Best Buy First-Quarter Earnings From Continuing Operations Increase 63% To $114 Million, Or 34 Cents Per Diluted Share.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. -- Higher revenue and efficiency improvements drive earnings growth
----------------------------------------------------------------------
First-Quarter Performance Summary - Continuing Operations
(U.S. dollars in millions, except per share amounts)
May 29, 2004 May 31, 2003
----------------------------------------------------------------------
Revenue $5,475 $4,668
----------------------------------------------------------------------
Comparable store sales % gain(1) 8.3% 1.3%(2)
----------------------------------------------------------------------
Gross profit as % of revenue 25.4% 25.4%
----------------------------------------------------------------------
SG&A as % of revenue 22.0% 22.9%
----------------------------------------------------------------------
Operating income as % of revenue 3.4% 2.4%
----------------------------------------------------------------------
Diluted EPS - continuing operations $0.34 $0.21
----------------------------------------------------------------------
Note: All periods presented exclude Musicland's financial results,
which are reported as discontinued operations.
(1) Comprised of revenue at stores and Internet 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.
Acquired stores are included in the comparable store sales
calculation beginning with the first full quarter following the
first anniversary of the date of acquisition. The calculation of
the comparable store sales percentage gain excludes the impact of
fluctuations in foreign currency exchange rates.
(2) We refined our methodology for calculating our comparable store
sales percentage change in the third quarter of fiscal 2004. All
comparable store sales figures now reflect the impact of
non-point-of-sale revenue transactions. The change did not impact
previously reported revenue, earnings or cash flow.
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) ), North America's leading retailer of consumer electronics, today reported 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 $114 million, or 34 cents per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, for the quarter ended May 29, 2004, an increase of 63 percent compared with $69 million, or 21 cents per diluted share, for the quarter ended May 31, 2003. "We achieved significant expense leverage related to new store openings and the comparable store sales gain. Clearly employees raised their productivity, and I thank them for their hard work," 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 Co., Inc. "Diligent expense control also drove our earnings growth." As reported on June June: see month. 3, first-quarter revenue increased 17 percent to $5.5 billion, compared with revenue of $4.7 billion for the first quarter of fiscal 2004. The revenue increase reflected the addition of 84 new stores in the past 12 months and a comparable store sales gain of 8.3 percent. The gross profit rate was 25.4 percent of revenue for the first quarter, equal to the gross profit rate for the first quarter of the prior year. The company improved its product assortments and offered more effective promotions. Reward Zone, the company's customer loyalty program, contributed to the company's revenue growth but also constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. the gross profit rate by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 0.8 percent of revenue for the first quarter. The impact of Reward Zone on the gross profit rate was larger than in previous quarters because the number of members increased, as did the rate at which they redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. awards earned. The company's selling, general and administrative expense rate improved to 22.0 percent of revenue for the first quarter, compared with 22.9 percent of revenue for the prior year's first quarter. The company benefited from expense leverage associated with higher revenue and ongoing cost-savings initiatives. The selling, general and administrative expense rate for the fiscal 2004 first quarter reflected a technology write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. as well as expenses related to the move to the company's new corporate campus. The company's investment in its 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). initiative increased the fiscal 2005 first-quarter SG&A rate by approximately 0.4 percent of revenue. Reflecting the improvement in the expense rate, 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. from continuing operations rose to 3.4 percent of revenue for the first quarter, compared with a rate of 2.4 percent of revenue for the first quarter of the prior year. The company reported net interest expense of less than $1 million for the first quarter of fiscal 2005. The cash position increased to $2.1 billion at the end of the first quarter of fiscal 2005, versus $1.5 billion at the end of the same quarter of fiscal 2004. The company's effective income tax rate for the first quarter declined to 38.1 percent, compared with 38.3 percent for the same period one year ago, reflecting a lower effective state income tax rate. Company Updates Customer Centricity Lab Results, Plans for Pilot Stores The company said that its 33 customer centricity lab stores collectively continued to outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. other stores in terms of the comparable store sales gain and the gross profit rate. The stores had a comparable store sales gain of approximately 14 percent and a gross profit rate that was approximately 0.2 percent of revenue better than that of other U.S. Best Buy stores. In addition, currently projected capital expenditures for the customer centricity pilot stores (which are expected to be launched this fall) are lower than the company's initial expectations. The selling, general and administrative rate for the lab stores was 2.2 percent of revenue higher than that of other U.S. Best Buy stores. The lessons of the lab stores have been significant. In addition, only the successful elements of customer centricity are expected to be applied to the new pilot stores. Costs associated with the lab stores therefore may not be indicative indicative: see mood. of costs associated with the pilot stores that have not yet been converted. "We believe that putting the interests of the customer first will pay off in the long term," said Anderson, CEO. "As in past transformations, our initial focus was on growing the top line and boosting gross profits. Now that we have shown we can do both of those things, we will turn our focus to the bottom line at these lab stores and determine the best way to scale it. That is Best Buy's power zone." During the first quarter, the company assessed the lab stores' results, developed a plan for scaling customer centricity and determined its plan for rolling out successful elements of this initiative to additional stores in California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). . Following three months of preparation and training, the company anticipates converting approximately 70 additional stores into customer centricity pilots during the fiscal third quarter. All are scheduled during October October: see month. . This experience is expected to assist the company in determining the rollout plans and pace for future conversions. "We believe that our customer centricity initiative is the right path for us. It clearly differentiates Best Buy from its competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. ," Anderson said. "I also am very pleased with the success of our dual branding strategy 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 ," he added. "Operating both Future Shop and Best Buy stores in Canada gives consumers a choice of experiences, and they are responding very positively." Company Repurchases $82 Million in Stock In light of its strong cash position and future growth prospects, the company during the first quarter repurchased 1,564,800 shares of its common stock at an average price of $52.38 per share. At the end of the first quarter of fiscal 2005, the company had approximately $118 million remaining under the existing 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. . During the quarter, the company paid a quarterly dividend of 10 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. , as previously reported. In addition, it announced last month its intention to redeem all of its 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. due 2021, which had a carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of $355 million on May 29, 2004. The redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. is expected to be completed in the fiscal second quarter. Company Expects Q2 Diluted EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of 47 to 52 Cents For the second quarter of fiscal 2005, which ends on Aug. 28, 2004, Best Buy anticipates earnings from continuing operations in the range of 47 to 52 cents per diluted share, an increase of approximately 18 percent. For the second quarter of fiscal 2004, the company had earnings from continuing operations of 42 cents per diluted share. Currently, the average analyst earnings estimate for the fiscal second quarter is 50 cents per diluted share. Best Buy reported a 75-percent increase in earnings per diluted share from continuing operations for the second quarter of fiscal 2004. The guidance for the fiscal 2005 second quarter is based on the company's expectation of a comparable store sales gain of 5 to 7 percent and a modest improvement in the operating income rate, compared with the prior year's period. "So far in June, our comparable store sales gain is consistent with our guidance for the second quarter. Our revenue guidance reflects the tougher comparisons we face through the rest of our fiscal year," stated 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 and CFO See Chief Financial Officer. . "We are also redoubling our efforts to expand our operating income rate so that we can continue to provide shareholders with double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. revenue growth while also achieving top-quartile financial performance." 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. added, "For the second quarter of fiscal 2005, we expect that our store associates will use increases in our most popular products and services (such as digital TV assortments) and the expansion of the 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. to drive comparable store sales gains. We also plan to implement improved selling practices that we have drawn from our customer centricity lab stores." Turning to profit drivers, he said, "We believe that improved assortments can continue to offset the cost of Reward Zone, which rewards our best customers with discounts on future purchases. In addition, we anticipate that the SG&A rate will decrease slightly for the second quarter, even as we prepare to convert more stores to 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. ." Jackson said that the company continues to expect earnings from continuing operations to increase 15 to 20 percent for fiscal 2005, to a range of $2.80 to $2.93 per diluted share. This guidance assumes the opening of approximately 73 new stores, a gain in comparable store sales of 4 to 6 percent, the conversion of additional stores to its customer centricity platform, and an improvement in the operating income rate for the fiscal year of approximately 0.3 percent of revenue, driven primarily by a lower SG&A rate. Best Buy is scheduled to conduct an earnings conference call at 10 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT on June 16, 2004. The call is expected to be available on its Web site both live and after the call, at www.BestBuy.com. Investors may access the call by clicking on "For Our Investors." 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: 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 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. Minneapolis-based Best Buy Co., Inc. (NYSE:BBY) is North America's leading 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, home-office products, entertainment software, appliances and related services. The company's subsidiaries operate retail stores and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. Web sites under the names: Best Buy (BestBuy.com), Future Shop (FutureShop.ca), Geek Squad (GeekSquad.com), and 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. (Magnoliaav.com). The company's subsidiaries reach consumers through more than 750 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. and Canada.
----------------------------------------------------------------------
Domestic First-Quarter Performance Summary(1)
(U.S. dollars in millions)
May 29, 2004 May 31, 2003
----------------------------------------------------------------------
Revenue $4,980 $4,280
----------------------------------------------------------------------
Comparable store sales % gain(2) 8.4% 1.4%(3)
----------------------------------------------------------------------
Gross profit as % of revenue 25.5% 25.5%
----------------------------------------------------------------------
SG&A as % of revenue 21.6% 22.6%
----------------------------------------------------------------------
Operating income $190 $123
----------------------------------------------------------------------
Operating income as % of revenue 3.8% 2.9%
----------------------------------------------------------------------
(1) The domestic segment is comprised of U.S. Best Buy and Magnolia
Audio Video operations.
(2) Comprised of revenue at stores and Internet 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.
Acquired stores are included in the comparable store sales
calculation beginning with the first full quarter following the
first anniversary of the date of acquisition.
(3) We refined our methodology for calculating our comparable store
sales percentage change in the third quarter of fiscal 2004. All
comparable store sales figures now reflect the impact of
non-point-of-sale revenue transactions. The change did not impact
previously reported revenue, earnings or cash flow.
----------------------------------------------------------------------
International First-Quarter Performance Summary(1)
(U.S. dollars in millions)
May 29, 2004 May 31, 2003
----------------------------------------------------------------------
Revenue $495 $388
----------------------------------------------------------------------
Comparable store sales % gain(2) 7.2% (0.1%)(3)
----------------------------------------------------------------------
Gross profit as % of revenue 24.3% 24.5%
----------------------------------------------------------------------
SG&A as % of revenue 25.6% 26.7%
----------------------------------------------------------------------
Operating loss ($6) ($9)
----------------------------------------------------------------------
Operating loss as % of revenue (1.3%) (2.2%)
----------------------------------------------------------------------
(1) The international segment is comprised of Future Shop and Best Buy
operations in Canada.
(2) Comprised of revenue at stores and Internet sites operating for at
least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales
calculation until at least 14 full months after reopening.
Acquired stores are included in the comparable store sales
calculation beginning with the first full quarter following the
first anniversary of the date of acquisition. The calculation of
the comparable store sales percentage gain excludes the impact of
fluctuations in foreign currency exchange rates.
(3) We refined our methodology for calculating our comparable store
sales percentage change in the third quarter of fiscal 2004. It
now reflects the impact of non-point-of-sale revenue transactions.
The change did not impact previously reported revenue, earnings or
cash flow.
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited)
Three Months
Ended
---------------
May 29, May 31,
2004 2003
------- -------
Revenue $5,475 $4,668
Cost of goods sold 4,086 3,483
------- -------
Gross profit 1,389 1,185
Gross profit % 25.4% 25.4%
Selling, general and administrative expenses 1,205 1,071
SG&A % 22.0% 22.9%
------- -------
Operating income 184 114
Net interest expense -- 2
------- -------
Earnings from continuing operations before income tax
expense 184 112
Income tax expense 70 43
Effective tax rate 38.1% 38.3%
------- -------
Earnings from continuing operations 114 69
Loss from discontinued operations, net of $15 tax -- (24)
Impairment loss on disposal of discontinued
operations, net of $3 tax -- (70)
------- -------
Net earnings (loss) $ 114 $ (25)
======= =======
Basic earnings (loss) per share:
Continuing operations $ 0.35 $ 0.22
Discontinued operations -- (0.08)
Impairment loss on disposal of discontinued
operations -- (0.22)
------- -------
Basic earnings (loss) per share $ 0.35 $(0.08)
======= =======
Diluted earnings (loss) per share:
Continuing operations $ 0.34 $ 0.21
Discontinued operations -- (0.07)
Impairment loss on disposal of discontinued
operations -- (0.22)
------- -------
Diluted earnings (loss) per share $ 0.34 $(0.08)
======= =======
Dividends declared per common share $ 0.10 $ --
Basic weighted average common shares outstanding (in
millions) 324.7 322.0
Diluted weighted average common shares outstanding (in
millions) 329.8 325.2
BEST BUY CO., INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in millions)
(Unaudited)
Subject to Reclassification
May 29, May 31,
2004 2003
------- -------
ASSETS
Current assets
Cash & cash equivalents $2,070 $1,466
Receivables 371 302
Merchandise inventories 2,915 2,368
Other current assets 246 230
------ ------
Total current assets 5,602 4,366
Net property & equipment 2,239 2,161
Goodwill, net 467 465
Intangible assets 37 37
Other assets 205 123
------ ------
TOTAL ASSETS $8,550 $7,152
====== ======
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $2,710 $2,357
Accrued liabilities 1,259 913
Current portion of long-term debt 369 6
------ ------
Total current liabilities 4,338 3,276
Long-term liabilities 251 284
Long-term debt 477 829
Shareholders' equity 3,484 2,763
------ ------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $8,550 $7,152
====== ======
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion