Best Buy 2005 Annual Report Download - page 69

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vendor allowances, were offset by an early contract increasing comparable store sales gains in the second
termination penalty paid to a third-party product warranty half of fiscal 2006 will drive the revenue growth. For the
insurance provider. fiscal year, we are projecting an increase in comparable
store sales of 4% to 5%.
The International segment’s SG&A rate for the fourth
quarter of fiscal 2005 increased to 17.7% of revenue, Our fiscal 2006 outlook assumes an improvement in our
compared with 16.9% of revenue for the fourth quarter of operating income rate of approximately 0.2% of revenue,
fiscal 2004. The increase was due primarily to the due to the improvement in our gross profit rate, partially
absence of favorable settlements realized in the prior offset by an increase in our SG&A rate. The increase in
year’s fourth quarter related to previously established our fiscal 2006 SG&A rate is expected to be driven
legal and location closing liabilities. The fiscal 2004 primarily by additional spending to support expected
fourth-quarter settlements did not have a significant effect growth in our services business, as well as costs
on fiscal 2004 fourth-quarter earnings from continuing associated with both the rollout and operation of customer
operations. In addition, our fiscal 2005 fourth-quarter centricity segmented stores. We estimate that our effective
SG&A rate was affected by a charge to correct our income tax rate for fiscal 2006 to be 36.5% to 37.0%.
accounting for leases. Capital expenditures for fiscal 2006 are expected to be
$650 million to $700 million. Of that total, we expect
Outlook for Fiscal 2006 approximately $400 million will support our planned
Our outlook for fiscal 2006 is based on information new-store openings and various U.S. and Canadian store
presently available and contains certain assumptions remodeling projects, including the costs of converting
regarding future economic conditions. Differences in additional stores to our customer centricity model.
actual economic conditions compared with our Specifically, the capital expenditures are expected to
assumptions could have a material impact on our fiscal support the opening of approximately 60 new U.S. Best
2006 results. Readers are encouraged to read our Buy stores, 15 Canadian Best Buy stores and two Future
Current Report on Form 8-K filed with the SEC on Shop stores. We also anticipate opening or converting
March 18, 2004, that describes additional important 150 to 200 stores to our customer centricity operating
factors that could cause future results to differ materially model and relocating nine U.S. Best Buy and five Future
from those contemplated by the following forward-looking Shop stores. Capital expenditures for fiscal 2006 also are
statements. expected to include approximately $200 million in
technology investments intended to, among other things,
Looking forward to fiscal 2006, we are projecting net improve our customer service capabilities and increase
earnings in a range of $2.95 to $3.10 per diluted share, our operating efficiencies.
including stock-based compensation expense of $0.17 per
diluted share. We expect the earnings growth to be driven During fiscal 2006, we plan to continue with our
primarily by an increase in revenue of approximately quarterly dividend program. We will continue to evaluate
11% and an improvement in our gross profit rate for the size of our quarterly dividend based on our strong
fiscal 2006. We expect the increase in our gross profit cash and short-term investments position at the end of
rate will be driven by continued growth in our services fiscal 2005, and our expected increase in cash flows
business and increased global sourcing and private-label during fiscal 2006.
activities, as well as the acceleration of our customer We also expect to continue repurchasing our common
centricity initiative. stock during fiscal 2006 pursuant to a $1.5 billion share
We are projecting revenue of approximately $30.0 billion repurchase program authorized by our Board of Directors
for fiscal 2006, compared with revenue of $27.4 billion in April 2005. There is no stated expiration date
for fiscal 2005. We expect that improving trends in governing the period over which we can make our share
customer traffic, the opening of 75 to 80 new stores and repurchases.
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