Best Buy 2006 Annual Report Download - page 43

29
PART II
fiscal yearwith 300 customer centricity stores, or 40% of
U.S. Best Buy stores.
Second, we expanded and strengthened our services
offeringby adding 5,000 Geek Squad agents. In addition,
we brought our previously outsourced hometheater
installation services in-house to serve ourcustomers better.
Third,we expanded individualized marketingcapabilities
through our Reward Zone customer loyaltyprogram.
Memberships in Reward Zone increased approximately 50%
to more than seven million members and gained key
insights about customer purchase patterns.
Fourth, because customer centricity relies on employees
engaging with customers in new ways, we focused on
increasingemployee retention. During the fiscal year we
changed how we manage ourpeople, mademore extensive
use of strengths-based tools and created an incentive
system in which all store employees could be effectively
rewarded. Our efforts reduced store employee turnover by
15% comparedwith the previous fiscal year.
Fifth, we embarked on a three-year plan to re-engineer our
supply chain and information technology systems. This work
is aimedat streamlining our processes in order to improve
the customer experience in important areas such as product
in-stock levels. Initial results are promising— our systems
are faster, cost less and have the flexibility to adjust as we
transform the customer experience.
Profitably Scaling Customer Centricity
Scaling and refining our customer-centric operating model
remains ourprimary strategy for fiscal 2007. Customer
centricity allows us to better serve the unmet needs of
consumers and develop new growth channels. During fiscal
2007, we are committed to scaling the model profitably
across U.S. Best Buy.
We have set six priorities forfiscal2007 that support our
transformation to a customer-centric company.
•One, we plan to implement a single, customer-
centric operating model at our corporate campus
by the endof fiscal 2007. Moving to a single
operating model will eliminate redundant work and
unify the organization. We also will divest resources
in mature areas so we caninvest resources in
growth areas, such as small businesses, services
and home theater.
•Two, we will continue to grow organically. We plan
to open approximately 90 new stores in North
America. We also anticipate opening 200 more
MagnoliaHome Theaters inside U.S. Best Buy
stores, takingadvantage of rising consumer interest
in flat-panel TVs.
•Three, we plan to build our small-business
capabilities. This priority includes increasingour
Best Buy For Business locations to more than 200
stores and trainingmore than 900 Microsoft-
certified professionals by year end.
•Four, we expect to grow our services business by
drivingproductivity improvements incomputer
services and home theater installation. We also
plan to drive gains through the implementation of
newtools, the benefits of scale and a market-based
approach to home visits.
•Five, we plan to enhance ourability toprovide
complete solutions to customers by giving our
employees better tools and capabilities for
describing, demonstrating and selling solutions
such as digital music subscriptions, digital cable
and voice-over-Internet telephony.
•Six, we plan to pursue international growth
opportunities. Specifically, we anticipate leveraging
our investments in Canada, where we operate both
Future Shop and Best Buy stores, while we embark
on a controlled growth strategy in China.
Ourcompany priorities are aimed at refining this model
andinvesting in the capabilities and customer experiences
that will drive long-term profitable growth.
Results ofOperations
Fiscal 2006 Summary
•Earnings from continuingoperations for fiscal 2006
increased 22% to $1.1billion,or $2.27per diluted
share, compared with $934 million, or $1.86 per diluted
share, for fiscal 2005. The increase was driven by
revenue growth, including a comparable store sales gain
of 4.9%, and an increase in ourgross profit rate, and