Best Buy Accelerates Customer Centricity Transformation.

Business Editors

MINNEAPOLIS--(BUSINESS WIRE)--May 3, 2004

Insights Gained from 32 Lab Stores Fuel

Decision to Launch Customer Centricity at up to

110 Additional U.S. Best Buy Stores During Fiscal 2005

Best Buy Co., Inc. (NYSE:BBY) plans to improve its services to its best customers as well as attract new groups of customers by launching its customer centricity initiative in up to 110 additional U.S. Best Buy stores during fiscal 2005.

"We are in the midst of a strategic transformation to put the customer at the center of all that we do," said Brad Anderson, vice chairman and chief executive officer, speaking ahead of the company's annual analyst meeting. "Our customer centricity initiative enables us to engage more deeply with customers by empowering our employees to deliver tailored products, solutions and services to customers through our stores, Web sites, call centers and in-home services. This work has allowed us to look at our business through a new lens. As a result, we see additional opportunities to connect more closely with our customers, to increase our competitive advantages, to boost our market share and to deliver superior financial results."

The expansion of Best Buy's customer centricity initiative is planned for up to 110 additional stores in Arizona, California, Nevada, Oregon and Washington. The changes are expected to be completed prior to the holiday season. The stores were chosen based on their proximity to each other and the readiness of the stores' leadership team.

Last year, Best Buy began testing its customer centricity initiative at 32 lab stores in several markets. The selected stores included both high-performing and below-average stores, and all were compared with a set of control stores. At the same time, the company assigned to the initiative several executives who focused on developing a sustainable strategy for putting the customer at the center of Best Buy's business model.

"Nearly a year of testing this new approach in our 32 lab stores has provided us with excellent insights to guide the expansion of our customer centricity initiative into other existing stores," said Mike Keskey, president of U.S. Best Buy Stores. "We harnessed data to segment our customer base and tailored our offerings accordingly. For example, we appealed to suburban moms with personal shopping assistants, and we attracted small business owners with the services of Geek Squad, our 24-hour, rapid response computer support task force. More important, we encouraged our store associates to create better relationships with customers. They brought passion, energy and creativity to this initiative, and they are the primary reason our test was successful."

At Best Buy's 32 lab stores, fourth-quarter comparable store sales gains averaged seven percentage points higher compared with other U.S. Best Buy stores. Close rates (the percentage of shoppers who make a purchase) also rose by approximately six percentage points versus other U.S. Best Buy stores. In addition, the lab stores achieved a gross profit rate approximately 50 basis points greater than the average for other U.S. Best Buy stores because of their focus on better serving the needs of the company's best customers. However, selling, general and administrative expenses, as a percent of revenue, rose by 240 basis points at the lab stores, including non-recurring costs and certain investments that are expected to benefit all stores. "The SG&A rate in our lab stores was higher than our goal during the test, but we expect modifying the labor model in the stores and realizing economies of scale will reduce costs and improve profitability," said Darren Jackson, executive vice president - finance and chief financial officer. The company expects the SG&A rate differential for customer centricity stores to be closer to 50 basis points in the first 12 months and to decline thereafter as a result of productivity and sales leverage.

The company said that lab tests are encouraging, but may not be indicative of future results. Last week, the company in its annual report on Form 10-K reaffirmed its earnings guidance for fiscal 2005, including earnings from continuing operations in a range of $2.80 to $2.93 per diluted share, an increase of 15 to 20 percent compared with fiscal 2004 results. Jackson said the guidance included the expected impact of up to 110 additional customer centricity stores.

Best Buy to Focus on Specific Customer Segments

As part of its customer centricity initiative, Best Buy identified five initial customer segments that it believes represent significant new growth opportunities or include some of the company's most profitable customers today. The segments include:

-- The affluent professional who wants the best technology and

entertainment experience and who demands excellent service.

-- The focused, active, younger male customer who wants the

latest technology and entertainment.

-- The family man who wants technology that improves his life -

the practical adopter of technology and entertainment.

-- The busy suburban mom who wants to enrich her children's lives

with technology and entertainment.

-- The small business customer who can use Best Buy's product

solutions and services to enhance the profitability of his or

her business.

Each of the stores in Best Buy's customer centricity expansion plans are to be adapted to serve one or more dominant customer segments shopping at that store.

To support its rollout of customer centricity, Best Buy is teaching its employees to focus on specific customers rather than just product categories. The company also is decentralizing more decision-making to the stores to allow the person closest to the customer to make informed decisions using a new, adaptive operating model. This change may involve some variation in product offerings, customer service, promotions and store design. Store associates measure the results of all investments in terms of growth in segment revenue and return on invested capital, a metric taught to all store employees as part of their customer centricity training.

"Becoming a customer-centric organization requires that we take full advantage of the talent and creativity of every Best Buy employee working in our stores across the country," said Keskey. "Our employees are energized because they have both the responsibility and the accountability to make decisions and drive innovation based on their knowledge of the customer. They behave like owner/operators and really understand the customer and financial impact of their decisions."

The company currently expects to allocate approximately $50 million in store capital expenditures for customer centricity stores in fiscal 2005. In addition, it expects the stores to require higher spending on labor and employee training. Finally, Best Buy plans to invest in corporate capabilities that enable its customer centricity rollout (such as supply chain and customer relationship management systems). The company anticipates revenue and gross profit gains from the customer centricity stores to offset these costs. All of these investments were included in the assumptions supporting the earnings guidance Best Buy provided on March 31, 2004, which was reiterated in the company's annual report on Form 10-K last week.

"Our goal is to transform Best Buy into a customer-driven, talent-powered enterprise that is focused on enhancing our customers' enjoyment of technology," said Anderson. "We plan to continue using our 32 lab stores to test new concepts and value propositions because our intensely competitive marketplace always will demand innovation."

Statements made in this news release, other than those concerning historical financial information, should be considered forward-looking and subject to various risks and uncertainties. Such forward-looking statements are based on management's beliefs and assumptions regarding information currently available, and are made pursuant to the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended, 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 leading specialty retailer of consumer electronics, home-office products, entertainment software and appliances. The company's subsidiaries operate retail stores and/or web sites under the names: Best Buy (BestBuy.com), Future Shop (FutureShop.ca), Geek Squad (GeekSquad.com), and Magnolia Audio Video (Magnoliaav.com). The company's subsidiaries reach consumers through more than 750 retail stores in the United States and Canada.