Best Buy 2002 Annual Report Download - page 23

Net earnings for fiscal 2002 increased 44%, growing to
a record $570 million, compared with $396 million in
fiscal 2001 and $347 million in fiscal 2000. Earnings
per diluted share increased to $1. 77 in fiscal 2002,
compared with $1.24 in fiscal 2001 and $1.09 in
fiscal 2000.
Our net earnings increase was primarily driven by an
improved gross profit rate, new store growth, expense
controls and the inclusion of operations from acquired
businesses. Revenues compared with the last fiscal year’s
reported results grew 28%. Approximately half of the
increase in revenues was due to new Best Buy stores
opened in the past two fiscal years, including 62 new
stores opened in fiscal 2002. The remainder of the
increase was due to the inclusion of revenues from
acquired businesses. The 1.9% increase in comparable
Best Buy store sales was offset by the inclusion of an extra
week of operations in fiscal 2001, which increased fiscal
2001 revenues by approximately $280 million.
Our improved gross profit rate was due to increased sales
of higher-margin digital products, improved supply chain
management and more effective promotional strategies.
In addition, the inclusion of Musicland’s higher-margin
sales mix increased our gross profit rate by approximately
1.1% of revenues.
Our selling, general and administrative expenses (SG&A)
rate was 17.8% of revenues, an increase of 1.8% of
revenues over last fiscal year. The inclusion of Musicland’s
higher expense structure increased our SG&A rate by
approximately 1.4% of revenues. The remainder of the
increase was primarily due to the impact of operating
expenses increasing at a faster rate than comparable store
sales, as well as increased performance-based
compensation, higher depreciation expenses related to
capital investments and increased charitable giving. The
increase was partially offset by reduced outside consulting
costs, improved productivity and comparison with prior
fiscal year expenses, which included the launch of
BestBuy.com™, our entry into the New York market and the
write-off of certain e-commerce investments.
Fiscal 2001 revenues were $15.3 billion, compared with
$12.5 billion in fiscal 2000. The majority of the increase
in revenues, compared with the prior fiscal year, was due
to the addition of 62 Best Buy stores, a full year of
operations at the 4
7 Best Buy stores opened in fiscal
2000 and a 4.9% comparable store sales increase at
Best Buy stores. The remainder of the increase resulted
from the inclusion of revenues generated by Musicland
and Magnolia Hi-Fi from their dates of acquisition and
the inclusion of a 53rd week that added approximately
$280 million in revenues. The Best Buy comparable store
sales increase reflected the strength of the digital product
cycle and benefits from our enhanced operating model
that included an improved merchandise assortment, higher
in-stock positions and more consistent store execution.
Gross profit in fiscal 2001 increased to 20.0% of
revenues, compared with 19.2% of revenues in fiscal
2000, mainly due to improved product margins and a
more profitable sales mix that resulted from increased sales
of digital products and higher-end, more fully featured
products. In addition, the inclusion of Musicland’s higher
margin sales mix increased our gross profit rate by
approximately 0.2% of revenues.
Our SG&A rate increased to 16.0% of revenues in fiscal
2001, compared with 14.8% in fiscal 2000, primarily
due to our increased investment in strategic initiatives and
a more modest sales growth environment. In addition, the
launch and operation of BestBuy.com, expenses related to
our entry into the New York market and the write-off of
certain e-commerce investments also impacted our SG&A
rate in fiscal 2001.
Best Buy Co., Inc. 21