Best Buy 2011 Annual Report Download - page 36

Download and view the complete annual report

Please find page 36 of the 2011 Best Buy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 138

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138

movies and music, internet and television. This opportunity is most prevalent today in mobile phones, but also in
connecting computing devices to mobile broadband and televisions to broadband services.
We believe that our established multi-channel strategy provides us competitive advantages in that it allows customers to
connect with us in a variety of ways. For example, customers can interact with us directly through our store, online, mobile
application or call center channels or through a combination of channels, such as purchasing online for in-store pick up.
We plan to continue to leverage these capabilities to offer consumers options that are flexible and convenient. Our online
growth plans also include allowing external vendors and retailers to sell through our Web sites, extending our reach by
allowing partners to market our products and services and leveraging online traffic to sell advertising.
Improve Growth and Returns in International Markets. Our international strategy is focused on four key geographic areas
(Canada, China, Europe and Mexico), where we believe we can leverage size, scale and economics to succeed. In China,
we expect to continue investment in profitable growth as we look to grow our position in this fast growing market through
our Five Star business. In our established businesses in Canada and Europe (small-format stores), we plan to continue our
evolution into Connected World solutions. In our relatively new markets such as the U.K. (large-format stores) and Mexico,
our growth will likely be more measured, as we increase our understanding and appreciation for customers’ needs in
these markets.
Drive Structural Opportunities to Improve Returns. In order to provide value to our customers and to fund growth
opportunities that we are targeting, we must operate efficiently and effectively. We have a disciplined approach to
managing our costs and capital allocation. We require each of our businesses to meet sufficient ROIC levels over
appropriate time horizons. Our growth strategies require that we continue to increase our points of presence in order to
fully realize the benefits of our multi-channel strategy. Our plans to continue the expansion of our U.S. Best Buy Mobile
stand-alone stores is expected to increase our presence and allow us to reduce our large-format store footprint.
We also seek to improve store productivity through actions such as expansion of our ‘‘Connected Store’’ model roll-out,
increasing our presence in pre-owned and pre-order games and expanding our Pacific Sales store-within-a-store
appliances model.
Results of Operations
Fiscal 2011 Summary
• Net earnings decreased 3.0% in fiscal 2011 compared to fiscal 2010. The decrease in net earnings was the result of
decreases in both the Domestic and International segments’ operating income, driven primarily by the $222 million
($147 million net of tax) of restructuring charges recorded in the fourth quarter of fiscal 2011, compared to $52 million
($25 million net of taxes and noncontrolling interest) of restructuring charges recorded in fiscal 2010. Earnings per
diluted share of $3.08 in fiscal 2011 was essentially flat compared to $3.10 in fiscal 2010.
• Revenue increased 1.2% to $50.3 billion. The increase was driven primarily by the net addition of 147 new stores
during fiscal 2011 and the favorable impact of foreign currency exchange rate fluctuations, partially offset by a
comparable store sales decline of 1.8%.
• Our gross profit rate increased by 0.6% of revenue to 25.1% of revenue. The increase was driven by an increase in our
Domestic segment’s gross profit rate primarily due to strong sales of higher-margin smartphones as a result of the
continued growth of Best Buy Mobile.
• Our SG&A rate increased by 0.6% of revenue to 20.5% of revenue. The increase was due primarily to the deleveraging
impact of lower comparable store sales in our Domestic segment, as well as a change in the form of vendor funding.
Partially offsetting these increases was a decrease in incentive compensation in our Domestic segment.
• In the fourth quarter of fiscal 2011, we recorded $222 million in restructuring charges related to our plans to exit the
Turkey market, restructure the Best Buy branded stores in China and improve efficiencies in our Domestic operations,
36