Best Buy 2015 Annual Report Download - page 21

Table of Contents
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We are highly dependent on the cash flows and net earnings we generate during our fourth fiscal quarter, which
includes the majority of the holiday shopping season.
Approximately one-third of our revenue and more than one-half of our net earnings have historically been generated in our
fourth fiscal quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico. Unexpected
events or developments such as natural or man-made disasters, product sourcing issues, failure or interruption of management
information systems, disruptions in services or systems provided or managed by third-party vendors or adverse economic
conditions in our fourth fiscal quarter could have a material adverse effect on our annual results of operations.
Our revenues and margins are highly sensitive to developments in products and services.
The consumer electronics industry involves constant innovation and evolution of products and services offered to consumers.
The following examples demonstrate the impact this can have on our business:
• Following the introduction of tablets, their sales grew rapidly and changed the market for mobile computing devices;
however, the market has declined rapidly in fiscal 2015 as demand levels have fallen due to market saturation and
minimal product innovation;
• Product convergence has significantly impacted the demand for some products; for example, the growth of
increasingly sophisticated smartphones has reduced the demand for separate cameras, gaming systems, music players
and GPS devices;
• The timing of new product introductions and updates can have a dramatic impact on the timing of revenues; for
example, the introduction of new gaming systems can produce high demand levels for hardware and the
accompanying software, which may be followed by several years of decline in demand;
• Delivery models for some products are affected by technological advances and new product innovations; for example,
media such as music, video and gaming is increasingly transferring to digital delivery methods that may reduce the
need for physical CD, DVD, Blu-ray and gaming products; and
• Disruptions in the availability of content (such as sporting events or other broadcast programming) may influence the
demand for hardware that our customers purchase to access such content, as well as the commission we receive from
service providers.
Many of the factors described above are not controllable by us. The factors can have a material adverse impact on our relevance
to the consumer and the demand for products and services we have traditionally offered. It is possible that these and similar
changes could materially affect our revenues and profitability.
Our international activities are subject to many of the same risks as described above, as well as to risks associated with
the legislative, judicial, regulatory, political and economic factors specific to the countries or regions in which we
operate.
We operate international retail locations in Canada and Mexico. In addition, we have a presence in various other foreign
countries, including Bermuda, China, Germany, Hong Kong, Japan, Luxembourg, the Republic of Mauritius, the Netherlands,
Taiwan, Turks and Caicos, and the U.K. During fiscal 2015, our International segment's operations generated 11% of our
revenue. Our future operating results in these countries and in other countries or regions throughout the world where we may
operate in the future could be materially adversely affected by a variety of factors, many of which are beyond our control,
including political conditions, economic conditions, legal and regulatory constraints, foreign trade rules and monetary and
fiscal policies (both of the U.S. and of other countries). In addition, foreign currency exchange rates and fluctuations may have
an impact on our future revenues, earnings and cash flows from International operations and could materially adversely affect
our reported financial performance.
Our International segment's operations face other risks as well, including the costs and difficulties of managing international
operations, greater difficulty in enforcing intellectual property rights in countries other than the U.S., and potential adverse tax
consequences. The various risks inherent in doing business in the U.S. generally also exist when doing business outside of the
U.S. and may be exaggerated by differences in culture, laws and regulations. There is a heightened risk that we misjudge the
response of consumers in foreign markets to our product and service assortments, marketing and promotional strategy and store
and website designs, among other factors, and this could adversely impact the results of these operations and the viability of
these ventures.