Best Buy's Fourth-Quarter Revenue Rises 9% to $9.2 Billion; Comparable Store Sales Increase By 2.8%.MINNEAPOLIS -- Company Expects Fourth Quarter Earnings at the Low End of Its Range or Slightly Below
Fourth-Quarter Revenue Summary - Fiscal 2005
(U.S. dollars in billions)
----------------------------------------------------------------------
Comparable Store
Revenue Revenue Gain Sales Gain(1)
----------------------------------------------------------------------
Total Company $9.2 9% 2.8%
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Domestic $8.2 8% 3.1%
----------------------------------------------------------------------
International $1.0 20%(2) 0.5%
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(1) Comprised of revenue at stores and Web sites operating for at
least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales
calculation until at least 14 full months after reopening. The
calculation of the comparable store sales gain excludes the effect of
fluctuations in foreign currency exchange rates.
(2) The effect of fluctuations in foreign currency exchange rates
accounted for approximately two-fifths of the international segment's
revenue gain for the fourth quarter of fiscal 2005.
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) ) today reported that revenue rose 9 percent to $9.2 billion for the fiscal fourth quarter ended Feb. 26, 2005, compared with $8.4 billion for the fourth quarter of the prior fiscal year. The opening of 78 new stores in the past 12 months and a comparable store sales gain of 2.8 percent drove the revenue increase. Increased sales at the company's 67 customer centricity Customer centricity refers to the orientation of a company to the needs and behaviours of its customers, rather than internal drivers (such as the quest for short term profit). segmented stores led the comparable store sales gain. The product categories at Best Buy where consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. grew fastest during the quarter included digital TVs, MP3 players A digital music player that supports the MP3 format, which was the audio format that started a revolution in online music downloads and distribution. All portable music players, the iPod being the most popular, support MP3 along with one or more other audio formats. , notebook computers A laptop computer that weighs in a range from five to seven pounds. The term originated when laptops were routinely more than 10 pounds, and those that became lighter were placed in a special "notebook" category. In practice, notebook computer and laptop computer are synonymous. , digital cameras, DVDs and appliances. U.S. Best Buy stores reported a fourth-quarter comparable store sales gain of 3.1 percent, on top of a comparable store sales gain of 9.9 percent for the prior year's quarter, reflecting an increase in the conversion rate (the percentage of shoppers who leave the store with a purchase) and a higher average ticket, which offset a modest decrease in customer traffic. The company's international stores, comprised of Future Shop and Best Buy stores in Canada, had a modest comparable store sales gain, up 0.5 percent, despite a modest decline in the average ticket. Magnolia Audio Video Magnolia Audio Video is a specialty consumer electronics retailer in the United States. It currently operates 13 standalone stores throughout Washington, Oregon, and California. stores - which sell high-end products through 20 stores in California, Oregon and Washington - posted revenue of approximately $50 million and a comparable store sales gain for the quarter of 1.8 percent, reflecting a modest improvement in the average ticket during the last two months of the quarter. The company previously reported revenue for the fiscal month of December of $5.1 billion, including a comparable store sales gain of 2.5 percent. "Consumers perked up Adj. 1. perked up - made or become more cheerful or lively; "his attention made her feel all perked up" enlivened - made sprightly or cheerful as we closed the fiscal year, and our solid revenue gain allowed us to continue growing our market share," said Brad Anderson, vice chairman and 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. of Best Buy. "We drove revenue gains by focusing on customers' unmet un·met adj. Not satisfied or fulfilled: unmet demands. needs and offering tailored solutions. As a result, more of our shoppers made purchases. Our measures also show that employees are more engaged with their work than ever before, and we believe that customers are noticing the difference." Anderson added, "Overall, we are pleased with our comparable store sales gain for the fiscal year of 4.3 percent, which was on top of the 7.1-percent increase of the prior year." Fiscal 2005 Revenue Increases by 12 Percent, Including 4.3% Comparable Store Sales Gain
Fiscal 2005 Revenue Summary
(U.S. dollars in billions)
----------------------------------------------------------------------
Comparable Store
Revenue Revenue Gain Sales Gain(1)
----------------------------------------------------------------------
Continuing Operations $27.4 12% 4.3%
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Domestic $24.6 11% 4.4%
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International $2.8 21%(2) 3.3%
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Note: All periods presented reflect the classification of Musicland's
financial results as discontinued operations.
(1) Comprised of revenue at stores and Web sites operating for at
least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales
calculation until at least 14 full months after reopening. The
calculation of the comparable store sales gain excludes the effect of
fluctuations in foreign currency exchange rates.
(2) The effect of fluctuations in foreign currency exchange rates
accounted for approximately one-third of the segment's revenue gain
for fiscal 2005.
For the 2005 fiscal year, total revenue rose 12 percent to $27.4 billion, compared with $24.5 billion for fiscal 2004, reflecting the opening of new stores and a comparable store sales gain of 4.3 percent. For the domestic segment, U.S. Best Buy stores had a fiscal 2005 comparable store sales gain of 4.4 percent, and Magnolia Audio Video had a fiscal 2005 comparable store sales gain of 4.5 percent. For the international segment, including Future Shop and Best Buy stores in Canada, the company reported a comparable store sales gain of 3.3 percent. Company Narrows Earnings Guidance Based on the revenue results for the quarter, Best Buy anticipates that its fourth-quarter earnings will be at the low end of, or slightly below, its range of $1.56 to $1.66 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. The new range reflected the quarter's revenue results, a more promotional environment and an increase in inventory markdowns. This new guidance excluded the impact of the resolution of certain tax matters and adjustments in accounting practices described below. The mean analyst estimate was $1.61 per diluted share for the fourth quarter. For the first three quarters, the company had earnings from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $1.24 per diluted share; accordingly, the company expects its earnings from continuing operations for fiscal 2005 to finish at the low end of, or slightly below, its range of $2.80 to $2.90 per diluted share, excluding the impact of the resolution of certain tax matters and adjustments in certain accounting practices. "We saw several reasons for optimism in the fourth quarter," said Darren Jackson Darren Jackson (born 25 July 1966 in Edinburgh) is a former Scottish professional footballer. Career Jackson played for Meadowbank Thistle, Newcastle United, Dundee United, Hibernian, Celtic, Coventry City, Hearts, Livingston, St. Johnstone and Clydebank. , executive vice president - finance and CFO See Chief Financial Officer. of Best Buy. "The customer centricity segmented stores collectively posted a high-single-digit comparable store sales gain for the quarter. Gift-card and Reward Zone redemptions supported our revenue growth for the quarter, despite the challenging 9.7 percent comparable store sales gain recorded in the fourth quarter of last year. We believe that our total market share improved during the quarter, to approximately 17 percent. We remain optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that we can drive more customer traffic in the coming year, thanks to improvements in our business, higher employee engagement, and the conversion of more stores to our customer-centric operating model Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. . From the product side, we anticipate continued growth in digital TVs, MP3 players, notebook computers and services, which will be partially offset by declines in our analog businesses." Best Buy is expected to provide initial earnings guidance for the fiscal 2006 first quarter and year on March 30, 2005, the same time as it reports its financial results for the fourth quarter. Company Resolves Certain Tax Matters and Adjusts Accounting Practices For its fiscal 2005 fourth quarter, the company expects to reduce its tax contingencies reserve based on the anticipated resolution of certain federal and state income tax matters. The reduction includes a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. ruling from the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. and the completion of IRS and certain state tax audits for fiscal 2000 through fiscal 2002. The one-time reduction in the tax contingencies reserve is expected to increase fourth-quarter and fiscal 2005 net earnings by a significant amount. During its fiscal fourth quarter, Best Buy adopted new accounting guidance (Emerging Issues Task Force No. 04-08) that requires it to include the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. in its computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. of diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of , regardless of whether the criteria for conversion have been met. The company believes that the adoption of the new accounting guidance will reduce diluted earnings per share by approximately 2 cents and 3 cents for the fourth quarter and fiscal year, respectively. Based on recent developments in the accounting practices of other major retailers, the company is reviewing its current lease accounting practices. The company has been recording rent expense over the initial lease term on a straight-line basis, beginning with the lease inception date, which generally coincided with the first rent payment. The company's review is expected to result in an adjustment that accelerates the recognition of Best Buy's rent expense. As a result, the company expects to reflect a one-time rent expense adjustment in its fourth-quarter fiscal 2005 financial results. However, cash flows and the timing of rent payments are not affected. In addition, Best Buy does not anticipate changing its leasehold improvement Leasehold Improvement Improvements on a leased asset that increase the value of the asset. Notes: A leasehold improvement is classified as an asset that must be depreciated over time. depreciation practices, as the company's practice has been to amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. its leasehold improvements over the shorter of the initial lease term or the useful life of the asset. The company's revised earnings guidance for both the fourth quarter and fiscal year excludes the effect of the resolution of certain tax matters as well as the impact of adjustments in accounting practices. The impact of the resolution of certain tax matters and the accounting adjustments are subject to review by Best Buy's external auditor The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. as part of the annual audit procedures. Consumer Electronics Product Group Drives the Comparable Store Sales Gain As shown below, Best Buy's revenue mix for the fourth quarter and fiscal 2005 reflected the relative out-performance of the consumer electronics product group.
Product Revenue Mix Summary - Continuing Operations
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Fourth Quarter Ended Year Ended
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Product Group Feb. 26, 2005 Feb. 28, 2004 Feb. 26, 2005 Feb. 28, 2004
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Consumer
Electronics 41% 39% 39% 38%
----------------------------------------------------------------------
Home Office 32% 32% 34% 35%
----------------------------------------------------------------------
Entertainment
Software 23% 25% 21% 22%
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Appliances 4% 4% 6% 5%
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Total 100% 100% 100% 100%
----------------------------------------------------------------------
Note: All periods presented reflect the reclassification of MP3
players into the consumer electronics product group from the home
office product group.
The consumer electronics product group - which comprised 41 percent of revenue for the fourth quarter - had the largest impact on the company's comparable store sales gain. The consumer electronics product group had a high-single-digit comparable store sales gain for the fourth quarter. Comparable store sales of digital televisions increased by the strong double digits Double Digits was a pricing game on the American television game show, The Price Is Right. Played from April 20, 1973 through May 18, 1973's show, it was played for a car and used small prizes. , benefiting from expanded assortments, attractive pricing and effective financing promotions. Comparable store sales of televisions rose by the high single digits, reflecting strong results from digital TVs partially offset by a double-digit decline in analog TVs as more consumers opted for improved TV displays. The company estimated that digital TVs represented approximately 70 percent of its TV revenue mix for the fourth quarter. The continued triple-digit gains in MP3 players reflected consumer interest in portable entertainment and new products. New merchandise displays supported a comparable store sales gain in the high teens for digital cameras for the fourth quarter. The company enjoyed a triple-digit gain in satellite radio hardware and subscriptions. Partially offsetting the gains were significant comparable store sales declines for DVD players A stand-alone device that plays DVDs. It contains a DVD drive and the electronics to decode the digital video. The device may play only manufactured DVDs, or it may be able to play DVD-R, DVD-RW and DVD+RW discs. DVD players are cabled to a TV or home theater system for display. and certain audio products. The company expects digital TV revenue to continue to increase in its revenue mix in fiscal 2006, thanks in part to improved supply and more affordable pricing. The strongest-performing product group for the fourth quarter was appliances, which posted a comparable store sales gain in the low double digits. This product group represented 4 percent of the revenue mix for the fourth quarter. Comparable store sales of major appliances A major appliance is usually defined as a large machine which accomplishes some routine housekeeping task, which includes purposes such as cooking, food preservation, or cleaning, whether in a household, institutional, commercial or industrial setting. rose by the mid teens, reflecting new product introductions and effective promotions that garnered continued market share gains in refrigeration refrigeration, process for drawing heat from substances to lower their temperature, often for purposes of preservation. Refrigeration in its modern, portable form also depends on insulating materials that are thin yet effective. products. In fiscal 2006, the company plans to continue to roll out its improved appliances labor model and expanded appliances assortments; currently, approximately 150 U.S. Best Buy stores are participating in the pilot program. The company also is planning to install new displays at all U.S. Best Buy stores' appliances departments by summer, featuring new lifestyle vignettes. The home office product group - which comprised 32 percent of revenue - showed a comparable store sales gain in the low single digits for the quarter, led by a gain from notebook computers in the high teens. Consumers responded to expanded assortments and improved displays of notebook computers. Strength in accessories, printers and computer services Data processing (timesharing, batch processing), software development and consulting services. See service bureau, SaaS and ASP. - supported by Geek Squad The Geek Squad is a subsidiary of the Best Buy Company and is based in Richfield, Minnesota [1]. Originally founded in 1994 by Robert Stephens, it offers various computer-related services and accessories for residential and commercial clients. agents at all Best Buy stores - contributed to the product group's results. Comparable store sales of desktop computers declined by the mid single digits compared with last year's fourth quarter, reflecting consumers' continued migration to notebook computers. The company anticipates nearly doubling its ranks of Geek Squad agents in fiscal 2006 and plans to expand its Geek Squad services to reach small business customers in select markets. In addition, the company said it expects growing consumer interest in media center PCs in the coming year. A low-single-digit comparable store sales decline for the entertainment software product group was driven by decreased revenue from video gaming video gaming n. 1. Gambling by means of interactive games of chance played on a video screen. 2. The playing of video games. and CDs, offset by a gain in DVDs. The high-single-digit comparable store sales gain in DVDs reflected a better in-stock position and successful new releases. During the quarter, the company's set of four Elton John Sir Elton Hercules[1] John CBE[2] (born Reginald Kenneth Dwight on 25 March, 1947) is a five-time Grammy and one-time Academy Award-winning English pop/rock singer, composer and pianist. DVDs - which are exclusive to Best Buy and Future Shop stores for a limited time - attained 12 times platinum status (certified See certification. by the Recording Industry Association of America), establishing the release as the legendary artist's best-performing DVD DVD: see digital versatile disc. DVD in full digital video disc or digital versatile disc Type of optical disc. The DVD represents the second generation of compact-disc (CD) technology. . Digital music subscriptions also increased, yet the company had a low-double-digit decrease in comparable store sales of CDs. Comparable store sales of video gaming declined by the high single digits, reflecting hardware shortages as well as softness in video game software related to the current product lifecycle Product lifecycle or product life cycle is the course of a product's sales and profits over time. The five stages of each product lifecycle are product development, introduction, growth, maturity and decline. . The entertainment software product group represented 23 percent of the company's revenue mix in the fourth quarter. In fiscal 2006, the company anticipates launching tailored CD and DVD assortments in many of its U.S. Best Buy stores, shifting a portion of its CD selling space to DVDs, and expanding its digital entertainment offerings. The video game product category in fiscal 2006 is expected to benefit from the launch of Playstation Portable in the spring, the launch of XBox2 next winter and improved supplies of existing video game hardware platforms Each hardware platform, or CPU family, has a unique machine language. All software presented to the computer for execution must be in the binary coded machine language of that CPU. Following is a list of the major hardware platforms in existence today. See platform. . The company opened 11 stores during its fiscal fourth quarter and closed two unprofitable Magnolia Audio Video stores (which had a total of 35,000 square feet). The new stores included nine U.S. Best Buy stores, including three of its 45,000-square-foot stores, two of its 30,000-square-foot stores and four of its 20,000-square-foot stores. It also opened two Best Buy stores in Canada averaging 27,000 square feet, as part of the company's dual branding strategy. The company operated 668 U.S. Best Buy stores, 20 Magnolia Audio Video stores, 114 Future Shop stores and 30 Canadian Best Buy stores at the end of the fiscal fourth quarter. (For updated square footage and store concept information, as well as Best Buy's fiscal 2006 new store opening plans announced in January, please refer to www.BestBuy.com and click on "For Our Investors.") Best Buy is scheduled to release its fourth-quarter and fiscal year earnings before the stock market opens on Wednesday, March 30. Its earnings conference call is scheduled to begin at 10 a.m. E.S.T. on March 30 and is expected to be available on its Web site both live and after the call, at www.BestBuy.com. To access the call, simply click on "For Our Investors." Forward-Looking and Cautionary Statements: This news release contains 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. that reflect management's current views and estimates regarding future market conditions, company performance and financial results, 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," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning. These statements involve a number of risks and uncertainties 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. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: general economic conditions, acquisitions and development of new businesses, product availability, sales volumes, profit margins, weather, foreign currency fluctuation Fluctuation A price or interest rate change. , availability of suitable real estate locations, our ability to react to a disaster recovery situation, and the impact of labor markets labor market A place where labor is exchanged for wages; an LM is defined by geography, education and technical expertise, occupation, licensure or certification requirements, and job experience and new product introductions on our overall profitability. A further list and description of these risks, uncertainties and other matters can be found in the company's filings with the Securities and Exchange Commission. Best Buy cautions that the foregoing list of important factors is not complete and assumes no obligation to update any forward-looking statements that it may make. About Best Buy Co., Inc. Best Buy Co., Inc. (NYSE:BBY) is an innovative Fortune 100 growth company that continually strives to create superior customer experiences. Through more than 830 retail stores across the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and in Canada, our employees connect customers with technology and entertainment products and services that make life easier and more fun. We sell consumer electronics, home-office products, entertainment software, appliances and related services. A Minneapolis-based company, our operations include: Best Buy (BestBuy.com and BestBuyCanada.ca), Future Shop (FutureShop.ca), Geek Squad (GeekSquad.com) and Magnolia Audio Video (Magnoliaav.com). We support our communities through employee volunteerism vol·un·teer·ism n. Use of or reliance on volunteers, especially to perform social or educational work in communities. volunteerism and grants from The Best Buy Children's Foundation. |
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