Best Buy 2002 Annual Report Download - page 16

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Our Magnolia Hi-Fi stores had a challenging
fiscal 2002. Comparable store sales at this
retailer of high-end consumer electronics
declined during the year amid a national
recession and high unemployment in the
Pacific Northwest, where most of these stores
operate. Total sales decreased 5.4 percent to
$99 million, as negative comparable store
sales offset strong gains in the two newest
stores in California and at Magnolia Hi-Fi’s
Design Center in Seattle, which provides
custom installations of home theater systems.
Founded in 1954, the chain has flourished
largely due to its reputation for superior service.
Magnolia Hi-Fi expanded to California more
than one year ago as part of a test of whether
the stores could be successful outside their
traditional market. We are pleased with the
strong consumer acceptance we enjoyed,
which resulted in strong positive comparable
store sales at our California stores.
We continue to believe that Magnolia Hi-Fi
has the potential to expand to 150 stores
nationwide. Before we embark on an aggres-
sive growth strategy for the chain, we believe
that we must refine the store concept and
broaden the scope of products and services
we offer to our existing customer base, which
includes affluent early adopters of technology,
typically ages 25 to 54.
Our goals for fiscal 2003 include:
•Increase the store count by nearly 50
percent. We expect to open six additional
California stores with an average of
11,000 square feet. The new stores would
bring our total to 19 stores.
•Expand the product and service offering
to include popular digital products. The
current offering focuses on home theater
systems and select consumer electronics.
We expect to increase the digital imaging
product assortment and launch digital
services and personal digital assistants.
•Prepare the chain for aggressive growth.
We plan to build the management and staff
infrastructure, and partner with Best Buy’s
top-notch real estate team to determine
locations for future stores.
•
Use the Company’s knowledge management
systems for merchants in different business
units to share information about products,
features, prices and services sought by
early adopter customers.
Extending our Leadership
into New Locations
14 Business Review: Magnolia Hi-Fi