Best Buy 2014 Annual Report Download - page 40

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• Services: The 0.8% comparable store sales gain was primarily due to the benefit from a periodic profit sharing
payment that was earned based on the long-term performance of the our externally managed extended service plan
portfolio, partially offset by a decrease in the sales of notebook computers, which contributed to fewer service
products sales opportunities.
Our Domestic segment experienced a decrease in gross profit of $438 million, or 5.3%, in fiscal 2013 (11-month) compared to
fiscal 2012 (11-month recast), driven by lower revenue and a decline in the gross profit rate. The 0.7% of revenue decrease in
the gross profit rate resulted primarily from the following factors:
• increased promotional activity, notably in computing, home theater, MP3 players and movies; and
• an increased mix of smartphones with higher average selling prices but a lower margin rate;
• partially offset by an improvement in sales mix due to decreased sales of computing and gaming products.
Our Domestic segment's SG&A grew $174 million, or 2.7%, in fiscal 2013 (11-month) compared to fiscal 2012 (11-month
recast). The increase in SG&A was driven by an increase in field incentive compensation and executive retention and transition
costs, costs related to the addition of 104 net new Best Buy Mobile stand-alone stores, and increased investments in advertising
and other costs to drive online sales. This increase was partially offset by lower expenses as a result of large-format store
closures. The SG&A rate increased by 1.1% of revenue as a result of the deleveraging impact of the revenue decline, as well as
from the aforementioned factors.
Our Domestic segment recorded $328 million of restructuring charges in fiscal 2013 (11-month), which included $1 million of
inventory write-downs included in cost of goods sold. The restructuring charges related to our Renew Blue and first quarter
fiscal 2013 U.S. restructuring activities and consisted primarily of facility closure costs, employee termination benefits and
asset impairments. These restructuring charges resulted in a decrease in our operating income in fiscal 2013 (11-month) of
1.0% of revenue. Our Domestic segment recorded restructuring charges of $38 million, including $19 million of inventory
write-downs included in cost of goods sold, in fiscal 2012 (11-month recast). The restructuring charges consisted of facility
closure costs, and property and equipment impairments related to our fiscal 2012 restructuring activities, as well as inventory
write-downs and facility closure costs related primarily to our fiscal 2011 restructuring activities. Refer to Note 6,
Restructuring Charges, of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and
Supplementary Data, of this Annual Report on Form 10-K for further information about our restructuring activities.
The $923 million decrease in our Domestic segment's operating income for fiscal 2013 (11-month) was principally the result of
a decrease in revenue as a result of large-format store closures and a comparable store sales decline, as well as an increase in
restructuring charges.
International
The following table presents selected financial data for our International segment for each of the past three fiscal years and
fiscal 2012 (11-month recast) ($ in millions):
12-Month 11-Month 12-Month
International Segment Performance Summary 2014 2013 2012 2012
(recast)
Revenue $ 6,579 $ 6,605 $ 7,209 $ 7,861
Revenue gain (decline) % (0.4)% (8.4)% n/a 6.8 %
Comparable store sales % decline (3.1)% (11.4)% (1.5)% (1.1)%
Gross profit $ 1,416 $ 1,509 $ 1,681 $ 1,805
Gross profit as a % of revenue 21.5 % 22.8 % 23.3 % 23.0 %
SG&A $ 1,385 $ 1,453 $ 1,432 $ 1,564
SG&A as a % of revenue 21.1 % 22.0 % 19.9 % 19.9 %
Restructuring charges $ 36 $ 87 $ 5 $ 5
Goodwill impairments $ — $ 819 $ — $ —
Operating income (loss) $ (5) $ (850) $ 244 $ 236
Operating income (loss) as a % of revenue (0.1)% (12.9)% 3.4 % 3.0 %