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Best Buy Posts Higher Sales, Earnings


– Best Buy reported higher net earnings and revenue for its second fiscal
quarter, ended Aug. 28.

Net earnings were
$254 million, up from the prior year’s $158 million. Revenue also grew to $11.3
billion, from $11 billion in last year’s second quarter.

Comp-store sales
were basically flat, down 0.1 percent. During last year’s fiscal second quarter
comp-store sales dropped 3.9 percent.

In a prepared
statement, Brian Dunn, CEO, said, “We’re still in the early stages of our
Connected World strategy, but this quarter’s results give me continued
confidence that we’re making progress in driving value through growth in
connections for our customers, vendors and shareholders.”

Dunn added he was
impressed with Best Buy’s performance “in a quarter with constrained consumer

Best Buy said in
its statement that it continues to advance its Connected World strategy to sell
more mobile phone, broadband and TV connections to customers through the
evolution of its selling model supported by the completion of various in-store

During the fiscal
second quarter, the company improved the home-theater and mobile computing
experiences in its stores in an effort to better demonstrate and educate
customers how technology can empower them to connect to the content, networks
and people they care most about –anywhere, at any time, on any device, the
retailer noted.

Best Buy increased
sales from connection solutions and attached connections at a low double-digit
rate for customers purchasing connectable devices such as mobile phones,
computers, and TVs during the fiscal second quarter. The company noted that the
growth in connections drove a meaningful increase in its domestic gross-profit
dollar growth for the quarter.

While Best Buy
Mobile comprises the largest share of the company’s current connections
business, its mobile computing and TV categories experienced strong connections
growth during the quarter.

In reviewing the
numbers, the increase in revenues in the quarter reflected the impact of net
new stores in the past 12 months and essentially flat comparable store sales.
The domestic segment’s fiscal second-quarter revenue totaled $8.4 billion, an
increase of 2 percent vs. the prior-year period. This increase was driven by
the addition of net new stores, partially offset by a comp-store sales decline
of 1 percent.

Best Buy reported
that the comp-store sales results were driven primarily by a decline in
customer traffic, partially offset by an increase in average ticket. The domestic
segment experienced a low double-digit comp-store sales increase in mobile
phones, a high single-digit comp-store sales increase in appliances and a mid
single-digit comp-store sales increase in mobile computers, which includes
tablet computers.

These gains were
more than offset by comp-store sales decreases in TVs and entertainment
hardware and software. The company noted that the low-double digit comp-store
sales decline in TVs was driven by a low double-digit decline in unit sales and
moderating price declines.

The decline in TV
unit sales was driven primarily by weaker overall consumer demand in the TV
industry as well as the digital conversion that occurred during the second
quarter of fiscal 2010. The company also noted that its online revenue
increased approximately 16 percent in the second fiscal quarter vs. the
prior-year period.

Best Buy believes
that its domestic market share declined 50 basis points vs. the comparable
period last year for the three months, ended July 2010. The decline was
primarily driven by the impact of lost traffic associated with constrained
inventory during the initial iPad launch, which adversely impacted traditional
mobile computing traffic; the continued decline in entertainment software; and
moderating market share gains in home theater due to last year’s digital

The company noted
that it continues to expect to increase its market share for the full fiscal

The domestic
segment gross profit rate for the fiscal second quarter was 25.8 percent,
compared with 24.3 percent for the prior-year period, due primarily to the
growth and improved gross profit rate of Best Buy Mobile and continued lower
promotional and loyalty program costs driven by changes in key categories like
home theater, portable electronics and appliances, the chain said.

Also during the
fiscal second quarter in its domestic segment, it reported operating income of
$407 million, an increase of 29 percent when compared with operating income in
the prior-year period.