Best Buy 2005 Annual Report Download - page 48

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effective advertising and promotional campaigns, environment compared with the prior fiscal year, including
including a full year of our Reward Zone customer loyalty a full year of impact from and increased membership in
program. Reward Zone. Reward Zone contributed to the revenue
gain for the fiscal year, but reduced the fiscal 2005 gross
All four of our product groups posted comparable store profit rate by approximately 0.6% of revenue, compared
sales gains for fiscal 2005 in the Domestic segment. The with a 0.3% of revenue reduction in the gross profit rate
consumer electronics group posted a high single-digit for the prior fiscal year. In addition, our gross profit rate
comparable store sales gain for the fiscal year driven was affected by a higher level of promotional activity
primarily by sales of digital products, including digital initiated to increase revenue and stem customer traffic
televisions, MP3 players and digital cameras and declines, a trend we believe was experienced throughout
accessories. These gains reflect continued consumer the consumer electronics retail industry. The increase in
preference for and the increased affordability of these promotional activity was partially offset by the increase of
products. These increases were partially offset by declines services revenue in the revenue mix, as services carry a
in sales of analog televisions. A low single-digit higher gross profit rate, and benefits from our global
comparable store sales gain in the home-office group was sourcing initiative which enabled us to improve margins
driven primarily by sales of notebook computers, through lower product costs.
reflecting consumers’ continued attraction to the portability
of these products. The entertainment software group The fiscal 2005 SG&A rate for the Domestic segment
recorded a comparable store sales gain in the low single declined by 0.2% of revenue to 18.2% of revenue, down
digits driven primarily by increased revenue from DVDs from 18.4% of revenue for the prior fiscal year. The
and computer software, which was partially offset by improvement was due primarily to reduced performance-
decreased sales in video gaming and CDs. The based incentive compensation, expense leverage from the
mid-single-digit comparable store sales increase in the comparable store sales gain and the addition of new
appliances group was driven primarily by increased sales stores, and the realization of cost savings from our
of major appliances, resulting in part from expanded efficient enterprise initiative. Our fiscal 2005 SG&A rate
assortments, and was partially offset by comparable store also benefited from favorable settlements with two credit
sales declines in other products (e.g., small appliances) card companies. These factors were partially offset by
within the appliances group. additional expenses associated with our customer
centricity initiative, and charges to correct our accounting
The Domestic segment’s gross profit rate declined to for leases and for settlement of litigation which,
23.8% of revenue for fiscal 2005, a decrease of 0.3% collectively, increased our Domestic segment’s SG&A rate
compared with 24.1% of revenue for fiscal 2004. The for fiscal 2005 by approximately 0.2% of revenue.
decrease was due primarily to a more promotional
32