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Best Buy Revenue Jumps 17%

9/04/2003 09:14:00 AM Eastern

Minneapolis — Higher customer traffic levels, and modest improvement in the average amount spent by consumers — driven in part by federal tax refunds — helped push up Best Buy's fiscal second quarter revenue from continuing operations 17 percent, to $5.4 billion. The sales increase was boosted by a 7.5 percent rise in comp-store sales, as well as the addition of 74 stores in the past 12 months.

Revenue from continuing operations at Best Buy domestic stores jumped 14 percent in the second quarter, hitting $4.9 billion. Comp-store sales climbed 7.8 percent in the three months, ended Aug. 30. The chain noted all U.S. regions for Best Buy posted comp-store sales gains, with home office and consumer electronics categories experiencing the largest revenue improvement in the second quarter. The retailer added 51 U.S. Best Buy stores and four Magnolia Audio Video locations in the past 12 months.

At Magnolia Audio Video, formerly Magnolia Hi-Fi, second quarter revenue increased 10 percent, to about $30 million, reflecting the impact of stores opened in the last 12 months. Revenue growth at the Seattle-based retailer was partially offset by a comp-store sales drop of 5.9 percent.

Best Buy's international segment, comprised of Future Shop stores and Best Buy units in Canada, recorded second quarter revenue of $480 million, a 44 percent increase compared with the second quarter last year. Comp-store sales climbed 4.1 percent. The chain added six Future Shop stores and 13 Canadian Best Buy locations in the past 12 months.

Due primarily to increased revenue from notebook computers, total second quarter revenue in the home office category increased its share of the overall company product revenue mix, to 39 percent, up from 36 percent in the same period a year ago.

Comp-store sales gains in notebooks reached the strong double digits in the second quarter, while comp-store sales of desktop computers reversed recent trends, gaining in the high single digits. The category benefited from the increased use of computers as media servers, the rising popularity of digital photography and technology advances, said Best Buy.

The CE category declined slightly in the second quarter revenue mix, down to 35 percent, from 36 percent, despite a comp-store sales gain that reflected the demand for digital, plasma and LCD televisions, as well as the rising popularity of digital cameras and camcorders.

Comp-store sales of digital TVs increased in the strong double digits, as Best Buy significantly expanded its assortment in this category during the second three months. Digital products - including digital, plasma and LCD televisions; digital cameras and camcorders; DVD hardware and software; cellular telephones and digital broadcasting systems — comprised 24 percent of revenue in the second quarter, up from a 20 percent share in the same three months in 2002.

Revenue from entertainment software declined in the overall mix in the second quarter, down to 19 percent, compared with 20 percent in the year-ago period. Comp-store sales in the category, however, increased by the low single digits. Comp-store sales of DVDs rose by strong double digits and were supported by sales of popular new releases. These gains were largely offset by a comp-store sales decline of CDs and video game hardware and software.

A cool June limited demand for air conditioners, driving down the appliance category share in the revenue mix in the second quarter, to 7 percent, compared with 8 percent year-on-year. Majaps posted a comp-store sales decline in the low single digits during the period.

For the six months, Best Buy revenue from continuing operations increased 14 percent, to $10.1 billion, on a 5 percent comp-store sales jump. Domestic stores enjoyed a 12 percent rise in revenue, to $9.2 billion, on a 5.2 percent comp-store sales rise. The international segment saw second quarter revenue soar 36 percent, to $870 million, with comp-store sales increasing 2.2 percent.

Best Buy updated its guidance for second quarter earnings from operations, coming in at 41 cents to 43 cents per share, the high end of its prior guidance of 37 cents to 42 cents. Full fiscal year earnings guidance has been pushed to $2.30 to $2.35 per share, a 22 percent increase, compared with $1.91 for the previous fiscal year.