Best Buy 2005 Annual Report Download - page 40

over the next several years and contribute to us achieving income rate. Next, we believe the strategic relationships
our annual operating income rate goal of 7% of revenue we formed in 2004 with Accenture LLP (Accenture),
for fiscal 2008. The four strategic initiatives are: discussed in greater detail below, could increase our
annual operating income rate by as much as 0.5% of
• Customer Centricity revenue. Further, we believe that our organic growth
• Efficient Enterprise through the customer centricity initiative will generate
• Win with Service significant comparable store sales gains, which could help
us leverage our cost structure and could increase our
• Win in Entertainment
annual operating income rate by approximately 0.5% of
Before we discuss each of our four strategic initiatives in revenue. Additionally, the lessons learned in rolling out
greater detail, we’d like to first provide an update on our our segmented stores will be applied as we convert
7% operating income rate goal. During fiscal 2004, we additional existing U.S. Best Buy stores to the customer
announced our goal of increasing our annual operating centricity operating model.
income rate to 7% of revenue for fiscal 2007, while
Our progress toward achieving the goal of an annual 7%
continuing to deliver double-digit revenue growth. While
operating income rate is not expected to be perfectly
we still are focused on delivering an annual operating
linear; however, we expect to make progress each fiscal
income rate of 7% of revenue, we now believe that it is
year. Finally, we remain focused on double-digit revenue
more likely to be attained for fiscal 2008, rather than
growth and an earnings growth rate of at least 15%.
fiscal 2007. We extended this timeframe due to the
expected impact of the adoption of Statement of Financial Customer Centricity
Accounting Standards (SFAS) No. 123 (revised 2004),
Share-Based Payment (123(R)), which we plan to adopt Our customers are at the core of all of our business
effective for the first quarter of fiscal 2006, as well as the strategies, and our customer centricity initiative is the most
need to make additional investments in our business in the important of our four strategic initiatives. In short,
short-term in order to achieve our long-term goals. We customer centricity means focusing on the customer.
believe that it is critical to accelerate our customer The customer centricity initiative includes identifying
centricity initiative, expand our services business, boost profitable customer segments, tailoring our store
retention of employees, add individualized marketing experience to satisfy their needs, and training our
capabilities, and simplify our supply chain and employees to think and behave as owner/operators. We
information technology systems. believe that we can extend our competitive advantage by
engaging more fully with our customers, offering them
Our operating income rate for fiscal 2005 was 5.3% of broader and deeper assortments than our competitors,
revenue, consistent with our operating income rate for and supporting their shopping experiences with a full
fiscal 2004. In order to accomplish our goal of increasing array of services. Our goal is to maximize every customer
our annual operating income rate to 7% of revenue for touch point, including store visits, phone calls, online visits
fiscal 2008, we believe we must increase the profitability and in-home visits.
of our International segment; improve our supply chain,
global sourcing, merchandising and pricing effectiveness; We believe the customer centricity operating model offers
realize the anticipated benefits from our efficient our customers a richer in-store experience, including
enterprise strategy; and successfully roll out our customer better shopping assistance as well as more of the products
centricity initiative. We believe that increasing our and services they want. Customer centricity empowers
International segment’s annual operating income rate to employees to recognize unique sets of customers and to
5% of revenue would add up to 0.4% of revenue to our build offerings and experiences to meet their needs. Our
consolidated annual operating income rate. In addition, employees also like this model because it gives them more
we believe that supply chain improvements, such as more power to make decisions about how to satisfy their
accurate demand forecasting and direct importing, as well customers. Over time, we believe that our customer
as sourcing opportunities and private-labeled products, centricity initiative will attract new customer segments to
could add up to 0.5% of revenue to our annual operating our stores, which would leverage our existing assets.
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