01—Abstract
Summary
Summary of the 10-K filed April 29, 2009. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. reported fiscal 2009 (ended February 28, 2009) revenue of $45.0 billiona, up 13% from $40.0 billion in fiscal 2008, driven mainly by the acquisition of Best Buy Europe, which contributed $3.2 billion of revenue, and a net addition of 214 new stores.
Comparable store sales declined 1.3%. Net earnings fell 29% to $1.0 billionb, or $2.39 per diluted share, from $1.4 billion, or $3.12 per diluted share. The decline reflected the comparable store sales drop, deterioration in the SG&A rate (20.0% of revenue, up from 18.5%), and $144 million of restructuring and goodwill/tradename impairment charges in the fourth quarter, partially offset by an improved gross profit rate (24.4% of revenue, up from 23.9%).
The balance sheet and liquidity position weakened. Debt including the current portion rose to $1.96 billionc from $816 million, and the debt-to-capitalization ratio increased to 30% from 15%. Cash and cash equivalents and short-term investments fell to $509 million from $1.5 billion, and working capital was a deficiency of $243 million.
The company funded the Best Buy Europe, Napster and remaining Five Star acquisitions largely from cash and borrowings, sold $500 milliond of 6.75% notes due 2013, and made no share repurchases in fiscal 2009. Standard & Poor's downgraded its rating to BBB- with a stable outlook, while Fitch assigned a negative outlook to its BBB+ rating. Lehman CPI's $180 million commitment under the $2.5 billion credit agreement has gone unfunded.
Management guided to approximately 65 net new stores in fiscal 2010, fewer new-store openings internationally, and further restructuring charges, including about $27 million at Best Buy Europe in the first quarter of fiscal 2010. Chief Executive Officer Bradbury H.
Anderson is scheduled to retire on June 24, 2009, and Brian J. Dunn is to succeed him.
02—Key points
Key Highlights
- Revenue rose 13% to $45.0 billion, driven primarily by the $3.2 billion of revenue from Best Buy Europe and the net addition of 214 new stores, partly offset by a 1.3% comparable store sales decline.
- Net earnings declined 29% to $1.0 billion, or $2.39 per diluted share, versus $3.12 per diluted share in fiscal 2008.
- Gross profit rate improved to 24.4% of revenue from 23.9%, while the SG&A rate rose to 20.0% from 18.5%, reducing operating income to $1.87 billion from $2.16 billion.
- Fourth-quarter charges included $78 million of restructuring costs and $66 million of goodwill and tradename impairment related to the Speakeasy business, plus a $111 million impairment on the investment in CPW common stock.
- Total debt including the current portion rose to $1.96 billion from $816 million, and the debt-to-capitalization ratio increased to 30% from 15%; working capital was a $243 million deficiency.
- Standard & Poor's downgraded the company's debt rating to BBB- (stable outlook), Fitch assigned a negative outlook to its BBB+ rating, and Moody's maintained Baa2 with a stable outlook.
- No share repurchases were made in fiscal 2009, and the quarterly dividend was raised 8% to $0.14 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Best Buy kept $0.02.
- Revenue$45.02B100.0%
- Cost of revenue−$34.02B75.6%
- Gross profit$11.00B24.4%
- Operating costs−$9.13B20.3%
- Operating income$1.87B4.2%
- Interest, other & tax−$867.0M1.9%
- Net income$1.00B2.2%
Where FY2009 revenue went
$45.02B- Cost of revenue: $34.02B, 76% of revenue
- SG&A: $8.98B, 20% of revenue
- Net income: $1.00B, 2.2% of revenue
- Interest, other & tax: $867.0M, 1.9% of revenue
Kept 2.2% as net incomeNet income $1.00B · 2.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed April 29, 2009Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $45.02B$40.02B | +12.5% |
| Cost of Revenue | $34.02B$30.48B | +11.6% |
| Gross Profit | $11.00B$9.55B | +15.2% |
| SG&A Expenses | $8.98B$7.38B | +21.7% |
| Operating Income | $1.87B$2.16B | −13.5% |
| Interest Expense | $94.00M$62.00M | +51.6% |
| Net Income | $1.00B$1.41B | −28.7% |
| EPS (Basic) | $2.43$3.20 | −24.1% |
| EPS (Diluted) | $2.39$3.12 | −23.4% |
| Shares Outstanding (Basic) | 412.50M439.90M | −6.2% |
| Shares Outstanding (Diluted) | 422.90M452.90M | −6.6% |
05—Questions
Frequently Asked Questions
Why did Best Buy's net earnings fall in fiscal 2009?
Net earnings fell 29% to $1.0 billion, or $2.39 per diluted share, from $1.4 billion, or $3.12 per diluted share. The company attributed the decline to a 1.3% comparable store sales drop, a higher SG&A rate (20.0% of revenue versus 18.5%), restructuring and impairment charges, and a $111 million impairment on its CPW investment, partly offset by a higher gross profit rate.
How did the Best Buy Europe acquisition affect results?
The company acquired a 50% interest in Best Buy Europe for $2.2 billion on June 28, 2008. It contributed $3.2 billion of fiscal 2009 revenue, added 0.4% of revenue to the gross profit rate and 0.7% of revenue to the SG&A rate at the consolidated level, and is consolidated on a two-month lag.
What is the company's liquidity and credit position?
Cash and cash equivalents and short-term investments totaled $509 million, versus $1.5 billion a year earlier, and short-term debt was $783 million. Standard & Poor's downgraded the debt to BBB-. Lehman CPI, a unit of the bankrupt Lehman Brothers, has declined to fund its $180 million commitment under the $2.5 billion revolving credit agreement, which reduces the effective borrowing base.
What are the company's plans for fiscal 2010?
The company expects to open approximately 65 net new stores across the U.S., Europe, Canada, China, Mexico and Turkey, and plans fewer new-store openings internationally. It expects further restructuring charges, including about $27 million at Best Buy Europe in the first quarter of fiscal 2010, and does not anticipate share repurchases in fiscal 2010.
Are there leadership changes?
Bradbury H. Anderson will retire as Chief Executive Officer on June 24, 2009, and Brian J. Dunn, currently President and Chief Operating Officer, will become Chief Executive Officer on that date. Effective March 31, 2009, David P. Berg and John Noble resigned, and Allen U. Lenzmeier retired as Vice Chairman on February 28, 2009 while continuing as a director.
06—Continue