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Best Buy's Fourth-Quarter Earnings Per Diluted Share Rise 10 percent to $1.71
MINNEAPOLIS - April 2. 2008 - Best Buy Co., Inc. (NYSE: BBY): Fourth-Quarter Performance Summary
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(U.S. dollars in millions, except per share amounts)
Three Months Ended
|
March 1, 2008 |
March 3, 2007 |
| Revenue |
$ 13,418 |
$ 12,899 |
| Comparable store sales % change1 |
(0.2%) |
5.9% |
| Gross profit as % of revenue |
23.7% |
24.1% |
| SG&A as % of revenue |
15.2% |
15.3% |
| Operating income as % of revenue |
8.5% |
8.8% |
| Net earnings |
$737 |
$763 |
| Diluted EPS |
$1.71 |
$1.55 |
1 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. Acquired stores are included in the comparable
store sales calculation beginning with the first full quarter
following the first anniversary of the date of the acquisition. The
calculation of the comparable store sales percentage change excludes
the effect of fluctuations in foreign currency exchange rates. The
method of calculating comparable store sales varies across the
retail industry. As a result, Best Buy’s method of calculating
comparable store sales may not be the same as other retailers’
methods. All comparable store sales percentage calculations reflect
an equal number of weeks.
Best Buy Co., Inc. (NYSE: BBY - News)
today reported net earnings of $737 million, or $1.71 per diluted
share, for its fiscal fourth quarter ended on March 1, 2008. The
leading consumer electronics retailer’s diluted earnings per share
increased 10 percent, compared with $1.55 per diluted share, or $763
million, for the prior year’s fiscal fourth quarter, which had one
extra week. The company estimates that its year-over-year diluted
EPS growth was 14 percent after adjusting for the extra week in the
prior year’s period. The EPS growth was largely driven by the
year-over-year reduction in the average number of shares outstanding
plus a modest gain in operating income.
The company noted that the quarter’s
operating results were in line with its mid-February guidance
update, when, after a solid holiday shopping season, Best Buy
reduced its expectations for fiscal 2008 earnings due to a slowdown
in customer traffic. The diluted EPS was higher than the updated
annual guidance range of $3.05 to $3.10 due primarily to a
lower-than-expected effective income tax rate.
Fiscal 2008 Marks 10th Consecutive Year
of Double-Digit Revenue Growth
Annual revenue increased 11 percent to
$40.0 billion versus the prior fiscal year, reflecting the net
addition of 137 new stores and an annual comparable store sales gain
of 2.9 percent. For the fiscal year, the comparable store sales
gains for the domestic and international segments were 1.9 percent
and 9.0 percent, respectively. Total online revenue grew more than
25 percent in the fiscal year.
Operating income of $2.2 billion improved by 8 percent versus the
prior fiscal year.
Earnings per diluted share grew 12 percent to $3.12, compared with
EPS of $2.79 for the prior fiscal year.
Company estimates indicated that U.S. market share grew almost one
percentage point to nearly 21 percent, reflecting the impact of new
store openings and strength in key product categories such as
notebooks, flat-panel TVs and video gaming.
U.S. Best Buy stores accelerated their improvement in employee
turnover in fiscal 2008. Employee turnover in U.S. Best Buy stores
improved by 8 percentage points to 60 percent.
U.S. Best Buy stores added the Dell brand to the computer assortment
and ended the fiscal year with 357 Apple store-within-a-store
locations, making it the only U.S. retailer offering all major
computing brands. The company also finished the fiscal year with 181
Best Buy Mobile locations within its U.S. Best Buy stores. Best Buy
Mobile, which the company is developing through its relationship
with The Carphone Warehouse Group PLC (CPW), offers customers twice
the assortment of mobile phones and is producing higher customer
satisfaction scores (as compared to stores without the Best Buy
Mobile experience).
The international segment grew its annual revenue and operating
income by 37 percent and 64 percent, respectively, due largely to
revenue and operating income gains in Canada.
Total share repurchases and dividends paid during the fiscal year
totaled a company record of $3.7 billion. The company repurchased
75.6 million shares during the fiscal year, or 16 percent of the
shares that were outstanding at the beginning of fiscal 2008.
“We accomplished a lot in a tough year,” said Brad Anderson, vice
chairman and CEO of Best Buy. “As I look back, I view it as a
pivotal year in terms of learning how to listen to the customer and
engage our employees on their behalf. Given what we have begun to
unlock internally with our people, and the limited extent to which
the promise of technology has been fulfilled for customers, I see a
rich set of growth opportunities ahead for us in the long term.”
Fourth-Quarter Results Reflect New Store
Openings
For the fiscal 2008 fourth quarter, Best
Buy’s revenue increased 4 percent to $13.4 billion, compared with
revenue of $12.9 billion for the fourth quarter of fiscal 2007. The
revenue increase reflected the net addition of 137 new stores in the
past 12 months, which was partially offset by the loss of an extra
week in the fiscal 2008 fourth quarter. Excluding the impact of the
lost week, revenue grew 9 percent in the fiscal quarter. The
comparable store sales decline of 0.2 percent reflected a decline in
the domestic segment, coupled with growth in the smaller
international segment. The decrease in the domestic segment was
driven by lower traffic, which was partially offset by an increase
in the average selling price as the company’s revenue mix continued
to reflect a shift toward higher-ticket items, such as video gaming
consoles, notebook computers, flat-panel TVs and GPS devices. The
online channel continued to deliver solid performance with
low-double-digit revenue growth in the fiscal fourth quarter.
The gross profit rate for the fourth
quarter declined by 40 basis points, year-over-year, to 23.7 percent
of revenue. Excluding the 15 basis points of benefit in the prior
year due to gift card breakage (gift cards issued but not expected
to be redeemed), the company had a 25-basis-point decline in the
gross profit rate. The benefits of more efficient promotional costs
were more than offset by higher revenue growth from lower-margin
parts of the business, such as notebook computers, gaming consoles
and international stores.
Best Buy’s SG&A expense rate improved by
10 basis points, year-over-year, to 15.2 percent of revenue for the
fourth quarter. Expense rate improvements in the domestic segment
were partially offset by investments to support and to grow the
international segment. Although negatively impacted by the soft
revenue growth environment, the domestic segment’s SG&A expense rate
improved due to lower incentive compensation and changes in its
store labor model.
The company reported investment and
other income of $31 million, compared with $71 million in the prior
year’s fourth quarter. Excluding the $20 million gain from the sale
of its investment in Golf Galaxy in the prior year’s period,
investment and other income decreased by $20 million,
year-over-year. The change reflected lower average cash and
investment balances, due to the company’s share repurchase activity.
The company’s effective income tax rate
for the fourth quarter was 36.8 percent, versus 36.2 percent for the
prior year’s period. The increase in the effective income tax rate
was primarily due to lower tax-exempt interest income.
“In a year of ever-changing variables,
the one constant, as always, was our employees’ execution. That’s
the spine of everything we do as a company, and it always will be.
We know the year ahead is going to be challenging, but we see that
as an opportunity to leverage our strengths – and a chance to
further demonstrate why Best Buy matters for customers,” said Brian
Dunn, President and Chief Operating Officer. “You’ll see us get even
sharper on the power of our brand in the year ahead. It is our
growth story. It’s the story of our employees, the value they create
when they are part of a customer’s shopping equation, and the
standard of service we intend to hold ourselves to. Our investments
flow directly from that story – here in the U.S. and around the
world.”
Fiscal 2008 Share Repurchases Total 16
Percent of Outstanding Shares
As previously disclosed, on Feb. 21,
2008, the company received a final delivery of 7.6 million shares
from Goldman, Sachs & Co., which marked the conclusion of the
accelerated share repurchase (ASR) program initiated in June 2007.
In total, Best Buy repurchased 65.8 million shares in fiscal 2008
through the ASR program. Including other repurchases of 9.8 million
shares during the fiscal year, the company repurchased an aggregate
of 75.6 million shares for $3.5 billion in fiscal 2008. The company
has a remaining authorization of $2.5 billion for the repurchase of
its common stock with no stated expiration date.
On Jan. 30, 2008, the company paid a
dividend of 13 cents per share, or $56 million in the aggregate,
which was a 30-percent increase compared with the dividend per share
paid in the prior year’s fourth quarter.
Investments in Auction-Rate Securities
At March 1, 2008, Best Buy held $417
million (par value) of investments in auction-rate securities, the
vast majority of which are AAA/Aaa-rated and collateralized by
student loans guaranteed 95 percent to 100 percent by the U.S.
government.
In mid-February 2008, market auctions,
including substantially all of the company’s auction-rate securities
portfolio, began to fail due to insufficient buyers. As a result of
the persistent failed auctions, and the uncertainty of when these
investments could be successfully liquidated at par, the company
reclassified all of its investments in auction-rate securities to
non-current assets within equity and other investments in its
unaudited condensed consolidated balance sheet at March 1, 2008.
Best Buy continues to evaluate whether
these investments are appropriately valued at par and will conclude
its analysis prior to filing its Annual Report on Form 10-K for
fiscal 2008, which will be no later than April 30, 2008. If any of
the company’s auction-rate securities are deemed to be temporarily
impaired, the valuation for that security will be reduced, and the
reduction will not impact earnings, but be reflected in accumulated
other comprehensive income, a component of shareholders’ equity.
The company continues to believe that it
will ultimately recover all amounts invested in these securities
given their high credit quality. Management does not believe the
current illiquidity of these investments will have a material impact
on Best Buy’s ability to execute its business plans as described
below in the outlook for fiscal 2009. Excluding investments in
auction-rate securities, the company had $1.4 billion in cash and
cash equivalents and $2.4 billion available under its unsecured
revolving credit agreement at March 1, 2008.
Company Establishes Annual EPS Outlook
of $3.25 to $3.40 for Fiscal 2009
Jim Muehlbauer, enterprise CFO
(interim), said, “We delivered solid results and grew our market
share in a volatile year. As we consider the macro-economic
pressures on the consumer and evaluate the industry business trends,
we believe it is prudent to plan for a soft consumer environment in
the near-term. Given the current environment, we expect that growth
in the second half of the year will more than offset modest declines
in the first half. We are focusing our investments to quicken our
progress in transforming the customer experience in key opportunity
areas—like in Best Buy Mobile and in our international segment. We
believe our plans strike the right balance of continuing to invest
for future growth while still delivering earnings growth in the
short-term.”
The company estimates annual earnings
per diluted share of $3.25 to $3.40 for fiscal 2009, which ends on
Feb. 28, 2009. Its initial earnings guidance represents an average
increase of 7%, year-over-year. The company’s earnings guidance for
the year includes the following key assumptions:
Revenue of $43 billion to $44 billion,
including an estimated comparable store sales gain of 1 percent to 3
percent for the year. The company expects the comparable store sales
gain in the international segment to exceed the domestic segment’s
comparable store sales gain for fiscal 2009.
Revenue growth of 9 percent from new store openings and comparable
store sales gains from notebook computers, GPS devices,
video-gaming, home theater and mobile phones. These gains are
expected to be partially offset by comparable store sales declines
in music and DVDs.
An unchanged gross profit rate, year-over-year. The company expects
mix benefits from revenue growth in mobile phones, GPS devices and
services to offset the negative mix from continued growth in
notebook computers and video-gaming. The company also pointed to
opportunities to improve promotional effectiveness in order to
support the gross profit rate in fiscal 2009.
A 30- to 40-basis-point deterioration in the SG&A rate due to slower
revenue growth combined with continued investment in strategic
growth platforms (including Best Buy Mobile and international
expansion).
An increase in the company’s effective tax rate to a range of 37.5
percent to 38 percent, due primarily to a reduced tax benefit from
foreign operations and lower tax-exempt interest income.
In addition, the company provided its capital expenditures guidance
for fiscal 2009 of approximately $1.1 billion, up from approximately
$800 million in fiscal 2008. The estimate includes increased
investments in new store openings, Best Buy Mobile, and information
technology and supply chain infrastructure to support domestic and
international growth. The company previously reported that it
anticipates opening approximately 140 new stores globally during
fiscal 2009.
“Our first priority continues to be
investments in our core business and adjacent businesses to fuel our
growth. Our current plans show strong cash flow for fiscal 2009, so
for the purposes of providing earnings guidance we have assumed $800
million of share repurchases. As always, we continue to evaluate
market conditions and high-return investment alternatives—and our
capital allocation decisions will continue to be aimed at growing
the company and driving shareholder value,” said Muehlbauer.
Solid SG&A Performance in Domestic
Segment Helps Offset Slower Traffic
Domestic Performance Summary
(U.S. dollars in millions)
Three Months Ended Twelve Months Ended
March 1, March 3, 2007 March 1, March 3, 2007
2008 (As Adjusted(1)) 2008 (As Adjusted(1))
Revenue $ 11,184 $ 11,084 $ 33,328 $
31,031
Comparable store sales % change2 (0.9 %) 4.8
% 1.9 % 4.1 %
Gross profit as % of revenue 24.2 % 24.6 %
24.5 % 24.8 %
SG&A as % of revenue 14.9 % 15.1 % 18.5
% 18.7 %
Operating income $ 1,042 $ 1,047 $ 1,999
$ 1,900
Operating income as % of revenue 9.3 % 9.4 %
6.0 % 6.1 %
1 Prior year amounts have been
adjusted to conform to the current year presentation, which
allocates to the international segment certain SG&A support
costs previously reported as part of the domestic segment in
fiscal 2007.
2 Comprised of revenue at stores,
call centers 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. Acquired stores
are included in the comparable store sales calculation beginning
with the first full quarter following the first anniversary of
the date of the acquisition. The method of calculating
comparable store sales varies across the retail industry. As a
result, Best Buy’s method of calculating comparable store sales
may not be the same as other retailers’ methods. All comparable
store sales percentage calculations reflect an equal number of
weeks.
Best Buy’s domestic
segment—comprised of U.S. Best Buy, Best Buy Mobile, U.S. Geek
Squad, Magnolia Audio Video, Pacific Sales and Speakeasy
operations—reported fourth-quarter operating income of $1,042
million, a decrease of $5 million, as compared with the prior
year’s 14-week period. The 10-basis-point operating income rate
decline reflected a mix-driven decline in the gross profit rate,
which was nearly offset by an SG&A rate improvement. Lower
incentive compensation and the benefit of previous changes to
the store labor model helped generate 20 basis points of SG&A
leverage in an environment of lower revenue growth.
Domestic revenue increased 1
percent, driven by the net addition of 98 new stores. The
revenue from new stores was partially offset by the loss of a
week versus the prior year’s quarter and a comparable store
sales decline of 0.9 percent. Pacific Sales, a retailer of
high-end home improvement products, contributed revenue of $78
million during the quarter, an increase of 1.5 percent over the
prior year’s fiscal fourth quarter, driven by five store
openings in the past 12 months.
Best Buy finished the fiscal fourth
quarter with an enhanced mobile phone experience, branded Best
Buy Mobile, in 181 U.S. Best Buy locations and at nine
stand-alone locations. The company has stated that it intends to
remodel the majority of its U.S. Best Buy stores within the next
18 months to add the Best Buy Mobile experience, which includes
three national carriers, more than 80 handsets and improved
services. The decision to expand was based on early positive
results and the company’s expectation for market share gains
within the mobile business in the United States. The company has
plans to continue testing the stand-alone model and to evaluate
future store opening plans.
International Segment Delivers
Strong Revenue and Operating Income Growth
International Performance Summary
(U.S. dollars in millions)
Three Months Ended Twelve Months Ended
March 1, March 3, 2007 March 1, March 3, 2007
2008 (As Adjusted(1)) 2008 (As Adjusted(1))
Revenue $ 2,234 $ 1,815 $ 6,695 $
4,903
Comparable store sales % gain2 3.4 % 14.0
% 9.0 % 11.7 %
Gross profit as % of revenue 20.9 % 21.0
% 20.7 % 21.6 %
SG&A as % of revenue 16.4 % 16.2 % 18.3
% 19.6 %
Operating income $ 101 $ 89 $ 162 $
99
Operating income as % of revenue 4.5 % 4.9
% 2.4 % 2.0 %
1 Prior year amounts have been
adjusted to conform to the current year presentation, which
allocates to the international segment certain SG&A support
costs previously reported as part of the domestic segment in
fiscal 2007.
2 Comprised of revenue at stores,
call centers 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. Acquired stores
are included in the comparable store sales calculation beginning
with the first full quarter following the first anniversary of
the date of the acquisition. The calculation of the comparable
store sales percentage change excludes the effect of
fluctuations in foreign currency exchange rates. The method of
calculating comparable store sales varies across the retail
industry. As a result, Best Buy’s method of calculating
comparable store sales may not be the same as other retailers’
methods. All comparable store sales percentage calculations
reflect an equal number of weeks.
The company’s international
segment—comprised of Best Buy and Geek Squad operations in
Canada and China, Five Star operations in China and Future Shop
operations in Canada—generated fourth-quarter operating income
of $101 million, compared with operating income of $89 million
in the prior year’s period. The 40-basis-point decline in the
operating income rate was driven by investments for further
international expansion, which more than offset a modest rate
improvement in Canada. Investment spending for continued
international growth included investments in information
technology (e.g., new integrated financial systems), customer
analytic capabilities, new store openings and start-up expenses
to launch stores in Mexico and Turkey.
International fiscal fourth-quarter
revenue rose 23 percent to $2.2 billion. The fourth-quarter
revenue increase was driven primarily by a favorable foreign
currency exchange rate, the net addition of 39 new stores and a
comparable store sales gain of 3.4 percent. The revenue growth
was partially offset by the loss of a week versus the prior
year’s quarter. In Canada, the 3.6-percent comparable store
sales gain reflected strong consumer interest in video gaming
hardware, flat-panel TVs, GPS devices and notebook computers at
both Future Shop and Best Buy stores. Similar to the U.S.
business, the Canadian business experienced a consumer slow down
starting in mid-January, following a solid holiday shopping
season.
Revenue from retail operations in
China grew 33 percent to approximately $350 million for the
fourth quarter. The revenue growth included the impact of new
store openings, a favorable foreign currency exchange rate and a
comparable store sales gain of 2.1 percent. (The company reports
results from its operations in China on a two-month lag basis.)
“Led by Canada, our international
business achieved strong increases in annual revenue and
operating income, even as we paved the way for entering two new
countries,” said Bob Willett, CEO of Best Buy International and
CIO. “Our earnings growth in the coming year will be muted by
further investments in infrastructure for continued
international growth. We believe that these investments are well
placed because a larger international business over time should
enable faster growth, improved diversification, reduced risk,
and improved access to global best practices (as evidenced by
our relationship with CPW in Europe and the U.S.). Accelerating
our international growth is key to our long-term strategy.
Moreover, our work on the business model in China is very
promising, and we see a path toward a higher profitability rate
there, similar to our journey in Canada.”
Company Growth Led by Sales of Video
Gaming, Notebooks, Flat-Panel TVs and GPS
Revenue Mix Summary
Comparable Store Sales
Revenue Category Three Months Ended Three Months Ended
March 1, 2008
March 3, 2007 March 1, 2008 March 3, 2007
Consumer Electronics 42 % 44 % (4.6 %) 7.8
%
Home Office 26 % 25 % 5.5 % 0.3 %
Entertainment Software 21 % 20 % 2.2 % 8.9
%
Appliances 5 % 5 % (2.9 %) 1.4 %
Services1 5 % 5 % 3.9 % 5.5 %
Other2 1 % 1 % n/a n/a
Total 100 % 100 % (0.2 %) 5.9 %
1Services consists primarily of
commissions from the sale of extended service contracts; revenue
from computer-related services; product repair revenue; and
delivery and installation revenue derived from home theater,
mobile audio and appliances.
2Other includes revenue, such as
fees received from cardholder account activations, that is
recognized over time, resulting in revenue recognition that is
not indicative of sales activity in the current period. Other
also includes gift card breakage. These revenue types are
excluded from our comparable store sales calculation. Finally,
Other includes revenue from the sale of products that are not
related to our core offerings. For these reasons, we do not
provide a comparable store sales metric for this revenue
category.
During the fourth quarter of fiscal
2008, Best Buy’s comparable store sales declined modestly as
higher revenue from video gaming, notebook computers, flat-panel
TVs and GPS products were more than offset by declines in
projection and tube TVs, MP3 devices, DVDs and CDs.
Consumer electronics, which
represented 42 percent of fourth-quarter revenue, declined 4.6
percent on a comparable store sales basis. Within consumer
electronics, a low-double-digit comparable store sales increase
in flat-panel TVs and a triple-digit increase in GPS products
led the revenue category. More than offsetting these gains were
declines in projection and tube televisions and MP3 devices.
The home office revenue category
accounted for 26 percent of fourth-quarter revenue and had a
5.5-percent comparable store sales gain. A double-digit
comparable store sales increase for notebook computers fueled
the growth as customers continued to opt for mobility and
responded to the expanded assortments. The gain from notebook
computers was partially offset by a comparable store sales
decline for printers, desktop computers and monitors.
The entertainment software revenue
category, which comprised 21 percent of fourth-quarter revenue,
increased 2.2 percent on a comparable store sales basis. A
double-digit gain in comparable store sales of video gaming
software and hardware, which was constrained by an industry-wide
hardware inventory shortage, was partially offset by comparable
store sales declines for DVDs and CDs.
The appliances revenue category,
which totaled 5 percent of fourth-quarter revenue, had a
comparable store sales decline of 2.9 percent for the quarter.
This decline was driven by a mid-single-digit decline in the
domestic segment due to a challenging industry-wide environment.
Partially offsetting this decline was a mid-single-digit gain in
the international segment, where appliances represent a larger
percentage of the business (primarily in China).
The services revenue category
accounted for 5 percent of fourth-quarter revenue. On a
comparable store sales basis, the services category increased
3.9 percent. A solid double-digit gain in repair revenue plus a
low double-digit gain in computer services drove the comparable
store sales increase. These results were offset partially by
single-digit declines in commissions from the sale of extended
service contracts and home theater services.
The other revenue category consists
of fees from credit card and related programs, which are
provided by an outside financial institution, and revenue
principally from the sales of products unrelated to the core
business, such as food and beverages.
During the fourth quarter, the
company opened six U.S. Best Buy stores, including two of its
45,000-square-foot stores, three of its 30,000-square-foot
stores, and one of its 20,000-square-foot stores. At the end of
the fourth quarter, the domestic segment included 923 Best Buy
stores, nine Best Buy Mobile stand-alone stores, seven Geek
Squad stand-alone stores, 13 Magnolia Audio Video stores and 19
Pacific Sales showrooms. The international segment included 160
Five Star stores and one Best Buy store in China, and 131 Future
Shop stores and 51 Best Buy stores in Canada. For the fiscal
year, the company opened 155 new stores and closed 18 stores.
More details regarding historical store counts and square
footage are available on the company’s Web site under “For Our
Investors.”
Best Buy is scheduled to conduct an
earnings conference call at 10 a.m. Eastern Time on April 2,
2008. 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.”
About Best Buy Co., Inc.
Best Buy Co., Inc. (NYSE:BBY)
operates a global portfolio of brands with a commitment to
growth and innovation. Our employees strive to provide customers
around the world with superior experiences by responding to
their unique needs and aspirations. We sell consumer
electronics, home-office products, entertainment software,
appliances and related services through approximately 1,300
retail stores across the United States, throughout Canada and in
China. Our multi-channel operations include: Best Buy (BestBuy.com,
BestBuy.ca and BestBuy.com.cn), Future Shop (FutureShop.ca),
Geek Squad (GeekSquad.com and GeekSquad.ca), Pacific Sales
Kitchen and Bath Centers (PacificSales.com), Magnolia Audio
Video (Magnoliaav.com), Jiangsu Five Star Appliance Co. (Five-Star.cn)
and Speakeasy (Speakeasy.net). Best Buy supports the communities
in which its employees work and live through volunteerism and
grants that benefit children and education.
BEST BUY CO., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
Mar. 1, Mar. 3, Mar. 1, Mar. 3,
2008 2007 2008 2007
Revenue $ 13,418 $ 12,899 $ 40,023 $ 35,934
Cost of goods sold 10,240 9,792 30,477
27,165
Gross profit 3,178 3,107 9,546 8,769
Gross profit % 23.7 % 24.1 % 23.9 % 24.4 %
Selling, general and administrative expenses 2,035 1,971
7,385 6,770
SG&A % 15.2 % 15.3 % 18.5 % 18.8 %
Operating income 1,143 1,136 2,161 1,999
Operating income % 8.5 % 8.8 % 5.4 % 5.6 %
Other income (expense)
Investment income and other 31 71 129 162
Interest expense (9 ) (8 ) (62 ) (31 )
Earnings before income tax expense and minority interest
1,165 1,199 2,228 2,130
Income tax expense 429 435 815 752
Effective tax rate 36.8 % 36.2 % 36.6 % 35.3 %
Minority interest 1 (1 ) (3 ) (1 )
Equity in loss of affiliates --- --- (3 )
---
Net earnings $ 737 $ 763 $ 1,407 $
1,377
Earnings per share
Basic $ 1.76 $ 1.59 $ 3.20 $ 2.86
Diluted(1) $ 1.71 $ 1.55 $ 3.12 $ 2.79
Dividends declared per common share $ 0.13 $ 0.10 $
0.46 $ 0.36
Weighted average common shares outstanding (in millions)
Basic 418.2 481.0 439.9 482.1
Diluted(1) 431.4 494.6 452.9 496.2
(1) The calculation of diluted
earnings per share assumes the conversion of our convertible
debentures due in 2022 into 8.8 million shares of common stock
and adds back the related after-tax interest expense of $1.4 and
$1.7 for the three months ended March 1, 2008, and March 3,
2007, respectively, and $5.8 and $6.8 for the 12 months ended
March 1, 2008, and March 3, 2007, respectively.
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
(Unaudited)
Mar. 1,
Mar. 3,
2008 2007
ASSETS
Current assets
Cash and cash equivalents $ 1,438 $ 1,205
Short-term investments 64 2,588
Receivables 549 548
Merchandise inventories 4,708 4,028
Other current assets 583 712
Total current assets 7,342 9,081
Net property & equipment 3,306 2,938
Goodwill 1,088 919
Tradenames 97 81
Equity and other investments 605 338
Other assets 320 213
TOTAL ASSETS $ 12,758 $ 13,570
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,297 $ 3,934
Accrued liabilities 2,283 2,307
Short-term debt 156 41
Current portion of long-term debt 33 19
Total current liabilities 6,769 6,301
Long-term liabilities 838 443
Long-term debt 627 590
Minority interests 40 35
Shareholders' equity 4,484 6,201
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
$ 12,758 $ 13,570
Certain amounts have been
reclassified to conform to the current presentation. These
reclassifications had no effect on previously reported total
assets, liabilities or shareholders’ equity.
Contact:
Best Buy Co., Inc.
Media Contacts:
Susan Busch, 612-291-6114
Director of Corporate PR
Email : susan.busch@bestbuy.com
or
Kelly Groehler, 612-291-6115
Senior Manager of Corporate PR
Email : kelly.groehler@bestbuy.com
or
Investor Contacts:
Jennifer Driscoll, 612-291-6110
Vice President of Investor Relations
Email : jennifer.driscoll@bestbuy.com
or
Charles Marentette, 612-291-6184
Senior Director of Investor Relations
Email : charles.marentette@bestbuy.com
or
Carla Haugen, 612-291-6146
Director of Investor Relations
Email : carla.haugen@bestbuy.com
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Forward-Looking and Cautionary Statements:
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 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,” “believe,” “estimate,” “expect,” “intend,” “project,” “plan,” “outlook,” and other words and terms of similar meaning. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. 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, divestitures, product availability, sales volumes, pricing actions and promotional activities of competitors, profit margins, weather, changes in law or regulations, foreign currency fluctuation, availability of suitable real estate locations, the company’s ability to react to a disaster recovery situation, and the impact of labor markets and new product introductions on overall profitability. A further list and description of these risks, uncertainties and other matters can be found in the company’s annual report and other reports filed from time to time with the Securities and Exchange Commission, including, but not limited to, Best Buy’s Annual Report on Form 10-K filed with the SEC on May 2, 2007. Best Buy cautions that the foregoing list of important factors is not complete and assumes no obligation to update any forward-looking statement that it may make.
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Source: Best Buy Co., Inc.
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