Best Buy 2005 Annual Report Download - page 67

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Segment Performance
Domestic
The following table presents selected financial data for the Domestic segment ($ in millions):
Three Months Ended
February 26, February 28,
(Unaudited) 2005 2004(1)
Revenue $8,212 $7,605
Comparable stores sales % gain(2) 3.1% 9.9%
Gross profit as % of revenue 23.7% 24.5%
SG&A as % of revenue 14.7% 15.1%
Operating income $ 735 $ 712
Operating income as % of revenue 8.9% 9.4%
(1) During fiscal 2005, we reclassified from SG&A into cost of goods sold certain expenses related to operating our distribution
network, consisting primarily of handling and transportation costs related to moving merchandise from our distribution centers to
our stores. We believe that the revised presentation provides greater consistency for investors by aligning the classification of our
distribution costs with the practices of many other retailers.
(2) Comprised of revenue at stores and Web sites operating for at least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales calculation until at least 14 full months after reopening.
For the fourth quarter of fiscal 2005, Domestic segment the low double digits for the fiscal fourth quarter,
operating income was $735 million, or 8.9% of revenue, benefiting primarily from new product introductions, an
compared with $712 million, or 9.4% of revenue, for the improved labor model, enhanced customer experience
fourth quarter of the prior fiscal year. The decrease in the and effective promotions. The low single-digit comparable
operating income rate was driven primarily by a 0.8% of store sales gain in home-office products was driven
revenue decrease in the gross profit rate, and was primarily by increased sales of notebook computers,
partially offset by a 0.4% of revenue improvement in the which were partially offset by declines in sales of cellular
SG&A rate. phones and desktop computers. For the fiscal fourth
quarter, the entertainment software product group had a
Domestic segment revenue for the fourth quarter of fiscal low single-digit comparable store sales decrease, driven
2005 was $8.2 billion, an 8% increase compared with primarily by declines in sales of video gaming and CDs,
fiscal 2004 fourth-quarter revenue of $7.6 billion. More which were partially offset by a comparable store sales
than three-fifths of the revenue increase resulted from the gain in DVDs.
addition of 61 U.S. Best Buy stores in the past 12 months.
The remainder of the revenue increase resulted from the The Domestic segment’s gross profit rate for the fourth
3.1% comparable store sales gain. quarter of fiscal 2005 decreased by 0.8% of revenue to
23.7% of revenue, down from 24.5% of revenue for the
Comparable store sales gains in the consumer electronics, fourth quarter of fiscal 2004. The decline was due
appliances and home-office product groups were partially primarily to a less profitable revenue mix resulting from
offset by a comparable store sales decline in the increased sales of MP3 players, DVDs and notebook
entertainment software product group. The high single- computers, as these products carry a lower gross profit
digit comparable store sales gain in the consumer rate. In addition, the gross profit rate for the fiscal fourth
electronics product group was driven primarily by quarter was adversely affected by increased promotional
increased sales of digital televisions, MP3 players and activity compared with the fourth quarter of fiscal 2004,
digital cameras, partially offset by softer sales of analog as well as the impact of product model transitions which
televisions and certain audio products. The appliances resulted in increased markdowns. These factors were
product group posted a comparable store sales gain in
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