Best Buy Fiscal Q4 Sales, Net Increase

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MINNEAPOLIS — Bolstered by the expanding breadth of new digital technologies and the success of its store format, product assortments and consumer shopping experience, Best Buy reported record results for its fiscal fourth quarter and 12 months.

Sales in the fourth quarter climbed 27 percent to $5.46 billion, up from $4.31 billion in the year-ago three months. Sales benefited from an extra week, compared with the fourth quarter in 2000. Comp-store sales edged up 1.8 percent on top of an 11 percent increase during the same quarter a year ago.

Best Buy recorded a 16 percent increase in net earnings for the three months ended March 3, reaching $189.7 million in the fourth quarter, compared with $163.8 million in the year-ago period.

Sales for the fiscal year, which also benefited from an extra week, reached $15.33 billion, climbing 23 percent, compared with $12.49 billion the previous year. Comp-store sales for the year rose 4.9 percent, on top of an 11 percent increase during the same period a year ago.

For the 12 months, Best Buy pushed its net earnings up 14 percent to $395.8 million, compared with $347.1 million in the same quarter last year.

Both the quarterly and full-year results were diluted by the retailer's purchase and integration of Musicland Stores in the fourth quarter. Certain investments in e-commerce companies were written off in the quarter.

Best Buy earnings grew 26 percent for the quarter and 19 percent for the year, excluding the impact of the Musicland acquisition and write-offs.

"In view of the challenging economic environment, our ability to report record profits and exceed earnings estimates is particularly gratifying," said Dick Schulze, chairman/CEO.

Operating income margin, under siege from slowing comp-store sales growth, the launch of BestBuy.com, 15 additional new-store openings and the acquisition of Musicland, declined for both the quarter and the year. Operating income margin was 5.4 percent of sales in the fourth quarter, 50 basic points lower than the 5.9 percent recorded in the year-earlier three months.

For the 12 months, operating income margin was 3.9 percent, 40 basis points lower than the previous year's 4.3 percent. Excluding the impact of the Musicland acquisition, and write-offs, operating income margin was 6 percent of sales for the quarter and 4.1 percent for the year.

Increased gross profit margins, mainly the result of a higher margin sales mix and improved product margins, reached 20.4 percent of sales for the quarter and 20 percent for the year, improvements of 160 and 80 basis points, respectively, compared with the same periods last year. The addition of Musicland added 40 basis points to Best Buy's gross margin rate for the quarter and 20 basis points for the year.

The company intends to open about 60 stores in the coming fiscal year, including about 20 smaller-market locations of about 30,000 square feet. It plans to remodel or relocate about seven stores. During the past fiscal year, Best Buy opened 62 new stores and relocated or expanded 10 units.

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