SOURCE: Best Buy Co., Inc.
Best Buy 4th Quarter Earnings Increase 84% to a Record $350 Million, or $1.62 Per Share
Full-year EPS increases by 42% to $2.65 per share
MINNEAPOLIS--(BUSINESS WIRE)--April 2, 2002--Best Buy Co., Inc.
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Total Company Fourth Quarter
performance summary ------------------------------------
($ in millions, except per share
amounts)
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This Last Year Last year
Year Pro Forma(1)
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Total Company sales $6,980 $5,462 $6,415
Total store sales % change 28% 27% N/A
Comparable store sales change(2) 4.5% 1.8% N/A
Gross profit margin as % of sales 23.0% 20.4% 22.0%
SG&A expenses as % of sales 14.9% 15.0% 15.9%
Earnings per diluted share $1.62 $0.89 $1.13
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(1) The pro forma information presents the combined results of
operations of Best Buy, Musicland and Future Shop. Musicland was
acquired in the fourth quarter of fiscal 2001. Its results of
operations are presented as if Musicland had been acquired at the
beginning of fiscal 2001 and includes amortization of goodwill.
Future Shop was acquired at the beginning of November fiscal 2002.
Its results of operations are presented as if Future Shop had been
acquired at the beginning of November fiscal 2001 and do not
include amortization of goodwill.
(2) Includes only sales at Best Buy stores open at least 14 months.
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Total Company Fiscal Year
performance summary ------------------------------------
($ in millions, except per share
amounts)
------------------------------------
This year Last year Last year
pro forma(1)
--------------------------------- ------------------------------------
Total Company sales $19,597 $15,327 $17,621
Total store sales % change 28% 23% N/A
Comparable store sales change(2) 1.9% 4.9% N/A
Gross profit margin as % of sales 22.6% 20.0% 21.8%
SG&A expenses as % of sales 17.8% 16.0% 17.8%
Earnings per diluted share $2.65 $1.86 $2.00
--------------------------------- ------------------------------------
(1) The pro forma information presents the combined results of
operations of Best Buy, Musicland and Future Shop. Musicland was
acquired in the fourth quarter of fiscal 2001. Its results of
operations are presented as if Musicland had been acquired at the
beginning of fiscal 2001 and includes amortization of goodwill.
Future Shop was acquired at the beginning of November fiscal 2002.
Its results of operations are presented as if Future Shop had been
acquired at the beginning of November fiscal 2001 and do not
include amortization of goodwill.
(2) Includes only sales at Best Buy stores open at least 14 months.
Best Buy Co., Inc. (NYSE:BBY - news) today reported record net earnings of $350 million, or $1.62 per diluted share, for the quarter ended March 2, 2002, up 84 percent from $190 million, or $0.89 per diluted share, for the quarter ended March 3, 2001.
``An 84-percent increase in fourth-quarter earnings is a great way to conclude this banner year,'' said Best Buy Founder, Chairman & CEO Richard M. Schulze. ``Our employees' focus on meeting customers' needs drove our results. Our Best Buy stores continued to post strong sales, while expanding margins and leveraging fixed costs. Our Musicland stores met our profitability targets despite reduced mall traffic, due to expense control and our remerchandising of Sam Goody stores. Also, our results at Future Shop have been significantly better than expected.''
As reported on March 7, total sales for the fourth quarter increased 28 percent to $7.0 billion from $5.5 billion a year ago. The sales increase reflected the addition of 62 Best Buy stores in the past 12 months, which brought the total to 481 stores, as well as the inclusion of a full quarter of sales from approximately 1,320 Musicland stores and the addition of sales from 95 Future Shop stores. Total sales were reduced approximately 5 percent due to the inclusion of one less week than was in the prior year's fourth quarter. Comparable store sales rose 4.5 percent.
``Our strong finish to the quarter and the year builds our optimism for the year ahead,'' Schulze added. ``We expect continued growth in revenues and earnings as we open new stores, leverage expertise across our brands and benefit from an improving economy.''
The gross profit margin rate for the Company was 23.0 percent of sales in the quarter, up by 2.6 percent of sales compared with last year's fourth quarter. The inclusion of Musicland's results increased the Company's total gross profit margin by 1.2 percent of sales in the quarter. The balance of the gross profit margin improvement resulted from changes in product mix at Best Buy stores, including significant growth in sales of digital products and entertainment software, combined with lower markdowns, a stable promotional environment and reduced costs associated with financing offers.
The SG&A expense rate was 14.9 percent of sales for the quarter versus 15.0 percent of sales in the fourth quarter of fiscal 2001. The reduction in the expense rate was driven by expense control at Best Buy stores, and a strong comparable store sales increase that helped the Company gain leverage in the expense rate. Offsetting these factors was the inclusion of Musicland's higher expense structure, which increased expenses by 1.1 percent of sales for the quarter.
Total operating income was 8.2 percent of sales for the quarter, up by 2.8 percent of sales compared with last year's fourth-quarter rate, reflecting a higher gross profit rate as well as a lower SG&A rate. Net interest income was $5 million in the fourth quarter compared with net interest income of $12 million for the same period last year. The decrease in interest income was primarily due to lower yields on the investment portfolio.
For the fiscal year, the Company's total sales rose 28 percent to $19.6 billion, driven by the addition of 62 Best Buy stores and the inclusion of Musicland's and Future Shop's results. Comparable store sales rose 1.9 percent, on top of a 4.9-percent increase last year, as strength in consumer electronics, movies and video gaming offset soft sales of desktop computers and prerecorded music. The gross profit margin rate in the fiscal year increased by 2.6 percent of sales, primarily due to favorable changes in product mix, lower markdowns and the inclusion of Musicland results, which boosted gross profit by 1.3 percent of sales.
The SG&A expense rate rose by 1.8 percent of sales in fiscal 2002, but was flat on a pro forma basis. Musicland's higher expense structure drove the increase. Total Company operating income rose to 4.8 percent of sales, compared with 3.9 percent in the prior fiscal year. Earnings per diluted share in fiscal 2002 increased 42 percent to $2.65, including 1 cent per share from Musicland and 5 cents per share from Future Shop. The prior year's earnings per share were $1.86. The Company's economic value added (EVA®) increased by $70 million.
Darren Jackson, Senior Vice President - Finance and CFO, said, ``The first quarter's sales to date are modestly ahead of our original expectations. Comparable store sales are on track to be 3 to 4 percent in the first quarter and for the fiscal year. We anticipate earnings per share of approximately $0.30 to $0.32 in the first quarter. Overall, we continue to anticipate revenues growth of 17 to 20 percent, and earnings growth of 18 to 21 percent for fiscal 2003, or $3.15 to $3.25 per share.''
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Fourth Quarter ($ in millions) Fiscal Year
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This Last Best Buy performance This Last
year year summary(1) year year
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$5,822 $5,324 Sales $17,115 $15,189
Comparable store sales
4.5% 1.8% % change(2) 1.9% 4.9%
Gross profit margin as
21.6% 20.1% % of sales 21.2% 19.8%
SG&A expenses as
13.3% 14.4% % of sales 16.0% 15.8%
$484 $302 Operating income $886 $611
Operating income as
8.3% 5.7% % of sales 5.2% 4.0%
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(1) Aggregates results at all of the Company's businesses other than
Musicland and Future Shop.
(2) Includes only sales at Best Buy stores open at least 14 months.
Total Best Buy store sales grew 9.4 percent during the fourth quarter to $5.8 billion, due to new store growth and a 4.5-percent comparable store sales gain, offset by the loss of the extra week in the prior year's fourth quarter, which reduced sales by approximately $280 million. Absent a calendar shift, which moved a week of post-Thanksgiving sales to the third quarter, comparable store sales would have risen by 6.5 percent. Best Buy opened three stores in the quarter.
Gross profit margins at Best Buy stores during the fourth quarter improved by 1.5 percent of sales, reflecting a higher-margin sales mix, improved pricing, a reduction in the cost of financing offers and strong inventory management. The SG&A rate declined by 1.1 percent of sales due to leverage from comparable store sales gains, a larger base of stores and expense controls. Operating income at Best Buy stores increased by 2.6 percent of sales to 8.3 percent of sales, or $484 million. Average inventories per Best Buy store increased by 6 percent, compared with a year ago, reflecting an enhanced in-stock position.
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Fourth Quarter ($ in millions) Fiscal Year
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This Last year Musicland performance This Last year
year pro forma summary(1) year pro forma
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$685 $681 Sales $1,886 $1,915
1.2% (2.8%) Comparable store sales (0.9%) (0.7%)
% change
34.7% 36.0% Gross profit margin as 35.0% 36.9%
% of sales
25.1% 25.1% SG&A expenses as 33.5% 32.9%
% of sales
$66 $75 Operating income $29 $77
9.7% 10.9% Operating income as 1.6% 4.0%
% of sales
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(1) Pro forma results of operations of Musicland are presented as
though it had been acquired at the beginning of the 2001 fiscal
year and include amortization of goodwill.
Musicland comparable store sales in the fourth quarter were up slightly due to strong sales of DVD movies and video gaming. Sales of consumer electronics increased modestly, and sales of prerecorded music and VHS movies remained soft. Musicland's store count at the end of the quarter was approximately 1,320 stores, including an increase in small market On Cue stores and fewer Sam Goody stores versus last year. Gross profit margins declined by 1.3 percent of sales, as expected, as a result of the repositioning of the product mix to lower-margin DVD software and gaming. In the fourth quarter, sales of movies rose to equal that of prerecorded music. SG&A expenses as a percentage of sales remained steady. Musicland's financial results, including approximately $4 million in goodwill amortization for the quarter, produced quarterly operating income of $66 million. The segment's results for the quarter, at 17 cents per diluted share, resulted in 1 cent of earnings per diluted share for the year, which was in line with management's expectations of no dilution.
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Fourth Quarter ($ in millions) Fiscal Year
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This Last year International performance This Last year
year pro forma summary(1),(2) year pro forma
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$473 $436 Sales $596 $543
Comparable store sales
16.5% N/A % change 17.4% N/A
Gross profit margin as
23.8% 24.2% % of sales 23.4% 24.3%
SG&A expenses as
19.5% 21.1% % of sales 19.7% 21.4%
$20 $13 Operating income $22 $16
Operating income as
4.3% 3.1% % of sales 3.7% 2.9%
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(1) Fiscal 2002 results reflect Future Shop's operations from the date
of acquisition, the beginning of November fiscal 2002.
(2) Pro forma results of operations of Future Shop are presented as
though it had been acquired at the beginning of November fiscal
2001 and do not include amortization of goodwill.
Future Shop comparable store sales in the fourth quarter climbed by 16.5 percent, reflecting robust sales of digital products. Future Shop's store count at the end of the quarter was unchanged at 95 stores. Gross profit margins declined by 0.4 percent of sales, as a result of changes in product mix. The SG&A expense rate declined by 1.6 percent of sales, reflecting leverage related to sales growth. Future Shop had quarterly operating income of $20 million. The segment's results were significantly ahead of management's expectations and contributed 5 cents per diluted share for the quarter and for the fiscal year.
The Company will conduct a conference call for analysts, institutional investors and news media at 10 a.m. eastern time today. Individuals may access the live call via the Internet on the Company's Web site at www.BestBuy.com by clicking on the ``Investor Relations'' link. Following the live event, the call will be posted on the Audio Archive page of Best Buy's web site and may be accessed at any time. Best Buy's quarterly financial results and news releases can be found on the Internet at the Company's web site, www.BestBuy.com, or accessed via Business Wire's Web site at www.businesswire.com.
The Company is expected to announce its first-quarter sales on June 6, 2002, and its first-quarter earnings on June 18, 2002.
Statements made in this news release, other than those concerning historical financial information, should be considered forward-looking and subject to various risks and uncertainties. Such forward-looking statements are based on management's beliefs and assumptions regarding information currently available, and are made pursuant to the ``safe harbor'' provisions of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results could differ materially from those expressed in the forward-looking statements. Factors that could cause results to vary include, among others, those expressed in the Company's filings with the Securities and Exchange Commission. The Company has no obligation to publicly update or revise any of the forward-looking statements that may be in this news release. |
