01—Abstract
Summary
Summary of the 10-K filed May 2, 2007. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. (Richfield, Minnesota) reported fiscal 2007 results for the 53-week year ended March 3, 2007.
Revenue rose 16% to $35.9 billiona, and net earnings increased 21% to $1.4 billion, or $2.79 per diluted share, compared with $1.1 billion, or $2.27 per diluted share, in fiscal 2006. The comparable store sales gain was 5.0%. Gross profit rate declined to 24.4% of revenue from 25.0%, while the SG&A rate fell to 18.8% from 19.7%, and operating income reached $2.0 billion, or 5.6% of revenue.
The Domestic segment generated $31.0 billionb in revenue and $1.9 billion in operating income (6.1% of revenue). The International segment, which includes Canada and the newly entered China market through the 75% acquisition of Jiangsu Five Star Appliance Co., generated $4.9 billion in revenue and $110 million in operating income (2.2% of revenue). Fiscal 2007 also included the acquisition of Pacific Sales Kitchen and Bath Centers for $411 million.
Cash and short-term investments were $3.8 billionc at year-end, and shareholders' equity rose to $6.2 billion. The company repurchased $599 million of stock and paid $174 million in dividends, and the quarterly dividend was raised 25% to $0.10 per share.
For fiscal 2008, Best Buy projects net earnings of $3.10 to $3.25d per diluted share, an average increase of 14%, on revenue of about $39.0 billion, roughly 9% growth, driven by approximately 130 new stores. The company also disclosed a May 1, 2007 subsequent acquisition of Speakeasy, Inc. for $97 million in cash.
02—Key points
Key Highlights
- Revenue increased 16% to $35.9 billion in fiscal 2007, with a 5.0% comparable store sales gain.
- Net earnings rose 21% to $1.4 billion, or $2.79 per diluted share, versus $2.27 in fiscal 2006.
- Gross profit rate fell to 24.4% of revenue from 25.0%, partly offset by an SG&A rate decline to 18.8% from 19.7%.
- International segment revenue rose 41% to $4.9 billion, with operating income of $110 million (2.2% of revenue), up from $56 million.
- Domestic segment operating income was $1.9 billion, or 6.1% of revenue, versus $1.6 billion, or 5.8%, in fiscal 2006.
- Cash and short-term investments totaled $3.8 billion at year-end; the company returned $773 million to shareholders through buybacks and dividends.
- Fiscal 2008 guidance projects diluted EPS of $3.10 to $3.25 and revenue of $39.0 billion.
03—Questions
Frequently Asked Questions
How did Best Buy perform financially in fiscal 2007?
Revenue grew 16% to $35.9 billion and net earnings grew 21% to $1.4 billion, or $2.79 per diluted share. Fiscal 2007 included 53 weeks, compared with 52 weeks in fiscal 2006.
What drove the decline in gross profit rate?
The gross profit rate decreased by 0.6% of revenue to 24.4%, due primarily to a lower-margin revenue mix, including increased revenue from notebook computers and video gaming hardware, and a more promotional environment. China operations also reduced the rate by approximately 0.2% of revenue.
What is the company's expansion strategy?
Best Buy opened 96 new stores in fiscal 2007 and plans about 130 new stores in fiscal 2008. It also entered China through the 75% acquisition of Jiangsu Five Star Appliance Co. and its first China Best Buy store, and plans test stores in Mexico and Turkey.
What is the fiscal 2008 outlook?
Best Buy projects net earnings of $3.10 to $3.25 per diluted share, an average increase of 14%, on revenue of about $39.0 billion, roughly 9% growth. It expects comparable store sales growth of 3% to 5% and capital expenditures of $800 million to $850 million.
How is the balance sheet and shareholder return?
Shareholders' equity rose to $6.2 billion and total debt, including the current portion, was $650 million. The company repurchased $599 million of common stock, paid $174 million in dividends, and raised the quarterly dividend 25% to $0.10 per share, with $1.2 billion remaining under its $1.5 billion repurchase program.
04—Continue