Best Buy Rides Strong Notebook, Cellphone Sales To Q4 Gains
By Alan Wolf On Apr 5 2010 - 4:20am
MINNEAPOLIS — Best Buy reported
strong double-digit sales and profit gains in
its global and U.S. businesses for its fiscal
fourth quarter, ended Feb. 27.
Net earnings increased 38 percent to
$810 million and net revenue rose 12 percent
to $16.6 billion for the three-month
period, reflecting a 7 percent gain in compstore
sales, the addition of new stores and
favorable currency fluctuations.
Within the U.S., net revenue rose 11 percent
to $12.6 billion and comp-store sales
increased 7.4 percent due to larger average
The quarter’s strongest product
performers included notebook
computers and mobile phones,
which both saw low double-digit
increases in comp-store sales, and
flat-panel TVs, whose comp sales
grew by the high single digits. The
gains in these categories, which
Best Buy characterized as critical
to its three-screen, connected-world strategy, stemmed from brisk unit
growth that helped offset declines in average
selling prices, CEO Brian Dunn said
in a conference call last month.
But high sales velocity in computers,
reflected by the 29th consecutive
quarter of double-digit growth in
notebooks, also pressured gross
margins, chief financial officer
Jim Muehlbauer acknowledged
during the call.
“Computers have a lower gross
profit rate than other categories
and have become a bigger part of
our mix” due to their central role in the
connected-solutions strategy, he told analysts.
The company plans to offset the
margin hit by attaching more peripherals,
extended warranties, broadband subscriptions,
content offers and IT support services,
while the category’s high unit volume
and low expense structure provide strong
operating margin, Muehlbauer said.
Within other categories, comps for major
appliances increased 6.5 percent, compared
with a 20.5 percent decline during the yearago
quarter, and services slipped 2.3 percent
following a 2.2 percent increase last
year. Weakest performers included music
and movie software, which declined by the
low double digits.
The chain estimates its market share
grew about 2.6 percent for the three
months, ended Jan. 31, with the most pronounced
increases coming in the flat-panel, notebook, mobile phone and digital imaging
For the full fiscal year, net earnings increased
35 percent to $1.4 billion and total
revenue grew 10 percent to $49.7 billion,
boosted by a 20 percent spike in online revenue,
to about $2 billion.
The revenue forecast ref lects the
planned opening of 50 to 55 Best Buy
stores, mostly in the U.S.; 75 to 100 smallformat
stores, comprised largely of U.S.
Best Buy Mobile stores; and 10 to 15 Five
Star stores in China.
The Best Buy Mobile stores, located in
high-traffic areas like shopping malls, are
focused on selling “margin-rich” connections
for wireless devices, generating greater
margin per square foot than the company’s
flagship stores, Muehlbauer said.
The smaller-format stores also attract a
different customer, notably women, Dunn
said, so that “the vast majority” of Mobile
shop sales are incremental and do not cannibalize
business at the big-box stores.Looking ahead, Best Buy is projecting
net revenue gains of 5 percent to 7 percent
for the current fiscal year, which
would total between $52 billion and $53
billion, and comp- sale increases of 1 percent
to 3 percent.