Best Buy 2012 Annual Report Download - page 45

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Our International segment recorded $15 million and $107 million of restructuring charges in fiscal 2012 and 2011, respectively.
The restructuring charges consisted of property and equipment impairments related to information technology ("IT") assets as a
result of changes in our international expansion strategy. These restructuring charges resulted in a decrease in our operating
income in fiscal 2012 and 2011 of 0.1% of revenue and 0.9% of revenue, respectively.
During the fourth quarter of fiscal 2012, we recorded a $1.2 billion goodwill impairment charge relating to our Best Buy
Europe reporting unit, as a result of the Mobile buy-out. The cash flows attributable to Best Buy Europe under the profit share
agreement represented a significant proportion of the fair value attributable to the Best Buy Europe reporting unit. Accordingly,
the Mobile buy-out resulted in these cash flows no longer being available to the reporting unit. Upon completion of the Mobile
buy-out, we performed an impairment review of the associated goodwill and determined that the entire amount of $1.2 billion
was impaired. Refer to Note 2, Profit Share Buy-Out, of the Notes to Consolidated Financial Statements, included in Item 8,
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information about the goodwill
impairment.
The International segment experienced an operating loss in fiscal 2012, compared to operating income in fiscal 2011, primarily
due to the write-off of $1.2 billion of goodwill at our Best Buy Europe reporting unit, partially offset by improved operating
income in Canada and lower ongoing support costs due to previous restructuring activities. The goodwill write-off more than
offset the increase in revenue and improvement in the gross profit rate in fiscal 2012. For further information on the Mobile
buy-out, see Additional Consolidated Results, below.
Fiscal 2011 Results Compared With Fiscal 2010
While challenging economic conditions persisted in fiscal 2011 in many of the countries in which we operate, our International
segment continued to grow revenue and experienced a comparable store sales gain for the year. An increase in operating
income was due principally to improvements within Europe and our Five Star operations, partially offset by impact of the
restructuring activities in fiscal 2011. Excluding the impact of foreign currency exchange rate fluctuations, the International
segment experienced a decrease in SG&A, while the gross profit rate remained consistent. Continued growth in consumer
spending and temporary government stimulus programs contributed to stronger sales and improved operating income in our
Five Star business. Our Canada operations faced many of the same market conditions and factors affecting the U.S. consumer
electronics industry, with the adoption of new technology and the timing of product life-cycles continuing to play an important
role in revenue trends. Similarly, our Europe operations saw the impacts from a constrained economy, but continued to benefit
from higher Best Buy Mobile profit share-based management fees paid in fiscal 2011.
The 4.7% increase in revenue for fiscal 2011 was due to the positive impact of foreign currency exchange rate fluctuations
(mainly related to the Canadian dollar), a 2.3% comparable store sales gain and the impact of net new stores opened during
fiscal 2011, partially offset by the impact of having one less week of revenue in Europe and a decline in sales in non-
comparable sales channels. The increase in comparable store sales in fiscal 2011 was the result of gains in Five Star and
Europe, partially offset by a decline in Canada.
The components of the International segment's 4.7% revenue increase in fiscal 2011 were as follows:
Impact of foreign currency exchange rate fluctuations 2.5 %
Comparable store sales impact 1.9 %
Net new stores 1.3 %
One less week of revenue for Best Buy Europe(1) (0.6)%
Non-comparable sales channels(2) (0.4)%
Total revenue increase 4.7 %
(1) Represents the incremental revenue associated with Best Buy Europe in fiscal 2010, which had 53 weeks of activity, compared to 52 weeks in fiscal 2011.
(2) Non-comparable sales channels primarily reflects the impact from revenue we earn from sales of merchandise to wholesalers and dealers as well as other
non-comparable sales channels not included within our comparable store sales calculation.
The net addition of 18 large-format stores throughout the International segment during the past 12 months (primarily Best Buy
Canada, Future Shop and Five Star) contributed the majority of the change in revenue associated with net new stores, with Five
Star stores having a lesser impact given the timing of their openings later in the year. Offsetting the revenue increase from
large-format stores was the impact of net closures of small-format stores in Europe, which had a smaller impact on the overall
revenue change given their smaller square footage compared to our large-format stores.