Best Buy 2007 Annual Report Download - page 21

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services, and we believe that over time it will become a
significant component of our business.
In fiscal 2005, we opened our first Magnolia Home Theater
store-within-a-store experience within a U.S. Best Buy store.
We believe Magnolia Home Theater — with its high-end
brands, home-like displays and specially trained
employees — offers a unique solution for our customers.
The Magnolia Home Theater store-within-a-store
experience was offered in more than 300 U.S. Best Buy
stores at the end of fiscal 2007. During fiscal 2008, we
plan to add the Magnolia Home Theater store-within-a-
store experience to more than 50 additional new and
existing U.S. Best Buy stores.
In fiscal 2005, we also began converting U.S. Best Buy
stores to our customer centricity operating model. Stores
operating under the customer centricity model, also known
as segmented stores, offer variations in product
assortments, staffing, promotions and store design, and are
focused on key customer segments. The segmented stores
tailor their store merchandising, staffing, marketing and
presentation to address specific customer groups.
Originally, these customer groups included affluent
professional males, young entertainment enthusiasts who
appreciate a digital lifestyle, upscale suburban moms,
families who are practical technology adopters and small
businesses.
In fiscal 2007, based on the segmented stores’ operating
results, as well as positive customer feedback, we
completed the transition of all remaining U.S. Best Buy
stores to the customer centricity operating model. Also in
fiscal 2007, we evolved our customer centricity
segmentation to address the needs of customer lifestyle
groups, rather than specific customer types. Our stores now
focus on affluent suburban families, trend-setting urban
dwellers, and the closely knit families of Middle America.
Best Buy For Business seeks to satisfy the needs of small
business owners, who can be found within all of our lifestyle
groups.
On March 7, 2006, we acquired Pacific Sales. Based in
southern California, Pacific Sales specializes in the sale of
high-end kitchen appliances, plumbing fixtures, home
entertainment products and home furnishings. We acquired
Pacific Sales to enhance our ability to grow with an affluent
customer base and premium brands using a proven and
successful showroom format. Utilizing the existing store
format, we expect to increase the number of stores in order
to capitalize on the expanding high-end segment of the
U.S. appliance market.
At March 3, 2007, we operated 822 U.S. Best Buy stores in
49 states and the District of Columbia that averaged
approximately 40,500 retail square feet. Collectively, U.S.
Best Buy stores totaled approximately 33.3 million retail
square feet at the end of fiscal 2007, or about 80% of our
total retail square footage. In fiscal 2007, U.S. Best Buy
retail stores generated average revenue of approximately
$39.2 million per store.
At March 3, 2007, we operated 20 Magnolia Audio Video
stores in California, Washington and Oregon that averaged
approximately 9,700 retail square feet. Collectively,
Magnolia Audio Video stores totaled approximately 0.2
million retail square feet at the end of fiscal 2007, or less
than 1% of our total retail square footage. In fiscal 2007,
Magnolia Audio Video retail stores generated average
revenue of approximately $8.0 million per store.
At March 3, 2007, we operated 14 Pacific Sales stores in
California that averaged approximately 30,300 retail
square feet. Collectively, Pacific Sales stores totaled
approximately 0.4 million retail square feet at the end of
fiscal 2007, or about 1% of our total retail square footage.
In fiscal 2007, Pacific Sales retail stores generated average
revenue of approximately $21.1 million per store.
International Segment
Our International segment was established in connection
with our acquisition of Canada-based Future Shop Ltd. in
fiscal 2002. The Future Shop acquisition provided us with
an opportunity to increase revenue, gain market share and
leverage our operational expertise in consumer electronics
retailing. Since the acquisition, we have continued to build
on Future Shop’s position as the leading consumer
electronics retailer in Canada.
During fiscal 2003, we launched our dual-branding
strategy in Canada by introducing the Best Buy brand. The
dual-branding strategy allows us to retain Future Shop’s
brand equity and attract more customers by offering a
choice of store experiences. As we expand the presence of
Best Buy stores in Canada, we expect to gain continued
operating efficiencies by leveraging our capital investments,
supply chain management, advertising, merchandising and
administrative functions. Our goal is to reach differentiated
customers with each brand by giving them the unique
shopping experiences they desire. The primary differences
between our two brands in Canada are:
In-store experience — The customer’s interaction with
store employees is different at each of the two brands.