[0] Best Buy Reports Record Results - 4th Consecutive Year of Double-Digit Profit Gains; Annual Earnings Increase 14% on Higher Gross Margin.Business Editors MINNEAPOLIS--(BUSINESS WIRE)--April 3, 2001 Best Buy Co., Inc. (NYSE NYSE See: New York Stock Exchange :BBY BBY Best Buy (stock symbol) BBY Before Battle of Yavin (Star Wars) BBY BeBeyond (Chinese online community) ):
Quarter Ended Year Ended
----------------- -------------------
Results ($ in billions,
except per-share amounts) 3/3/01 2/26/00 3/3/01 2/26/00
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Total Sales $ 5.462 $ 4.315 $ 15.327 $ 12.494
Total Sales Increase 27% 25% 23% 24%
Comparable Store Sales
Increase(a) 1.8% 11.0% 4.9% 11.1%
Gross Margin 20.4% 18.8% 20.0% 19.2%
Diluted EPS $ 0.89 $ 0.78 $ 1.86 $ 1.63
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(a) Includes Best Buy stores only.
Best Buy Co., Inc. (NYSE:BBY) today reported record financial results for the fourth quarter and fiscal 2001 year, ended March 3, 2001. "In view of the challenging economic environment, our ability to report record profits and exceed earnings estimates is particularly gratifying grat·i·fy tr.v. grat·i·fied, grat·i·fy·ing, grat·i·fies 1. To please or satisfy: His achievement gratified his father. See Synonyms at please. 2. ," said Founder, Chairman & CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Richard M. Schulze Richard M. "Dick" Schulze is the Founder and Chairman of Best Buy. He was born and raised in St. Paul, Minnesota where he graduated from Central High School, afterwards attending Marquette University (he did not graduate[1]). He subsequently spent time in the U.S. . "Our sales growth of more than 20 percent, the increased gross margin rate along with the excellent performance by our employees produced these outstanding results. Best Buy reported a 16-percent increase in net earnings to $189.7 million, or 89 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the fourth quarter of fiscal 2001, compared with $163.8 million, or 78 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , for the comparable quarter last year. Net earnings for fiscal 2001 increased 14 percent to $395.8 million, or $1.86 per diluted share, compared with $347.1 million, or $1.63 per share, for the same period last year. Both the quarter and full-year results include dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. of 4 cents per share related to the Company's acquisition and integration of Musicland Stores in the fourth quarter. In addition, certain investments in e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. companies were written off in the quarter, which reduced earnings by another 4 cents per share. Best Buy earnings grew 26 percent in the quarter and 19 percent in the year, excluding the impact of the Musicland acquisition and the write-offs. Sales for the fourth quarter increased 27 percent to $5.46 billion from $4.31 billion a year ago. Fiscal 2001 sales were $15.33 billion, a 23-percent increase, compared with $12.49 billion last year. Sales for the quarter and the fiscal year benefited from an extra week as compared to the same periods a year ago. Comparable store sales increased 1.8 percent for the quarter and 4.9 percent for the fiscal year on top of 11.0-percent increases during the same periods last year. Schulze added, "Consumers are embracing the expanding breadth of new digital technologies and are showing strong preference for Best Buy's store format, product assortments and shopping experience." Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. margin was 5.4 percent of sales for the quarter and 3.9 percent for the year compared to 5.9 percent and 4.3 percent, respectively, last year. A combination of slowing comparable store sales growth, the launch of BestBuy.com, 15 additional new-store openings (62 new stores versus 47 the prior year) and the acquisition of Musicland accounted for the decline in reported operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . Operating income margin was 6.0 percent of sales for the quarter and 4.1 percent for the year excluding the impact of the Musicland acquisition and the investment write-offs. Gross profit margins Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. were 20.4 percent and 20.0 percent of sales for the quarter and full year, respectively, representing improvements of 1.6 percent and 0.8 percent of sales over last year's comparable periods. Increased gross profit margins were principally the result of a higher margin sales mix sales mix See product mix. and improved product margins. The addition of Musicland added 0.4 percent to the Company's gross margin rate in the quarter and 0.2 percent for the year. Average Best Buy store inventories declined 3 percent as of the fiscal year end. Selling, general and administrative expenses (SG&A) were 15.0% and 16.0% of sales for the quarter and fiscal year, respectively, versus expense ratios of 12.9% and 14.8% for last year's comparable periods. Contributing to the higher SG&A spending for the year were the Company's launch of BestBuy.com and 15 additional new stores, in particular the Company's grand opening in the New York metropolitan area New York–Northern New Jersey–Long Island is the most populous metropolitan area in the United States and the third most populous in the world, after Tokyo and Mexico City. . In addition, the more moderate comparable store sales growth in fiscal 2001, as compared to the last three years, contributed to the increase in the SG&A rate. The write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of investments in other e-commerce businesses also added approximately $15 million to SG&A expenses. The inclusion of Musicland results added 0.7 percent to the SG&A rate in the quarter and 0.2 percent for the year. Net interest income was $12.0 million in the fourth quarter compared to $10.2 million for the same period last year and $37.2 million for the fiscal year compared to $23.3 million last year. The annual improvement in net interest income of nearly $14 million resulted from higher levels of cash balances. During the fiscal year Best Buy opened 62 new stores, and relocated re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. or expanded 10 stores. The Company plans to grand open approximately 60 stores in the coming fiscal year, including approximately 20 of its smaller market stores (which average 30,000 square feet.) In addition, the Company plans to remodel re·mod·el tr.v. re·mod·eled also re·mod·elled, re·mod·el·ing also re·mod·el·ling, re·mod·els also re·mod·els To make over in structure or style; reconstruct. or relocate re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. approximately seven stores. Schulze said, "We expect comparable store sales at Best Buy stores to increase modestly in the coming fiscal year, notwithstanding the fact that consumer sentiment is expected to remain soft, particularly in the first half. We expect moderate growth in gross profit margins as a result of the continued expansion of the digital product cycle and a more profitable assortment assortment /as·sort·ment/ (ah-sort´ment) the random distribution of nonhomologous chromosomes to daughter cells in metaphase of the first meiotic division. as·sort·ment n. . Given those assumptions, we expect our annual earnings to grow approximately 16 to 18 percent, resulting in earnings per share of $2.15 to $2.20." He added, "I remain confident regarding our prospects for fiscal 2002 and beyond. We will continue to focus on profitability through market share growth. In addition, our Musicland, Magnolia Magnolia, city, United States Magnolia (măgnō`lyə), city (1990 pop. 11,151), seat of Columbia co., SW Ark.; inc. 1855. Its oil industry has been important since 1938. Hi-Fi and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. expansion efforts are moving ahead as planned, positioning Best Buy for long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. success." The Company will conduct a conference call for analysts, institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. and news media at 10 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy today. Individuals may access the live call via the Internet on the Company's Web site at www.BestBuy.com by clicking on the "About Us" link and then selecting the "Investor Relations Investor relations The process by which the corporation communicates with its investors. " link. The call will be posted on the "Investor's Overview." Following the live event, the call will be posted on the Audio Archive page of Best Buy's Web site and may be accessed at any time. Statements made in this news release, other than those concerning historical financial information, should be considered forward-looking and subject to various risks and uncertainties. Such forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. are based on management's beliefs and assumptions regarding information currently available, and are made pursuant to the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The Company's actual results could differ materially from those expressed in the forward-looking statements. Factors that could cause results to vary include, among others, those expressed in the Company's filings with the Securities and Exchange Commission. The Company has no obligation to publicly update or revise any of the forward-looking statements that may be in this news release. Best Buy's quarterly financial results and news releases can be found on the Internet at the Company's Web site, www.BestBuy.com, or accessed via Business Wire's Web site at www.businesswire.com. About Best Buy Co., Inc. Minneapolis-based Best Buy Co., Inc. (NYSE:BBY) is the nation's number one specialty retailer of consumer electronics, personal computers, entertainment software and appliances. The Company operates retail stores and commercial web sites under the names: Best Buy (BestBuy.com), Magnolia Hi-Fi (MagnoliaHiFi.com), Media Play (MediaPlay.com), On Cue (OnCue.com), Sam Goody Sam Goody is a music and entertainment retailer in the United States and formerly in the United Kingdom. It is owned and operated by Musicland, which itself is owned by former rival Trans World Entertainment which also runs Suncoast Motion Picture Company and, until January 2006, (SamGoody.com), and Suncoast (Suncoast.com). The Company reaches consumers through more than 1,700 retail stores nationwide, in Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. and in the U.S. Virgin Islands.
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share amounts)
THREE MONTHS ENDED(a) FISCAL YEAR ENDED
March 3, Feb. 26, March 3, Feb. 26,
2001(aa) 2000 2001(aa) 2000
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Revenues $ 5,461,583 $ 4,314,615 $15,326,552 $12,494,023
Cost of goods sold 4,345,869 3,504,075 12,267,459 10,100,594
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Gross profit 1,115,714 810,540 3,059,093 2,393,429
Gross profit percent 20.4 % 18.8 % 20.0 % 19.2 %
Selling, general &
administrative
expenses 820,287 555,176 2,454,785 1,854,170
SG&A percent 15.0 % 12.9 % 16.0 % 14.8 %
----------- ----------- ----------- -----------
Operating income 295,427 255,364 604,308 539,259
Net interest income 11,983 10,171 37,171 23,311
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Earnings before income
tax expense 307,410 265,535 641,479 562,570
Income tax expense 117,740 101,730 245,640 215,500
Effective tax rate 38.3 % 38.3 % 38.3 % 38.3 %
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Net earnings $ 189,670 $ 163,805 $ 395,839 $ 347,070
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Net earnings per share
Basic $ 0.91 $ 0.81 $ 1.92 $ 1.70
Diluted $ 0.89 $ 0.78 $ 1.86 $ 1.63
Weighted number of
shares (000's)
Basic 207,875 202,919 206,699 204,194
Diluted 212,477 210,373 212,658 212,580
(a) Quarterly data is unaudited.
(aa) Three months and fiscal year ended March 3, 2001, contained 14
weeks and 53 weeks, respectively. The comparable periods in the
prior year contained 13 weeks and 52 weeks.
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
March 3, Feb. 26,
2001 2000
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ASSETS
Current assets
Cash & cash equivalents $ 746,879 $ 750,723
Receivables 209,031 189,301
Recoverable costs 103,846 72,770
Merchandise inventories 1,766,934 1,183,681
Other current assets 101,973 41,985
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Total current assets 2,928,663 2,238,460
Net property & equipment 1,444,172 698,084
Goodwill 385,355 --
Other assets 81,397 58,798
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TOTAL ASSETS $4,839,587 $2,995,342
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LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $1,772,722 $1,313,940
Accrued compensation expenses 154,159 102,065
Accrued liabilities 545,590 287,888
Accrued income taxes 127,287 65,366
Current portion of long-term debt 114,940 15,790
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Total current liabilities 2,714,698 1,785,049
Long-term liabilities 121,952 99,448
Long-term debt 181,009 14,860
Shareholders' equity 1,821,928 1,095,985
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TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $4,839,587 $2,995,342
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