Best Buy 4th Quarter Earnings Increase 84% to a Record $350 Million, or $1.62 Per Share; Full-year EPS increases by 42% to $2.65 per share.Business Editors MINNEAPOLIS--(BUSINESS WIRE)--April 2, 2002 Best Buy Co., Inc. (NYSE NYSE See: New York Stock Exchange :BBY BBY Best Buy (stock symbol) BBY Before Battle of Yavin (Star Wars) BBY BeBeyond (Chinese online community) ):
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Total Company Fourth Quarter
performance summary ------------------------------------
($ in millions, except per share
amounts)
-------------------------------------
This Last Year Last year
Year Pro Forma(1)
--------------------------------- ------------------------------------
Total Company sales $6,980 $5,462 $6,415
Total store sales % change 28% 27% N/A
Comparable store sales change(2) 4.5% 1.8% N/A
Gross profit margin as % of sales 23.0% 20.4% 22.0%
SG&A expenses as % of sales 14.9% 15.0% 15.9%
Earnings per diluted share $1.62 $0.89 $1.13
--------------------------------- ------------------------------------
(1) The pro forma information presents the combined results of
operations of Best Buy, Musicland and Future Shop. Musicland was
acquired in the fourth quarter of fiscal 2001. Its results of
operations are presented as if Musicland had been acquired at the
beginning of fiscal 2001 and includes amortization of goodwill.
Future Shop was acquired at the beginning of November fiscal 2002.
Its results of operations are presented as if Future Shop had been
acquired at the beginning of November fiscal 2001 and do not
include amortization of goodwill.
(2) Includes only sales at Best Buy stores open at least 14 months.
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Total Company Fiscal Year
performance summary ------------------------------------
($ in millions, except per share
amounts)
------------------------------------
This year Last year Last year
pro forma(1)
--------------------------------- ------------------------------------
Total Company sales $19,597 $15,327 $17,621
Total store sales % change 28% 23% N/A
Comparable store sales change(2) 1.9% 4.9% N/A
Gross profit margin as % of sales 22.6% 20.0% 21.8%
SG&A expenses as % of sales 17.8% 16.0% 17.8%
Earnings per diluted share $2.65 $1.86 $2.00
--------------------------------- ------------------------------------
(1) The pro forma information presents the combined results of
operations of Best Buy, Musicland and Future Shop. Musicland was
acquired in the fourth quarter of fiscal 2001. Its results of
operations are presented as if Musicland had been acquired at the
beginning of fiscal 2001 and includes amortization of goodwill.
Future Shop was acquired at the beginning of November fiscal 2002.
Its results of operations are presented as if Future Shop had been
acquired at the beginning of November fiscal 2001 and do not
include amortization of goodwill.
(2) Includes only sales at Best Buy stores open at least 14 months.
Best Buy Co., Inc. (NYSE:BBY) today reported record net earnings of $350 million, or $1.62 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 quarter ended March 2, 2002, up 84 percent from $190 million, or $0.89 per diluted share, for the quarter ended March 3, 2001. "An 84-percent increase in fourth-quarter earnings is a great way to conclude this banner Same as banner ad. 1. banner - The title page added to printouts by most print spoolers. Typically includes user or account ID information in very large character-graphics capitals. year," said Best Buy 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 employees' focus on meeting customers' needs drove our results. Our Best Buy stores continued to post strong sales, while expanding margins and leveraging fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). . Our Musicland
Musicland is an entertainment company which runs Sam Goody and Suncoast Motion Picture Company and ran the former Media Play Superstore Chain. stores met our profitability targets despite reduced mall mall: see shopping center. (World-Wide Web) mall - A collection of World-Wide Web documents featuring commercial products and services, usually served by one particualr Internet access provider. traffic, due to expense control and our remerchandising of 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, stores. Also, our results at Future Shop have been significantly better than expected." As reported on March 7, total sales for the fourth quarter increased 28 percent to $7.0 billion from $5.5 billion a year ago. The sales increase reflected the addition of 62 Best Buy stores in the past 12 months, which brought the total to 481 stores, as well as the inclusion of a full quarter of sales from approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 1,320 Musicland stores and the addition of sales from 95 Future Shop stores. Total sales were reduced approximately 5 percent due to the inclusion of one less week than was in the prior year's fourth quarter. Comparable store sales rose 4.5 percent. "Our strong finish to the quarter and the year builds our optimism Optimism See also Hope. Bontemps, Roger personification of cheery contentment. [Fr. Lit.: “Roger Bontemps” in Walsh Modern, 66] Candide beset by inconceivable misfortunes, hero indifferently shrugs them off. [Fr. for the year ahead," Schulze Schulze is a common German family name. It may refer to:
The gross profit margin 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. rate for the Company was 23.0 percent of sales in the quarter, up by 2.6 percent of sales compared with last year's fourth quarter. The inclusion of Musicland's results increased the Company's total gross profit margin by 1.2 percent of sales in the quarter. The balance of the gross profit margin improvement resulted from changes in product mix at Best Buy stores, including significant growth in sales of digital products and entertainment software, combined with lower markdowns, a stable promotional environment and reduced costs associated with financing offers. The SG&A expense rate was 14.9 percent of sales for the quarter versus 15.0 percent of sales in the fourth quarter of fiscal 2001. The reduction in the expense rate was driven by expense control at Best Buy stores, and a strong comparable store sales increase that helped the Company gain leverage in the expense rate. Offsetting these factors was the inclusion of Musicland's higher expense structure, which increased expenses by 1.1 percent of sales for the quarter. Total 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. was 8.2 percent of sales for the quarter, up by 2.8 percent of sales compared with last year's fourth-quarter rate, reflecting a higher gross profit rate as well as a lower SG&A rate. Net interest income was $5 million in the fourth quarter compared with net interest income of $12 million for the same period last year. The decrease in interest income was primarily due to lower yields on the investment portfolio. For the fiscal year, the Company's total sales rose 28 percent to $19.6 billion, driven by the addition of 62 Best Buy stores and the inclusion of Musicland's and Future Shop's results. Comparable store sales rose 1.9 percent, on top of a 4.9-percent increase last year, as strength in consumer electronics, movies and 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. offset soft sales of desktop computers and prerecorded pre·re·cord tr.v. pre·re·cord·ed, pre·re·cord·ing, pre·re·cords To record (a television program, for example) at an earlier time for later presentation or use. Adj. 1. music. The gross profit margin rate in the fiscal year increased by 2.6 percent of sales, primarily due to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. changes in product mix, lower markdowns and the inclusion of Musicland results, which boosted gross profit by 1.3 percent of sales. The SG&A expense rate rose by 1.8 percent of sales in fiscal 2002, but was flat on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis. Musicland's higher expense structure drove the increase. Total Company operating income rose to 4.8 percent of sales, compared with 3.9 percent in the prior fiscal year. Earnings per diluted share in fiscal 2002 increased 42 percent to $2.65, including 1 cent per share from Musicland and 5 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. from Future Shop. The prior year's earnings per share were $1.86. The Company's economic value added Economic value added (EVA) A method of performance evaluation that adjusts accounting performance for investors' required return on investment. Suppose a division produces a 12% return on capital invested. (EVA Eva to marry winner of singing contest. [Ger. Opera: Wagner, Meistersinger, Westerman, 225–228] See : Prize 1. Eva - A toy ALGOL-like language used in "Formal Specification of Programming Languages: A Panoramic Primer", F.G. (R)) increased by $70 million. 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. , Senior Vice President - Finance and CFO See Chief Financial Officer. , said, "The first quarter's sales to date are modestly ahead of our original expectations. Comparable store sales are on track to be 3 to 4 percent in the first quarter and for the fiscal year. We anticipate earnings per share of approximately $0.30 to $0.32 in the first quarter. Overall, we continue to anticipate revenues growth of 17 to 20 percent, and earnings growth of 18 to 21 percent for fiscal 2003, or $3.15 to $3.25 per share."
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Fourth Quarter ($ in millions) Fiscal Year
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This Last Best Buy performance This Last
year year summary(1) year year
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$5,822 $5,324 Sales $17,115 $15,189
Comparable store sales
4.5% 1.8% % change(2) 1.9% 4.9%
Gross profit margin as
21.6% 20.1% % of sales 21.2% 19.8%
SG&A expenses as
13.3% 14.4% % of sales 16.0% 15.8%
$484 $302 Operating income $886 $611
Operating income as
8.3% 5.7% % of sales 5.2% 4.0%
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(1) Aggregates results at all of the Company's businesses other than
Musicland and Future Shop.
(2) Includes only sales at Best Buy stores open at least 14 months.
Total Best Buy store sales grew 9.4 percent during the fourth quarter to $5.8 billion, due to new store growth and a 4.5-percent comparable store sales gain, offset by the loss of the extra week in the prior year's fourth quarter, which reduced sales by approximately $280 million. Absent a calendar shift, which moved a week of post-Thanksgiving sales to the third quarter, comparable store sales would have risen by 6.5 percent. Best Buy opened three stores in the quarter. Gross profit margins at Best Buy stores during the fourth quarter improved by 1.5 percent of sales, reflecting a higher-margin sales mix sales mix See product mix. , improved pricing, a reduction in the cost of financing offers and strong inventory management. The SG&A rate declined by 1.1 percent of sales due to leverage from comparable store sales gains, a larger base of stores and expense controls. Operating income at Best Buy stores increased by 2.6 percent of sales to 8.3 percent of sales, or $484 million. Average inventories per Best Buy store increased by 6 percent, compared with a year ago, reflecting an enhanced in-stock position.
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Fourth Quarter ($ in millions) Fiscal Year
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This Last year Musicland performance This Last year
year pro forma summary(1) year pro forma
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$685 $681 Sales $1,886 $1,915
1.2% (2.8%) Comparable store sales (0.9%) (0.7%)
% change
34.7% 36.0% Gross profit margin as 35.0% 36.9%
% of sales
25.1% 25.1% SG&A expenses as 33.5% 32.9%
% of sales
$66 $75 Operating income $29 $77
9.7% 10.9% Operating income as 1.6% 4.0%
% of sales
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(1) Pro forma results of operations of Musicland are presented as
though it had been acquired at the beginning of the 2001 fiscal
year and include amortization of goodwill.
Musicland comparable store sales in the fourth quarter were up slightly due to strong sales of 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. movies and video gaming. Sales of consumer electronics increased modestly, and sales of prerecorded music and VHS (Video Home System) A half-inch, analog videocassette recorder (VCR) format introduced by JVC in 1976 to compete with Sony's Betamax, introduced a year earlier. movies remained soft. Musicland's store count at the end of the quarter was approximately 1,320 stores, including an increase in small market On Cue stores and fewer Sam Goody stores versus last year. Gross profit margins declined by 1.3 percent of sales, as expected, as a result of the repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of the product mix to lower-margin DVD software and gaming. In the fourth quarter, sales of movies rose to equal that of prerecorded music. SG&A expenses as a percentage of sales remained steady. Musicland's financial results, including approximately $4 million in goodwill amortization for the quarter, produced quarterly operating income of $66 million. The segment's results for the quarter, at 17 cents per diluted share, resulted in 1 cent of earnings per diluted share for the year, which was in line with management's expectations of no dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. .
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Fourth Quarter ($ in millions) Fiscal Year
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This Last year International performance This Last year
year pro forma summary(1),(2) year pro forma
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$473 $436 Sales $596 $543
Comparable store sales
16.5% N/A % change 17.4% N/A
Gross profit margin as
23.8% 24.2% % of sales 23.4% 24.3%
SG&A expenses as
19.5% 21.1% % of sales 19.7% 21.4%
$20 $13 Operating income $22 $16
Operating income as
4.3% 3.1% % of sales 3.7% 2.9%
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(1) Fiscal 2002 results reflect Future Shop's operations from the date
of acquisition, the beginning of November fiscal 2002.
(2) Pro forma results of operations of Future Shop are presented as
though it had been acquired at the beginning of November fiscal
2001 and do not include amortization of goodwill.
Future Shop comparable store sales in the fourth quarter climbed by 16.5 percent, reflecting robust sales of digital products. Future Shop's store count at the end of the quarter was unchanged at 95 stores. Gross profit margins declined by 0.4 percent of sales, as a result of changes in product mix. The SG&A expense rate declined by 1.6 percent of sales, reflecting leverage related to sales growth. Future Shop had quarterly operating income of $20 million. The segment's results were significantly ahead of management's expectations and contributed 5 cents per diluted share for the quarter and for the fiscal year. 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. eastern time today. Individuals may access the live call via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the on the Company's Web site at www.BestBuy.com by clicking on the "Investor Relations Investor relations The process by which the corporation communicates with its investors. " link. Following the live event, the call will be posted on the Audio Archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. page of Best Buy's web site and may be accessed at any time. 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. The Company is expected to announce its first-quarter sales on June June: see month. 6, 2002, and its first-quarter earnings on June 18, 2002. Statements made in this news release, other than those concerning historical financial information, should be considered 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 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 section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and section 21E of the Securities Exchange Act of 1934, as amended. 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. About Best Buy Co., Inc. Minneapolis-based Best Buy Co., Inc. is North America's No. 1 specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. retailer of consumer electronics, personal computers, entertainment software and appliances. The Company operates retail stores and web sites under the names: Best Buy (BestBuy.com), Future Shop (FutureShop.ca), 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 (MagnoliaHiFi.com), Media Play (MediaPlay.com), On Cue (OnCue.com), Sam Goody (SamGoody.com) and Suncoast
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
THREE MONTHS ENDED(1) FISCAL YEAR ENDED
Pro Pro
Forma(2) Forma(2)
Mar. 2, Mar. 3, Mar. 3, Mar. 2, Mar. 3, Mar. 3,
2002 2001 2001 2002 2001 2001
--------------------------- ---------------------------
Revenues $6,980 $5,462 $6,415 $19,597 $15,327 $17,621
Cost of goods
sold 5,372 4,346 5,005 15,167 12,268 13,779
--------- -------- -------- -------- --------- --------
Gross profit 1,608 1,116 1,410 4,430 3,059 3,842
Gross profit % 23.0% 20.4% 22.0% 22.6% 20.0% 21.8%
Selling, general
& administrative
expenses 1,038 821 1,020 3,493 2,455 3,139
SG&A % 14.9% 15.0% 15.9% 17.8% 16.0% 17.8%
--------- -------- -------- -------- --------- --------
Operating income 570 295 390 937 604 703
Net interest
income (expense) 5 12 3 (1) 37 (5)
--------- -------- -------- -------- --------- --------
Earnings before
income tax
expense 575 307 393 936 641 698
Income tax
expense 225 117 154 366 245 273
--------- -------- -------- -------- --------- --------
Net earnings $350 $190 $239 $570 $396 $425
========= ======== ======== ======== ========= ========
Net earnings per
share
Basic $1.65 $0.91 $1.15 $2.71 $1.92 $2.06
Diluted $1.62 $0.89 $1.13 $2.65 $1.86 $2.00
Weighted number
of shares
(in millions)
Basic 212.2 207.9 207.9 210.7 206.7 206.7
Diluted 216.7 212.5 212.5 215.0 212.7 212.7
(1) Quarterly data is unaudited.
(2) Pro forma information reflects combined results of operations of
Best Buy, Musicland and Future Shop. Musicland, which was acquired
in the fourth quarter of fiscal 2001, is presented as if it had
been acquired at the beginning of fiscal 2001 and includes
amortization of goodwill. Future Shop, which was acquired at the
beginning of November fiscal 2002, is presented as if it had been
acquired at the beginning of November of fiscal 2001 and excludes
amortization of goodwill.
Note: The three months and fiscal year ended March 3, 2001, contained
14 weeks and 53 weeks, respectively. The comparable periods in the
current fiscal year contain 13 weeks and 52 weeks, respectively.
BEST BUY CO., INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in millions)
Mar. 2, Mar. 3,
2002 2001
---------- ----------
ASSETS
Current assets
Cash & cash equivalents $ 1,855 $ 747
Receivables 247 209
Recoverable costs from
developed properties 79 104
Merchandise inventories 2,258 1,767
Other current assets 172 102
---------- ----------
Total current assets 4,611 2,929
Net property & equipment 1,897 1,444
Goodwill, net 773 385
Other assets 94 82
---------- ----------
TOTAL ASSETS $ 7,375 $ 4,840
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,449 $ 1,773
Accrued compensation 253 154
Accrued liabilities 1,028 788
---------- ----------
Total current liabilities 3,730 2,715
Long-term liabilities 311 122
Long-term debt 813 181
Shareholders' equity 2,521 1,822
---------- ----------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 7,375 $ 4,840
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