Best Buy 2007 Annual Report Download - page 6

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Best Buy U.S. market share
(calendar year data)
We grew market share in TVs, gaming and notebook
computers. Our greatest successes are achieved by
focusing on customers’ needs and wants.
FY 06FY 05FY 04 FY 06FY 05FY 04 FY 07FY 06FY 05
20%
18%
17%
2006
2005
2004
Source: Company internal estimates and
NPD Group point-of-sale data
Corporate responsibility
We have two operating principles for our corporate responsibility:
1. Corporate responsibility is not a function unto itself;
rather, it’s the responsibility of every function, operation
and employee.
2. We need to actively steer this philosophy throughout
our operations, and ensure all employees define it,
evolve it and live it.
Our corporate responsibility report can be accessed at
www.BestBuy.com by selecting “responsibility.”
04
|
Succeeding in a
challenging environment
In fiscal 2007, the consumer electronics industry faced
a perfect storm. Amid heightened consumer interest in
flat-panel TVs, we saw a surplus of products coupled
with retail competitors that were anxious to increase
customer traffic and grow market share. As a result,
what transpired was a radical increase in the pace of
price declines. The consumer benefited, as average
selling prices for certain flat-panel TVs declined by
more than 30 percent in a brief window of time. Yet
retailers endured costly pressure on gross margins, in
some cases followed by excessive product returns.
In this environment, we chose to respond by matching
competitors’ prices on certain branded items, particularly
flat-panel TVs in larger screen sizes. Our bet was that
being promotional would increase customer traffic, and
if we could provide an outstanding level of service,
customers would be satisfied with their purchases and
shop us again. So far, our data shows that our thesis
held. In addition, we had a strong consumer response
from our HD Done Right campaign, which offered
consumers an incentive to serve their own best interest:
buy a flat-panel TV 37 inches or larger, let us profes-
sionally install it and upgrade to a high-definition
source. We believe this customer-centric approach
helped us deliver solid financial results coupled with
higher customer satisfaction. We plan to build on this
success with similar campaigns in the coming year.
Anticipating growth in fiscal 2008
Based on last year’s results and current trends, we are
expecting approximately 14-percent earnings growth in
fiscal 2008, or a range of $3.10 to $3.25 per diluted
share. This earnings range assumes a comparable
store sales gain of 3 percent to 5 percent, as well as
operating profit rate expansion of approximately 30
basis points.
We expect to improve on our fiscal 2007 results based
on the opening of new stores, increased loyalty from
customers, and strong consumer demand for flat-panel
TVs, notebook computers, video gaming products and
services. Bottom line, these results will happen only to
the extent that engaged employees offer unique solu-
tions to our customers.
As we consider the strong results we reported for fiscal
2007 and the year ahead, we are very grateful to our
innovative employees and the fine vendors who make
it all possible. We also thank our customers for their
business with us, and we thank you, our fellow
shareholders, for your continuing support.
Bradbury H. Anderson
Vice Chairman and CEO