Best Buy Fiscal 2005 Earnings From Continuing Operations Increase 17% To $934 Million; Company Plans to Accelerate Transformation to Its Customer-Centric Operating Model.
Fourth-Quarter Performance Summary
(U.S. dollars in millions, except per share amounts)
Quarter Ended
Feb. 26, 2005 Feb. 28, 2004(1)
----------------------------------------------------------------------
Revenue $9,227 $8,449
----------------------------------------------------------------------
Comparable store sales % gain(2) 2.8% 9.7%
----------------------------------------------------------------------
Gross profit as % of revenue 23.5% 24.2%
----------------------------------------------------------------------
SG&A as % of revenue 15.0% 15.3%
----------------------------------------------------------------------
Operating income as % of revenue 8.5% 9.0%
----------------------------------------------------------------------
Diluted EPS - continuing operations $1.55 $1.40
----------------------------------------------------------------------
Diluted EPS $1.69 $1.40
----------------------------------------------------------------------
Fiscal Year Performance Summary
(U.S. dollars in millions, except per share amounts)
Fiscal 2005 Fiscal 2004(1)
----------------------------------------------------------------------
Revenue $27,433 $24,548
----------------------------------------------------------------------
Comparable store sales % gain(2) 4.3% 7.1%
----------------------------------------------------------------------
Gross profit as % of revenue 23.7% 23.9%
----------------------------------------------------------------------
SG&A as % of revenue 18.4% 18.6%
----------------------------------------------------------------------
Operating income as % of revenue 5.3% 5.3%
----------------------------------------------------------------------
Diluted EPS - continuing operations $2.79 $2.41
----------------------------------------------------------------------
Diluted EPS $2.94 $2.13
----------------------------------------------------------------------
(1) 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.
(2) 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
impact of fluctuations in foreign currency exchange rates.
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 $522 million, or $1.55 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 Feb. 26, 2005, an increase of 11 percent compared with $469 million, or $1.40 per diluted share, for the quarter ended Feb. 28, 2004. These results compare with a median analyst consensus yesterday of $1.55 per diluted share, which the company believes excluded the net $0.04 per share of 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. resulting from the impact of a lease accounting adjustment, a sales return liability adjustment, its adoption of EITF EITF Emerging Issues Task Force EITF Edinburgh International Television Festival EITF Europe International Taekwon-Do Federation Issue No. 04-08, as well as the decrease in the company's effective tax rate due to various state and federal tax matters, as previously reported. "We had our strongest revenue gains of the quarter in February February: see month. , which allowed us to post quarterly same-store sales Same-store sales is a business term which refers to the revenue generated by one of a retail chain's specific outlets during a certain period of time (often a fiscal quarter or a particular shopping season), compared to an identical period in the past, usually in the previous year. stronger than the trend we saw in December December: see month. ," 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. "We are proud of another year of double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. growth in our bottom line, particularly as we invest in the transformation of our company. We believe so deeply in this transformation that we are going to accelerate it in fiscal 2006. We are planning for all of our U.S. Best Buy stores to convert to our customer-centric operating model Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. within three years." As reported on March 3, fourth-quarter revenue increased 9 percent to $9.2 billion, compared with revenue of $8.4 billion for the fourth quarter of fiscal 2004. The revenue increase reflected the addition of 78 new stores in the past 12 months and a comparable store sales gain of 2.8 percent. The gross profit rate for the fourth quarter was 23.5 percent of revenue, down from a gross profit rate of 24.2 percent of revenue for the fourth quarter of the prior year. The revenue mix unfavorably affected the gross profit rate, as strong growth in lower-margin products 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. , 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 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. placed pressure on the rate on a year-over-year basis. Seasonal promotional activity, as well as the impact of product model transitions, also contributed to the rate decline, which was partially offset by improvements associated with significant growth in the company's higher-margin computer services Data processing (timesharing, batch processing), software development and consulting services. See service bureau, SaaS and ASP. business and increases in global sourcing volumes. As reported yesterday, in the fourth quarter certain costs associated with operating the company's distribution network were reclassified into cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold from SG&A; prior periods were restated to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current-year presentation. The company's selling, general and administrative expenses rate improved to 15.0 percent of revenue for the fourth quarter, compared with 15.3 percent of revenue for the prior year's fourth quarter. This improvement occurred despite the adjustment in accounting for leases, which increased the SG&A rate for the fourth quarter by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 20 basis points, compared with the prior year. The overall improvement in the SG&A rate was primarily driven by lower incentive compensation costs and a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. settlement with a credit card company. 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. declined to 8.5 percent of revenue for the fourth quarter, compared with 9.0 percent of revenue for the prior year's period, primarily due to the change in the gross profit rate. The company reported net interest expense of $6 million for the fourth quarter of fiscal 2005, which includes $21 million of interest expense related to the lease accounting adjustment. Excluding the lease accounting adjustment, net interest expense improved by $14 million from the same period one year ago, due to higher yields on investments and higher average investment balances. The cash and 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 position increased to $3.3 billion at the end of the fourth quarter, versus $2.6 billion at the end of the fourth quarter of fiscal 2004. For fiscal 2005, the company reported revenue of $27.4 billion, an increase of 12 percent, driven by the opening of new stores as well as a comparable store sales gain of 4.3 percent. The company's operating income rate for fiscal 2005 was consistent with the prior year, at 5.3 percent of revenue, despite a reduction in the gross profit rate and investments in the company's 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. The company reported fiscal 2005 earnings from continuing operations of $934 million, or $2.79 per diluted share, an increase of 17 percent compared with earnings from continuing operations of $800 million, or $2.41 per diluted share, for the prior year. Reflecting various state and federal tax matters, the company's effective income tax rate for fiscal 2005 for continuing operations declined to 35.3 percent, compared with 38.3 percent for the same period one year ago. As previously reported, the company estimated that its normalized effective income tax rate for fiscal 2005 for continuing operations would be 36.4 percent. The company's fiscal 2005 net earnings, including a $50 million tax benefit related to its former Musicland
Musicland is an entertainment company which runs Sam Goody and Suncoast Motion Picture Company and ran the former Media Play Superstore Chain. subsidiary, totaled almost $1 billion. Best Buy Stores Accelerate Move to New Operating Model In fiscal 2006, Best Buy plans to accelerate the conversion of its stores to its customer-centricity operating model. Currently, 85 U.S. Best Buy stores have been converted into the customer centricity operating model (including lab stores, which continue to develop ideas to serve customers better). After several months of developing the leadership, talent and standard operating platforms at its stores, the company intends to open or convert 150 to 200 more U.S. Best Buy stores to this operating model in fiscal 2006, beginning with the conversion of more segmented stores in late spring. The customer-centricity operating model enhances the ability of store employees to satisfy the unique needs of the people who shop in their store. Each of the converted stores are expected to include elements designed to appeal to one or two of the company's five key customer segments, including affluent professional males, young entertainment enthusiasts who appreciate a digital lifestyle, upscale suburban moms, families who are practical technology adopters and small businesses with fewer than 20 employees. By the end of the fiscal year, as new stores open with the customer-centric operating model, the company expects to be operating 250 to 300 customer centricity stores. In addition, the company anticipates rolling out key elements of customer centricity to all of its U.S. Best Buy stores in fiscal 2006. For example, the company plans to provide training to help U.S. Best Buy stores begin their transformation to customer centricity. Specific training segments include financial acumen acumen Astuteness, perception, perspicacity , the new customer service model, the new model for managing employees, and a deeper understanding of the customer segment(s) on which the store will be focusing. The decision to accelerate the conversion of stores was based on the strong top-line results at the company's 67 segmented stores converted in early October October: see month. and the expected future performance of the segmented stores. The segmented stores outperformed other U.S. Best Buy stores in terms of the comparable store sales gain for the fourth quarter. The segmented stores collectively reported a comparable store sales gain of 8.4 percent, compared with 2.3 percent at other U.S. Best Buy stores. As expected, the segmented stores' collective gross profit rate was higher than that of other U.S. Best Buy stores as well, due to a more profitable revenue mix. Due to conversion costs and a higher expense structure, segmented stores' expenses initially increased at a higher rate than their gross profit rate improved, resulting in an operating income rate decline. However, these stores collectively increased operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. over the prior year's quarter as the impact of comparable store sales gains more than offset the lower operating profit rate. The company continues to make improvements in this operating model; the company believes the profitability profile of segmented stores will improve after the expected three-year conversion process is complete, similar to its historical experience with new store openings. "We believe this new operating model offers our customers a richer in-store experience, including better shopping assistance as well as more of the products and services they want," said CEO Anderson. "Customer centricity empowers employees to recognize unique sets of customers and to build offerings and experiences that meet their needs. Our employees also like this model because it gives them more power to make decisions about how to satisfy their customers. Over time, we believe that our customer centricity work will help us attract new customer segments to our stores, which leverages our existing assets. In addition, it gives us an engine for continuing to innovate in·no·vate v. in·no·vat·ed, in·no·vat·ing, in·no·vates v.tr. To begin or introduce (something new) for or as if for the first time. v.intr. To begin or introduce something new. and respond to changing customer needs." In addition, the company anticipates continued strong growth in its computer services business, which is branded 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. , and strengthening its home theater An audio/video entertainment center that has a large-screen TV and hi-fi system with three speakers in the front (left, right and center) and left and right speakers in the rear. Starting in the early 1990s, video inputs were added to stereo receivers and preamplifiers. installation service. "Geek Squad service protects consumers from virus attacks, spyware Software that sends information about your Web surfing habits to its Web site. Often quickly installed in your computer in combination with a free download you selected from the Web, spyware transmits information in the background as you move around the Web. invasions This is a list of invasions ordered by date. An invasion is a military action consisting of armed forces of one geopolitical entity entering territory controlled by another such entity. , loss of critical information and other annoying computer maladies," Anderson said. "Consumers' response to Geek Squad has been tremendous. We now employ nearly 7,000 Geek Squad agents, and in fiscal 2006, we expect to add another 5,000 agents so that more consumers can take advantage of this service. Finally, we plan to offer new Geek Squad services - including network installations, server installations and server maintenance services - to small businesses in select markets." Company Expects 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 $2.95 to $3.10 for Fiscal 2006 For fiscal 2006, which ends on Feb. 25, 2006, Best Buy said it anticipates earnings in the range of $2.95 to $3.10 per diluted share from continuing operations (including expected stock-based compensation expense of $0.17 per diluted share). The company estimated that diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from continuing operations would increase by an average of 15 percent, before the impact of stock-based compensation expense. Yesterday, the mean analyst earnings estimate was $3.31 per diluted share for fiscal 2006, before the impact of stock-based compensation, EITF Issue No. 04-08 and certain accounting adjustments ($0.23 per diluted share impact in aggregate). The company also estimated earnings of $0.27 to $0.32 per diluted share from continuing operations for the first quarter of fiscal 2006 (including stock-based compensation expense of $0.05 per diluted share). The mean analyst earnings estimate yesterday was $0.38 per diluted share for the fiscal first quarter, before the impact of stock-based compensation expense, EITF Issue No. 04-08 and certain accounting adjustments ($0.05 per diluted share impact in the aggregate). Supporting the earnings increase is an anticipated revenue gain of approximately 11 percent, to more than $30 billion in revenue for fiscal 2006. This fiscal 2006 guidance assumes the opening of approximately 75 new stores, as announced in January January: see month. , as well as a comparable store sales gain of 4 percent to 5 percent for the fiscal year. Best Buy also anticipates a comparable store sales gain in the low single digits for the fiscal first quarter, on top of a gain of 8.3 percent in the prior year's first quarter. "We saw an improving trend in customer traffic throughout the fourth quarter, and we have seen additional improvement year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. ," said Darren Jackson Darren Jackson (born 25 July 1966 in Edinburgh) is a former Scottish professional footballer. Career Jackson played for Meadowbank Thistle, Newcastle United, Dundee United, Hibernian, Celtic, Coventry City, Hearts, Livingston, St. Johnstone and Clydebank. , executive vice president and CFO See Chief Financial Officer. . The company also expects an improvement in its operating income rate for fiscal 2006, driven by gross profit rate gains resulting from growth in services, continued global sourcing and private label activities, as well as benefits from re-engineering re-engineering - The examination and modification of a system to reconstitute it in a new form and the subsequent implementation of the new form. http://erg.abdn.ac.uk/users/brant/sre. its supply chain. The SG&A rate is expected to increase due to higher operational costs to support the services business and the labor model in the segmented stores, as well as the related conversion costs. The company anticipates its effective income tax rate for fiscal 2006 will be 36.5 percent to 37.0 percent. The company anticipates capital expenditures for fiscal 2006 of $650 million to $700 million, including the opening of new stores, the acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of customer centricity and costs related to updating the stores' technology and customer service infrastructure. "We continue to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution on our plans related to re-engineering our supply chain, reducing our total cost of ownership related to information technology, scaling out our two brands 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 and converting our U.S. Best Buy stores to our customer-centric operating model," said 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. . "We are currently testing several changes in our supply chain. We outsourced Outsourced is a modern day comedy of cross-cultural conflict and romance, directed by John Jeffcoat, released in 2007. Synopsis Todd Anderson (Josh Hamilton) spends his days managing a customer call center for American Novelty Products in Seattle, until his job, IT to Accenture (Accenture, Chicago, IL, www.accenture.com) The world's largest management and technology consulting firm, which was spun off of Arthur Andersen & Co. in 1989 as a separate entity known as Andersen Consulting. last year, which is enabling us to implement tailored market assortments as well as price optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. tools in the coming year. Our international segment continues to focus on growing Best Buy Canada store locations, which helped increase its profits significantly in fiscal 2005. In addition, our customer centricity transformation continues to meet our expectations, and we continue to expand our services offering. Yet all of this work requires investments in our capabilities, and some of the benefits now are expected to come later than initially planned. As a result, we continue to work toward a 7-percent operating income rate, and we are now focused on achieving that goal in fiscal 2008 rather than fiscal 2007. As before, we expect our operating income rate improvement to be driven by a combination of revenue growth, improvement in our gross profit rate and the relentless pursuit of expense savings." Best Buy Repurchases $26 Million in Stock During the fourth quarter, Best Buy repurchased 466,531 shares of its common stock at an average price of $55.80 per share for a total of $26 million. At the end of the fourth quarter of fiscal 2005, the company had $382 million remaining under the $500 million 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. approved by the board of directors in June June: see month. 2004. The company paid a fourth-quarter 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. , a 10-percent increase compared with the dividend paid in the prior year's fourth quarter. Jackson said, "Overall, we are pleased that in fiscal 2005 we were able to return to shareholders 36 percent of our earnings from continuing operations (through stock repurchases Stock repurchase A firm's repurchase of outstanding shares of its common stock. and dividends) and to retire retire v. 1) to stop working at one's occupation. 2) to pay off a promissory note, and thus "retire" the loan. 3) for a jury to go into the jury room to decide on a verdict after all evidence, argument and jury instructions have been completed. $355 million in 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. ." Best Buy is scheduled to conduct an earnings conference call at 10 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on April 1, 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." 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 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. About Best Buy Co., Inc. 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 830 retail stores across the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and in Canada, our employees connect customers with technology and entertainment products and services that make life easier and more fun. We sell consumer electronics, home-office products, entertainment software, appliances and related services. A Minneapolis-based company, our operations include: Best Buy (BestBuy.com and BestBuyCanada.ca), Future Shop (FutureShop.ca), Geek Squad (GeekSquad.com) and Magnolia Audio Video 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). 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 Fourth-Quarter Performance Summary(1)
(U.S. dollars in millions)
Feb. 26, 2005 Feb. 28, 2004(2)
----------------------------------------------------------------------
Revenue $8,212 $7,605
----------------------------------------------------------------------
Comparable store sales % gain(3) 3.1% 9.9%
----------------------------------------------------------------------
Gross profit as % of revenue 23.7% 24.5%
----------------------------------------------------------------------
SG&A as % of revenue 14.7% 15.1%
----------------------------------------------------------------------
Operating income $735 $712
----------------------------------------------------------------------
Operating income as % of revenue 8.9% 9.4%
----------------------------------------------------------------------
(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)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 Fourth-Quarter Performance Summary(1)
(U.S. dollars in millions)
Feb. 26, 2005 Feb. 28, 2004(2)
----------------------------------------------------------------------
Revenue $1,015 $844
----------------------------------------------------------------------
Comparable store sales % gain(3) 0.5% 7.9%
----------------------------------------------------------------------
Gross profit as % of revenue 22.4% 22.4%
----------------------------------------------------------------------
SG&A as % of revenue 17.7% 16.9%
----------------------------------------------------------------------
Operating income $48 $47
----------------------------------------------------------------------
Operating income as % of revenue 4.7% 5.5%
----------------------------------------------------------------------
(1) The international segment is comprised of Future Shop and Best Buy
operations in Canada.
(2) Certain amounts have been reclassified to conform to the current
presentation. These reclassifications had no effect on operating
income, net earnings, financial position or cash flows.
(3) Comprised of revenue at stores and Web sites operating for at
least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales
calculation until at least 14 full months after reopening. The
calculation of the comparable store sales percentage gain excludes the
effect of fluctuations in foreign currency exchange rates.
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
--------------------- ---------------------
Feb. 26, Feb. 28, Feb. 26, Feb. 28,
2005 2004(1) 2005(1) 2004(1)
---------- ---------- ---------- ----------
Revenue $9,227 $8,449 $27,433 $24,548
Cost of goods sold 7,056 6,400 20,938 18,677
---------- ---------- ---------- ----------
Gross profit 2,171 2,049 6,495 5,871
Gross profit % 23.5% 24.2% 23.7% 23.9%
Selling, general and
administrative expenses 1,388 1,290 5,053 4,567
SG&A % 15.0% 15.3% 18.4% 18.6%
---------- ---------- ---------- ----------
Operating income 783 759 1,442 1,304
Net interest expense
(income) 6 (1) (1) 8
---------- ---------- ---------- ----------
Earnings from continuing
operations before income
tax expense 777 760 1,443 1,296
Income tax expense 255 291 509 496
Effective tax rate 32.8% 38.3% 35.3% 38.3%
---------- ---------- ---------- ----------
Earnings from continuing
operations 522 469 934 800
Loss from discontinued
operations, net of tax -- -- -- (29)
Gain (loss) on disposal of
discontinued operations,
net of tax 50 -- 50 (66)
---------- ---------- ---------- ----------
Net earnings $572 $469 $984 $705
========== ========== ========== ==========
Basic earnings (loss) per
share:
Continuing operations $1.59 $1.45 $2.87 $2.47
Discontinued operations -- -- -- (0.09)
Gain (loss) on disposal
of discontinued
operations 0.15 -- 0.15 (0.20)
---------- ---------- ---------- ----------
Basic earnings per share $1.74 $1.45 $3.02 $2.18
========== ========== ========== ==========
Diluted earnings (loss)
per share:(2)
Continuing operations $1.55 $1.40 $2.79 $2.41
Discontinued operations -- -- -- (0.09)
Gain (loss) on disposal
of discontinued
operations 0.15 -- 0.15 (0.20)
---------- ---------- ---------- ----------
Diluted earnings per
share $1.69 $1.40 $2.94 $2.13
========== ========== ========== ==========
Dividends declared per
common share $0.11 $0.10 $0.42 $0.40
Basic weighted average
common shares outstanding
(in millions) 328.3 324.2 325.9 323.3
Diluted weighted average
common shares outstanding
(in millions)(2) 338.4 335.6 336.6 333.9
(1) Reflects: (a) The reclassification of certain costs of operating
our distribution network to cost of goods sold from selling, general
and administrative expenses; and (b) the adoption of EITF Issue No.
04-08, The Effect of Contingently Convertible Instruments on Diluted
Earnings per Share, that required us to include our convertible
debentures due in 2022 in our diluted earnings per share calculation
as if the debentures had been converted into shares of our common
stock. Certain other amounts have been reclassified to conform to the
current year's presentation.
(2) Diluted earnings per share is calculated using the "if converted"
method for our convertible debentures due in 2022. Earnings from
continuing operations and net earnings are adjusted to exclude
interest, net of tax, on the convertible debentures due in 2022.
Interest, net of tax, was $1.6 million for the three months and $6.5
million for the 12 months ended Feb. 26, 2005, and Feb. 28, 2004. The
diluted weighted average common shares outstanding include 5.8 million
shares related to the assumed conversion of the convertible
debentures.
BEST BUY CO., INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
($ in millions)
(Unaudited)
Subject to Reclassification
Feb. 26, Feb. 28,
2005 2004(1)
---------- ----------
ASSETS
Current assets
Cash & cash equivalents $470 $245
Short-term investments 2,865 2,355
Receivables 375 343
Merchandise inventories 2,851 2,607
Other current assets 329 174
---------- ----------
Total current assets 6,890 5,724
Net property & equipment 2,464 2,244
Goodwill, net 513 477
Tradename 40 37
Long-term investments 161 --
Other assets 226 170
---------- ----------
TOTAL ASSETS $10,294 $8,652
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $2,824 $2,460
Other liabilities 2,063 1,673
Current portion of long-term debt 72 368
---------- ----------
Total current liabilities 4,959 4,501
Long-term liabilities 358 247
Long-term debt 528 482
Shareholders' equity 4,449 3,422
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $10,294 $ 8,652
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(1) Reflects the classification of investments in auction-rate debt
securities as investments rather than cash and cash equivalents
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