Best Buy 2005 Annual Report Download - page 68

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partially offset by the increase of services revenue in the quarter of fiscal 2004. The improvement was driven
revenue mix, as services carry a higher gross profit rate, primarily by lower performance-based incentive
and benefits from our global sourcing initiative, which compensation costs and a favorable settlement with a
reduces the cost of acquiring merchandise. credit card company. These factors were partially offset
by a fourth-quarter charge to correct our accounting for
The Domestic segment’s SG&A rate for the fourth quarter leases.
of fiscal 2005 improved by 0.4% of revenue to 14.7% of
revenue, down from 15.1% of revenue for the fourth
International
The following table presents selected financial data for the International segment ($ in millions):
Three Months Ended
February 26, February 28,
(Unaudited) 2005 2004(1)
Revenue $1,015 $ 844
Comparable stores sales % gain(2) 0.5% 7.9%
Gross profit as % of revenue 22.4% 22.4%
SG&A as % of revenue 17.7% 16.9%
Operating income $48 $47
Operating income as % of revenue 4.7% 5.5%
(1) Certain amounts have been reclassified to conform to the current presentation. These reclassifications had no effect on operating
income, net earnings, financial position or cash flows. 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. The
calculation of the comparable store sales percentage gain excludes the impact of fluctuations in foreign currency exchange rates.
The International segment reported operating income of nearly all of the revenue increase for the fourth quarter of
$48 million, or 4.7% of revenue, for the fourth quarter of fiscal 2005, excluding the effect of fluctuations in foreign
fiscal 2005 compared with operating income of currency exchange rates. The remainder of the revenue
$47 million, or 5.5% of revenue, for the fourth quarter of increase, excluding the effect of fluctuations in foreign
fiscal 2004. The decrease in the operating income rate currency exchange rates, was due to the 0.5%
was due primarily to an increase in the SG&A rate of comparable store sales gain. The comparable store sales
0.8% of revenue compared with the fourth quarter of gain for the fourth quarter of fiscal 2005 was driven
fiscal 2004. primarily by strength in comparable store sales of MP3
players, digital televisions, monitors and notebook
International segment revenue for the fourth quarter of computers, and was partially offset by softer comparable
fiscal 2005 increased 20% to $1.0 billion, compared with store sales in analog televisions and DVD players.
$844 million for the fourth quarter of fiscal 2004.
Excluding the effect of fluctuations in foreign currency The International segment’s gross profit rate for the fourth
exchange rates, International segment revenue would quarter of fiscal 2005 was 22.4% of revenue, consistent
have increased 12% for the fourth quarter of fiscal 2005 with the gross profit rate for the fourth quarter of fiscal
compared with the same period of the prior fiscal year. 2004. For the fourth quarter of fiscal 2005, gross profit
The addition of six Future Shop stores and 11 Canadian rate improvements, primarily as a result of increased
Best Buy stores in the past 12 months accounted for
52