Best Buy 2015 Annual Report Download - page 33

Table of Contents
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to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.
These non-GAAP financial measures are an additional way of viewing aspects of our operations that, when viewed with our
GAAP results and the reconciliations to corresponding GAAP financial measures within our discussion of consolidated
performance below, provide a more complete understanding of our business. We strongly encourage investors and shareholders
to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
Business Strategy
In the fall of 2012, we laid out for investors the state of our business and summarized the challenges we faced by articulating
two fundamental problems: (1) declining comparable sales and (2) declining margins. To address these problems and achieve
our goal of becoming the leading authority and destination for technology products and services, we unveiled our Renew Blue
transformation effort, incorporating the following five pillars:
• Reinvigorate and rejuvenate the customer experience
• Attract and inspire leaders and employees
• Work with vendor partners to innovate and drive value
• Increase our return on invested capital
• Continue our leadership role in positively impacting our world
Fiscal 2015 was the second full fiscal year in our Renew Blue transformation, and we continued to make progress against the
two main problems we had to solve that we outlined in November of 2012 – declining comparable sales and declining
operating margins. In fiscal 2015, we stabilized comparable sales on a full year basis and delivered incremental non-GAAP
SG&A reductions of approximately $420 million, resulting in non-GAAP operating income rate expansion of 0.8% of revenue
and a 26% increase in non-GAAP diluted earnings per share to $2.60. We also ended the year with $3.9 billion in cash, cash
equivalents and short-term investments versus $2.6 billion last year.
These results reflect the cumulative progress since 2012 that we have made against our Renew Blue transformation initiatives.
To date, we have: (1) improved our Net Promoter Score (NPS) by 450 basis points; (2) rolled out 71 Pacific Kitchen and Home
and 34 Magnolia Design Center stores-within-a-store in addition to our enhanced vendor experiences; (3) implemented ship-
from-store across the whole chain, driving significant growth for our business; (4) increased our Domestic online penetration
from 7.0% to 9.8%; (5) gained share across multiple categories; (6) delivered $1.02 billion in cost reductions, exceeding our
$1 billion target; (7) divested our under-performing European and Chinese businesses; and (8) intensively managed our capital
resources and significantly strengthened our balance sheet.
In light of this progress, we announced a plan on March 2, 2015, to return excess capital to shareholders. This plan allows us to
continue to invest in the growth of our business and preserve a strong balance sheet and includes: (1) a special, one-time
dividend of $0.51 per share, or approximately $180 million, related to the net, after-tax proceeds from LCD-related legal
settlements received in the last three fiscal years; (2) a 21% increase in our regular quarterly dividend to $0.23 per share; and
(3) the resumption of share repurchases, with the intent to repurchase $1 billion worth of shares over the next three years.
As we look forward to fiscal 2016 and beyond, it is imperative that we continue to focus on driving comparable sales and
improving operating margins, while funding investments in our future. We are pursuing a strategy that is focused on delivering
Advice, Service and Convenience at competitive prices to our customers. Within this strategy, we are focused on driving a
number of growth initiatives around key product categories, life events and services. To drive these initiatives, we are pursuing
and investing in the transformation of our key functions and processes. The initiatives we intend to pursue in fiscal 2016 reflect
our continued execution against the 24-month road map that we outlined a year ago.
The first initiative is Merchandising. Our goal is to create a compelling assortment online and in the stores with a superior end-
to-end customer experience that yields enhanced financial returns. In pursuit of that goal, we plan to: (1) capitalize on the ultra
-high definition television cycle through best-in-class merchandising, assortment and customer experience, including opening
approximately 20 additional Magnolia Design Center stores-within-a-store to end fiscal 2016 with 78; (2) accelerate our
expansion in growing categories with structural barriers to entry – like large appliances and mobile – including opening
approximately 60 additional Pacific Kitchen & Home stores-within-a-store to end fiscal 2016 with 177 and extending our
installment billing selling capability to online; (3) grow our Connected Home and health and wearables businesses through an
optimized assortment and an improved multi-channel customer experience; (4) increase our exclusive brand and private label
assortments; (5) expand our secondary market growth strategy to offer consumers better access to these types of products and
improve our margin recovery on returned, replaced and damaged products; and (6) apply more science behind our promotional
and pricing strategies.