Best Buy 2006 Annual Report Download - page 48

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notebook computers, reflecting expanded assortments and
continued customer demand for portable technology, and
an increase in computer services revenue. A 6.3%
comparable store sales increase in our Domestic segment’s
appliances product group was driven primarily by the
expansion of our improved appliance assortments and an
increase in the average sellingprices of major appliances.
Our Domestic segment’s entertainment software product
group recorded a 5.7% comparable store sales decline for
fiscal 2006. Continued softnessin the sales of new movie
andmusic releases contributed to the comparable store
sales decrease. This decrease was partially offset by strong
customer response to the launches of PlayStation Portable
and the Xbox 360 console, which more than offset softness
in sales of gaming platforms leading upto these anticipated
launches.
Our Domestic segment’s gross profit rate for fiscal 2006
increasedby 1.5% of revenue to 25.3% of revenue. The
increase was driven by the continued transformation of our
supply chain, which enabled us to improve margins through
lower product costs, more effective pricing strategies, and
increased sales of higher-margin services and private-label
products. We also benefited from better product transition
management, a more stable promotional environment and
income related toour initial recognition of gift card breakage.
Our Domestic segment’s SG&A rate for fiscal 2006
increased by 1.3% of revenue to19.5% of revenue.The
increase was due primarily to increased incentive
compensation based on our strong operating results, a
growing number of stores operating under the customer-
centriclabor model and costs associated with supporting our
services business, partially offset by expense leverage
resulting fromahigher revenue base and the absence of
charges recognized in fiscal 2005 to correct our accounting
for leases and to settle litigation. The change in our
accounting for stock-based compensation increased our
fiscal 2006 SG&Arate by approximately 0.5% of revenue
compared with the prior fiscal year.
The following table reconciles Domesticstores open at the beginning andend of fiscal 2006:
Total
Stores at
End of
Fiscal 2005
Stores
Opened
Stores
Closed
Total
Stores at
End of
Fiscal 2006
U.S. Best Buy 66874 — 742
Magnolia Audio Video 20 —— 20
U.S. Geek Squad 6 7 1 12
Total 694 81 1 774
Note: During fiscal 2006, we converted 163 existing U.S. Best Buy stores to our customer centricity format, relocated 10 otherU.S. Best Buy
stores and remodeled one other U.S. Best Buy store. At the end of fiscal 2006, we operated 742 U.S. Best Buy stores in 49 states and the
District of Columbia. No Magnolia Audio Video or U.S. GeekSquad stores were relocated or remodeled during fiscal 2006. At the end of
fiscal 2006, we operated 20 Magnolia AudioVideo stores in California, Washington and Oregon, and operated 12 U.S. Geek Squad
stores in Texas, Georgia, California, Minnesota, Wisconsin and Colorado.
The following table reconciles Domesticstores open at the beginning andend of fiscal 2005 :
Total
Stores at
End of
Fiscal 2004
Stores
Opened
Stores
Closed
Total
Stores at
End of
Fiscal 2005
U.S. Best Buy 608 61 1 668
Magnolia Audio Video 22 —2 20
U.S. Geek Squad 15 — 6
Total 631 66 3 694
Note: During fiscal 2005, we converted 67 existing U.S. Best Buystores to ourcustomer centricity formatand relocated six other U.S. Best Buy
stores. No other U.S. Best Buy stores were remodeled or relocated during fiscal 2005. At the end of fiscal 2005, we operated 668 U.S. Best Buy
stores in 48 states and the District ofColumbia. NoMagnoliaAudio Video or U.S. Geek Squad stores were relocated or remodeled during fiscal
2005. At the end of fiscal 2005, we operated 20 Magnolia Audio Video stores in California, Washington and Oregon; and operated six U.S.
Geek Squad stores inGeorgia, California, Minnesota and Wisconsin.