Best Buy 2005 Annual Report Download - page 47

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vacating our previous corporate facilities, as well as to our long-term incentive compensation program, as well
various expenses in our International segment to support as spending on our customer centricity initiative. Other
strategic initiatives. These factors were partially offset by offsetting factors included reduced funding received from
increased performance-based incentive compensation as a vendor alliance programs and technology asset
result of our improved year-over-year financial impairment charges.
performance and restricted stock grants awarded pursuant
Segment Performance
Domestic
The following table presents selected financial data for the Domestic segment for each of the past three fiscal years
($ in millions):
Segment Performance Summary (unaudited) 2005 2004 2003
Revenue $24,616 $22,225 $19,303
Comparable stores sales % gain(1) 4.4% 7.4% 2.4%
Gross profit as % of revenue(2) 23.8% 24.1% 23.7%
SG&A as % of revenue(2) 18.2% 18.4% 18.5%
Operating income $ 1,393 $ 1,267 $ 1,002
Operating income as % of revenue 5.7% 5.7% 5.2%
Note: All periods presented reflect the classification of Musicland’s financial results as discontinued operations.
(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.
During fiscal 2004, we refined our methodology for calculating our comparable store sales percentage gain to reflect the impact of
non-point-of-sale (non-POS) revenue transactions. We refined our comparable store sales calculation methodology in light of
changes in our business. Previously, our comparable store sales calculation was based on store POS revenue. The comparable store
sales percentage gains for fiscal 2005 and fiscal 2004 have been computed based on the refined methodology. The comparable
store sales percentage gain for fiscal 2003 has not been computed using the refined methodology. Refining the methodology for
calculating our comparable store sales percentage gain did not impact previously reported revenue, net earnings or cash flows.
(2) During fiscal 2005, we reclassified from SG&A into cost of goods sold certain expenses related to operating our distribution
network, consisting primarily of handling and transportation costs related to moving merchandise from our distribution centers to
our stores. We believe that the revised presentation provides greater consistency for investors by aligning the classification of our
distribution costs with the practices of many other retailers. Prior-year amounts have been reclassified to conform to the current-year
presentation. The reclassification had no impact on previously reported operating income, net earnings, financial position or cash
flows.
Our Domestic segment reported operating income for increase for fiscal 2005 was due to the addition of new
fiscal 2005 of $1.4 billion, or 5.7% of revenue, compared stores in the past two fiscal years. The remainder of the
with $1.3 billion, or 5.7% of revenue, for fiscal 2004. The revenue increase was attributable to the 4.4% comparable
Domestic segment’s operating income rate for fiscal 2005 store sales gain.
benefited from revenue gains, including a 4.4% We believe the comparable store sales performance of
comparable store sales increase, and a decrease in the our Domestic segment for fiscal 2005 reflected improved
SG&A rate of 0.2% of revenue, and was offset by a in-store execution, including our ability to increase the
decrease in the gross profit rate of 0.3% of revenue. close rate and average ticket, which more than offset
Revenue for our Domestic segment increased to customer traffic declines in our stores. In addition, we
$24.6 billion for fiscal 2005, an 11% increase over fiscal believe our fiscal 2005 comparable store sales benefited
2004 revenue of $22.2 billion. Nearly three-fifths of the from continued demand for digital products and our
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