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Best Buy First-Quarter Revenue from Continuing Operations Increases 11% to $4.67 Billion.

Business Editors


Best Buy Co., Inc. (NYSE:BBY):

Company expects first-quarter earnings of 19 to 21 cents per

diluted share from continuing operations, compared

to analysts' consensus of 17 cents

 First-Quarter Revenue Summary
 (U.S. dollars in billions)
 Revenue Comparable Store
 Revenue Gain Sales Gain(1)
------------------------------------------- --------- ----------------
Continuing Operations(2) $4.67 11% 2.2%
------------------------------------------- --------- ----------------
 Domestic $4.28 10% 2.3%
------------------------------------------- --------- ----------------
 International $0.39 28% 0.0%

(1) Includes 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. The
 calculation of the Comparable Store Sales Change excludes
 Musicland revenue, which is included in discontinued operations.

(2) Excludes Musicland revenue, which has been classified as
 discontinued operations for all periods presented.

Best Buy Co., Inc. (NYSE:BBY) today reported that revenue from continuing operations rose 11 percent to $4.67 billion for the fiscal quarter ended May 31, 2003, compared with $4.20 billion for the Company's fiscal 2003 first quarter. The increase was driven by the addition of 79 stores in the past 12 months as well as a comparable store sales gain of 2.2 percent, which was a stronger performance than anticipated. Driving the comparable store sales gains were customer traffic increases at the stores and improvements in's traffic levels and conversion rate, which is the percentage of visitors who make a purchase.

"Our sales rebounded nicely in April and May, driven by a swift conclusion to the war in Iraq and a gradual recovery in consumer confidence. Comparable store sales gains benefited from the compelling offers we presented to our customers, including free shipping on purchases from," said Brad Anderson, vice chairman and CEO of Best Buy. "We believe we gained market share in several key categories in the fiscal first quarter. We anticipate earnings per share from continuing operations for the first quarter to be at the high end of our previously projected range."

Segment Results

Comparable store sales for the Company's domestic segment, which includes U.S. Best Buy stores and Magnolia Hi-Fi stores, rose 2.3 percent, reflecting U.S. Best Buy comparable store sales gains. The fastest-growing product categories were digital televisions, digital cameras, digital camcorders, notebook computers and computer peripherals. Sales of cellular telephones also showed gains, driven by new products with enhanced features. Also, consumers purchased more merchandise through the Company's Web site, These gains were offset in part by declining sales of desktop computers as consumers migrate to mobile computing, in addition to continued weakness in sales of audio products and appliances. Domestic revenue from continuing operations totaled $4.28 billion in the first quarter of fiscal 2004. The 10-percent gain in revenue over that of the same period of the previous year included the addition of 59 new U.S. Best Buy stores and three Magnolia Hi-Fi stores in the past 12 months. Magnolia Hi-Fi revenue for the first quarter totaled approximately $30 million, an increase of 31 percent. Magnolia Hi-Fi's comparable store sales declined 0.4 percent.

For the international segment, which is comprised of Future Shop stores and Canadian Best Buy stores, comparable store sales were even compared with the prior year's first quarter, impacted by the opening of new Best Buy and Future Shop stores in major markets. (Note: The international segment's fiscal 2003 figure is calculated as if Future Shop had been acquired at the beginning of fiscal 2002.) Sales of digital cameras, digital televisions and entertainment software showed strength in the quarter, offset by revenue declines in the home office product category. Comparable store sales growth also benefited from revenue gains at the Web site, driven by compelling offers, including free shipping. International first-quarter revenue totaled approximately $390 million, an increase of 28 percent compared with the prior year's first quarter. The gain reflected the addition of seven new Future Shop stores and 10 new Canadian Best Buy stores in the past 12 months.

Consumer Electronics, Home Office Categories Increase in Mix

The Company's revenue mix for continuing operations, by major product category, is shown below.

 Product Revenue Mix Summary -
 Continuing Operations
 First Quarter Ended
Product Category -------------------------------------------
 6/1/02 before
 5/31/03 Reclassified reclassification
-------------------------------------- ------------ ------------------
Consumer Electronics 37% 36% 33%
-------------------------------------- ------------ ------------------
Home Office 37% 36% 32%
-------------------------------------- ------------ ------------------
Entertainment Software 20% 21% 20%
-------------------------------------- ------------ ------------------
Appliances 6% 7% 7%
-------------------------------------- ------------ ------------------
Other -- -- 8%
-------------------------------------- ------------ ------------------
TOTAL 100% 100% 100%

As of the beginning of fiscal 2004, the Company has reclassified the revenue from "Other" to the appropriate product categories to provide more clarity on the revenue mix. The Other category included performance service plans, blank digital media, furniture, storage, business cases and batteries.

Consumer electronics revenue increased in the mix for the first quarter of fiscal 2004, compared with the prior year's first quarter, reflecting strength in sales of digital televisions, digital cameras and digital camcorders. Revenue from home office products also increased in the mix for the quarter due to strong sales of notebook computers and computer peripherals. In the entertainment software category, continued gains in sales of DVD movies and video game software partially offset continued softness in sales of prerecorded music and video game hardware. Appliance revenue decreased modestly in the mix during the quarter.

Digital products - including DVD hardware and software; digital cameras and camcorders; digital, plasma and LCD TVs; cellular telephones and digital broadcast systems - comprised 22 percent of revenue in the first quarter, up from 19 percent in the same period last year. Household penetration rates remain low for many of these products.

The Company opened four U.S. Best Buy stores during its fiscal first quarter, including two 45,000-square-foot stores and two 30,000-square-foot stores. The Company also opened two Best Buy stores in Canada during the quarter. Total retail square footage of continuing operations increased by approximately 0.9 percent in the quarter to 27.0 million square feet at period-end. The Company currently operates 552 U.S. Best Buy stores and 19 Magnolia Hi-Fi stores in the domestic segment, and 104 Future Shop stores and 10 Canadian Best Buy stores in the international segment.

Discontinued Operations

Total revenue at Musicland stores in the first quarter was approximately $300 million, a decline of 22 percent from the first quarter of fiscal 2003. This reduction reflected a 15.6-percent decline in comparable store sales, which was in line with expectations. Sales of prerecorded music continued to decline in the quarter, and Musicland closed 61 stores in the quarter. In March 2003, the Company announced that it is actively marketing its Musicland business, and the results of the Musicland subsidiary are now classified as discontinued operations. The Company today projected that the after-tax loss from discontinued operations for the first quarter will be in line with the earlier estimate. At the end of the first quarter, Musicland operated 76 Media Play stores, 683 Sam Goody stores and 378 Suncoast stores.

Company Raises First-Quarter Earnings Guidance

"Comparable store sales from continuing operations exceeded expectations," said Darren Jackson, executive vice president and CFO of Best Buy. "Momentum built throughout the quarter as consumer sentiment improved, and we drove sales by making compelling offers to our customers. Consequently, we are raising our earnings estimate for continuing operations in the first quarter to 19 to 21 cents per diluted share from our previous guidance of 14 to 20 cents per diluted share. This new guidance includes the impact of one-time costs to close our previous corporate offices and move to our new corporate headquarters, as we previously discussed." The current consensus estimate for Best Buy's first-quarter diluted earnings is 17 cents per share from continuing operations.

Best Buy is scheduled to release its fiscal first-quarter earnings before the stock market opens on Wednesday, June 18. Its earnings conference call is scheduled to begin at 10 a.m. EDT on June 18 and will be available on its Web site both live and after the call, at Investors may access the call by clicking on "Investor Relations."

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, personal computers, entertainment software and appliances. The Company's subsidiaries operate retail stores and/or web sites under the names: Best Buy (, Future Shop (, Geek Squad (, Magnolia Hi-Fi (, Media Play (, Sam Goody ( and Suncoast ( The Company's subsidiaries reach consumers through over 1,800 retail stores in the United States, Canada, Puerto Rico and the U.S. Virgin Islands.
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Publication:Business Wire
Date:Jun 5, 2003
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