Best Buy's December Revenue Rises 10%; Comps Increase 2.5%; Promotes Healy to EVP, Business

LAS VEGAS — Best Buy today reported that revenue for the fiscal month ended January 1, 2005, rose 10% to $5.1 billion, compared with $4.6 billion for the fiscal month ended January 3, 2004, according to a Business Wire report.

The revenue increase was principally driven by the addition of 79 new stores in the past 12 months. Best Buy also reported a comps gain of 2.5% for the five-week period.

"Our stores' productivity has never been higher," said Brad Anderson, vice chairman and ceo, referring to revenue per sq. ft. "While we noted a modest decline in customer traffic compared with that of December of last year, our average ticket increased, driven by continued consumer interest in digital products and the performance of our customer centricity stores. Our comps gain came on top of a 9.3-percent gain for the same period last year. Overall, we believe we gained market share, thanks to outstanding teamwork between our retail and corporate employees."

U.S. and Canadian Stores Enjoy Comps Gains, Customer Centricity Stores' Gains Collectively Continue to Lead Chain

The company's 661 U.S. Best Buy stores reported revenue of $4.5 billion for fiscal December, an increase of 9% over the prior year. Best Buy's U.S. stores reported a comps gain of 2.6% for the fiscal month, reflecting solid in-store execution and the benefit of two extra shopping days prior to Christmas. Best Buy's 67 segmented stores, which opened in October as part of the company's customer centricity initiative, collectively maintained their relative sales outperformance compared with the other U.S. Best Buy stores, which was expected.

"We were very pleased with our segmented stores' performance and continue to explore ways to apply what we are learning to other stores," Anderson said. "Best Buy's customer centricity initiative empowers employees to recognize unique sets of customers and to build offerings and experiences that meet their specific needs. These stores' continued performance gives us increased confidence that this approach is the right direction for Best Buy."

Magnolia Audio Video, a high-end retailer of consumer electronics with 22 stores, reported revenue of $20 million, which was a decrease of 6%, driven by a comps decline of 6.0%. The company's domestic segment, including both U.S. Best Buy stores and Magnolia Audio Video stores, had revenue of $4.5 billion, an increase of 9%, including a comps gain of 2.6%.

The company's 144 Canadian stores, including both Future Shop and Best Buy locations, contributed revenue of $610 million for the fiscal month, an increase of 23% compared with the prior year. Approximately two-fifths of the increase was due to favorable exchange rates, while the addition of new stores also had a significant impact. The international segment had a comps gain of 1.4% for the period, reflecting solid holiday results, which were partially offset by the Sunday timing of the Boxing Day holiday.

Online traffic at the company's Web sites — including BestBuy.com, BestBuy.ca, FutureShop.ca, GeekSquad.com and MagnoliaAV.com — also rose significantly for fiscal December.

The company opened two U.S. Best Buy stores and two Canadian Best Buy stores during the fiscal month, adding a total of 122,000 sq. ft.

For the first 10 months of the fiscal year, the company reported a comps gain of 4.4%, including a gain of 4.5% at U.S. Best Buy stores; a gain of 3.5% for Magnolia Audio Video stores; and a gain of 3.7% for the international segment. Revenue for the first 10 months of the fiscal year was $23.3 billion, an increase of 12%, reflecting the addition of new stores as well as the comps gain.

"We now expect our comps gain for the quarter to be at the low end of our prior range of 3% to 5%. In addition, we continue to expect a modest increase in the promotional environment," said Darren Jackson, evp — finance and cfo of Best Buy. "That said, similar to the last quarter, we believe that we also will be able to deliver productivity improvements, as well as higher net interest income and a slightly lower tax rate."

Best Buy Promotes Healy to EVP, Business

In other news from Best Buy, the company has promoted Tom Healy to evp, Best Buy For Business, a new position in the company's recently formed customer business group. Healy, age 43, reports to John Walden, evp and leader of the new group which aggregates all resources that manage customer segment performance, and consolidates resources that define Best Buy for consumers.

"Two years ago, Tom assumed leadership for Best Buy For Business, an evolving customer segment focused on providing solutions for small business owners. Under his guidance, the Best Buy For Business team developed a multi-channel strategy to provide an even higher level of service and more relevant offerings to American businesses," said Walden. "We are excited about the opportunities that accrue from our focus on the business customer. We believe Tom's deep industry expertise will enrich our capabilities in this area."

Prior to his customer centricity assignment, Healy led Best Buy International where he oversaw the company's expansion into Canada. He previously served as svp of Best Buy's Canadian operations.

Healy joined Best Buy in 1990 as a retail general manager and served as general manager of two store locations before being promoted to district manager. Between 1998 and 2000, he was a regional vp.

Healy, a native of Maplewood, MN, has a bachelor's degree in business from the Carlson School of Management at the University of Minnesota.

Best Buy operates more than 780 retail stores across the United States and in Canada.

---

Best Buy is the cover story of the January 2005 issue of Retail Merchandiser. Click on: www.retail-merchandiser.com