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Best Buy Annual Report, Year Ended Feb 26, 2005

Filing Date
Filed May 10, 2005
Period End
February 26, 2005
Security
BBY
In the record · 2016–202610-K1110-Q328-K109

BBY filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 109 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jun ’16Jun ’16
  2. Leadership change8-K · Apr ’19Apr ’19
  3. Material agreement8-K · May ’21May ’21
  4. Leadership change8-K · Sep ’25Sep ’25

01—Abstract

Summary

Summary of the 10-K filed May 10, 2005. Cited figures are marked; the original filing is the authoritative source.

Best Buy Co., Inc. reported fiscal 2005 (ended February 26, 2005) earnings from continuing operations of $934 milliona, or $2.79 per diluted share, up 17% from $800 million, or $2.41 per diluted share, in fiscal 2004.

Revenue rose 12% to $27.4 billionb, driven by 78 new stores, a 4.3% comparable store sales gain, and favorable foreign currency effects. Net earnings were $984 million, or $2.94 per diluted share, including a $50 million tax benefit from the resolution of Musicland-related IRS matters. The operating income rate was 5.3% of revenue, flat with fiscal 2004, as a lower gross profit rate (23.7% versus 23.9%) from a more promotional environment was offset by a lower SG&A rate (18.4% versus 18.6%).

Management reiterated its goal of a 7% annual operating income rate, now expected for fiscal 2008 rather than fiscal 2007, citing the expected impact of SFAS 123(R) and additional short-term investments. Its four strategic initiatives are customer centricity, efficient enterprise (including a seven-year agreement with Accenture to manage IT operations), win with service (Geek Squad), and win in entertainment. For fiscal 2006, the company projects revenue of approximately $30.0 billionc and diluted earnings per share of $2.95 to $3.10.

It ended the year with $3.3 billiond in cash and short-term investments, $600 million in total debt, and a $1.5 billion share repurchase program authorized in April 2005. The filing also notes that a securities class action was dismissed with prejudice on April 12, 2005, subject to appeal rights, and that Ernst & Young was dismissed in favor of Deloitte & Touche for fiscal 2006.

02—Key points

Key Highlights

  1. Revenue grew 12% to $27.4 billion, with a 4.3% comparable store sales gain and 78 new stores opened during fiscal 2005.
  2. Earnings from continuing operations rose 17% to $934 million ($2.79 per diluted share); net earnings were $984 million ($2.94 per diluted share), including a $50 million Musicland-related tax benefit.
  3. Gross profit rate declined to 23.7% of revenue from 23.9%, due mainly to a more promotional environment and the Reward Zone loyalty program; the SG&A rate improved to 18.4% from 18.6%.
  4. The 7% operating income rate goal is now expected for fiscal 2008 rather than fiscal 2007; the fiscal 2005 operating income rate was 5.3%.
  5. International segment operating income was $49 million (1.7% of revenue), up from $37 million; Domestic segment operating income was $1.39 billion (5.7% of revenue).
  6. Fiscal 2006 outlook projects revenue of about $30.0 billion and diluted EPS of $2.95 to $3.10, including $0.17 of stock-based compensation expense.
  7. Cash and short-term investments reached $3.3 billion; debt fell to $600 million, and a new $1.5 billion share repurchase program was authorized in April 2005.

03—Questions

Frequently Asked Questions

  1. How did Best Buy perform financially in fiscal 2005?

    Revenue increased 12% to $27.4 billion and earnings from continuing operations rose 17% to $934 million, or $2.79 per diluted share. Net earnings were $984 million, or $2.94 per diluted share, including a $50 million tax benefit tied to the former Musicland subsidiary.

  2. What drove the revenue growth?

    Growth came from 78 new stores, a 4.3% comparable store sales gain, and favorable foreign currency effects. Comparable store sales benefited from digital products such as digital televisions, MP3 players and digital cameras, as well as the Reward Zone loyalty program.

  3. What is Best Buy's profitability target and timing?

    Management targets an annual operating income rate of 7% of revenue, now expected for fiscal 2008 rather than fiscal 2007. The fiscal 2005 operating income rate was 5.3%, and management cited the impact of SFAS 123(R) and short-term investments in extending the timeline.

  4. What are the company's main strategic initiatives?

    The four initiatives are customer centricity (segmented stores; 85 stores operated under the model at year-end), efficient enterprise (including a seven-year agreement with Accenture for IT operations), win with service (Geek Squad, with nearly 7,000 agents), and win in entertainment.

  5. What does the filing say about legal and auditor matters?

    A securities class action was dismissed with prejudice on April 12, 2005, subject to plaintiffs' right to appeal. A related shareholder derivative action is on inactive status. Ernst & Young was dismissed as auditor effective with the fiscal 2005 audit, and Deloitte & Touche LLP was engaged for fiscal 2006.

04—Continue

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