01—Abstract
Summary
Summary of the 10-K filed May 1, 2012. Cited figures are marked; the original filing is the authoritative source.
Best Buy Co., Inc. reported fiscal 2012 (53 weeks ended March 3, 2012) revenue of $50.7 billiona, up 1.9%, but a net loss attributable to Best Buy Co., Inc. of $1.23 billion, or $(3.36) per diluted share, compared with net earnings of $1.28 billion in fiscal 2011.
The loss was driven primarily by the $1.3 billionb Mobile buy-out of the Best Buy Mobile profit share agreement with Carphone Warehouse Group plc and a $1.2 billion goodwill impairment at the Best Buy Europe reporting unit. Operating income fell to $1.085 billion (2.1% of revenue) from $2.374 billion, and comparable store sales declined 1.7%. Operating cash flow rose to $3.3 billion from $1.2 billion, mainly due to working capital changes.
The company is in transition. Management announced a multi-year plan to reduce costs by $800 millionc by fiscal 2015, including closing approximately 50 large-format U.S. Best Buy stores in fiscal 2013, and expects $300 to $350 million of pre-tax restructuring charges tied to those actions. It is expanding small-format Best Buy Mobile stand-alone stores and Five Star stores in China, and it closed large-format stores in China, Turkey and the U.K.
Chief Executive Officer Brian J. Dunn resigned effective April 10, 2012, and George L. Mikan III was named interim CEO while the Audit Committee investigates allegations related to Mr. Dunn's personal conduct.
Balance sheet and capital allocation changed significantly. Total assets were $16.0 billion, total equity fell to $4.4 billiond from $7.3 billion, and debt including current portion rose to $2.2 billion from $1.7 billion. The company repurchased $1.5 billion of stock in fiscal 2012 and had $4.1 billion remaining under its June 2011 authorization.
Fitch lowered its rating to BBB-, and Fitch's outlook was revised to negative in April 2012. Securities class actions relating to fiscal 2011 earnings guidance remain pending.
02—Key points
Key Highlights
- Revenue rose 1.9% to $50.7 billion, driven by 135 net new Domestic stores, an extra week of revenue, and favorable foreign currency effects, partially offset by a 1.7% comparable store sales decline.
- Net loss attributable to Best Buy Co., Inc. was $1.23 billion, or $(3.36) per diluted share, versus net earnings of $1.28 billion ($3.08 per diluted share) in fiscal 2011.
- A $1.3 billion payment for the Mobile buy-out and a $1.2 billion goodwill impairment at Best Buy Europe drove the loss; the effective tax rate was 68.0%, versus 33.4% in fiscal 2011.
- Gross profit rate declined to 24.8% of revenue from 25.2%, driven by increased promotional activity in the Domestic segment.
- Operating cash flow increased to $3.3 billion from $1.2 billion, while capital expenditures were $766 million.
- Plans include a $800 million cost reduction target by fiscal 2015, closing approximately 50 large-format U.S. Best Buy stores in fiscal 2013, and expected restructuring charges of $300 to $350 million.
- Chief Executive Officer Brian J. Dunn resigned effective April 10, 2012; George L. Mikan III is interim CEO, and the Audit Committee is investigating allegations related to Mr. Dunn's personal conduct.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2012, Best Buy lost $0.03.
- Revenue$41.31B100.0%
- Cost of revenue−$31.40B76.0%
- Gross profit$9.91B24.0%
- Operating costs−$8.01B19.4%
- Operating income$1.90B4.6%
- Interest, other & tax−$3.32B8.0%
- Net income−$1.43B3.4%
Where FY2012 revenue went
$41.31B- Cost of revenue: $31.38B, 76% of revenue
- SG&A: $7.99B, 19% of revenue
- Operating income: $1.90B, 4.6% of revenue
Kept 4.6% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed May 1, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $41.31B$49.75B | −17.0% |
| Cost of Revenue | $31.38B$37.20B | −15.6% |
| Gross Profit | $9.91B$12.54B | −21.0% |
| SG&A Expenses | $7.99B$10.03B | −20.4% |
| Operating Income | $1.90B$2.37B | −20.1% |
| Interest Expense | $101.00M$86.00M | +17.4% |
| Net Income | -$1.43B$1.28B | −211.6% |
| EPS (Basic) | $-3.83$3.14 | −222.0% |
| EPS (Diluted) | $-3.72$3.08 | −220.8% |
| Shares Outstanding (Basic) | 372.50M406.10M | −8.3% |
| Shares Outstanding (Diluted) | 382.00M416.50M | −8.3% |
05—Questions
Frequently Asked Questions
Why did Best Buy report a net loss in fiscal 2012 after earning $1.28 billion in fiscal 2011?
The filing attributes the net loss primarily to the $1.3 billion Mobile buy-out of the Best Buy Mobile profit share agreement and the resulting $1.2 billion goodwill impairment in the Best Buy Europe reporting unit. Operating income fell to $1.085 billion from $2.374 billion.
How did the Domestic and International segments perform?
Domestic revenue rose 1.5% to $37.6 billion with operating income of $1.855 billion, down from $2.054 billion. International revenue rose 3.3% to $13.1 billion but posted an operating loss of $770 million, compared with operating income of $320 million in fiscal 2011, due to the goodwill impairment.
What is management doing to address performance?
Management announced a transformation strategy with four initiatives: multi-year cost reductions targeting $800 million by fiscal 2015 ($250 million in fiscal 2013), U.S. store format improvements including closing about 50 large-format stores, growth initiatives in e-commerce, connections, services and China, and an improved customer experience program.
What is the status of the leadership change and legal matters?
Brian J. Dunn resigned as CEO and director effective April 10, 2012, and George L. Mikan III became interim CEO while a permanent search is conducted. The Audit Committee is conducting an independent investigation into allegations related to Mr. Dunn's personal conduct. Securities class actions over fiscal 2011 earnings guidance remain pending, and the company believes the allegations are without merit.
How is the company funding operations and share repurchases?
The company ended fiscal 2012 with $1.2 billion of cash and cash equivalents and had $2.8 billion of undrawn credit facility capacity. It repurchased $1.5 billion of common stock in fiscal 2012, leaving $4.1 billion available under the June 2011 authorization, and paid dividends of $228 million ($0.62 per share).
06—Continue