01—Abstract
Summary
Summary of the 10-K filed April 28, 2010. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. reported fiscal 2010 (ended February 27, 2010) revenue of $49.69 billiona, up 10.4% from $45.02 billion in fiscal 2009, driven primarily by the acquisition of Best Buy Europe, net addition of 85 Domestic stores, and a comparable store sales gain of 0.6%.
Net earnings attributable to Best Buy rose 31.3% to $1.32 billionb, or $3.10 per diluted share, versus $1.00 billion, or $2.39 per diluted share, in fiscal 2009. Operating income was $2.24 billion (4.5% of revenue) compared with $1.87 billion (4.2%) a year earlier, and the prior year included $78 million of restructuring charges and $66 million of goodwill and tradename impairment charges. Cash and cash equivalents rose to $1.83 billion from $498 million, and operating cash flow increased 17.5% to $2.2 billion while capital expenditures fell 52.8% to $615 million.
Short-term debt declined to $663 millionc from $783 million, and the debt-to-capitalization ratio fell to 22% from 30%. The company made no share repurchases in fiscal 2010 or 2009, with $2.5 billion remaining under its June 2007 authorization, and paid $0.56 per share in dividends. The filing notes continued exposure to consumer discretionary spending, supplier concentration (the five largest suppliers represented 35% of merchandise purchased), and the International segment, which generated 25% of revenue.
The company opened 191 new stores during fiscal 2010 and plans 50-55 net large-format Best Buy stores and 75-100 small-format stores in fiscal 2011. Pending legal matters include a class action (Holloway v. Best Buy) alleging employment discrimination, which the company believes is without merit.
02—Key points
Key Highlights
- Revenue rose 10.4% to $49.69 billion, driven mainly by the Best Buy Europe acquisition (5.8 percentage points of the increase) and net new stores.
- Net earnings attributable to Best Buy Co., Inc. increased 31.3% to $1.32 billion, or $3.10 per diluted share, versus $2.39 in fiscal 2009.
- Operating income increased to $2.24 billion, a 4.5% operating income rate versus 4.2% in fiscal 2009.
- Comparable store sales gain of 0.6%, with the Domestic segment up 1.7% and the International segment down 3.7%.
- Operating cash flow increased 17.5% to $2.2 billion, while capital expenditures decreased 52.8% to $615 million.
- Cash and cash equivalents ended the year at $1.83 billion, up from $498 million, and short-term debt fell to $663 million from $783 million.
- No share repurchases in fiscal 2010 or 2009; $2.5 billion remains under the June 2007 authorization, and the quarterly dividend was $0.14 per share.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Best Buy kept $0.03.
- Revenue$49.24B100.0%
- Cost of revenue−$37.20B75.5%
- Gross profit$12.04B24.5%
- Operating costs−$9.67B19.6%
- Operating income$2.37B4.8%
- Interest, other & tax−$1.05B2.1%
- Net income$1.32B2.7%
Where FY2010 revenue went
$49.24B- Cost of revenue: $37.20B, 76% of revenue
- SG&A: $9.62B, 20% of revenue
- Net income: $1.32B, 2.7% of revenue
- Interest, other & tax: $1.05B, 2.1% of revenue
Kept 2.7% as net incomeNet income $1.32B · 2.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed April 28, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $49.24B$45.02B | +9.4% |
| Cost of Revenue | $37.20B$34.02B | +9.4% |
| Gross Profit | $12.04B$11.00B | +9.5% |
| SG&A Expenses | $9.62B$8.98B | +7.1% |
| Operating Income | $2.37B$1.87B | +26.6% |
| Interest Expense | $92.00M$94.00M | −2.1% |
| Net Income | $1.32B$1.00B | +31.3% |
| EPS (Basic) | $3.16$2.43 | +30.0% |
| EPS (Diluted) | $3.10$2.39 | +29.7% |
| Shares Outstanding (Basic) | 416.80M412.50M | +1.0% |
| Shares Outstanding (Diluted) | 427.50M422.90M | +1.1% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue and earnings in fiscal 2010?
Revenue growth came primarily from the acquisition of Best Buy Europe, which contributed no revenue in the first six months of fiscal 2009 and $2.6 billion in the first six months of fiscal 2010, along with the net addition of 85 new stores. Net earnings increased on higher Domestic and International segment operating income, driven by revenue growth, a modest gross profit rate increase, and lower restructuring and impairment charges than the prior year.
How did the Domestic and International segments perform?
Domestic revenue rose 6.4% to $37.31 billion, with operating income of $2.07 billion (5.6% of revenue) versus $1.76 billion (5.0%) in fiscal 2009. International revenue rose 24.5% to $12.38 billion, with operating income of $164 million (1.3% of revenue) versus $112 million (1.1%). International comparable store sales declined 3.7%, reflecting a decline in Canada partially offset by gains in Europe and China.
How is the company funding its operations and capital needs?
The company cites operating cash flow, available cash, and credit facilities as its principal liquidity sources. It has a $2.3 billion five-year unsecured revolving credit facility with no borrowings outstanding at February 27, 2010, and management believes these sources are sufficient for fiscal 2011 expansion plans. Debt including current portion was $1.80 billion, down from $1.96 billion, and the debt-to-capitalization ratio was 22%, compared with 30% a year earlier.
What risks does the filing highlight for investors?
Key risks include sensitivity to consumer discretionary spending and macroeconomic conditions, dependence on major suppliers (the 20 largest suppliers accounted for just under 60% of merchandise purchased), competition from other retailers and Internet businesses, exposure to foreign currency and political conditions in International markets, and reliance on the fourth fiscal quarter, which generated approximately one-third of revenue and more than one-half of net earnings. The company also holds $280 million in auction-rate securities that have been subject to failed auctions.
What are the company's plans for fiscal 2011?
The company plans to open 50-55 net large-format Best Buy stores, mostly in the Domestic segment, along with 75-100 small-format stores, primarily Best Buy Mobile stand-alone stores in the U.S., and 10-15 Five Star stores in China. It also plans to launch large-format Best Buy-branded stores in the European market beginning in fiscal 2011.
06—Continue