Best Buy's Second-Quarter Net Earnings Rise 47% to $188 Million, or $0.37 per Diluted Share; Gross profit rate improvement funds added investments in customer centricity, new stores.MINNEAPOLIS Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. -- 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) ):
Second-Quarter Performance Summary
----------------------------------------------------------------------
(U.S. dollars in millions, except per share amounts)
----------------------------------------------------------------------
Three Months
Ended
----------------------------------------------------------------------
Aug. 28, 2004
Aug. 27, Aug. 28, 2004 (As
2005 (As Reported)(1) Adjusted)(2)
----------------------------------------------------------------------
Revenue $6,702 $6,080 $6,080
----------------------------------------------------------------------
Comparable store sales %
gain(3) 3.5% 4.3% 4.3%
----------------------------------------------------------------------
Gross profit as % of revenue 25.5% 24.2% 24.2%
----------------------------------------------------------------------
SG&A as % of revenue 21.6% 20.2% 20.8%
----------------------------------------------------------------------
Operating income as % of
revenue 3.9% 4.0% 3.4%
----------------------------------------------------------------------
Diluted EPS $0.37 $0.30 $0.26
----------------------------------------------------------------------
(1) Certain amounts have been reclassified to conform to the current
presentation. These reclassifications had no effect on operating
income or net earnings.
(2) As adjusted results reflect the impact of expensing stock-based
compensation, as if the company had applied Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, in fiscal 2005. The as adjusted financial data is
considered a non-GAAP financial measure and is not preferable to
GAAP financial data. However, the company believes this
information provides comparability of its fiscal 2006 financial
results (which include stock-based compensation expense) with the
results for the prior year.
(3) 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.
NOTE: The company completed a three-for-two stock split effected in
the form of a 50% stock dividend distributed on Aug. 3, 2005.
All share and per share information reflects this split.
E[acute accent acute accent n. A mark (´) indicating: a. that a vowel is close or tense, as é in French été. b. that a vowel or syllable has a high or rising pitch, as in Chinese or Ancient Greek. c. ]Best Buy Co., Inc. (NYSE:BBY) today reported net earnings of $188 million, or $0.37 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 fiscal second quarter, which ended on Aug. 27, 2005. Net earnings increased 47 percent as compared with $127 million, or $0.26 per diluted share, for the second quarter of the prior year had Best Buy expensed stock-based compensation as it does in the current fiscal year. E[acute accent]"Second-quarter earnings were at the top end of the range of our guidance. Consumers continued to prefer the shopping experience offered by our stores and online sites," said Brad Anderson Anderson, river, Canada Anderson, river, c.465 mi (750 km) long, rising in several lakes in N central Northwest Territories, Canada. It meanders north and west before receiving the Carnwath River and flowing north to Liverpool Bay, an arm of the Arctic , 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. "Our employees continued to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution well for customers, despite the significant amount of activity in the quarter aimed at driving changes to our business model." E[acute accent]"We can satisfy customers only if we satisfy our employees as well, and I'm I'm Contraction of I am. Our Living Language Speakers of some scattered varieties of American English sometimes use I'm instead of I've or I have in present perfect constructions, as in pleased with our progress with changing our store culture and management style," Anderson added. "Every day more employees are empowered to find new ways to create a differentiated dif·fer·en·ti·ate v. dif·fer·en·ti·at·ed, dif·fer·en·ti·at·ing, dif·fer·en·ti·ates v.tr. 1. To constitute the distinction between: , end-to-end end-to-end a pattern of anastomosis in which severed ends are matched and united, in contrast with other patterns such as end-to-side or side-to-side. Usually applied to anastomosis of the intestine. shopping experience for customers."
Comparable Store Sales % Gain - By Segment
----------------------------------------------------------------------
Three Months Ended Six Months Ended
----------------------------------------------------------------------
Aug. 27, Aug. 28, Aug. 27, Aug. 28,
Segment 2005 2004 2005 2004
----------------------------------------------------------------------
U.S. Best Buy 3.8% 4.4% 4.2% 6.3%
----------------------------------------------------------------------
Magnolia Audio Video 3.5% 6.8% 2.5% 5.0%
----------------------------------------------------------------------
Domestic Segment 3.8% 4.4% 4.1% 6.3%
----------------------------------------------------------------------
International Segment 0.9% 3.0% 1.9% 5.0%
----------------------------------------------------------------------
Total 3.5% 4.3% 3.9% 6.2%
----------------------------------------------------------------------
E[acute accent]North America's leading consumer electronics retailer reported that revenue increased 10 percent to $6.7 billion, driven by the opening of new stores and a comparable store sales gain of 3.5 percent. U.S. Best Buy stores reported revenue of $6.0 billion and a second-quarter comparable store sales gain of 3.8 percent, reflecting a higher average transaction than in the prior year's second quarter. The rise in the average transaction reflected continued customer interest in larger-ticket items such as 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. and flat-panel TVs. In addition, consumers purchased fewer CDs and DVDs, which are lower priced. 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. , a retailer of high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. consumer electronics, had revenue of $33 million, similar to its revenue for the prior year's quarter. Magnolia Audio Video reported a comparable store sales gain of 3.5 percent, which was offset by the closure of two stores in the past year. The company's international stores, comprised of Future Shop and Best Buy stores in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , generated revenue of $705 million, including the opening of new stores and a comparable store sales gain of 0.9 percent for the quarter, which was driven by a modest increase in the average transaction.
Comparable Store Sales by
Revenue Mix Summary Product Group
----------------------------------------------------------------------
Three Months Ended Three Months Ended
----------------------------------------------------------------------
Aug. 27, Aug. 28, Aug. 27, Aug. 28,
Product Group 2005 2004 2005 2004
----------------------------------------------------------------------
Consumer Electronics 41% 38% 11.4% 9.0%
----------------------------------------------------------------------
Home Office 36% 37% (0.7%) 2.7%
----------------------------------------------------------------------
Entertainment Software 16% 18% (7.2%) 2.0%
----------------------------------------------------------------------
Appliances 7% 7% 10.9% (1.6%)
----------------------------------------------------------------------
Total 100% 100% 3.5% 4.3%
----------------------------------------------------------------------
Note: All periods presented reflect the reclassification of MP3
players into the consumer electronics product group from the
home office product group.
E[acute accent]The company saw the largest comparable store sales gain in MP3 players, flat-panel TVs, notebook computers and digital cameras. Declines in the average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. of these products have continued to drive strong unit volume growth. These strong-selling products more than offset the declines of product categories such as analog televisions Analog television (or analogue television) encodes television and transports the picture and sound information as an analog signal, that is, by varying the amplitude and/or frequencies of the broadcast signal. , desktop computers, DVDs, CDs and telephones. "To date, the increasing affordability of our key product categories and the strength of our retail team have enabled us to grow our business despite macro-economic factors such as rising gas prices," Anderson said. E[acute accent]As shown above, Best Buy's revenue mix for the second quarter of fiscal 2006 reflected an increase for the consumer electronics product group. The consumer electronics product group, which represented 41 percent of revenue for the quarter, posted an 11.4 percent comparable store sales gain for the quarter and led the company's results again. Within this group, flat-panel televisions enjoyed triple-digit comparable store sales growth as customers continued to experience the benefits of this platform, resulting in unit increases that more than offset lower average selling prices. Total television comparable store sales grew by mid-single-digits as digital television gains more than offset declines from analog TVs. The consumer electronics product group continued to be supported by triple-digit gains in comparable store sales from MP3 players, which benefited from increased 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. and availability, and low-double-digit growth in digital imaging, reflecting expanded assortments as well as new displays installed last fall. The results from these strong growth areas were partially offset by declines in comparable store sales for satellite TV systems and certain home audio products. E[acute accent]Home office products, representing 36 percent of the quarter's revenue, reported a comparable store sales decline of 0.7 percent for the second quarter. Low-double-digit comparable store sales increases for notebook computers reflected expanded assortments and further customer interest in the benefits of portable technology. These results were offset by comparable store sales declines in monitors and desktop computers as well as telephones. During the quarter, U.S. Best Buy store locations collectively added nearly 1,000 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 as more consumers look for computer support. At the end of the quarter, the Geek Squad was represented by a total of more than 9,400 total agents providing in-home in-home adj. Operating in or provided at the home of the customer or patient: in-home shopping; an in-home nursing program. , in-store and over-the-phone computer support. E[acute accent]The entertainment software product group, which comprised 16 percent of revenue for the second quarter, declined 7.2 percent on a comparable store sales basis. Continued softness in the performance of new releases in music and movies drove the decline in this product group. Mid-single-digit growth in comparable store sales of 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. products offset some of the decline. E[acute accent]Appliances represented 7 percent of revenue and reported a comparable store sales gain of 10.9 percent. The growth from the appliances product group was led by high-single-digit comparable store sales growth in 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. , reflecting an expansion of the company's improved appliance A stand-alone hardware device or software environment dedicated to a specific task. See hardware appliance and software appliance. assortments and labor model to more stores. In addition, a hot summer drove a strong double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. comparable store sales gain in air-conditioning air-conditioning Control of temperature, humidity, purity, and motion of air in an enclosed space, independent of outside conditions. In a self-contained air-conditioning unit, air is heated in a boiler unit or cooled by being blown across a refrigerant-filled coil and then products. E[acute accent]During the second quarter of fiscal 2006, the company opened 15 U.S. Best Buy stores, including one 45,000-square-foot store, twelve 30,000-square-foot stores and two 20,000-square-foot stores. It also opened four stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." Geek Squad stores in the quarter. In addition, the company opened two 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. Best Buy stores and one Future Shop store in its international segment. At the end of the second quarter, the company operated 694 Best Buy stores, 20 Magnolia Audio Video stores and 10 stand-alone Geek Squad stores in 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. ; it also operated 34 Best Buy stores and 116 Future Shop stores in Canada. For the trailing 12 months, the company opened 96 new stores and closed three stores. E[acute accent]Expansion in Operating Profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. Fueled by Continued Gross Profit Rate Gains E[acute accent]The gross profit rate for the second quarter was 25.5 percent of revenue, up from a gross profit rate of 24.2 percent of revenue for the second quarter of the prior year. The gross profit rate improvement for the quarter was driven by the continued expansion of computer services Data processing (timesharing, batch processing), software development and consulting services. See service bureau, SaaS and ASP. and benefits from pricing and sourcing activities. E[acute accent]The company's selling, general and administrative expense rate was 21.6 percent of revenue for the second quarter, compared with 20.8 percent for the prior year's second quarter, including stock-based compensation expense. The increase in the SG&A rate was driven by the operational costs associated with expanding the services business across the chain and using the 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. at more stores (which the company refers to as segmented stores, since they are designed to appeal to specific customer segments). Transformation costs -- including preparations for launching additional segmented stores and the reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. of field leadership in the quarter to support the changes -- also added to the SG&A expense rate. In addition, infrastructure costs related to the development of new systems to support store operations and supply chain initiatives contributed to the increase. For comparison purposes, the company noted that the second quarter of fiscal 2005 included $39 million of pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern charges associated with asset impairments, legal settlements and the outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. of IT services. E[acute accent]The company reported net interest income of $18 million for the second quarter of fiscal 2006, an increase of $17 million compared with the same period last year. The gain was primarily driven by higher interest rates and increased short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments. E[acute accent]The company's effective income tax rate declined to 32.7 percent for the second quarter of fiscal 2006, compared with 38.1 percent for the same period one year ago. The decline was due primarily to higher levels of tax-exempt interest Tax-Exempt Interest Interest income that is exempt from federal income tax. Although it is not directly taxed, this income may still be required to determine other tax calculations such as social security benefits. , increased income-tax benefits associated with foreign operations, and the resolution of certain state income tax matters. E[acute accent]Segmented Stores' Results Spawn Decision to Convert Additional Stores in FY06 E[acute accent]The company today reported the collective results of U.S. Best Buy stores converted to its customer-centric operating model, which the company refers to as segmented stores. Segmented stores operating during the quarter reported a second-quarter comparable store sales gain more than double the chain. In addition, the segmented stores also delivered a higher 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. rate and operating income dollars versus last year. Based on the success of these segmented stores, the company today announced that it now anticipates converting a fourth wave of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 50 segmented stores as early as February February: see month. 2006. The company currently operates 187 stores under the customer-centricity operating model, and a wave with 58 segmented stores is expected to be completed by the end of October October: see month. . As a result of the additional store conversions and the opening of new stores as segmented stores, the company now expects to begin the next fiscal year with at least 350 segmented stores. (For more information on segmented store counts, please refer to the company's Web site.) E[acute accent]"We believe that this new approach, which helps us engage with our customers differently, is essential to Best Buy's success," Anderson said. "In the coming years, more products will become digital and more homes will become networked. The increased complexity in the business will require more complex labor in our stores and additional services capabilities, which we are now building. Yet the transformation is not easy, and I'd I'd 1. Contraction of I had. 2. Contraction of I would. I'd I had or I would I'd have ~would like to thank employees for delivering solid earnings growth despite the high level of store conversion activity in the quarter." E[acute accent]Company Increases Expectations for FY06 New Store Openings E[acute accent]"In order to press our competitive advantage, we now plan to open approximately 72 new U.S. Best Buy stores during the fiscal year," Anderson said. Previously, the company reported plans to open 60 U.S. Best Buy stores, which had been its rhythm rhythm, the basic temporal element of music, concerned with duration and with stresses or accents whether irregular or organized into regular patternings. The formulation in the late 12th cent. for the past few years. The company said that these new store openings are in addition to 14 new Best Buy Canada and six new Future Shop store openings scheduled for fiscal 2006. E[acute accent]Company Reiterates Guidance for Annual Earnings Growth of Approximately 26% E[acute accent]The company reported that it continues to expect 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 for the fiscal year ending Feb. 25, 2006, to be in the range of $2.07 to $2.17 per diluted share, an increase of approximately 26 percent, reflecting stock-based compensation on a comparable basis. The company also continues to expect revenue for fiscal 2006 of approximately $30 billion. That figure includes a comparable store sales gain of 3 to 5 percent for the second half of the fiscal year, resulting in a comparable store sales gain of approximately 4 percent for the fiscal year. These expectations exclude the potential direct impact from Hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. , which affected 15
Best Buy stores and more than 1,000 employees in the Gulf Coast. Nine of
the stores re-opened quickly, and four are expected to re-open by the
end of September September: see month. . The re-opening dates for two stores remain
undetermined. E[acute accent]The company also provided its initial
earnings guidance for the third quarter of fiscal 2006. The company said
it expects earnings per diluted share of 28 to 32 cents for the fiscal
third quarter, compared with earnings per diluted share of 25 cents in
the prior year's period if Best Buy had expensed stock-based
compensation. The company stated that its earnings guidance for the
quarter assumed a comparable store sales gain of 3 to 5 percent. It also
anticipates a modest improvement in the operating income rate, compared
with last year's period, including a gross profit rate improvement
more modest than in the first half of the fiscal year. E[acute
accent]Darren Jackson Darren Jackson (born 25 July 1966 in Edinburgh) is a former Scottish professional footballer. CareerJackson 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. , said, "We are encouraged by our performance for the first half of the year. Our activities to improve gross profit allowed us to invest in substantive Substantive may refer to: In grammar:
1. to distinguish, on the basis of differences. 2. to develop specialized form, character, or function differing from that surrounding it or from the original. ourselves from the competition by increasing our investment in converting stores to our customer-centric operating model, opening new stores and continuing to build our services business." E[acute accent]"We are very encouraged by the traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. we are gaining on our transformation efforts, and are energized as we accelerate this work," Jackson Jackson. 1 City (1990 pop. 37,446), seat of Jackson co., S Mich., on the Grand River; inc. 1857. It is an industrial and commercial center in a farm region. said. "We believe that the improvements in our business model will enable us to continue delivering significant earnings growth for the year, despite the additional investments we're we're Contraction of we are. we're we are making in 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). and new store openings. Our wider range for comparable store sales reflects our current view of the macro economy for the second half. We continue to remain confident in the potential of our business model changes." E[acute accent]Best Buy Repurchases $54 Million in Common Stock E[acute accent]During the second quarter, Best Buy repurchased 1.1 million shares of its common stock at an average price of $49.56 per share for a total of approximately $54 million. At the end of the second quarter of fiscal 2006, the company had $1.3 billion remaining under the $1.5 billion authorization The right or permission to use a system resource; the process of granting access. See access control. for share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. created in April. Fiscal year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. , the company has repurchased approximately $261 million in common stock, up from $150 million for the same period last year. E[acute accent]The company on July July: see month. 26, 2005, paid a dividend of 11 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. (on a pre-split basis), or $36 million in the aggregate, which was a 10-percent increase compared with the dividend paid in the prior year's second quarter. E[acute accent]Best Buy is scheduled to conduct an earnings conference call at 10 a.m. Eastern Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time on Sept. 13, 2005. The call is expected to be available on its Web site both live and after the call, at www.BestBuy.com. The public may access the call by clicking on "For Our Investors." E[acute accent]Forward-Looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and Cautionary Statements: E[acute accent]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 Current Report on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. filed with the Securities and Exchange Commission on March 18, 2004, and in our other periodic reports filed from time to time with the SEC. 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. E[acute accent]About Best Buy Co., Inc. E[acute accent]Best Buy Co., Inc. (NYSE:BBY) is an innovative Fortune 100 growth company that continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. strives to create superior customer experiences. Through more than 870 retail stores across the United States 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.
Domestic Second-Quarter Performance Summary(1)
----------------------------------------------------------------------
(U.S. dollars in millions)
----------------------------------------------------------------------
Quarter Ended
----------------------------------------------------------------------
Aug. 27, Aug. 28, 2004 Aug. 28, 2004
2005 (As Reported)(2) (As Adjusted)(3)
----------------------------------------------------------------------
Revenue $5,997 $5,506 $5,506
----------------------------------------------------------------------
Comparable store sales %
gain(4) 3.8% 4.4% 4.4%
----------------------------------------------------------------------
Gross profit as % of
revenue 25.7% 24.3% 24.3%
----------------------------------------------------------------------
SG&A as % of revenue 21.5% 19.9% 20.6%
----------------------------------------------------------------------
Operating income 255 $239 $202
----------------------------------------------------------------------
Operating income as % of
revenue 4.3% 4.3% 3.7%
----------------------------------------------------------------------
(1) The domestic segment is comprised of U.S. Best Buy and Magnolia
Audio Video operations.
(2) Certain amounts have been reclassified to conform to the current
presentation. These reclassifications had no effect on operating
income, net earnings, financial position or cash flows.
(3) As adjusted results reflect the impact of expensing stock-based
compensation, as if the company had applied SFAS No. 123 in fiscal
2005.
(4) 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.
International Second-Quarter Performance Summary(1)
----------------------------------------------------------------------
(U.S. dollars in millions)
----------------------------------------------------------------------
Quarter Ended
----------------------------------------------------------------------
Aug. 27, Aug. 28, 2004 Aug. 28, 2004
2005 (As (As
Reported)(2) Adjusted)(3)
----------------------------------------------------------------------
Revenue $705 $574 $574
----------------------------------------------------------------------
Comparable store sales % gain(4) 0.9% 3.0% 3.0%
----------------------------------------------------------------------
Gross profit as % of revenue 23.9% 23.3% 23.3%
----------------------------------------------------------------------
SG&A as % of revenue 23.1% 22.8% 22.9%
----------------------------------------------------------------------
Operating income $6 $3 $2
----------------------------------------------------------------------
Operating income as % of revenue 0.8% 0.5% 0.4%
----------------------------------------------------------------------
(1) The international segment is comprised of Future Shop and Best Buy
operations in Canada.
(2) Certain amounts have been reclassified to conform to the current
presentation. These reclassifications had no effect on operating
income, net earnings, financial position or cash flows.
(3) As adjusted results reflect the impact of expensing stock-based
compensation, as if the company had applied SFAS No. 123 in fiscal
2005.
(4) Comprised of revenue at stores and Web sites operating for at
least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales
calculation until at least 14 full months after reopening. The
calculation of the comparable store sales percentage gain excludes
the effect of fluctuations in foreign currency exchange rates.
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited)
Three Months Ended
---------------------------------
Aug. 28, Aug. 28, 2004
Aug. 27, 2004 (As (As
2005 Reported) Adjusted)(1)
------- ---------- -------------
Revenue $6,702 $6,080 $6,080
Cost of goods sold 4,991 4,610 4,610
------- ---------- -------------
Gross profit 1,711 1,470 1,470
Gross profit % 25.5% 24.2% 24.2%
Selling, general and administrative
expenses 1,450 1,228 1,266
SG&A % 21.6% 20.2% 20.8%
------- ---------- -------------
Operating income 261 242 204
Net interest income 18 1 1
------- ---------- -------------
Earnings from continuing operations
before income tax expense 279 243 205
Income tax expense 91 93 78
Effective tax rate 32.7% 38.1% 38.1%
------- ---------- -------------
Net earnings $ 188 $ 150 $ 127
======= ========== =============
Basic earnings per share (2) $ 0.38 $ 0.31 $ 0.26
======= ========== =============
Diluted earnings per share (2) $ 0.37 $ 0.30 $ 0.26
======= ========== =============
Dividends declared per common share
(2) $0.07 $ 0.07 $ 0.07
Basic weighted average common shares
outstanding (in millions) (2) 491.2 487.1 487.1
Diluted weighted average common
shares outstanding (in millions) (2) 509.1 502.7 498.8
(1) As adjusted results reflect the impact of expensing stock-based
compensation, as if the company had applied Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, in fiscal 2005. The as adjusted financial data is
considered a non-GAAP financial measure and is not preferable to
GAAP financial data. However, the company believes this
information provides comparability of its fiscal 2006 financial
results (which include stock-based compensation expense) with the
results for the prior year.
(2) Reflects the three-for-two stock split effected Aug. 3, 2005. All
share and per share information reflects this split.
Note: Certain amounts have been reclassified to conform to the current
presentation. These reclassifications had no effect on operating
income or net earnings.
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited)
Six Months Ended
----------------------------------
Aug. 28, Aug. 28, 2004
Aug. 27, 2004 (As (As
2005 Reported) Adjusted)(1)
-------- ---------- -------------
Revenue $12,820 $11,559 $11,559
Cost of goods sold 9,551 8,778 8,778
-------- ---------- -------------
Gross profit 3,269 2,781 2,781
Gross profit % 25.5% 24.1% 24.1%
Selling, general and administrative
expenses 2,769 2,355 2,428
SG&A % 21.6% 20.4% 21.0%
-------- ---------- -------------
Operating income 500 426 353
Net interest income 31 1 1
-------- ---------- -------------
Earnings from continuing operations
before income tax expense 531 427 354
Income tax expense 173 163 135
Effective tax rate 32.6% 38.1% 38.1%
-------- ---------- -------------
Net earnings $ 358 $ 264 $ 219
======== ========== =============
Basic earnings per share (2) $ 0.73 $ 0.54 $ 0.45
======== ========== =============
Diluted earnings per share (2) $ 0.71 $ 0.53 $ 0.45
======== ========== =============
Dividends declared per common share
(2) $0.15 $ 0.13 $ 0.13
Basic weighted average common shares
outstanding (in millions)(2) 491.2 487.1 487.1
Diluted weighted average common
shares outstanding (in millions)(2) 507.5 503.4 496.4
(1) As adjusted results reflect the impact of expensing stock-based
compensation, as if the company had applied Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, in fiscal 2005. The as adjusted financial data is
considered a non-GAAP financial measure and is not preferable to
GAAP financial data. However, the company believes this
information provides comparability of its fiscal 2006 financial
results (which include stock-based compensation expense) with the
results for the prior year.
(2) Reflects the three-for-two stock split effected Aug. 3, 2005. All
share and per share information reflects this split.
Note: Certain amounts have been reclassified to conform to the current
presentation. These reclassifications had no effect on operating
income or net earnings.
- Balance Sheets Follow -
BEST BUY CO., INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in millions)
(Unaudited)
Subject to Reclassification
Aug. 27, Aug. 28,
2005 2004
----------- ----------
ASSETS
Current assets
Cash & cash equivalents $ 798 $ 656
Short-term investments 2,027 1,313
Receivables 389 328
Merchandise inventories 3,250 2,987
Other current assets 378 312
----------- ----------
Total current assets 6,842 5,596
Net property & equipment 2,523 2,251
Goodwill 529 485
Tradename 42 38
Long-term investments 122 41
Other assets 201 233
----------- ----------
TOTAL ASSETS $ 10,259 $ 8,644
=========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,760 $ 2,698
Accrued liabilities 1,744 1,599
Current portion of long-term debt 12 11
----------- ----------
Total current liabilities 4,516 4,308
Long-term liabilities 380 257
Long-term debt 540 478
Shareholders' equity 4,823 3,601
----------- ----------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 10,259 $ 8,644
=========== ==========
Note: Certain amounts have been reclassified to conform to the current
presentation. These reclassifications had no effect on operating
income or net earnings.
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