Best Buy Co., Inc. (NYSE:BBY), from the Consumer Electronics Show, today
reported that revenue for the fiscal month ended Jan. 3, 2009, rose 4
percent to $7.5 billion, which was in line with company expectations.
The revenue for the five-week period compared with $7.3 billion in
revenue for the five-week period ended Jan. 5, 2008. Gains from the
inclusion of Best Buy Europe’s revenue and the net addition of 194 new
stores in the past 12 months were largely offset by a 6.5-percent
decline in comparable store sales and the unfavorable impact of
fluctuations in foreign currency exchange rates.
In commenting on fiscal December’s revenue results, Brad Anderson, vice
chairman and chief executive officer, stated, “While the environment
continues to be as challenging as we expected, consumers are being drawn
to brands that they trust, and they are responding to our
customer-centric model. In this light, we believe the market share gains
we’ve been making will be sustained.”
The company’s domestic segment generated $5.9 billion in revenue for
fiscal December, which was nearly unchanged compared with last year’s
period. The domestic revenue performance included gains from the net
addition of 138 new stores in the past 12 months, offset by a comparable
store sales decline of 6.8 percent. The comparable store sales decline
reflected a decrease in traffic, which was partially offset by an
increase in average ticket. The company stated that this year’s December
calendar shift did not have a significant impact on domestic comparable
store sales.
Brian Dunn, president and chief operating officer of Best Buy, said, “I
would like to thank our employees for once again rising to the challenge
and delivering extraordinary service. They helped our customers make the
most of their entertainment and technology purchases during the busy
holiday shopping season.”
The company’s international segment increased its fiscal December
revenue by 29 percent to $1.6 billion. International revenue, except for
the company’s Canadian operations, is reported on a two-month lag and
therefore reflects fiscal October results. The increase was driven
primarily by the inclusion of Best Buy Europe’s revenue and the net
addition of 56 new stores over the past 12 months (including 25 new
store openings in Europe). These gains were partially offset by the
impact of unfavorable foreign-currency exchange rates and a comparable
stores sales decline of 4.2 percent, with the latter being driven by
general weakness in the global economy.
Bob Willett, CEO of International, said, “Despite the uncertain economy,
Canada stores and Web sites modestly exceeded our revenue expectations.
Our teams delivered superior execution during the important Boxing Week
shopping period. The majority of stores had revenue on Boxing Day in
excess of $1 million, with many stores significantly surpassing that
figure. Revenue in China was modestly below plan, as we saw in the
United States during calendar October as well. In Europe, we were
satisfied with results, including steady top-line growth. We believe we
made further strides in market share in Europe, particularly with
prepaid mobile phones.”
December Highlights
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The company believes it continued to gain market share during the
holiday shopping season, particularly in mobile phones, computing,
home theater and music, due to new store openings and its customer
centricity strategy.
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The domestic segment’s comparable store sales were strongest in
categories where the company has recently enhanced its customer
experience, including flat-panel TVs, notebook computers, and mobile
phones and accessories.
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The company’s revenue from its Web sites grew approximately 34 percent
for the fiscal month, as more consumers migrated to this purchasing
channel.
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The company continued to manage its inventory levels aggressively and
believes it is on track to finish the fiscal year with domestic
inventory levels (in dollars) flat with the prior year-end levels.
U.S. Performance of Flat-Panel TVs, Notebooks and Mobile Phones
Remains Strong
The home office revenue category, which accounted for 24 percent of
fiscal December domestic revenue, posted a comparable store sales gain
of 6.5 percent. This growth was driven primarily by very strong
double-digit comparable store sales growth in mobile phones and
accessories. Total connections increased by the solid double digits. In
the prior year’s period, only 181 U.S. Best Buy stores offered the Best
Buy Mobile experience, which is now available at all U.S. Best Buy
stores. Notebook computers experienced low double-digit comparable store
sales growth due to the company’s broad assortments and the availability
of services.
The services revenue category, which comprised 4 percent of fiscal
December domestic revenue, posted a 0.5-percent comparable store sales
decrease for the month.
Consumer electronics, which represented 44 percent of fiscal December
domestic revenue, posted an 8.7-percent comparable store sales decline.
The total television category posted a high single-digit comparable
store sales gain, while flat-panel TVs showed low double-digit
comparable store sale increases on even stronger unit growth. The
strength in televisions was more than offset by comparable store sales
declines in digital cameras and MP3 players, which experienced a
reduction in consumer demand during the month. In addition, GPS products
had significant declines in average selling prices, which more than
offset strong double-digit unit increases.
The entertainment software revenue category, which comprised 25 percent
of fiscal December domestic revenue, experienced a comparable store
sales decline of 12.2 percent. Music and movies experienced double-digit
comparable store sales declines. Video gaming comparable store sales
declined by the mid single digits, primarily due to a shift toward
software and reduced sales of large-ticket consoles, as well as
comparisons with strong results in the prior year’s period.
The appliances revenue category, which accounted for 3 percent of fiscal
December domestic revenue, declined by 24.5 percent on a comparable
store sales basis. The decline was driven primarily by continued
weakness in purchases of major appliances.
Year-to-Date Revenue Rises 12 Percent
For the first 10 months of fiscal 2009, Best Buy reported revenue of
$37.8 billion, an increase of 12 percent compared with the same period
last year. The revenue growth reflected the acquisition of Best Buy
Europe and gains from new store openings since the prior year period,
which was partially offset by a 0.9 percent comparable store sales
decline. The comparable store sales decline for the 10-month period
included a 1.1-percent decline for the company’s domestic segment and a
0.2-percent gain for the company’s international segment.
Company Updates Fiscal 2009 Annual EPS Guidance Range
Best Buy updated its guidance for fiscal 2009 annual earnings per
diluted share to a range of $2.50 to $2.70, which excludes the $111
million investment impairment charge taken during the fiscal third
quarter, expenses related to its voluntary separation program and any
other restructuring charges to streamline operations in preparation for
a challenging fiscal 2010 environment. This new earnings guidance
represents a narrowing of the prior range of $2.30 to $2.90 per diluted
share. The guidance assumes a comparable store sales decline of 2
percent to 3 percent for fiscal 2009.
In mid-December, the company announced a voluntary separation package
available to nearly all corporate employees in order to reduce future
non-customer facing expenses. Based on the number of employees who
accepted the offer, the company expects to recognize in its fiscal
fourth quarter a charge of approximately $60 million for this voluntary
program, as reported on Jan. 8 in an SEC filing. This estimate was
limited to the cost of the voluntary separation package and excludes
other restructuring activities, such as the cost of future involuntary
workforce reductions, if any.
Commenting on the updated earnings range, Jim Muehlbauer, executive vice
president and chief financial officer, said, “Given the expected
volatility in consumer spending over the holiday shopping season, we
prepared plans that reflected a wide range of potential outcomes. Our
employees did an outstanding job of execution and truly focused on
solving customers’ problems. They delivered revenue results for December
that both were in line with our expected range, and reflected strong
market share gains. December revenue trends improved as the month
progressed, and we were pleased with the effectiveness with which we
managed our promotions. While we have limited visibility to consumer
spending patterns in the post-holiday period, we feel confident in
narrowing the range of our annual EPS guidance, given the proportion of
the year that is behind us.”
On March 26, 2009, the company expects to report fiscal fourth-quarter
earnings and to provide its initial earnings guidance for fiscal 2010.
Best Buy’s financial results and other news releases can be found on the
Internet at the company’s Web site, www.BestBuy.com
by clicking on the “For Our Investors” link, or accessed via Business
Wire’s Web site at www.businesswire.com.
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 include 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, the impact of labor markets and new product
introductions on overall profitability, failure to achieve anticipated
benefits of announced transactions and integration challenges relating
to new ventures. A further list and description of these risks,
uncertainties and other matters can be found in the company’s annual
report and other filings made 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 April 30, 2008. 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.
About Best Buy Co., Inc.
With operations in the United States, Canada, Europe and China, Best Buy
is a multinational retailer of technology and entertainment products and
services with a commitment to growth and innovation. The Best Buy family
of brands and partnerships collectively generates more than $40 billion
annual revenue and includes brands such as Best Buy, Audiovisions, The
Carphone Warehouse, Future Shop, Geek Squad, Jiangsu Five Star, Magnolia
Audio Video, Napster, Pacific Sales Kitchen, Bath and
Electronic Centers, The Phone House and Speakeasy. Approximately 165,000
employees apply their talents to help bring the benefits of these brands
to life for customers through retail locations, multiple
call centers and Web sites, in-home solutions, product delivery
and activities in our communities. Community partnership is central to
the way we do business at Best Buy. In fiscal 2008, we donated a
combined $31.8 million to improve the vitality of the communities where
our employees and customers live and work. For more information about
Best Buy, visit www.bestbuy.com.
