Best Buy 1999 Annual Report Download - page 24

MANAGE ME NT ’S DI S CU S S I ON & ANALYS I S OF R E S U L T S OF
OPE R AT I ONS AND F I NANCI AL CONDI T I ON
E S T U Y O N C
RESULTS OF OPERATIONS
Fiscal 1999 was an outstanding year, as the Company surpassed $10 billion in revenues and generated record
earnings. For the fiscal year ended February 27, 1999, earnings were $224.4 million, compared to $94.5 million
in fiscal 1998 and $1.7 million in fiscal 1997. Earnings per share on a diluted basis were $1.07 in fiscal 1999,
$.52 in fiscal 1998 and $.01 in fiscal 1997, and reflect two-for-one stock splits on March 18, 1999 and May 26, 1998.
The record results can be attributed to the success of initiatives to increase profitability through improvements
in inventory management, retail operations and marketing execution. These improvements enabled the Company
to effectively capitalize on strong consumer spending in fiscal 1999, nearly doubling operating income over
fiscal 1998 to $365 million. In addition, in fiscal 1999, the Company reduced its long-term debt by more than
$380 million, contributing to a decrease in net interest of $33 million as compared to the previous year.
The following table presents selected revenue data for each of the last three fiscal years ($ in thousands).
1999 1998 1997
Revenues $ 10,077,906 $ 8,358,2 12 $ 7,7 7 0 ,683
Percentage increase in revenues 21% 8% 8 %
Comparable store sales change 13.5% 2.0% (4.7%)
Average revenues per store $ 33,700 $ 29,700 $ 29,300
Sales in fiscal 1999 increased 21% to $10.078 billion, compared to $8.358 billion in fiscal 1998, principally due
to the 13.5% increase in comparable store sales, the addition of 28 new stores and a full year of operations at
the 13 stores opened in fiscal 1998. The comparable store sales gain was the result of strong consumer spending,
market share gains and improvements in the Company’s operating model. Double-digit comparable store sales
gains occurred in each quarter of fiscal 1999 as all major categories generated comparable store sales increases.
Increased affordability of products, including personal computers and consumer electronics, contributed to the
sales increase along with strong consumer response to new technology such as Digital Versatile Disc (DVD),
digital phones and digital cameras. The Company gained market share in fiscal 1999 as a result of more effective
advertising, better product in-stock positions and a more customer-focused product assortment, as well as the
continued consolidation and closing of competing retailers. New stores opened in fiscal 1999 included entry
into the New England market with eight stores; Nashville, TN, with three stores; and one store each in
Syracuse, NY; Charleston, SC; and Wausau, WI. The other new stores were opened in existing markets.
Fiscal 1998 sales were 8% higher than the $7.771 billion reported in fiscal 1997, as comparable store sales
increased 2.0% and results for the year included 13 new stores and a full year of operations at the 21 stores opened
in fiscal 1997. The comparable store sales gain was the result of increased consumer demand, particularly in the
second half of the year, as well as improved retail selling strategies. Increased sales of entertainment software
due to new technology in video games and consumer demand for new titles in both recorded music and computer
software also contributed to the comparable store sales increase in fiscal 1998.
The following table shows the Company’s retail store sales mix by major product category for each of the past
three fiscal years.
1999 1998 1997
Home Office 36% 38% 39%
Consumer Electronics - Video 16% 15% 17%
Consumer Electronics - Audio 11% 11% 12%
Entertainment Software 20% 20% 18%
Appliances 8% 9% 9%
Other 9% 7% 5%
Total 100% 100% 100 %