Best Buy 2008 Annual Report Download - page 49

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rates accounted for just over one-tenth of the revenue Additional Consolidated Results
increase; and the inclusion of an extra week of business in Other Income (Expense)
fiscal 2007 accounted for the remainder of the revenue
increase. Our investment income and other in fiscal 2008 decreased
to $129 million, compared with $162 million in fiscal 2007
We believe the comparable store sales increase reflected
and $107 million in fiscal 2006. The decrease in fiscal
market share gains and was driven by increased sales of
2008 compared to fiscal 2007 was due to the impact of
flat-panel televisions, video gaming hardware and software
lower average cash and investment balances, as
and notebook computers, partially offset by declines in
investments were liquidated to fund our ASR program in
tube and projection televisions. Our International segment
fiscal 2008 and a one-time $20 million gain on the sale of
reported comparable store sales increases in fiscal 2007
an equity investment in fiscal 2007. The change in fiscal
in the consumer electronics, home office, entertainment
2007 compared to fiscal 2006 was due primarily to higher
software, appliances and services revenue categories of
investment yields and the $20 million gain on the sale of
15.7%, 7.4%, 11.3%, 8.0% and 13.8%, respectively.
an equity investment in fiscal 2007.
Revenue from our International segment’s online
operations increased approximately 19% and added to the Interest expense in fiscal 2008 increased to $62 million,
overall comparable store sales increase. compared with $31 million and $30 million in fiscal 2007
and 2006, respectively. The increase in fiscal 2008
Our International segment’s gross profit rate in fiscal 2007
compared to fiscal 2007 and 2006 was due primarily to
decreased by 1.3% of revenue to 21.6% of revenue. Our
borrowings under our credit facilities related to the funding
China operations, which carry a significantly lower gross
of the ASR program in fiscal 2008.
profit rate than our Canada operations, reduced our
International segment’s gross profit rate by approximately
Effective Income Tax Rate
1.1% of revenue in fiscal 2007. The remainder of the
decrease in our International segment’s gross profit rate Our effective income tax rate increased to 36.6% in fiscal
was due primarily to increased financing costs, resulting 2008, compared with 35.3% in fiscal 2007 and 33.7% in
from increased borrowing rates and a shift towards fiscal 2006. The increase in the effective income tax rate
longer-term financing programs in conjunction with strong in fiscal 2008 compared to fiscal 2007 was due primarily
flat-panel television sales. to a reduced tax benefit from foreign operations, lower
tax-exempt interest income and an increase in state
Our International segment’s SG&A rate in fiscal 2007
income taxes. The increase in the effective income tax rate
decreased by 1.7% of revenue to 19.6% of revenue. Our
in fiscal 2007 compared to fiscal 2006 was due primarily
China operations, which carry a significantly lower SG&A
to a change in the composition of taxable income between
rate than our Canada operations, reduced our
foreign and domestic entities.
International segment’s SG&A rate by approximately 0.7%
of revenue in fiscal 2007. The remainder of the
Impact of Inflation and Changing Prices
improvement in our International segment’s SG&A rate
was due primarily to, in order of impact, the leveraging Highly competitive market conditions and the general
effect of the 41% growth in revenue; improvements in the economic environment minimized inflation’s impact on the
labor model used in our Canada Best Buy stores; reduced selling prices of our products and services, and on our
Canada headquarters payroll costs at the end of fiscal expenses. In addition, price deflation and the continued
2006; and the leveraging effect of the 11.7% comparable commoditization of key technology products affect our
store sales gain on advertising expense as a percentage of ability to increase our gross profit rate.
revenue. These factors were partially offset by a
performance-driven increase in incentive-based Liquidity and Capital Resources
compensation, expenses incurred related to the closure of
all six Canada Geek Squad stand-alone stores in the Summary
second quarter of fiscal 2007 and increased asset
We ended fiscal 2008 with $1.5 billion of cash and cash
impairment charges.
equivalents and short-term investments, compared with
41