Best Buy 2011 Annual Report Download - page 43

The following table presents the Domestic segment’s revenue mix percentages and comparable store sales percentage
changes by revenue category in fiscal 2010 and 2009:
Revenue Mix Summary Comparable Store Sales Summary
Year Ended Year Ended
February 27, 2010 February 28, 2009 February 27, 2010 February 28, 2009
Consumer electronics 39% 39% 1.1% (5.8)%
Home office 34% 31% 12.8% 10.4%
Entertainment 16% 19% (13.2)% (5.9)%
Appliances 4% 5% (4.2)% (15.4)%
Services 6% 6% (1.1)% 4.1%
Other 1% <1% n/a n/a
Total 100% 100% 1.7% (1.3)%
Our Domestic segment’s comparable store sales gain in fiscal 2010 improved sequentially each quarter of the fiscal year
due primarily to an increase in average ticket and reflected our market share gains. The products having the largest effect
on our Domestic segment’s comparable store sales gain in fiscal 2010 were notebook computers, flat-panel televisions
and mobile phones. Stronger sales in these product categories were partially offset by comparable store sales declines in
our entertainment revenue category. Revenue from our Domestic segment’s online operations increased 22% in fiscal
2010 and is incorporated in the table above.
The 1.1% comparable store sales gain in the consumer electronics revenue category was driven primarily by increases in
the sales of flat-panel televisions as unit sales increases more than offset average selling price decreases, partially offset by
declines in the sales of navigation products and MP3 players. The 12.8% comparable store sales gain in the home office
revenue category was primarily the result of continued growth in the sales of notebook computers, which benefited from
the launch of a new operating system, as well as mobile phones, which included a full year of our Best Buy Mobile store-
within-a-store experience in all U.S. Best Buy stores, partially offset by declines in the sales of computer monitors. The
13.2% comparable store sales decline in the entertainment revenue category was due principally to a decline in sales of
video gaming, partially caused by industry-wide softness and a maturing product platform, as well as a continued decline
in sales of DVDs and CDs. The 4.2% comparable store sales decline in the appliances revenue category was due to a
decrease in unit sales which more than offset increases in average selling prices. The 1.1% comparable store sales decline
in the services revenue category was due primarily to a decline in home theater installation, partially offset by modest
increases in our sales of extended warranties.
Our Domestic segment experienced gross profit growth of $407 million in fiscal 2010, or 4.7% compared to fiscal 2009,
due to increased revenue volumes. The 0.4% of revenue decrease in the gross profit rate was due primarily to a change
in revenue mix, which reduced the gross profit rate by 0.5% of revenue and resulted from a continued shift in the revenue
mix to sales of lower-margin notebook computers, partially offset by additional mix shift into higher-margin mobile phones.
In addition, improved margin rate performance provided a 0.1% of revenue increase to the gross profit rate.
Despite revenue growth of 6.4%, our Domestic segment’s SG&A grew only 3.1% or by $207 million. Continued store
openings and significant year over year performance improvements drove higher SG&A spend in fiscal 2010 for incentive
pay, payroll and benefits and rent, partially offset by lower SG&A spend in various discretionary categories such as
information technology and supply chain project expenditures, store reset and transformation costs, advertising and travel.
The 0.6% of revenue SG&A rate decline was primarily due to the reductions in discretionary categories discussed above,
which collectively reduced the SG&A rate by 1.0% of revenue. The overall leveraging impact of higher comparable store
sales on payroll and benefits further reduced the SG&A rate by 0.2% of revenue. However, we had higher incentive pay
expense due to improvements in performance in fiscal 2010 and no incentive pay expense in the prior year, which
collectively offset the SG&A rate improvement by 0.6% of revenue.
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