Best Buy 2013 Annual Report Download - page 31

31
We will also use NPS to help ensure we are upholding Best Buy's customer promises, which include offering the customer: (1)
the latest devices and services, all in one place; (2) impartial and knowledgeable advice; (3) competitive prices; (4) the ability
to shop when and where they want; and (5) support for the life of their products. We have defined key performance indicators
that measure our progress on a monthly basis. Since we first announced Renew Blue, we have seen an improvement in our
NPS, as well as increased customer satisfaction pertaining to our sales associates, service and price perception. Looking ahead,
we remain focused on driving customer satisfaction through: (1) better in-stock performance across our various channels; (2)
improved price perception through our low price guarantee; (3) higher personalization in our online offers; and (4) the re-
allocation of store labor hours to customer-facing activities.
Increase revenue and gross profit per square foot through enhanced store space optimization and merchandising. In fiscal
2014, we plan to reduce space allocated to declining or low-margin categories, such as music and movies, and replace it with
higher growth categories, such as mobile phones, appliances and accessories. To support these expanded categories, we plan to:
(1) deepen product assortments; (2) increase store employee training; and (3) reprioritize marketing investments.
Drive down cost of goods sold through supply chain efficiencies. In conjunction with our initiatives to improve the
effectiveness of our online channel described above, we also plan to expand our online fulfillment capabilities into all of our
existing distribution centers and improve our allocations of inventory in order to ensure that product availability is optimized.
Additionally, we will be consolidating multi-unit customer orders into one shipment, when possible, and refining order
management to fill orders from optimal locations. All of these initiatives are meant to improve service levels to the customer
and reduce shipping costs.
Another priority for supply chain will be to reduce expense by driving transportation efficiencies. To achieve this, we are
significantly improving information sharing, collaboration and route planning with our carrier partners to send fuller trucks and
reduce empty miles. Finally, we are reviewing all product movement to identify opportunities to alter product flows and
transportation methods to further reduce expense.
Continue to gradually optimize our U.S. real estate portfolio. Occupancy cost reductions continue to be a key focus, and we
made significant progress in fiscal 2013 (11-month) in both the area of store closings and renegotiated leases. In fiscal 2013
(11-month), we closed 47 large-format stores and expect to close an additional 5 to 10 large-format stores in fiscal 2014.
Additionally, we are adopting more stringent standards for returns on capital investments, including the performance levels we
require from prototype store formats before we commit to larger scale roll-outs. This includes all formats, including our
Richfield prototype stores, our Magnolia and Pacific Sales stores-within-a-store, and our Best Buy Mobile stand-alone stores.
However, we are planning to move forward with new stores in a small number of selected and opportunistic markets, including
12 new Best Buy Mobile stores, 10 Magnolia Design Center (stores-within-a-store), and 18 to 25 Pacific Kitchen and Home
(stores-within-a-store).
Reduce SG&A costs. Over time, we believe there is an opportunity to remove $400 million in costs in the U.S., Canada and
Mexico. Beginning in February 2013, we executed Phase One of our Renew Blue cost reduction plan with an estimated $150
million in annualized savings. These savings are being driven by: (1) the discontinuation of non-core activities; (2) the
elimination of management layers; and (3) various efficiency improvements intended to reduce costs and improve decision
making.
In addition to the $150 million of Phase One actions, we expect additional costs to be eliminated in fiscal 2014, as we continue
to systematically and aggressively challenge all elements of our SG&A cost structure in pursuit of a lower cost base.
Results of Operations
In order to align our fiscal reporting periods and comply with statutory filing requirements in certain foreign jurisdictions, we
consolidate the financial results of our Europe, China and Mexico operations on a lag. Consistent with such consolidation, the
financial and non-financial information presented in our MD&A relative to these operations is also presented on a lag. When
fiscal 2013 (11-month) results are compared to fiscal 2012 (11-month recast) results, lag entities are reported on a one-month
lag as a result of our fiscal year-end change. When fiscal 2012 results are compared to fiscal 2011 results, lag entities are
reported on a two-month lag based on our previous fiscal calendar year-end. Our policy is to accelerate the recording of events
occurring in the lag period that significantly affect our consolidated financial statements. There were no significant intervening
events which would have materially affected our financial condition, results of operations, liquidity or other factors had they
been recorded during fiscal 2013 (11-month).
Table of Contents