion decreased 10.7% versus last year. this decrease was primarily driven by the closure of mexico in fy22 and a comparable sales decline of 3.8% in canada. these items were partially offset by the benefit of approximately 150 basis points of favorable foreign currency exchange rates. international gross profit rate international gaap gross profit rate was 22.9% versus 21.6% last year. on a non-gaap basis, the gross profit rate was 22.9% versus 20.8% last year. the higher gaap and non-gaap gross profit rates were primarily driven by sales mixing out of mexico, which had a lower gross profit rate than canada, and a larger percentage of revenue from the higher margin services category in canada. the gaap gross profit rate in fy21 also included a $13 million benefit associated with more favorable than expected inventory markdowns in mexico. international sg&a international sg&a was $206 million, or 15.0% of revenue, versus $216 million, or 14.1% of revenue, last year. sg&a decreased primarily due to the closure of mexico, which was partially offset by increased store payroll expense in canada and the impact of foreign exchange rates. dividends and share repurchases in q4 fy22, the company returned a total of $1.94 billion to shareholders through share repurchases of $1.77 billion and dividends of $166 million. for the full year, the company returned a total of $4.2 billion to shareholders through share repurchases of $3.5 billion and dividends of $688 million. today, the company announced its board of directors approved a 26% increase in the regular quarterly dividend to $0.88 per share. the regular quarterly dividend will be payable on april 14, 2022, to shareholders of record as of the close of business on march 24, 2022. in addition, the company’s board of directors approved a new $5.0 billion share repurchase authorization, replacing the existing authorization dated february 2021, which had $1.6 billion in repurchases remaining at the end of fy22. combined q4 fy22 earnings and investor update webcast best buy is scheduled to conduct a video webcast from 8:00 a.m. to approximately 10:30 a.m. eastern time on march 3, 2022. members of the executive team will discuss the company’s quarterly results, share updates on strategic initiatives and provide forward-looking financial targets. following the prepared remarks, the company will host a virtual q&a session. a video webcast of the event will be available at www.investors.bestbuy.com, both live and after the event. notes: (1) comparable sales include revenue from all stores that were temporarily closed or operating an enhanced curbside-only operating model as a result of covid-19. the method of calculating comparable sales varies across the retail industry, including the treatment of store closures as a result of covid-19. as a result, our method of calculating comparable sales may not be the same as other retailers’ methods. on november 24, 2020, the company announced its decision to exit its operations in mexico. as a result, all revenue from mexico operations has been excluded from the comparable sales calculation beginning in fiscal december fy21. for additional information on comparable sales, please see our most recent annual report on form 10-k, and our subsequent quarterly reports on form 10-q, filed with the securities and exchange commission (“sec”), and available at www.investors.bestbuy.com. (2) a reconciliation of the projected non-gaap operating income, non-gaap operating income rate and non-gaap diluted eps, which are forward-looking non-gaap financial measures, to the most directly comparable gaap financial measures, is not provided because the company is unable to provide such reconciliation without unreasonable effort. the inability to provide a reconciliation is due to the uncertainty and inherent difficulty predicting the occurrence, the financial impact and the periods in which the non-gaap adjustments may be recognized. these gaap measures may include the impact of such items as restructuring charges; price-fixing settlements; goodwill impairments; gains and losses on investments; intangible asset amortization; certain acquisition-related costs; and the tax effect of all such items. historically, the company has excluded these items from non-gaap financial measures. the company currently expects to continue to exclude these items in future disclosures of non-gaap financial measures and may also exclude other items that may arise (collectively, “non-gaap adjustments”). the decisions and events that typically lead to the recognition of non-gaap adjustments, such as a decision to exit part of the business or reaching settlement of a legal dispute, are inherently unpredictable as to if or when they may occur. for the same reasons, the company is unable to address the probable significance of the unavailable information, which could be material to future results. forward-looking and cautionary statements: this release contains forward-looking statements within the meaning of the private securities litigation reform act of 1995 as contained in section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934 that reflect management’s current views and estimates regarding future market conditions, company performance and financial results, operational investments, business prospects, new strategies, the competitive environment and other events. you can identify these statements by the fact that they use words such as “anticipate,” “believe,” “assume,” “estimate,” “expect,” “intend,” “foresee,” “project,” “guidance,” “plan,” “outlook,” and other words and terms of similar meaning. these statements involve a number of risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: the duration and scope of the ongoing covid-19 pandemic and its resurgence and the impact on demand for our products and services, levels of consumer confidence and our supply chain; the effects and duration of steps we have taken and will continue to take in response to the pandemic, including the implementation of our interim and evolving operating model; actions governments, businesses and individuals have taken and will continue to take in response to the pandemic and their impact on economic activity and consumer spending; the pace of recovery when the ongoing covid-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers), our expansion strategies, our focus on services as a strategic priority, our reliance on key vendors and mobile network carriers, our ability to attract and retain qualified employees, changes in market compensation rates, risks arising from statutory, regulatory and legal developments, macroeconomic pressures in the markets in which we operate, failure to effectively manage our costs, our reliance on our information technology systems, our ability to prevent or effectively respond to a privacy or security breach, our ability to effectively manage strategic ventures, alliances or acquisitions, our dependence on cash flows and net earnings generated during the fourth fiscal quarter, susceptibility of our products to technological advancements, product life cycle preferences and changes in consumer preferences, economic or regulatory developments that might affect our ability to provide attractive promotional financing, interruptions and other supply chain issues, catastrophic events, health crises, pandemics, our ability to maintain positive brand perception and recognition, product safety and quality concerns, changes to labor or employment laws or regulations, our ability to effectively manage our real estate portfolio, constraints in the capital markets or our vendor credit terms, changes in our credit ratings, any material disruption in our relationship with or the services of third-party vendors, risks related to our exclusive brand products and risks associated with vendors that source products outside of the u.s., including trade restrictions or changes in the costs of imports (including existing or new tariffs or duties and changes in the amount of any such tariffs or duties) and risks arising from our international activities. a further list and description of these risks, uncertainties and other matters can be found in the company’s annual report and other reports filed from time to time with the sec, including, but not limited to, best buy’s annual report on form 10-k filed with the sec on march 19, 2021 and its quarterly reports on form 10-q filed with the sec. best buy cautions that the foregoing list of important factors is not complete, and any forward-looking statements speak only as of the date they are made, and best buy assumes no obligation to update any forward-looking statement that it may make. best buy co., inc. condensed consolidated statements of earnings ($ and shares in millions, except per share amounts) (unaudited and subject to reclassification) three months ended twelve months ended january 29, 2022 january 30, 2021 january 29, 2022 january 30, 2021 revenue $ 16,365 $ 16,937 $ 51,761 $ 47,262 cost of sales 13,052 13,394 40,121 36,689 gross profit 3,313 3,543 11,640 10,573 gross profit % 20.2 % 20.9 % 22.5 % 22.4 % selling, general and administrative expenses 2,505 2,368 8,635 7,928 sg&a % 15.3 % 14.0 % 16.7 % 16.8 % restructuring charges 5 142 (34 ) 254 operating income 803 1,033 3,039 2,391 operating income % 4.9 % 6.1 % 5.9 % 5.1 % other income (expense): gain on sale of investments - 1 - 1 investment income and other 3 18 10 37 interest expense (6 ) (9 ) (25 ) (52 ) earnings before income tax expense 800 1,043 3,024 2,377 income tax expense 172 227 574 579 effective tax rate 21.4 % 21.6 % 19.0 % 24.3 % equity in income (loss) of affiliates (2 ) - 4 - net earnings $ 626 $ 816 $ 2,454 $ 1,798 basic earnings per share $ 2.65 $ 3.15 $ 9.94 $ 6.93 diluted earnings per share $ 2.62 $ 3.10 $ 9.84 $ 6.84 weighted-average common shares outstanding: basic 236.6 259.4 246.8 259.6 diluted 239.0 263.2 249.3 263.0 best buy co., inc. condensed consolidated balance sheets ($ in millions) (unaudited and subject to reclassification) january 29, 2022 january 30, 2021 assets current assets: cash and cash equivalents $ 2,936 $ 5,494 receivables, net 1,042 1,061 merchandise inventories 5,965 5,612 other current assets 596 373 total current assets 10,539 12,540 property and equipment, net 2,250 2,260 operating lease assets 2,654 2,612 goodwill 1,384 986 other assets 677 669 total assets $ 17,504 $ 19,067 liabilities and equity current liabilities: accounts payable $ 6,803 $ 6,979 unredeemed gift card liabilities 316 317 deferred revenue 1,103 711 accrued compensation and related expenses 845 725 accrued liabilities 946 972 short-term debt - 110 current portion of operating lease liabilities 648 693 current portion of long-term debt 13 14 total current liabilities 10,674 10,521 long-term operating lease liabilities 2,061 2,012 long-term liabilities 533 694 long-term debt 1,216 1,253 equity 3,020 4,587 total liabilities and equity $ 17,504 $ 19,067 best buy co., inc. condensed consolidated statements of cash flows ($ in millions) (unaudited and subject to reclassification) twelve months ended january 29, 2022 january 30, 2021 operating activities net earnings $ 2,454 $ 1,798 adjustments to reconcile net earnings to total cash provided by operating activities: depreciation and amortization 869 839 restructuring charges (34 ) 254 stock-based compensation 141 135 deferred income taxes 14 (36 ) other, net 11 3 changes in operating assets and liabilities, net of acquired assets and liabilities: receivables 17 73 merchandise inventories (328 ) (435 ) other assets (14 ) (51 ) accounts payable (201 ) 1,676 income taxes (156 ) 173 other liabilities 479 498 total cash provided by operating activities 3,252 4,927 investing activities additions to property and equipment (737 ) (713 ) purchases of investments (233 ) (620 ) sales of investments 66 546 acquisitions, net of cash acquired (468 ) - other, net - (1 ) total cash used in investing activities (1,372 ) (788 ) financing activities repurchase of common stock (3,502 ) (312 ) issuance of common stock 29 28 dividends paid (688 ) (568 ) borrowings of debt - 1,892 repayments of debt (133 ) (1,916 ) other, net (3 ) - total cash used in financing activities (4,297 ) (876 ) effect of exchange rate changes on cash and cash equivalents (3 ) 7 increase (decrease) in cash, cash equivalents and restricted cash (2,420 ) 3,270 cash, cash equivalents and restricted cash at beginning of period 5,625 2,355 cash, cash equivalents and restricted cash at end of period $ 3,205 $ 5,625 best buy co., inc. segment information ($ in millions) (unaudited and subject to reclassification) three months ended twelve months ended domestic segment results january 29, 2022 january 30, 2021 january 29, 2022 january 30, 2021 revenue $ 14,993 $ 15,400 $ 47,830 $ 43,293 comparable sales % change (2.1 ) % 12.4 % 11.0 % 9.2 % comparable online sales % change (11.2 ) % 89.3 % (12.0 ) % 144.4 % gross profit $ 2,999 $ 3,211 $ 10,702 $ 9,720 gross profit as a % of revenue 20.0 % 20.9 % 22.4 % 22.5 % sg&a $ 2,299 $ 2,152 $ 7,946 $ 7,239 sg&a as a % of revenue 15.3 % 14.0 % 16.6 % 16.7 % operating income $ 695 $ 971 $ 2,795 $ 2,348 operating income as a % of revenue 4.6 % 6.3 % 5.8 % 5.4 % domestic segment non-gaap results1 gross profit $ 2,999 $ 3,190 $ 10,702 $ 9,699 gross profit as a % of revenue 20.0 % 20.7 % 22.4 % 22.4 % sg&a $ 2,271 $ 2,132 $ 7,853 $ 7,159 sg&a as a % of revenue 15.1 % 13.8 % 16.4 % 16.5 % operating income $ 728 $ 1,058 $ 2,849 $ 2,540 operating income as a % of revenue 4.9 % 6.9 % 6.0 % 5.9 % three months ended twelve months ended international segment results january 29, 2022 january 30, 2021 january 29, 2022 january 30, 2021 revenue $ 1,372 $ 1,537 $ 3,931 $ 3,969 comparable sales % change (3.8 ) % 14.9 % 3.3 % 15.0 % gross profit $ 314 $ 332 $ 938 $ 853 gross profit as a % of revenue 22.9 % 21.6 % 23.9 % 21.5 % sg&a $ 206 $ 216 $ 689 $ 689 sg&a as a % of revenue 15.0 % 14.1 % 17.5 % 17.4 % operating income $ 108 $ 62 $ 244 $ 43 operating income as a % of revenue 7.9 % 4.0 % 6.2 % 1.1 % international segment non-gaap results1 gross profit $ 314 $ 319 $ 932 $ 876 gross profit as a % of revenue 22.9 % 20.8 % 23.7 % 22.1 % sg&a $ 206 $ 216 $ 689 $ 689 sg&a as a % of revenue 15.0 % 14.1 % 17.5 % 17.4 % operating income $ 108 $ 103 $ 243 $ 187 operating income as a % of revenue 7.9 % 6.7 % 6.2 % 4.7 % (1) for gaap to non-gaap reconciliations, please refer to the attached supporting schedule titled reconciliation of non-gaap financial measures. best buy co., inc. revenue category summary (unaudited and subject to reclassification) revenue mix comparable sales three months ended three months ended domestic segment january 29, 2022 january 30, 2021 january 29, 2022 january 30, 2021 computing and mobile phones 42 % 43 % (6.0 ) % 16.4 % consumer electronics 34 % 32 % 2.9 % (1.3 ) % appliances 13 % 12 % 7.9 % 36.0 % entertainment 8 % 9 % (9.5 ) % 31.4 % services 3 % 4 % (14.8 ) % 4.9 % other - % - % n/a n/a total 100 % 100 % (2.1 ) % 12.4 % revenue mix comparable sales three months ended three months ended international segment january 29, 2022 january 30, 2021 january 29, 2022 january 30, 2021 computing and mobile phones 40 % 42 % (6.0 ) % 20.5 % consumer electronics 35 % 34 % (3.8 ) % 2.4 % appliances 9 % 9 % (1.2 ) % 26.8 % entertainment 10 % 10 % (6.9 ) % 59.5 % services 4 % 3 % 23.0 % (18.0 ) % other 2 % 2 % 2.8 % 6.5 % total 100 % 100 % (3.8 ) % 14.9 % best buy co., inc. reconciliation of non-gaap financial measures ($ in millions, except per share amounts) (unaudited and subject to reclassification) the following information provides reconciliations of the most comparable financial measures presented in accordance with accounting principles generally accepted in the u.s. (gaap financial measures) to presented non-gaap financial measures. the company believes that non-gaap financial measures, when reviewed in conjunction with gaap financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. for these reasons, internal management reporting also includes non-gaap financial measures. generally, presented non-gaap financial measures include adjustments for items such as restructuring charges, price-fixing settlements, goodwill impairments, gains and losses on investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items. in addition, certain other items may be excluded from non-gaap financial measures when the company believes this provides greater clarity to management and investors. these non-gaap financial measures should be considered in addition to, and not superior to or as a substitute for, the gaap financial measures presented in this earnings release and the company’s financial statements and other publicly filed reports. non-gaap financial measures as presented herein may not be comparable to similarly titled measures used by other companies. three months ended three months ended january 29, 2022 january 30, 2021 domestic international consolidated domestic international consolidated gross profit $ 2,999 $ 314 $ 3,313 $ 3,211 $ 332 $ 3,543 % of revenue 20.0 % 22.9 % 20.2 % 20.9 % 21.6 % 20.9 % restructuring - inventory markdowns1 - - - - (13 ) (13 ) price-fixing settlement2 - - - (21 ) - (21 ) non-gaap gross profit $ 2,999 $ 314 $ 3,313 $ 3,190 $ 319 $ 3,509 % of revenue 20.0 % 22.9 % 20.2 % 20.7 % 20.8 % 20.7 % sg&a $ 2,299 $ 206 $ 2,505 $ 2,152 $ 216 $ 2,368 % of revenue 15.3 % 15.0 % 15.3 % 14.0 % 14.1 % 14.0 % intangible asset amortization3 (22 ) - (22 ) (20 ) - (20 ) acquisition-related transaction costs3 (6 ) - (6 ) - - - non-gaap sg&a $ 2,271 $ 206 $ 2,477 $ 2,132 $ 216 $ 2,348 % of revenue 15.1 % 15.0 % 15.1 % 13.8 % 14.1 % 13.9 % operating income $ 695 $ 108 $ 803 $ 971 $ 62 $ 1,033 % of revenue 4.6 % 7.9 % 4.9 % 6.3 % 4.0 % 6.1 % restructuring - inventory markdowns1 - - - - (13 ) (13 ) price-fixing settlement2 - - - (21 ) - (21 ) intangible asset amortization3 22 - 22 20 - 20 acquisition-related transaction costs3 6 - 6 - - - restructuring charges4 5 - 5 88 54 142 non-gaap operating income $ 728 $ 108 $ 836 $ 1,058 $ 103 $ 1,161 % of revenue 4.9 % 7.9 % 5.1 % 6.9 % 6.7 % 6.9 % effective tax rate 21.4 % 21.6 % price-fixing settlement2 - % 0.2 % intangible asset amortization3 - % (0.1 ) % restructuring charges4 - % (0.8 ) % gain on investments, net - % 0.1 % non-gaap effective tax rate 21.4 % 21.0 % three months ended three months ended january 29, 2022 january 30, 2021 pretax earnings net of tax5 per share pretax earnings net of tax5 per share diluted eps $ 2.62 $ 3.10 restructuring - inventory markdowns1 $ - $ - - $ (13 ) $ (13 ) (0.05 ) price-fixing settlement2 - - - (21 ) (15 ) (0.06 ) intangible asset amortization3 22 18 0.08 20 15 0.06 acquisition-related transaction costs3 6 5 0.02 - - - restructuring charges4 5 3 0.01 142 121 0.46 gain on investments, net - - - (12 ) (9 ) (0.03 ) non-gaap diluted eps $ 2.73 $ 3.48 twelve months ended twelve months ended january 29, 2022 january 30, 2021 domestic international consolidated domestic international consolidated gross profit $ 10,702 $ 938 $ 11,640 $ 9,720 $ 853 $ 10,573 % of revenue 22.4 % 23.9 % 22.5 % 22.5 % 21.5 % 22.4 % restructuring - inventory markdowns1 - (6 ) (6 ) - 23 23 price-fixing settlement2 - - - (21 ) - (21 ) non-gaap gross profit $ 10,702 $ 932 $ 11,634 $ 9,699 $ 876 $ 10,575 % of revenue 22.4 % 23.7 % 22.5 % 22.4 % 22.1 % 22.4 % sg&a $ 7,946 $ 689 $ 8,635 $ 7,239 $ 689 $ 7,928 % of revenue 16.6 % 17.5 % 16.7 % 16.7 % 17.4 % 16.8 % intangible asset amortization3 (82 ) - (82 ) (80 ) - (80 ) acquisition-related transaction costs3 (11 ) - (11 ) - - - non-gaap sg&a $ 7,853 $ 689 $ 8,542 $ 7,159 $ 689 $ 7,848 % of revenue 16.4 % 17.5 % 16.5 % 16.5 % 17.4 % 16.6 % operating income $ 2,795 $ 244 $ 3,039 $ 2,348 $ 43 $ 2,391 % of revenue 5.8 % 6.2 % 5.9 % 5.4 % 1.1 % 5.1 % restructuring - inventory markdowns1 - (6 ) (6 ) - 23 23 price-fixing settlement2 - - - (21 ) - (21 ) intangible asset amortization3 82 - 82 80 - 80 acquisition-related transaction costs3 11 - 11 - - - restructuring charges4 (39 ) 5 (34 ) 133 121 254 non-gaap operating income $ 2,849 $ 243 $ 3,092 $ 2,540 $ 187 $ 2,727 % of revenue 6.0 % 6.2 % 6.0 % 5.9 % 4.7 % 5.8 % effective tax rate 19.0 % 24.3 % price-fixing settlement2 - % 0.2 % intangible asset amortization3 0.1 % (0.6 ) % restructuring charges4 (0.1 ) % (1.0 ) % gain on investments, net - % 0.1 % non-gaap effective tax rate 19.0 % 23.0 % twelve months ended twelve months ended january 29, 2022 january 30, 2021 pretax earnings net of tax5 per share pretax earnings net of tax5 per share diluted eps $ 9.84 $ 6.84 restructuring - inventory markdowns1 $ (6 ) $ (6 ) (0.02 ) $ 23 $ 23 0.09 price-fixing settlement2 - - - (21 ) (15 ) (0.06 ) intangible asset amortization3 82 62 0.25 80 60 0.23 acquisition-related transaction costs3 11 10 0.04 - - - restructuring charges4 (34 ) (24 ) (0.10 ) 254 222 0.84 gain on investments, net - - - (12 ) (9 ) (0.03 ) non-gaap diluted eps $ 10.01 $ 7.91 (1) represents inventory markdown adjustments recorded within cost of sales associated with the decision to exit operations in mexico. (2) represents a price-fixing litigation settlement received in relation to products purchased and sold in prior fiscal years. (3) represents charges associated with acquisitions, including: (1) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and developed technology; and (2) acquisition-related transaction and due diligence costs, primarily comprised of professional fees. (4) represents charges and subsequent adjustments primarily related to actions taken in the domestic segment to better align the company’s organizational structure with its strategic focus and the decision to exit operations in mexico in the international segment. (5) the non-gaap adjustments primarily relate to the u.s. and mexico. as such, the income tax charge is generally calculated using the statutory tax rate of 24.5% for u.s. non-gaap items for all periods presented. there is no income tax charge for mexico non-gaap items and a minimal amount of u.s. non-gaap items, as there was no tax benefit recognized on these expenses in the calculation of gaap income tax expense. return on assets and non-gaap return on investment the tables below provide calculations of return on assets ("roa") (gaap financial measure) and non-gaap return on investment (“roi”) (non-gaap financial measure) for the periods presented. the company believes roa is the most directly comparable financial measure to roi. non-gaap roi is defined as non-gaap adjusted operating income after tax divided by average invested operating assets. all periods presented below apply this methodology consistently. the company believes non-gaap roi is a meaningful metric for investors to evaluate capital efficiency because it measures how key assets are deployed by adjusting operating income and total assets for the items noted below. this method of determining non-gaap roi may differ from other companies' methods and therefore may not be comparable to those used by other companies. return on assets ("roa") january 29, 20221 january 30, 20211 net earnings $ 2,454 $ 1,798 total assets 18,743 18,408 roa 13.1 % 9.8 % non-gaap return on investment ("roi") january 29, 20221 january 30, 20211 numerator operating income $ 3,039 $ 2,391 add: non-gaap operating income adjustments2 53 336 add: operating lease interest3 108 111 less: income taxes4 (784 ) (695 ) add: depreciation 787 759 add: operating lease amortization5 657 665 adjusted operating income after tax $ 3,860 $ 3,567 denominator total assets $ 18,743 $ 18,408 less: excess cash6 (3,055 ) (4,071 ) add: accumulated depreciation and amortization7 6,957 7,114 less: adjusted current liabilities8 (10,122 ) (9,189 ) average invested operating assets $ 12,523 $ 12,262 non-gaap roi 30.8 % 29.1 % income statement accounts represent the activity for the trailing 12 months ended as of each of the balance sheet dates. balance sheet accounts represent the average account balances for the trailing 12 months ended as of each of the balance sheet dates. non-gaap operating income adjustments include continuing operations adjustments for restructuring charges, intangible asset amortization, acquisition-related transaction costs and price-fixing settlements. additional details regarding these adjustments are included in the reconciliation of non-gaap financial measures schedule in this earnings release. operating lease interest represents the add-back to operating income to approximate the total interest expense that the company would incur if its operating leases were owned and financed by debt. the add-back is approximated by multiplying average operating lease assets by 4%, which approximates the interest rate on the company’s operating lease liabilities. income taxes are approximated by using a blended statutory rate at the enterprise level based on statutory rates from the countries in which the company does business, which primarily consists of the u.s. with a statutory rate of 24.5% for the periods presented. operating lease amortization represents operating lease cost less operating lease interest. operating lease cost includes short-term leases, which are immaterial, and excludes variable lease costs as these costs are not included in the operating lease asset balance. excess cash represents the amount of cash, cash equivalents and short-term investments greater than $1 billion, which approximates the amount of cash the company believes is necessary to run the business and may fluctuate over time. accumulated depreciation and amortization represents accumulated depreciation related to property and equipment and accumulated amortization related to definite-lived intangible assets. adjusted current liabilities represent total current liabilities less short-term debt and the current portions of operating lease liabilities and long-term debt. free cash flow ($ in millions) (unaudited and subject to reclassification) the table below provides a reconciliation of cash provided by operating activities (gaap financial measure) to free cash flow (non-gaap financial measure) for the periods presented. the company believes free cash flow, which measures our ability to generate additional cash from our ongoing business operations, is a relevant supplementary measure for investors in evaluating the company’s financial performance. in addition, it is one factor used by the company in determining the amount of cash available for acquisitions, dividends, share repurchases and other discretionary investments. this method of determining free cash flow may differ from other companies' methods and therefore may not be comparable to those used by other companies. twelve months ended january 29, 2022 january 30, 2021 cash provided by operating activities $ 3,252 $ 4,927 less: additions to property and equipment, net (737 ) (713 ) free cash flow $ 2,515 $ 4,214
