01—Abstract
Summary
Summary of the 10-K filed April 30, 2008. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. (BBY) reported fiscal 2008 (ended March 1, 2008) revenue of $40.0 billiona, up 11% from $35.9 billion, with net earnings of $1.41 billion, or $3.12 per diluted share, compared with $2.79 in fiscal 2007.
Growth was driven by the net addition of 137 new stores, a 2.9% comparable store sales gain and acquisitions, partly offset by a lower gross profit rate, which fell to 23.9% of revenue from 24.4%. The SG&A rate improved to 18.5% of revenue from 18.8%, and operating income rose to $2.16 billionb from $2.0 billion. The Domestic segment generated $33.3 billion of revenue and $2.0 billion of operating income, while the International segment's revenue reached $6.7 billion with operating income of $162 million.
Cash and short-term investments fell to $1.5 billionc from $3.8 billion as the company repurchased $3.5 billion of its common stock, including a $3.0 billion accelerated share repurchase (ASR) program. Financed partly by borrowings, total debt including the current portion rose to $816 million from $650 million, and the debt-to-capitalization ratio increased to 15% from 9%. Shareholders' equity declined to $4.48 billion from $6.20 billion.
Management's outlook for fiscal 2009 projects diluted EPS of $3.25 to $3.40d, revenue of $43 to $44 billion, and capital expenditures of about $1.1 billion, and it plans for a soft consumer environment in the near term. The company also disclosed risks tied to auction-rate securities: $417 million (par value) of these investments were reclassified to non-current assets as auctions began failing in February 2008. Management stated that it expects to recover the full principal and that the illiquidity will not materially affect its business plans.
The filing also notes a pending class action, Holloway v. Best Buy Co., Inc., alleging employment discrimination, which the company is defending.
02—Key points
Key Highlights
- Revenue rose 11% to $40.0 billion in fiscal 2008, driven by 137 net new stores, a 2.9% comparable store sales gain and acquisitions.
- Net earnings were $1.41 billion, or $3.12 per diluted share, up from $2.79 per diluted share in fiscal 2007.
- Gross profit rate declined to 23.9% of revenue from 24.4%, mainly due to lower-margin notebook computer and video gaming hardware sales.
- SG&A rate improved to 18.5% of revenue from 18.8%, and operating income reached $2.16 billion, or 5.4% of revenue.
- Share repurchases totaled $3.5 billion, including a $3.0 billion ASR program, which contributed to a debt-to-capitalization ratio of 15%, up from 9%.
- Cash and short-term investments fell to $1.5 billion from $3.8 billion, and working capital dropped to $0.6 billion from $2.8 billion.
- Fiscal 2009 outlook projects diluted EPS of $3.25 to $3.40 and revenue of $43 to $44 billion, while the company plans for a soft consumer environment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Best Buy kept $0.04.
- Revenue$40.02B100.0%
- Cost of revenue−$30.48B76.1%
- Gross profit$9.55B23.9%
- Operating costs−$7.38B18.5%
- Operating income$2.16B5.4%
- Interest, other & tax−$754.0M1.9%
- Net income$1.41B3.5%
Where FY2008 revenue went
$40.02B- Cost of revenue: $30.48B, 76% of revenue
- SG&A: $7.38B, 18% of revenue
- Net income: $1.41B, 3.5% of revenue
- Interest, other & tax: $754.0M, 1.9% of revenue
Kept 3.5% as net incomeNet income $1.41B · 3.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed April 30, 2008Financial Statements
| Revenue | $40.02B |
| Cost of Revenue | $30.48B |
| Gross Profit | $9.55B |
| SG&A Expenses | $7.38B |
| Operating Income | $2.16B |
| Interest Expense | $62.00M |
| Net Income | $1.41B |
| EPS (Basic) | $3.20 |
| EPS (Diluted) | $3.12 |
| Shares Outstanding (Basic) | 439.90M |
| Shares Outstanding (Diluted) | 452.90M |
05—Questions
Frequently Asked Questions
How did Best Buy perform financially in fiscal 2008?
Revenue increased 11% to $40.0 billion, and net earnings were $1.41 billion, or $3.12 per diluted share, compared with $2.79 per diluted share in fiscal 2007. The increase in earnings per share was due primarily to a lower average share count from repurchases.
What drove the decline in gross profit rate?
The gross profit rate fell 0.5% of revenue to 23.9%, due primarily to increased sales of lower-margin products such as notebook computers and video gaming hardware. China operations, which carry a lower gross profit rate, reduced the rate by about 0.2% of revenue.
How did the company use its cash and what happened to its balance sheet?
Best Buy repurchased $3.5 billion of common stock and paid $204 million in dividends. Cash and short-term investments fell to $1.5 billion from $3.8 billion, and total debt including the current portion rose to $816 million from $650 million, with shareholders' equity declining to $4.48 billion from $6.20 billion.
What are the risks related to auction-rate securities?
At March 1, 2008, the company held $417 million (par value) of auction-rate securities, which were reclassified to non-current assets because auctions began failing in February 2008. The company stated it expects to collect all interest and ultimately recover all amounts invested, and it does not expect the illiquidity to materially affect its business plans.
What is management's outlook for fiscal 2009?
Management projects diluted EPS of $3.25 to $3.40 and revenue of $43 to $44 billion, with a planned gross profit rate that is unchanged and an operating income rate that declines by 0.3% to 0.4% of revenue. Capital expenditures are expected to be about $1.1 billion, and the company plans for a soft consumer environment in the near term.
06—Continue