Best Buy 2002 Annual Report Download - page 27

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Best Buy Co., Inc. 25
Future Shop revenues were $596 million in fiscal 2002,
a 10% increase compared with last year’s pro forma
results. For the year, comparable store sales increased
17.4%, before the impact of foreign currency exchange
rate fluctuations. The comparable store sales gains were
driven by increased sales of entertainment software
products and consumer electronics, which includes the
rapidly expanding digital product category.
In fiscal 2002, Future Shop’s gross profit was 23.4% of
revenues, a decrease of 0.9% of revenues compared with
last year’s pro forma results. The decline was mainly due
to a shift in the sales mix driven by increased sales of
lower-margin entertainment software products. The impact
of the sales mix shift was partially offset by lower costs
associated with consumer financing offers due to lower
interest rates and more favorable terms related to a new
private-label credit card agreement.
For the year, the SG&A rate was 19.
7
% of revenues,
compared with 21.4% of revenues last year, on a pro
forma basis. Increased leverage resulting from strong
comparable store sales gains and controlled expenses
contributed to the SG&A rate decrease.
International
The following table presents selected financial data for the International segment for each of the past two fiscal years
($ in millions):
Segment Performance Summary Pro forma
(unaudited) 2002(1) 2001(2)
Revenues $596 $543
Comparable stores sales % gain(3) 17.4% —
Gross profit as a % of revenues 23.4% 24.3%
SG&A as a % of revenues 19.7% 21.4%
Operating income $22 $16
Operating income as a % of revenues 3.7% 2.9%
(1) Results of operations at Future Shop since its acquisition at the beginning of November fiscal 2002.
(2) Pro forma information presents the results of operations of Future Shop as though it had been acquired at the beginning of November
fiscal 2001.
(3) Includes sales at Future Shop stores open at least 14 full months, and includes remodeled and expanded locations. Relocated stores
are excluded from the comparable store sales calculation until they have been reopened for at least 14 full months. The comparable
store sales calculation excludes the impact of foreign currency exchange rate fluctuations.
The SG&A rate was 33.5% of revenues in fiscal 2002
compared with a pro forma rate of 32.9% last fiscal year.
The SG&A rate increase was primarily the result of the
deleveraging impact of the comparable store sales
decline, higher distribution costs and increased expenses
associated with the remerchandising of Sam Goody stores,
partially offset by reduced advertising expenditures. In
addition, both fiscal 2002 and pro forma 2001 included
approximately $16 million of goodwill amortization.
Goodwill amortization will cease at the beginning of
fiscal 2003 with our adoption of SFAS No. 142,
Goodwill and Other Intangible Assets.