MINNEAPOLIS, March 30 /PRNewswire/ -- Best Buy Co., Inc. (NYSE: BBY - news) today reported record financial results for the fourth quarter and fiscal 1999 year, which ended February 27, 1999.
According to Chairman & CEO Richard M. Schulze, Best Buy reported a 72% increase in net earnings to a record $110.2 million, or 52 cents per diluted share, for the fourth quarter of fiscal 1999, compared to $64.0 million, or 32 cents per share, for the comparable quarter last year. Net earnings for fiscal 1999 increased 138%, to a record $224.4 million, or $1.07 per diluted share, compared to $94.5 million, or 52 cents per share, for the same period last year. Per share figures reflect the 2-for-1 stock split on March 18, 1999.
Sales for the fourth quarter increased 21% to $3.458 billion from $2.852 billion a year ago. Comparable store sales increased 10.8% for the quarter on top of a 16.9% increase in last year's fourth quarter. Fiscal 1999 sales were $10.078 billion, also a 21% increase, compared to $8.358 billion last year. Comparable store sales for the fiscal year increased 13.5% in comparison to the 2.0% increase for the same period a year ago.
Gross profit margins were 17.9% and 18.1% of sales for the quarter and fiscal year, respectively, representing improvements of 1.9% and 2.2% of sales over last year's comparable periods. Increased gross profit margins were due to a more profitable sales mix, improved product margins and faster inventory turns that resulted in fewer markdowns. Sales of Performance Service Plans, which increased to 3.4% of sales for the quarter and 3.7% for the year, and a continued reduction in inventory shrink, also contributed to the gross profit margin improvements.
Selling, general and administrative expenses (SG&A) were 12.9% and 14.5% of sales for the quarter and fiscal year, respectively, versus expense ratios of 12.2% and 13.7% for last year's comparable periods. The year-over-year increases in SG&A were due to higher compensation expense, in particular performance-based pay, and an increase in professional fees associated with strategic initiatives, systems enhancements and business process improvements. The Company's investment in these areas has provided gross profit margin increases that exceed the growth in spending.
''Our operating income, which increased from 2.2% to 3.6% of sales, illustrates how our investment in improving operations is delivering significantly improved financial returns,'' Schulze added.
Net interest income in the fourth quarter was the result of the Company's cash position generated by strong sales and improved inventory management. The early redemption of $150 million in Senior Subordinated debt in the third quarter and conversion of the 6.5% Monthly Income Preferred Securities into equity in the first quarter has essentially eliminated the Company's interest bearing debt. Interest expense on these obligations was approximately $28 million annually.
The Company plans to grand open approximately 45 stores in the coming fiscal year, which includes the testing of four small market format stores in communities with populations generally between 100,000 to 200,000. These 30,000 square foot stores will carry a narrower assortment of the major product categories offered in the larger stores. In addition to the new stores, the Company plans to remodel or relocate approximately 20 stores to larger facilities, incorporating the features of the Concept IV store format.
''Our increased number of planned store openings, our e-commerce strategy and the digital product revolution create significant growth potential for Best Buy,'' Schulze stated. ''Our ongoing investments in people, technology and improved operating strategies provide the framework for us to capitalize on these opportunities.''
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 the Private Securities Litigation Reform Act of 1995. 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 identified 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.
Best Buy quarterly financial results and news releases can be found on the Internet at the Company's Web site, www.bestbuy.com, or accessed via PR Newswire's Web site at www.prnewswire.com. For an immediate faxed copy call ''Company News On-Call'' by dialing 800-758-5804 and then entering the access code 098313.
Minneapolis-based Best Buy Co., Inc. is the nation's largest volume specialty retailer of name brand consumer electronics, personal computers, entertainment software and appliances. The Company is ranked 199 on the Fortune 500 and operates 311 stores in 36 states. For CDs, VHS and DVD movies, visit the Company's on-line store at www.bestbuy.com.
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