Best Buy 2016 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 of the 2016 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 116

  • 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

36
The following table presents the Domestic segment's revenue mix percentages and comparable sales percentage changes by
revenue category in fiscal 2015 and 2014:
Revenue Mix Summary Comparable Sales Summary
Year Ended Year Ended
January 31, 2015 February 1, 2014 January 31, 2015 February 1, 2014
Consumer Electronics 31% 30% 3.7 % (5.6)%
Computing and Mobile Phones 47% 48% (0.6)% 4.7 %
Entertainment 9% 8% 4.5 % (16.3)%
Appliances 7% 7% 7.5 % 16.7 %
Services 5% 6% (11.1)% 0.2 %
Other 1% 1% n/a n/a
Total 100% 100% 1.0 % (0.4)%
The following is a description of the notable comparable sales changes in our Domestic segment by revenue category:
• Consumer Electronics: The 3.7% comparable sales increase was primarily due to growth in televisions, with strong
sales increases in Ultra-HD television. This was partially offset by declines in DVD/Blu-ray players, as online
streaming continues to increase, and cameras, as device convergence with smartphones and tablets continued.
• Computing and Mobile Phones: The 0.6% comparable sales decline primarily resulted from a significant decrease in
tablets due to industry declines. This decline was partially offset by an increase in sales of computers, as well as an
increase in sales of mobile phones driven by the introduction of mobile carrier installment billing plans and higher
year over year selling prices. Excluding the impact of installment billing, mobile phone comparable sales declined.
• Entertainment: The 4.5% comparable sales increase was driven primarily by gaming sales from new platforms
launched in the fourth quarter of fiscal 2014, partially offset by the continuing declines in movies and music as
consumers continue to shift from physical media to online streaming and downloads.
• Appliances: The 7.5% comparable sales gain was a result of strong performance throughout fiscal 2015 due to
effective promotions, the addition of appliance specialists in select stores and the positive impact of Pacific Kitchen &
Home store-within-a-store concepts.
• Services: The 11.1% comparable sales decline was primarily due to lower mobile repair revenue and lower sales of
extended warranty plans driven by lower attach rates.
Our Domestic segment experienced a decrease in gross profit of $194 million, or 2.3%, in fiscal 2015 compared to fiscal 2014.
The most significant driver of the decrease was $314 million of LCD legal settlement proceeds that we received in fiscal 2014.
Excluding these LCD settlements, we experienced an increase in gross profit of $120 million, and the gross profit rate
increased 0.2% of revenue. The primary drivers of the gross profit rate increase were: (1) the benefit from the realization of our
Renew Blue cost reductions and other supply chain cost containment initiatives (including initiatives related to returns,
replacements and damages); (2) a more structured and analytical approach to pricing, notably the fourth quarter; and (3)
increased revenue in higher-margin large-screen televisions. These increases were offset by a mix shift into lower-margin
gaming and computing categories and a highly competitive promotional environment in tablets.
Our Domestic segment's SG&A decreased $367 million, or 5.2%, in fiscal 2015 compared to fiscal 2014. In addition, the
SG&A rate decreased by 1.2% of revenue compared to the prior year. The decreases in SG&A and SG&A rate were primarily
driven by the realization of Renew Blue cost reduction initiatives and the benefit from tighter expense management throughout
the company. These declines were partially offset by Renew Blue investments in online growth and our in-store experience, as
well as higher incentive compensation.
Our Domestic segment recorded $4 million of restructuring charges in fiscal 2015 and incurred $123 million of restructuring
charges in fiscal 2014. These restructuring charges had an immaterial impact on our operating income rate in fiscal 2015 and
resulted in a decrease in our operating income rate in fiscal 2014 of 0.3% of revenue. Refer to Note 4, Restructuring Charges,
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 our restructuring activities.
Our Domestic segment’s operating income increased $292 million, or 0.8% of revenue, in fiscal 2015 compared to fiscal 2014.
The increase was driven by lower SG&A, a comparable sales gain and lower restructuring charges, partially offset by the
decrease in gross profit from the prior-year LCD settlements described above.