Best Buy 2014 Annual Report Download - page 30

25
Our business, like that of many retailers, is seasonal. Historically, we have realized more of our revenue and earnings in the
fiscal fourth quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico. While
consumers view some of the products and services we offer as essential, others are viewed as discretionary purchases.
Consequently, our financial results are susceptible to changes in consumer confidence and other macroeconomic factors,
including unemployment, consumer credit availability and the condition of the housing market. Additionally, there are other
factors that directly impact our performance, such as product life-cycles (including the introduction and pace of adoption of
new technology) and the competitive retail environment. As a result of these factors, predicting our future revenue and net
earnings is difficult. However, we remain confident in our unique customer promise: (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 you want;
and (5) support for the life of your products.
Throughout this MD&A, we refer to comparable store sales. Comparable store sales is a commonly used metric in the retail
industry, which compares revenue for a particular period with the corresponding period in the prior year, excluding the impact
of sales from new stores opened or closed stores. Our comparable store sales is comprised of revenue from stores operating for
at least 14 full months, as well as revenue related to website and online sales, call centers and our other comparable sales
channels. Revenue we earn from sales of merchandise to wholesalers or dealers is generally not included within our
comparable store sales calculation. Relocated stores, as well as remodeled, expanded, and downsized stores closed more than
14 days, are excluded from the comparable store sales calculation until at least 14 full months after reopening. Acquired stores
are included in the comparable store sales calculation beginning with the first full quarter following the first anniversary of the
date of the acquisition. The calculation of comparable store sales excludes the impact of the extra week of revenue in the fourth
quarter of fiscal 2012, as well as revenue from discontinued operations. The portion of our calculation of the comparable store
sales percentage change attributable to our International segment excludes the effect of fluctuations in foreign currency
exchange rates. The method of calculating comparable store sales varies across the retail industry. As a result, our method of
calculating comparable store sales may not be the same as other retailers' methods.
In our discussions of the operating results of our consolidated business and our International segment, we sometimes refer to
the impact of changes in foreign currency exchange rates or the impact of foreign currency exchange rate fluctuations, which
are references to the differences between the foreign currency exchange rates we use to convert the International segment’s
operating results from local currencies into U.S. dollars for reporting purposes. The impact of foreign currency exchange rate
fluctuations is typically calculated as the difference between current period activity translated using the current period’s
currency exchange rates and the comparable prior-year period’s currency exchange rates. We use this method to calculate the
impact of changes in foreign currency exchange rates for all countries where the functional currency is not the U.S. dollar.
In our discussions of the operating results below, we sometimes refer to the impact of net new stores on our results of
operations. The key factors that dictate the impact that the net new stores have on our operating results include: (i) store
opening and closing decisions; (ii) the size and format of new stores, as we operate stores ranging from approximately 1,000
square feet to approximately 50,000 square feet; (iii) the length of time the stores were open during the period; and (iv) the
overall success of new store launches.
This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the United
States ("GAAP"), as well as certain non-GAAP financial measures such as adjusted operating income, adjusted net earnings
from continuing operations, adjusted diluted earnings per share from continuing operations and adjusted debt to earnings before
goodwill impairment, interest, income taxes, depreciation, amortization and rent ("EBITDAR") ratio. Generally, a non-GAAP
financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes)
amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance
with GAAP. The non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial
measures presented in accordance with GAAP. Non-GAAP measures as presented herein may not be comparable to similarly
titled measures used by other companies.
We believe that the non-GAAP measures described above provide meaningful supplemental information to assist shareholders
in understanding our financial results and assessing our prospects for future performance. Management believes adjusted
operating income, adjusted net earnings from continuing operations and adjusted diluted earnings per share from continuing
operations are important indicators of our operations because they exclude items that may not be indicative of, or are unrelated
to, our core operating results and provide a baseline for analyzing trends in our underlying businesses. Management makes
standard adjustments for items such as restructuring charges, goodwill impairments, non-restructuring asset impairments and
gains or losses on sales of investments, as well as adjustments for other items that may arise during the period and have a
meaningful impact on comparability. To measure adjusted operating income, we removed the impact of restructuring charges,
non-restructuring asset impairments, goodwill impairments and the impact of second quarter fiscal 2014 LCD-related legal
settlements from our calculation of operating income. Adjusted net earnings from continuing operations was calculated by