Best Buy Reports Fourth Quarter and Fiscal Year Results
Best Buy Reports Fourth Quarter and Fiscal Year Results
0.9% Fourth Quarter Domestic Comparable Store Sales Increase
$965 Million Adjusted Annual Free Cash Flow
$150 Million in Phase One Renew Blue Cost Reductions
Business Wire
MINNEAPOLIS -- March 1, 2013
Best Buy Co., Inc. (NYSE: BBY) today announced results for the 13-week fourth
quarter (“Q4 FY13”) and 53-week fiscal year ended February 2, 2013 (“FY13”),
as compared to the 13-week fourth quarter (“Q4 FY12”) and the 52-week fiscal
year ended January 28, 2012 (“FY12”). In FY13, the extra week occurred during
the first quarter.
Overview ($ in millions, except per share amounts) Q4 FY13 Q4 FY12
Revenue $16,711 $16,671
Comparable store sales % change^1 (0.8%) (1.3%)
Domestic Segment:
Comparable store sales % change^1 0.9% (1.1%)
Online growth 11.2% 25.4%
International Segment:
Comparable store sales % change^1 (6.6%) (1.8%)
Adjusted (non-GAAP) operating income as a % of revenue^2 5.5% 7.2%
GAAP operating loss as a % of revenue (0.9%) (0.7%)
Adjusted (non-GAAP) diluted EPS from continuing $1.64 $2.18
operations^2
GAAP EPS from continuing operations ($1.21) ($4.86)
Adjusted (non-GAAP) return on invested capital^3 9.2% 11.0%
Please see the table titled “Reconciliation of Non-GAAP Financial Measures”
attached to this release for more detail.
Hubert Joly, Best Buy President and CEO commented, “On revenue growth of 0.2%,
we delivered non-GAAP diluted earnings per share of $1.64. Adjusted free cash
flow for the year reached $965 million as we aggressively reduced inventories
and focused on working capital and cash flow management. To deliver these
better-than-expected results, renewed momentum in the Domestic business more
than offset continued softness in the International business.”
Joly continued, “Fourth quarter Domestic comparable store sales increased
0.9%, with an overall 10 basis point decline in the gross profit rate.
Domestic online revenue increased 11%. These results were driven by a
compelling assortment of new products in key growth categories, increased
“blue-shirt” training and higher customer engagement in our retail stores, and
impactful ‘traffic-generating’ marketing activities. It was a quarter that was
driven, not given and we are encouraged by the intensity, collaboration and
momentum that was generated by both our front line and corporate teams as we
began to execute against our Renew Blue initiatives.”
Joly concluded, “To build on this momentum in fiscal 2014, we remain intently
focused on the two problems we have to solve: stabilizing and improving our
comparable store sales and increasing profitability across our global
businesses. We recognize, however, that fiscal 2014 is a year of transition
and that further investment will be required to advance our Renew Blue
transformation. I would like to highlight six key priorities that will be
pursued in fiscal 2014 that fall under the various pillars of Renew Blue.
These priorities are (1) accelerating online growth; (2) escalating the
multi-channel customer experience; (3) increasing revenue and gross profit per
square foot through enhanced store space optimization and merchandising; (4)
driving down cost of goods sold through supply chain efficiencies; (5)
continuing to gradually optimize the U.S. real estate portfolio; and (6)
further reducing SG&A costs. In addition, we will focus on driving operational
improvements in our International business.”
Sharon McCollam, EVP, CAO and CFO of Best Buy, commented, “To support these
initiatives, we are expecting capital spending in fiscal 2014 to be in the
range of $700 to $800 million and incremental SG&A investments in the range of
$150 to $200 million. These investments will be principally in the areas of
online, mobile and the multi-channel customer experience, in addition to
non-recurring costs associated with the insourcing of IT (expected to be
completed in FY14) and the replatforming of bestbuy.com (expected to be
completed in FY15). These incremental SG&A investments, however, are expected
to be substantially offset by our Renew Blue cost reduction initiatives,
including the $150 million of Phase One reductions that were enacted over the
last several weeks and the additional reductions that we are expecting to
announce in the second quarter and later this year.”
McCollam continued, “From a revenue and earnings perspective in fiscal 2014,
we will not be providing financial guidance. Directionally, however, we do
expect the first quarter to be under significant pressure due to (1) the
absence of an additional week and the impact of this year’s “pre-Super Bowl”
sales shifting into Q4 FY13 versus Q1 FY14 (an impact of approximately $0.14
in diluted EPS); (2) a less favorable product and services mix due to the
timing of high velocity product launches that occurred in Q1 FY13 that are not
expected to recur in Q1 FY14; (3) the first quarter carry-over effect of sales
and marketing investments that were implemented in the second and third
quarters of FY13; (4) greater investment in price competitiveness, including
the impact of the company’s recently launched price match program; and (5) the
timing and impact of capital and SG&A investments in the P&L versus the timing
of the realization of the benefits (including the insourcing of IT and
replatforming of bestbuy.com).”
McCollam concluded, “Despite these first quarter financial pressures, the
energy in the organization around the successful execution of our Renew Blue
initiatives is inspiring. Our fourth quarter results and the actions that we
have taken since then to begin rationalizing our infrastructure, have given
the organization something that they have not had in a long time – pride in
the outcome and belief in what is possible. Our fourth quarter results have
also affirmed what Hubert shared at the November analyst day and what I knew
was true when I joined the company: (1) Best Buy is the market leader in a
highly fragmented and growing market; (2) we have a powerful platform from
which to deliver a superior multi-channel shopping and service experience to
our customers; (3) while already the 11th largest e-commerce retailer in the
U.S., Best Buy is underpenetrated from a market share perspective and early
investment and the momentum we have seen have validated that this is a
significant growth opportunity; and (4) the runway to improve financial
returns through increased online growth, enhanced retail execution, and
extensive structural cost reductions is tremendous.”
Domestic Segment Fourth Quarter Results
Revenue
Domestic revenue of $12.55 billion declined 0.3% versus last year. This
decline was driven by the loss of revenue from 49 big box stores that were
closed earlier in the year, but was substantially offset by a positive 0.9%
comparable store sales increase and incremental revenue from 126 additional
Best Buy Mobile stand-alone stores. It is important to note, however, that
comparable store sales in the quarter benefitted from an estimated 35 basis
points due to a calendar shift in this year’s “pre-Super Bowl” sales from Q1
FY14 to Q4 FY13.
Domestic online sales increased 11.2%, reaching a record $1.3 billion as
momentum accelerated throughout the quarter. Highly effective
“traffic-generating” marketing initiatives drove these better-than-expected
results.
From a merchandising perspective in the Domestic segment, strong growth in
mobile phone, tablets/eReaders and appliances was partially offset by declines
in gaming and digital imaging.
Gross Profit Rate
Adjusted (non-GAAP) Domestic gross profit rate was 22.4% (22.4% on a GAAP
basis) versus 22.5% (22.3% on a GAAP basis) last year. This 10 basis point
decrease is a net impact of two business drivers. The first, which represents
a 40 basis point decrease, is higher promotional activity principally in home
theater, that was partially offset by lower sales in gaming which sells at a
lower gross profit rate. The second is a 30 basis point benefit from a
periodic profit sharing payment that was earned by the company based on the
long-term performance of the company’s externally managed extended service
plan portfolio.
Selling, General and Administrative Expenses (“SG&A”)
Adjusted (non-GAAP) Domestic SG&A expenses were $2.07 billion ($2.08 billion
on a GAAP basis) or 16.5% of revenue versus $1.90 billion ($1.91 billion on a
GAAP basis) or 15.1% last year. The 140 basis point increase was primarily
driven by (1) increased investments in advertising and other direct selling
costs to drive in-store and online revenue; (2) a reversal of incentive
compensation expense in the prior year that did not recur in Q4 FY13; (3) an
increase in field incentive compensation and executive retention and
transition costs; and (4) a year-over-year increase in legal-related reserves.
International Segment Fourth Quarter Results
Revenue
International revenue of $4.16 billion increased 2% versus $4.09 billion last
year. This increase was driven by the positive impact of changes in foreign
currency exchange rates, partially offset by 6.6% decline in comparable store
sales. Positive comparable store sales in Europe were more than offset by
declines in Canada and China. In Canada, overall industry softness drove the
decline in comparable store sales. In China, however, increased competition
from e-commerce and year-over-impacts from expired government stimulus
programs in FY12 were the key drivers of the comparable store sales decline.
Gross Profit Rate
International gross profit rate was 23.4% versus 25.5% last year. This 210
basis points rate decline was primarily driven by a lower gross profit rate in
Europe. In Europe, the decline was driven by a higher percentage of revenue
coming from the wholesale channel, an unfavorable product mix, and greater
promotional activity. The International segment’s gross profit rate was also
negatively impacted by phone carrier and other periodic payments that were
earned by the company in the prior year that did not recur in Q4 FY13.
SG&A
Adjusted (non-GAAP) International SG&A expenses were $791 million ($826
million on a GAAP basis) or 19.0% of revenue versus $782 million ($831 million
on a GAAP basis) or 19.1% last year. This 10 basis point decrease was
primarily driven by overall lower costs, partially offset by the negative
impact of changes in foreign currency exchange rates.
Renew Blue Cost Reduction Initiatives
Over the last several weeks, the company enacted Phase One of its Renew Blue
Cost reductions, which totaled $150 million in annualized savings and included
an initial headcount reduction of approximately 400 people. These savings are
being driven by (1) the discontinuation of non-core activities; (2) the
take-out of management layers; and (3) various efficiency improvements,
including the removal of organizational silos that have driven up costs and
undermined accountability.
Non-Cash Impairments and Restructuring Charges
During Q4 FY13, the company recorded a pre-tax non-cash impairment charge of
$822 million primarily to reflect the write-off of goodwill for Canada and
China, as recent economic and competitive pressures contributed to a
worse-than-expected fourth quarter performance and lowered long-term outlooks
for both countries. The same factors that resulted in the goodwill impairments
also led to higher than normal non-restructuring, non-cash asset impairments,
which are included in the SG&A line and totaled $44 million (including $9
million related to Domestic segment asset impairments).
The company also recorded pre-tax restructuring charges totaling $203 million
in Q4 FY13 primarily related to previously announced store closures in Canada
and Europe in addition to severance charges associated with the Renew Blue
SG&A cost reduction initiatives outlined above. Of this $203 million,
approximately $140 million is expected to be paid out in cash primarily over
the next two years.
Please see the table titled “Reconciliation of Non-GAAP Financial Measures”
attached to this release for more detail.
Adjusted Free Cash Flow^4
Adjusted free cash flow FY13 was $965 million versus the most recently
provided guidance of $500 million. This better-than-expected outcome was
primarily driven by an aggressive inventory reduction plan and an intense
focus on working capital and cash flow management initiatives that were both
implemented after the company’s last financial press release, in addition to
the impact of better-than-expected Q4 FY13 earnings.
The adjusted free cash flow excludes the impact of previously announced
restructuring activities and includes the benefit from a change in restricted
cash related to working capital. Please see the table titled “Consolidated
Statement of Cash Flows” attached to this release for more detail.
Dividends
On December 31, 2012, the company paid a quarterly dividend of $0.17 per
common share outstanding, or $57 million in the aggregate.
Conference Call
Best Buy is scheduled to conduct an earnings conference call at 9:00 a.m.
Eastern Time (8:00 a.m. Central Time) on March 1, 2013. A webcast of the call
is expected to be available on its website at www.investors.bestbuy.com both
live and after the call. A telephone replay is also available starting at
approximately 12:00 p.m. Eastern Time (11:00 a.m. Central Time) on March 1
through March 15, 2013. The dial-in number for the replay is 800-406-7325
(domestic) or 303-590-3030 (international), and the access code is 4596731.
(1) Best Buy’s comparable store sales is comprised of revenue at stores, call
centers, and websites operating for at least 14 full months as well as revenue
related to other comparable sales channels. Relocated stores, as well as
remodeled, expanded and downsized stores closed more than 14 days, are
excluded from the comparable store sales calculation until at least 14 full
months after reopening. Acquired stores and businesses are included in the
comparable store sales calculation beginning with the first full quarter
following the first anniversary of the date of the acquisition. The portion of
the calculation of the comparable store sales percentage change attributable
to the International segment excludes the effect of fluctuations in foreign
currency exchange rates. The calculation of comparable store sales excludes
the impact of the extra week of revenue in the first quarter of fiscal 2012,
as well as revenue from discontinued operations. The method of calculating
comparable store sales varies across the retail industry. As a result, Best
Buy’s method of calculating comparable store sales may not be the same as
other retailers’ methods. Online revenue is included in Best Buy’s same store
sales calculation.
(2) The company defines adjusted gross profit, adjusted SG&A and adjusted
operating income for the periods presented as its reported gross profit, SG&A
and operating income for those periods calculated in accordance with
accounting principles generally accepted in the U.S. (“GAAP”) adjusted to
exclude the effects of restructuring charges, costs related to the purchase of
CPW’s share of the Best Buy Mobile profit share agreement (“BBE transaction
costs”), non-restructuring asset impairments and goodwill impairments. The
inclusion of non-restructuring asset impairments represents a change from
prior periods. In addition, the company defines adjusted net earnings and
adjusted diluted earnings per share from continuing operations for the periods
presented as its reported net earnings and diluted earnings per share from
continuing operations calculated in accordance with GAAP adjusted to exclude
the effects of the above referenced items, gains of sales of investments and
the noncontrolling interest impact of restructuring charges, BBE transaction
costs and the purchase of CPW’s share of the Best Buy Mobile profit share
agreement.
These non-GAAP financial measures provide investors with an understanding of
the company’s gross profit, SG&A, operating income, net earnings, and diluted
earnings per share adjusted to exclude the effect of the items described
above. These non-GAAP financial measures assist investors in making a ready
comparison of the company’s operating income, net earnings, and diluted
earnings per share for its fiscal quarter and year ended February 2, 2013,
against the company’s results for the respective prior-year periods and
against third party estimates of the company’s diluted earnings per share for
those periods that may not have included the effect of such items.
Additionally, management uses these non-GAAP financial measures as an internal
measure to analyze trends, allocate resources, and analyze underlying
operating performance. This non-GAAP financial measure should not be
considered superior to, as a substitute for, or as an alternative to, and
should be considered in conjunction with, GAAP financial measures and may
differ from similar measures used by other companies. Please see
“Reconciliation of Non-GAAP Financial Measures” attached to this release for
more detail.
(3) The company defines adjusted return on invested capital ("ROIC") as
adjusted net operating profit after taxes divided by average invested capital
for the periods presented (including both continuing and discontinued
operations). Adjusted net operating profit after taxes is defined as our
operating income for the periods presented calculated in accordance with GAAP
adjusted to exclude the effects of: (i) operating lease interest; (ii)
investment income; (iii) net earnings attributable to noncontrolling
interests; (iv) income taxes; (v) all restructuring charges in costs of goods
sold and operating expenses, goodwill and tradename impairments, and BBE
transaction costs; and (vi) the noncontrolling interest impact of the
restructuring charges, Best Buy Europe transaction costs and the purchase of
CPW's share of the Best Buy Mobile profit share agreement. Average invested
capital is defined as the average of our total assets for the trailing four
quarters in relation to the periods presented adjusted to: (i) exclude excess
cash and cash equivalent and short-term investments; (ii) include capitalized
operating lease obligations calculated using a multiple of eight times rental
expenses; (iii) exclude our total liabilities, less our outstanding debt; and
(iv) exclude equity of noncontrolling interests.
This non-GAAP financial measure provides investors with a supplemental measure
to evaluate how effectively the company is investing its capital and deploying
its assets. Management uses this non-GAAP financial measure to assist in
allocating resources, and trends in the measure may fluctuate over time as
management balances long-term initiatives with possible short-term impacts.
Our ROIC calculation utilizes total operations in order to provide a measure
that includes the results of and capital invested in all operations, including
those businesses that are no longer continuing operations. This non-GAAP
financial measure should not be considered superior to, as a substitute for,
or as an alternative to, and should be considered in conjunction with, GAAP
financial measures and may differ from similar measures used by other
companies. Please see “Reconciliation of Non-GAAP Financial Measures” attached
to this release for more detail.
(4) Best Buy defines free cash flow as total cash provided by (used in)
operating activities less additions to property and equipment. This non-GAAP
financial measure assists investors in making a ready comparison of the
company’s free cash flow results for the year ending February 2, 2013, against
the company’s results for the respective prior-year periods and against
management’s previously provided expectations. The company’s free cash flow
excludes the impact of previously announced restructuring activities (net of
taxes) and includes a benefit from a change in restricted cash related to
working capital, which is included within investing activities on the
condensed consolidated statements of cash flows. This non-GAAP financial
measure should not be considered superior to, as a substitute for, or as an
alternative to, and should be considered in conjunction with, GAAP financial
measures and may differ from similar measures used by other companies. Please
see “Condensed Consolidated Statements of Cash Flows” attached to this release
for more detail.
Forward-Looking and Cautionary Statements:
This news release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 as contained in Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934 that reflect management’s current views and estimates regarding
future market conditions, company performance and financial results, business
prospects, new strategies, the competitive environment and other events. You
can identify these statements by the fact that they use words such as
“anticipate,” “believe,” ”assume,” “estimate,” “expect,” “intend,” “project,”
“guidance,” “plan,” “outlook,” and other words and terms of similar meaning.
These statements involve a number of risks and uncertainties that could cause
actual results to differ materially from the potential results discussed in
the forward-looking statements. Among the factors that could cause actual
results and outcomes to differ materially from those contained in such
forward-looking statements are the following: general economic conditions,
changes in consumer preferences, credit market constraints, acquisitions and
development of new businesses, divestitures, product availability, sales
volumes, pricing actions and promotional activities of competitors, profit
margins, weather, natural or man-made disasters, changes in law or
regulations, foreign currency fluctuation, availability of suitable real
estate locations, the company’s ability to react to a disaster recovery
situation, the impact of labor markets and new product introductions on
overall profitability, failure to achieve anticipated benefits of announced
transactions, integration challenges relating to new ventures and
unanticipated costs associated with previously announced or future
restructuring activities. A further list and description of these risks,
uncertainties and other matters can be found in the company’s annual report
and other reports filed from time to time with the Securities and Exchange
Commission, including, but not limited to, Best Buy’s Annual Report on Form
10-K filed with the SEC on May 1, 2012. Best Buy cautions that the foregoing
list of important factors is not complete, and any forward-looking statements
speak only as of the date they are made, and Best Buy assumes no obligation to
update any forward-looking statement that it may make.
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF EARNINGS
($ in millions, except per share amounts)
(Unaudited and subject to reclassification)
Three Months Ended Twelve Months Ended
Feb. 2, Jan. 28, Feb. 2, Jan. 28,
2013 2012 2013 2012
Revenue $ 16,711 $ 16,671 $ 49,621 $ 50,041
Cost of goods sold 12,929 12,798 37,782 37,632
Restructuring charges - cost of 1 19 1 19
goods sold
Gross profit 3,781 3,854 11,838 12,390
Gross profit % 22.6% 23.1% 23.9% 24.8%
Selling, general and 2,902 2,736 10,398 10,167
administrative expenses
SG&A % 17.4% 16.4% 21.0% 20.3%
Goodwill impairment 822 1,207 822 1,207
Restructuring charges 202 32 456 36
Operating income (loss) (145) (121) 162 980
Operating income (loss) % (0.9%) (0.7%) 0.3% 2.0%
Other income (expense):
Gain on sale of investments 18 55 18 55
Investment income and other 7 21 32 46
Interest expense (31) (31) (125) (129)
Earnings (loss) from continuing
operations before income tax (151) (76) 87 952
expense and equity in loss of
affiliates
Income tax expense 226 328 310 692
Effective tax rate (149.9%) (434.9%) 354.4% 72.7%
Equity in loss of affiliates - (1) (5) (4)
Net earnings (loss) from (377) (405) (228) 256
continuing operations
Loss from discontinued (2) (188) (5) (325)
operations, net of tax
Net loss including (379) (593) (233) (69)
noncontrolling interest
Net earnings from continuing
operations attributable to
noncontrolling interests (31) (1,305) (20) (1,388)
Net loss from discontinued
operations attributable to 1 79 4 134
noncontrolling interests
Net loss attributable to Best $ (409) $ (1,819) $ (249) $ (1,323)
Buy Co., Inc. shareholders
Amounts attributable to Best Buy
Co., Inc. shareholders
Net loss from continuing $ (408) $ (1,710) $ (248) $ (1,132)
operations
Net loss from discontinued (1) (109) (1) (191)
operations
Net loss attributable to Best $ (409) $ (1,819) $ (249) $ (1,323)
Buy Co., Inc. shareholders
Basic loss per share attributable to Best Buy Co., Inc. shareholders
Continuing operations $ (1.21) $ (4.86) $ (0.73) $ (3.05)
Discontinued operations - (0.31) - (0.52)
Basic loss per share $ (1.21) $ (5.17) $ (0.73) $ (3.57)
Diluted loss per share attributable to Best Buy Co., Inc. ^ shareholders^1
Continuing operations $ (1.21) $ (4.86) $ (0.73) $ (3.05)
Discontinued operations - (0.31) - (0.52)
Diluted loss per share $ (1.21) $ (5.17) $ (0.73) $ (3.57)
Dividends declared per Best Buy $ 0.17 $ 0.16 $ 0.66 $ 0.62
Co., Inc. common share
Weighted average Best Buy Co., Inc. common shares
outstanding (in millions)
Basic 338.1 351.8 339.0 370.6
Diluted 338.1 351.8 339.0 370.6
(1) The calculation of diluted earnings loss per share for the three and
twelve months ended February 2, 2013 and March 3, 2012 does not include
potentially dilutive shares of common stock because their inclusion would be
anti-dilutive (i.e., reduce the net loss per share).
BEST BUY CO., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in millions)
(Unaudited and subject to reclassification)
Feb. 2, 2013 Jan. 28, 2012
ASSETS
Current assets
Cash and cash equivalents $ 1,826 $ 1,401
Receivables 2,704 2,448
Merchandise inventories 6,571 6,803
Other current assets 946 827
Total current assets 12,047 11,479
Net property and equipment 3,270 3,491
Goodwill 528 1,328
Tradenames 131 129
Customer relationships 203 229
Equity and other investments 86 142
Other assets 522 447
TOTAL ASSETS $ 16,787 $ 17,245
LIABILITIES & EQUITY
Current liabilities
Accounts payable $ 6,951 $ 6,858
Unredeemed gift card liabilities 428 491
Accrued compensation 520 524
Accrued liabilities 1,639 1,641
Accrued income taxes 129 213
Short-term debt 596 480
Current portion of long-term debt 547 46
Total current liabilities 10,810 10,253
Long-term liabilities 1,109 1,065
Long-term debt 1,153 1,685
Equity
Common stock 34 35
Additional paid-in capital 54 -
Retained earnings 2,861 3,512
Accumulated other comprehensive income 112 74
Total Best Buy Co., Inc. shareholders' equity 3,061 3,621
Noncontrolling interests 654 621
Total equity 3,715 4,242
TOTAL LIABILITIES & EQUITY $ 16,787 $ 17,245
BEST BUY CO., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in millions) (Unaudited and subject to reclassification)
Twelve Months Ended
Feb. 2, 2013 Jan. 28, 2012
OPERATING ACTIVITIES
Net loss including noncontrolling interests $ (233 ) $ (69 )
Adjustments to reconcile net loss to total cash
provided by operating activities:
Depreciation 876 884
Amortization of definite-lived intangible 41 48
assets
Restructuring charges 457 308
Goodwill impairment 822 1,207
Stock-based compensation 117 126
Realized gain on sale of investments (18 ) (55 )
Deferred income taxes (100 ) 3
Other, net 68 19
Changes in operating assets and liabilities,
net of acquired assets and liabilities:
Receivables (217 ) (187 )
Merchandise inventories 265 524
Other assets (110 ) 41
Accounts payable 38 284
Other liabilities (432 ) (32 )
Income taxes (152 ) (31 )
Total cash provided by operating activities 1,422 3,070
INVESTING ACTIVITIES
Additions to property and equipment (742 ) (747 )
Purchases of investments (13 ) (111 )
Sales of investments 69 297
Acquisition of business, net of cash acquired - (174 )
Change in restricted assets 74 72
Other, net 10 (2 )
Total cash used in investing activities (602 ) (665 )
FINANCING ACTIVITIES
Repurchase of common stock (255 ) (1,368 )
Issuance of common stock 27 68
Dividends paid (224 ) (228 )
Repayments of debt (2,103 ) (3,438 )
Proceeds from issuance of debt 2,173 3,951
Payment to noncontrolling interest - (1,303 )
Other, net (14 ) (31 )
Total cash used in by financing activities (396 ) (2,349 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1 7
ADJUSTMENT FOR CHANGE IN FISCAL YEAR 202 235
INCREASE IN CASH AND CASH EQUIVALENTS 627 298
CASH AND CASH EQUIVALENTS AT BEGINNING OF 1,199 1,103
PERIOD
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,826 $ 1,401
Total cash provided by operating activities $ 1,422 $ 3,070
Additions to property and equipment (742 ) (747 )
Free cash flow 680 2,323
Add: cash paid for restructuring 171 30
Add: changes in restricted cash related to 114 17
payables
Adjusted free cash flow $ 965 $ 2,370
BEST BUY CO., INC.
SEGMENT INFORMATION
($ in millions)
(Unaudited and subject to reclassification)
Domestic Segment Performance Summary
Three Months Ended Twelve Months Ended
Feb. 2, 2013 Jan. 28, 2012 Feb. 2, 2013 Jan. 28,
2012
Revenue $12,550 $12,583 $36,848 $37,007
Gross profit $2,809 $2,810 $8,793 $9,016
SG&A $2,076 $1,905 $7,414 $7,252
Operating income $649 $888 $1,043 $1,742
Key Metrics:
Comparable store sales 0.9% (1.1%) (1.7%) (2.1%)
% change^(1)
Gross profit as a % of 22.4% 22.3% 23.9% 24.4%
revenue
SG&A as a % of revenue 16.5% 15.1% 20.1% 19.6%
Operating income as a % 5.2% 7.1% 2.8% 4.7%
of revenue
Adjusted (non-GAAP)
Results^(2)
Gross profit $2,810 $2,829 $8,794 $9,035
Gross profit as a % of 22.4% 22.5% 23.9% 24.4%
revenue
SG&A $2,067 $1,897 $7,391 $7,244
SG&A as a % of revenue 16.5% 15.1% 20.1% 19.6%
Operating income $743 $932 $1,403 $1,791
Operating income as a % 5.9% 7.4% 3.8% 4.8%
of revenue
International Segment Performance Summary
Three Months Ended Twelve Months Ended
Feb. 2, 2013 Jan. 28, 2012 Feb. 2, 2013 Jan. 28,
2012
Revenue $4,161 $4,088 $12,773 $13,034
Gross profit $972 $1,044 $3,045 $3,374
SG&A $826 $831 $2,984 $2,915
Operating loss ($794) ($1,009) ($881) ($762)
Key Metrics:
Comparable store sales (6.6%) (1.8%) (7.5%) (2.0%)
% change^(1)
Gross profit as a % of 23.4% 25.5% 23.8% 25.9%
revenue
SG&A as a % of revenue 19.9% 20.3% 23.4% 22.4%
Operating loss as a % (19.1%) (24.7%) (6.9%) (5.8%)
of revenue
Adjusted (non-GAAP)
Results^(2)
SG&A $791 $782 $2,946 $2,865
SG&A as a % of revenue 19.0% 19.1% 23.1% 22.0%
Operating income $181 $262 $99 $509
Operating income as a % 4.3% 6.4% 0.8% 3.9%
of revenue
(1) Best Buy’s comparable store sales is comprised of revenue at stores, call
centers, and Web sites operating for at least 14 full months as well as
revenue related to other comparable sales channels. Relocated stores, as well
as remodeled, expanded and downsized stores closed more than 14 days, are
excluded from the comparable store sales calculation until at least 14 full
months after reopening. Acquired stores are included in the comparable store
sales calculation beginning with the first full quarter following the first
anniversary of the date of the acquisition. The portion of the calculation of
the comparable store sales percentage change attributable to the International
segment excludes the effect of fluctuations in foreign currency exchange
rates. The method of calculating comparable store sales varies across the
retail industry. As a result, Best Buy’s method of calculating comparable
store sales may not be the same as other retailers’ methods. Online revenue is
included in Best Buy’s same store sales calculation.
(2) Excludes the impact of previously announced restructuring charges. Please
see table titled “Reconciliation of Non-GAAP Financial Measures” at the back
of this release.
BEST BUY CO., INC.
REVENUE CATEGORY SUMMARY
(Unaudited and subject to reclassification)
Domestic Segment Summary
Revenue Mix Summary Comparable Store Sales
Three Months Ended Three Months Ended
Feb. 2, Jan. 28, Feb. 2, 2013 Jan. 28,
2013 2012 2012
Consumer Electronics 35% 38% (5.8%) (4.8%)
Computing and Mobile 42% 37% 13.4% 11.1%
Phones
Entertainment 12% 15% (18.9%) (17.9%)
Appliances 5% 4% 11.7% 14.5%
Services^(1) 5% 5% 6.2% (4.9%)
Other 1% 1% n/a n/a
Total 100% 100% 0.9% (1.1%)
International Segment Summary
Revenue Mix Summary Comparable Store Sales
Three Months Ended Three Months Ended
Feb. 2, Jan. 28, Feb. 2, 2013 Jan. 28,
2013 2012 2012
Consumer Electronics 20% 24% (18.4%) (4.8%)
Computing and Mobile 60% 53% 2.5% 0.8%
Phones
Entertainment 6% 7% (17.8%) (16.0%)
Appliances 8% 9% (14.7%) 7.2%
Services^(1) 6% 7% (3.3%) 0.1%
Other <1% <1% n/a n/a
Total 100% 100% (6.6%) (1.8%)
(1) The "Services" revenue category consists primarily of service contracts,
extended warranties, computer related services, product repair and delivery
and installation for home theater, mobile audio and appliances.
BEST BUY CO., INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
CONTINUING OPERATIONS
($ in millions, except per share amounts) (Unaudited and subject to
reclassification)
The following information provides reconciliations of non-GAAP financial
measures from continuing operations to the most comparable financial measures
calculated and presented in accordance with accounting principles generally
accepted in the U.S. (“GAAP”). The company has provided non-GAAP financial
measures, which are not calculated or presented in accordance with GAAP, as
information supplemental and in addition to the financial measures presented
in the accompanying news release that are calculated and presented in
accordance with GAAP. Such non-GAAP financial measures should not be
considered superior to, as a substitute for, or as an alternative to, and
should be considered in conjunction with, the GAAP financial measures
presented in the news release. The non-GAAP financial measures in the
accompanying news release may differ from similar measures used by other
companies.
The following tables reconcile operating income, net earnings and diluted
earnings per share for the periods presented for continuing operations (GAAP
financial measures) to adjusted operating income, adjusted net earnings and
adjusted diluted earnings per share for continuing operations (non-GAAP
financial measures) for the periods presented.
Three Months Ended Three Months Ended
Feb. 2, 2013 Jan. 28, 2012
$ % of Rev. $ % of Rev.
Domestic - Continuing Operations
Gross profit $2,809 22.4% $2,810 22.3%
Restructuring charges - COGS 1 0.0% 19 0.2%
Adjusted gross profit $2,810 22.4% $2,829 22.5%
SG&A $2,076 16.5% $1,905 15.1%
Non-restructuring asset (9) (0.1%) (8) (0.1%)
impairments - SG&A
Adjusted SG&A $2,067 16.5% $1,897 15.1%
Operating income $649 5.2% $888 7.1%
Restructuring charges - COGS 1 0.0% 19 0.2%
Non-restructuring asset 9 0.1% 8 0.1%
impairments - SG&A
Goodwill impairments 3 0.0% 0 0.0%
Restructuring charges 81 0.6% 17 0.1%
Adjusted operating income $743 5.9% $932 7.4%
International - Continuing
Operations
SG&A $826 19.9% $831 20.3%
BBE transaction costs - SG&A 0 0.0% (46) (1.1%)
Non-restructuring asset (35) (0.8%) (3) (0.1%)
impairments - SG&A
Adjusted SG&A $791 19.0% $782 19.1%
Operating loss ($794) (19.1%) ($1,009) (24.7%)
BBE transaction costs - SG&A 0 0.0% 46 1.1%
Non-restructuring asset 35 0.8% 3 0.1%
impairments - SG&A
Goodwill impairments 819 19.7% 1,207 29.5%
Restructuring charges 121 2.9% 15 0.4%
Adjusted operating income $181 4.3% $262 6.4%
Consolidated - Continuing
Operations
Gross profit $3,781 22.6% $3,854 23.1%
Restructuring charges - COGS 1 0.0% 19 0.1%
Adjusted gross pofit $3,782 22.6% $3,873 23.2%
SG&A $2,902 17.4% $2,736 16.4%
BBE transaction costs - SG&A 0 0.0% (46) (0.3%)
Non-restructuring asset (44) (0.3%) (11) (0.1%)
impairments - SG&A
Adjusted SG&A $2,858 17.1% $2,679 16.1%
Operating loss ($145) (0.9%) ($121) (0.7%)
Restructuring charges - COGS 1 0.0% 19 0.1%
BBE transaction costs - SG&A 0 0.0% 46 0.3%
Non-restructuring asset 44 0.3% 11 0.1%
impairments - SG&A
Goodwill impairments 822 4.9% 1,207 7.2%
Restructuring charges 202 1.2% 32 0.2%
Adjusted operating income $924 5.5% $1,194 7.2%
Net loss ($408) ($1,710)
After-tax impact of restructuring 1 12
charges - COGS
After-tax impact of BBE 0 33
transaction costs - SG&A
After-tax impact of
non-restructuring asset 30 8
impairments - SG&A
After-tax impact of restructuring 132 21
charges
After-tax impact of goodwill 821 1,180
impairments
After-tax impact of gain on sale (18) (48)
of investments
After-tax impact of BBYM profit 0 1,303
share buyout - NCI
After-tax impact of BBE 0 (13)
transaction costs - NCI
After-tax impact of restructuring (13) (3)
charges - NCI
After-tax impact of gain on sale 9 0
of investments - NCI
Adjusted net earnings $554 $783
Basic EPS ($1.21) ($4.86)
Per share impact of diluted share 0.00 0.11
count
Per share impact of restructuring 0.01 0.04
charges - COGS
Per share impact of BBE 0.00 0.09
transaction costs - SG&A
Per share impact of
non-restructuring asset 0.09 0.02
impairments - SG&A
Per share impact of restructuring 0.39 0.06
charges
Per share impact of goodwill 2.42 3.28
impairments
Per share impact of gain on sale (0.05) (0.13)
of investments
Per share impact of BBYM profit 0.00 3.62
share buyout - NCI
Per share impact of BBE 0.00 (0.04)
transaction costs - NCI
Per share impact of restructuring (0.04) (0.01)
charges - NCI
Per share impact of gain on sale 0.03 0.00
of investments - NCI
Adjusted diluted EPS $1.64 $2.18
Twelve Months Ended Twelve Months Ended
Feb. 2, 2013 Jan. 28, 2012
$ % of Rev. $ % of Rev.
Domestic - Continuing Operations
Gross profit $8,793 23.9% $9,016 24.4%
Restructuring charges - COGS 1 0.0% 19 0.1%
Adjusted gross profit $8,794 23.9% $9,035 24.4%
SG&A $7,414 20.1% $7,252 19.6%
Non-restructuring asset (23) (0.1%) (8) (0.0%)
impairments - SG&A
Adjusted SG&A $7,391 20.1% $7,244 19.6%
Operating income $1,043 2.8% $1,742 4.7%
Restructuring charges - COGS 1 0.0% 19 0.1%
Non-restructuring asset 23 0.1% 8 0.0%
impairments - SG&A
Goodwill impairments 3 0.0% 0 0.0%
Restructuring charges 333 0.9% 22 0.1%
Adjusted operating income $1,403 3.8% $1,791 4.8%
International - Continuing
Operations
SG&A $2,984 23.4% $2,915 22.4%
BBE transaction costs - SG&A 0 0.0% (46) (0.4%)
Non-restructuring asset (38) (0.3%) (4) (0.0%)
impairments - SG&A
Adjusted SG&A $2,946 23.1% $2,865 22.0%
Operating loss ($881) (6.9%) ($762) (5.8%)
BBE transaction costs - SG&A 0 0.0% 46 0.4%
Non-restructuring asset 38 0.3% 4 0.0%
impairments - SG&A
Goodwill impairments 819 6.4% 1,207 9.3%
Restructuring charges 123 1.0% 14 0.1%
Adjusted operating income $99 0.8% $509 3.9%
Consolidated - Continuing
Operations
Gross profit $11,838 23.9% $12,390 24.8%
Restructuring charges - COGS 1 0.0% 19 0.0%
Adjusted gross pofit $11,839 23.9% $12,409 24.8%
SG&A $10,398 21.0% $10,167 20.3%
BBE transaction costs - SG&A 0 0.0% (46) (0.1%)
Non-restructuring asset (61) (0.1%) (12) (0.0%)
impairments - SG&A
Adjusted SG&A $10,337 20.8% $10,109 20.2%
Operating income $162 0.3% $980 2.0%
Restructuring charges - COGS 1 0.0% 19 0.0%
BBE transaction costs - SG&A 0 0.0% 46 0.1%
Non-restructuring asset 61 0.1% 12 0.0%
impairments - SG&A
Goodwill impairments 822 1.7% 1,207 2.4%
Restructuring charges 456 0.9% 36 0.1%
Adjusted operating income $1,502 3.0% $2,300 4.6%
Net loss ($248) ($1,132)
After-tax impact of restructuring 1 12
charges - COGS
After-tax impact of BBE 0 33
transaction costs - SG&A
After-tax impact of
non-restructuring asset 41 9
impairments - SG&A
After-tax impact of restructuring 296 24
charges
After-tax impact of goodwill 821 1,180
impairments
After-tax impact of gain on sale (18) (48)
of investments
After-tax impact of BBYM profit 0 1,303
share buyout - NCI
After-tax impact of BBE 0 (13)
transaction costs - NCI
After-tax impact of restructuring (13) (3)
charges - NCI
After-tax impact of gain on sale 9 0
of investments - NCI
Adjusted net earnings $889 $1,365
Basic EPS ($0.73) ($3.05)
Per share impact of diluted share 0.00 0.09
count
Per share impact of restructuring 0.00 0.03
charges - COGS
Per share impact of BBE 0.00 0.09
transaction costs - SG&A
Per share impact of
non-restructuring asset 0.12 0.02
impairments - SG&A
Per share impact of restructuring 0.87 0.06
charges
Per share impact of goodwill 2.42 3.11
impairments
Per share impact of gain on sale (0.05) (0.13)
of investments
Per share impact of BBYM profit 0.00 3.43
share buyout - NCI
Per share impact of BBE 0.00 (0.03)
transaction costs - NCI
Per share impact of restructuring (0.04) (0.01)
charges - NCI
Per share impact of gain on sale 0.03 0.00
of investments - NCI
Adjusted diluted EPS $2.62 $3.61
BEST BUY CO., INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
($ in millions)
(Unaudited and subject to reclassification)
The following information provides a reconciliation of a non-GAAP financial
measure to the most comparable financial measure calculated and presented in
accordance with GAAP. The company has provided the non-GAAP financial measure,
which is not calculated or presented in accordance with GAAP, as information
supplemental and in addition to the financial measure that is calculated and
presented in accordance with GAAP. Such non-GAAP financial measures should not
be considered superior to, as a substitute for, or as an alternative to, and
should be considered in conjunction with, the GAAP financial measure. The
non-GAAP financial measure may differ from similar measures used by other
companies.
The following table includes the calculation of Adjusted ROIC for total
operations, which includes both continuing and discontinued operations
(non-GAAP financial measures), along with a reconciliation to the calculation
of return on total assets ("ROA") (GAAP financial measure) for the periods
presented.
Calculation of Return on Invested Capital^1
Feb. 2, 2013^2 Jan. 28, 2012^2
Net Operating Profit After Taxes (NOPAT)
Operating income - continuing operations $ 162 $ 980
Operating loss - discontinued operations (7) (423)
Total operating income 155 557
Add: Operating lease interest^3 587 602
Add: Investment income 32 46
Less: Net earnings attributable to (16) (1,254)
noncontrolling interest (NCI)
Less: Income taxes^4 (763) (981)
NOPAT $ (5) $ (1,030)
Add: Restructuring charges and 1,340 1,574
impairments^5
Add: NCI impact of BBYM profit share
buyout, restructuring charges and (2) 1,201
impairments
Adjusted NOPAT $ 1,333 $ 1,745
Average Invested Capital
Total assets $ 16,551 $ 19,060
Less: Excess Cash^6 (554) (1,612)
Add: Capitalized operating lease 9,397 9,637
obligations^7
Total liabilities (12,485) (12,832)
Exclude: Debt^8 2,140 2,307
Less: Noncontrolling interests (627) (696)
Average invested capital $ 14,422 $ 15,864
Adjusted Return on invested capital (ROIC) 9.2% 11.0%
Calculation of Return on Assets^1
Feb. 2, 2013^2 Jan. 28, 2012^2
Net loss including noncontrolling interests $ (233) $ (69)
Total assets 16,551 19,060
Return on assets (ROA) (1.4%) (0.4%)
(1) The calculations of Return on Invested Capital and Return on Assets use
total operations, which includes both continuing and discontinued operations.
(2) Income statement accounts represent the activity for the 12 months ended
as of each of the balance sheet dates. Balance sheet accounts represent the
average account balances for the 4 quarters ended as of each of the balance
sheet dates.
(3) Operating lease interest represents the add-back to operating income
driven by our capitalized lease obligations and represents 50% of our annual
rental expense, which we consider to be an appropriate multiple for our lease
portfolio.
(4) Income taxes are calculated using a blended statutory rate at the
enterprise level based on statutory rates from the countries we do business
in.
(5) Includes all restructuring charges in costs of goods sold and operating
expenses, goodwill and tradename impairments, non-restructuring impairments,
and the BBE transaction costs.
(6) Cash and cash equivalents and short-term investments are capped at the
greater of 1% of revenue or actual amounts on hand. The cash and cash
equivalents and short-term investments in excess of the cap are subtracted
from our calculation of average invested capital to show their exclusion from
total assets.
(7) The multiple of eight times annual rental expense in the calculation of
our capitalized operating lease obligations is the multiple used for the
retail sector by one of the nationally recognized credit rating agencies that
rates our creditworthiness, and we consider it to be an appropriate multiple
for our lease portfolio.
(8) Debt includes short-term debt, current portion of long-term debt and
long-term debt and is added back to our calculation of average invested
capital to show its exclusion from total liabilities.
Contact:
Best Buy Co., Inc.
Investor Contacts:
Bill Seymour, 612-291-6122
Vice President, Investor Relations
bill.seymour@bestbuy.com
or
Mollie O’Brien, 612-291-7735
Director, Investor Relations
mollie.obrien@bestbuy.com
or
Media Contact:
Amy von Walter, 612-291-4490
Senior Director, Public Relations
amy.vonwalter@bestbuy.com
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