Best Buy 2007 Annual Report Download - page 22

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7
PART I
Future Shop stores have predominantly commissioned
sales associates who take a more proactive role in
assisting customers. Through their expertise and
attentiveness, the sales associate drives the transaction.
In contrast, Canada Best Buy store employees are
noncommissioned, and the stores offer more interactive
displays and grab-and-go merchandising. This design
allows customers to drive the transaction as they
experience the products themselves, with store employees
available to demonstrate and explain product features.
Products and services — Only Future Shop stores carry
appliances. In addition, Geek Squad service is not
available in Future Shop stores, but is available in all
Canada Best Buy stores.
Store size — At the end of fiscal 2007, the average
Future Shop store was approximately 20,500 retail
square feet, compared with an average of approximately
25,300 retail square feet for Canada Best Buy stores.
Canada Best Buy stores generally have wider aisles, as
well as more square footage devoted to entertainment
software.
On June 8, 2006, we acquired a 75% interest in Five Star,
one of China’s largest appliance and consumer electronics
retailers. We made the investment in Five Star to further our
international growth plans, to increase our knowledge of
Chinese customers and to obtain an immediate retail
presence in China.
On December 28, 2006, we opened our first China Best
Buy store in Shanghai. We plan to open two to three
additional Best Buy stores in China during the next 12 to 18
months.
At March 3, 2007, we operated 121 Future Shop stores
throughout all of Canada’s provinces and 47 Canada Best
Buy stores in Ontario, Quebec, Alberta, British Columbia,
Manitoba and Saskatchewan. Collectively, our stores in
Canada totaled approximately 3.7 million retail square feet
at the end of fiscal 2007, or about 9% of our total retail
square footage. In fiscal 2007, Canada retail stores
generated average revenue of approximately $26.3 million
per store.
At March 3, 2007, we operated 135 Five Star stores in
seven of China’s 34 provinces and one China Best Buy
store in Shanghai. Collectively, our stores in China totaled
approximately 4.3 million retail square feet at the end of
fiscal 2007, or about 10% of our total retail square
footage.
As previously announced, we anticipate continuing our
international growth strategy by opening test stores in
Mexico and Turkey within the next 12 to 18 months.
Discontinued Operations
In fiscal 2004, we sold our interest in Musicland Stores
Corporation (“Musicland”). The transaction resulted in the
transfer of all of Musicland’s assets other than a distribution
center in Franklin, Indiana, and selected nonoperating
assets. In fiscal 2005, we reversed previously recorded
valuation allowances on deferred tax assets related to the
disposition of our interest in Musicland and recognized a
tax benefit. Musicland’s financial results have been
classified separately as discontinued operations in our
consolidated financial statements for all periods presented.
Operations
Domestic Segment
U.S. Best Buy store operations are organized into eight
territories. Each territory is divided into districts and is under
the management of a retail field officer who oversees store
performance through district managers. District managers
monitor store operations and meet regularly with store
managers to discuss merchandising, new product
introductions, sales promotions, customer loyalty programs,
employee satisfaction surveys and store operating
performance. Similar meetings are conducted at the
corporate level with divisional and regional management.
Each district also has a loss prevention manager, with
product security personnel employed at each store to
control physical inventory losses. Advertising, merchandise
purchasing and pricing, as well as inventory policies, are
centrally controlled.
U.S. Best Buy stores are generally open 80 hours per week,
seven days a week, with extended holiday hours. A typical
store is staffed by one general manager and five managers.
The average staff per store in fiscal 2007 was
approximately 128 employees and varied by store
depending on sales volumes.
U.S. Best Buy stores follow a standardized and detailed
operating procedure called our Standard Operating
Platform (“SOP”). The SOP includes procedures for
inventory management, transaction processing, customer
relations, store administration, product sales and services,
and merchandise display. All stores operate in the same
manner under the SOP.