Best Buy's Market Share Continues to IncreaseMINNEAPOLIS, Nov 12, 2008 (BUSINESS WIRE) -- Best Buy Co., Inc. (NYSE:BBY) reported today that falling consumer
spending, driven by the recent turmoil in the financial markets and
other macro economic factors, has resulted in lower-than-expected
revenue for the consumer electronics retailer. The uncertainty regarding
future consumer spending has limited the company's
ability to project revenue for the critical holiday shopping season and
the balance of the fiscal year. Given both the change in economic
environment and the significance of the holiday shopping season to the
company's annual earnings, Best Buy is
lowering its guidance for the fiscal year and widening its range for
potential revenue and earnings.
"Since mid-September, rapid, seismic changes
in consumer behavior have created the most difficult climate we've
ever seen. Best Buy simply can't adjust fast
enough to maintain our earnings momentum for this year,"
said Brad Anderson, vice chairman and chief executive officer of Best
beginning to adjust our cost structure to restore earnings momentum and
still gain market share. We firmly believe that our strategy of customer
centricity is of great value in driving our performance versus the
industry, and that's the strategy we plan to
pursue to continue to strengthen our position in the marketplace."
The company's total comparable store sales
declined by approximately 7.6 percent for fiscal October, following a
modest comparable store sales decline for fiscal September. The
following table summarizes recent comparable store sales performance.
Best Buy Fiscal 2009 Comparable Store Sales(1)
Domestic International(2) Total Company
Fiscal Second Quarter 5.3% (1.0%) 4.2%
Fiscal September (2.4%) 3.6% (1.3%)
Fiscal October (7.8%) (6.4%) (7.6%)
Fiscal Quarter to Date (through 11-1-08) (4.7%) (0.5%) (4.0%)
Fiscal Year to Date (through 11-1-08) 2.1% 1.1% 1.9%
(1 )Comprised of revenue at stores, call centers
and Web sites operating for at least 14 full months, as well as
remodeled and expanded locations. Relocated stores are excluded from the
comparable store sales calculation until at least 14 full months after
reopening. Acquired stores are included in the comparable store sales
calculation beginning with the first full quarter following the first
anniversary of the date of the acquisition. The calculation of the
comparable store sales percentage change excludes the effect of
fluctuations in foreign currency exchange rates. The method of
calculating comparable store sales varies across the retail industry. As
a result, Best Buy's method of calculating
comparable store sales may not be the same as other retailers'
(2) GAAP results for China are estimated and are
reported on a 60-day lag basis.
Based on data the company sees for the consumer electronics industry,
Best Buy believes it gained market share in most of its product
categories during September and October.
Anderson added, "We can't
change the overall level of consumer spending, but we can focus on
deepening our relationships with customers wherever we interact with
them: in our stores, on our Web sites and through our call centers. We
do that through our execution, the engagement of our employees, and the
quality of our products and services."
As significant changes in the consumer environment and competitive
landscape make it very difficult to project revenue trends, the company
is providing a wider range of guidance. Specifically, the company
anticipates that comparable store sales for the four months remaining in
fiscal 2009 (November 2008 through February 2009) could decline by 5
percent to 15 percent, resulting in an annual comparable store sales
decline of 1 percent to 8 percent. The stronger U.S. dollar also is
expected to result in lower revenue and profits from the company's
international segment than previously expected. Factoring in
year-to-date results, the high end of the company's
revenue range now includes annual revenue of $45.5 billion (including
Best Buy Europe), an annual comparable store sales decline of
approximately 1 percent, and annual earnings per diluted share guidance
of approximately $2.90. The low end of the company's
revenue range includes annual revenue of $43.7 billion, an annual
comparable store sales decline of approximately 8 percent, and annual
diluted EPS guidance of approximately $2.30. The midpoint of the new
earnings range represents a decline of approximately 17 percent compared
with diluted EPS of $3.12 for fiscal 2008, and it assumes that revenue
for the balance of the year is generally consistent with the company's
October comparable store sales decline of 8 percent.
Brian Dunn, president and chief operating officer, said, "In
42 years of retailing, we've never seen such
difficult times for the consumer. People are making dramatic changes in
how much they spend, and we're not immune
from those forces. That's why it's
critical that we manage our spending, while preserving key growth
initiatives. Having said that, we believe that our strategic indicators
remain strong. We continue to see improvements in employee turnover,
customer satisfaction and market share -- and
our commitment to our strategy of customer centricity is unwavering. In
fact, given recent announcements by competitors, we believe we have even
greater potential to serve new customers and to capture market share in
the months and years ahead."
The company previously had provided earnings guidance of $3.25 to $3.40
per share for fiscal 2009, including an annual comparable store sales
gain of approximately 2 to 3 percent. The average analyst estimate of
Best Buy's fiscal 2009 earnings on First Call
on Nov. 10 was $3.03 per diluted share.
"We are making adjustments to planned levels
of discretionary spending and inventory for the remainder of the year,"
said Jim Muehlbauer, executive vice president of finance and CFO. "In
addition, we will continue to execute against our growth priorities and
will carefully but aggressively examine all avenues to lower costs
significantly. We project that this work will benefit performance over
time by improving growth, profitability and overall shareholder returns."
As noted previously, the company's third and
fourth quarters include a significant year-over-year calendar shift. One
week of post-Thanksgiving shopping will move from the fiscal third
quarter into the fiscal fourth quarter, lowering third-quarter
comparable store sales in fiscal 2009. Last year, this calendar shift
boosted the third-quarter comparable store sales gain by approximately
250 basis points.
Company Manages Working Capital to Reflect Market Conditions
In reaction to changes in the marketplace, the company is proactively
working with its vendors to adjust both its inventory levels and its
near-term working capital position.
"In light of the downturn in consumer
spending, we have made several adjustments to our working capital
position, most notably an increase to our U.S. borrowing capacity,"
Muehlbauer said. "We now plan to finish the
fiscal third quarter with inventory levels, short-term borrowings and
accounts payable higher than previously projected. These increases are
the result of the rapid downturn in consumer spending. However, we
expect year-over-year domestic inventory to be flat by fiscal year end."
The company's new, $150 million committed
U.S. credit facility provides additional working capital flexibility to
address both market conditions and potential opportunities. This new
credit facility, which expires on Dec. 17, was undertaken partly in
response to the bankruptcy of one of the participants in Best Buy's
existing $2.5 billion revolving line of credit, which effectively
reduced the amount available to the company.
Upcoming Financial Updates
To increase the transparency of its revenue performance amid volatility
in consumer spending, Best Buy, after having reported its September and
October comparable store sales results, plans to report its November
comparable store sales results as part of its third-quarter earnings
communications on Dec. 16, 2008. As is customary, the retailer also
plans to report December comparable store sales results as part of its
December revenue release, scheduled for Jan. 9, 2009. Its fourth-quarter
and fiscal year earnings are expected to be released on March 26, 2009.
The company's financial results, store counts
and other news releases can be found on the Internet at the company's
Web site, www.BestBuy.com,
by clicking on the "For Our Investors"
Forward-Looking and Cautionary Statements:
This news release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 as contained in
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 that reflect management's
current views and estimates regarding future market conditions, company
performance and financial results, business prospects, new strategies,
the competitive environment and other events. You can identify these
statements by the fact that they use words such as "anticipate,"
other words and terms of similar meaning. These statements involve a
number of risks and uncertainties that could cause actual results to
differ materially from the potential results discussed in the
forward-looking statements. Among the factors that could cause actual
results and outcomes to differ materially from those contained in such
forward-looking statements include the following: general economic
conditions, acquisitions and development of new businesses,
divestitures, product availability, sales volumes, pricing actions and
promotional activities of competitors, profit margins, weather, changes
in law or regulations, foreign currency fluctuation, availability of
suitable real estate locations, the company's
ability to react to a disaster recovery situation, the impact of labor
markets and new product introductions on overall profitability, failure
to achieve anticipated benefits of announced transactions and
integration challenges relating to new ventures. A further list and
description of these risks, uncertainties and other matters can be found
in the company's annual report and other
reports filed from time to time with the Securities and Exchange
Commission, including, but not limited to, Best Buy's
Annual Report on Form 10-K filed with the SEC on April 30, 2008. Best
Buy cautions that the foregoing list of important factors is not
complete and assumes no obligation to update any forward-looking
statement that it may make.
About Best Buy
With operations in the United States, Canada, Europe, andChina, Best
Buy isa multinational retailer of technology and entertainment products
and services with a commitment to growth and innovation. The Best Buy
family of brands and partnerships collectively generates more than $40
billion annual revenueand includes brands such asBest Buy,
Audiovisions, The Carphone Warehouse, Future Shop, Geek Squad, Jiangsu
Five Star, Magnolia Audio Video, Napster, Pacific Sales Kitchen and
BathCenters, The Phone House and Speakeasy. Approximately 165,000
employees apply their talents to help bring the benefits of these brands
to life for customers throughretail locations, multiple
callcentersand Web sites, in-home solutions, product delivery
andactivities in our communities. Community partnership is central to
the way we do business at Best Buy. In fiscal 2008, we donateda
combined $31.8 million to improve the vitality of the communities where
our employees and customers live and work. For more information about
Best Buy, visit www.bestbuyinc.com.
SOURCE: Best Buy Co., Inc.
Best Buy Co., Inc.
Susan Busch, Director, Public Relations
Lisa Hawks, Director, Public Relations
Jennifer Driscoll, Vice President of Investor Relations
Wade Bronson, Director of Investor Relations