Best Buy 2013 Annual Report Download - page 16

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In addition, foreign currency exchange rates and fluctuations may have an impact on our future earnings and cash flows from
International operations, and could materially adversely affect our reported financial performance. The economies of some of
the countries in which we have operations have in the past suffered from high rates of inflation and currency devaluations,
which, if they were to occur again, could materially adversely affect our financial performance. Other factors which may
materially adversely impact our International segment's operations include foreign trade rules, monetary and fiscal policies
(both of the U.S. and of other countries), laws, regulations and other activities of foreign governments, agencies and similar
organizations and civil unrest or other conflict.
Additional risks inherent in our International segment's operations generally include, among others, the costs and difficulties of
managing international operations, adverse tax consequences and greater difficulty in enforcing intellectual property rights in
countries other than the U.S. The various risks inherent in doing business in the U.S. generally also exist when doing business
outside of the U.S., and may be exaggerated by the complexity of operating in numerous sovereign jurisdictions due to
differences in culture, laws and regulations. There is a heightened risk that we misjudge the response of consumers in foreign
markets to our product and service assortments, marketing and promotional strategy and store and website designs, among
other factors, and this could adversely impact the results of these operations and the viability of these ventures.
We rely heavily on our management information systems for our key business processes. Any failure or interruption in
these systems could have material adverse impact on our business.
The effective and efficient operation of our business is dependent on our management information systems. We rely heavily on
our management information systems to manage all key aspects of our business, including demand forecasting, purchasing,
supply chain management, point-of-sale processing, staff planning and deployment, website offerings, financial management
and forecasting and safeguarding critical and sensitive information. The failure of our management information systems to
perform as we anticipate, or to meet the continuously evolving needs of our business, could significantly disrupt our business
and cause, for example, higher costs and lost revenues and could threaten our ability to remain in operation.
We rely on third-party vendors for certain aspects of our business operations.
We engage key third-party business partners to manage various functions of our business, including but not limited to,
information technology, human resource operations, customer loyalty programs, promotional financing and customer loyalty
credit cards, customer warranty and insurance programs. Any material disruption in our relationship with key third-party
business partners or any disruption in the services or systems provided or managed by third parties could impact our revenues
and cost structure and hinder our ability to continue operations, particularly if a disruption occurs during peak revenue periods.
We are highly dependent on the cash flows and net earnings we generate during our fourth fiscal quarter, which
includes the majority of the holiday selling season.
Approximately one-third of our revenue and more than one-half of our net earnings have historically been generated in our
fourth fiscal quarter, which includes the majority of the holiday shopping season in the U.S., Europe, Canada and Mexico.
Unexpected events or developments such as natural or man-made disasters, product sourcing issues, failure or interruption of
management information systems, disruptions in services or systems provided or managed by third-party vendors or adverse
economic conditions in our fourth fiscal quarter could have a material adverse effect on our annual results of operations.
Our revenues and margins are highly sensitive to developments in products and services.
The consumer electronics industry involves constant innovation and evolution of products and services offered to consumers.
The following examples demonstrate the impact this can have on our business:
• New product categories such as tablets and e-readers have grown rapidly and fundamentally changed the market for
mobile computing devices;
• Product convergence has significantly impacted the demand for some products; for example, the growth of
increasingly sophisticated smartphones has reduced the demand for separate cameras, gaming systems, music players
and GPS devices;
• The timing of new product introductions and updates can have a dramatic impact on the timing of revenues; for
example, the introduction of new gaming systems can produce high demand levels for hardware and the
accompanying software, which may be followed by several years of decline in demand;
• Delivery models for some products are affected by technological advances and new product innovations; for example,
media such as music, video and gaming is increasingly transferring to digital delivery methods that may reduce the
need for physical CD, DVD, Blu-ray and gaming products.
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