Best Buy 2006 Annual Report Download - page 44

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30
was partially offset by an increase in our SG&A rate. In
addition, earnings from continuing operations for fiscal
2006 benefited from net interest income of $77 million,
compared with net interest income of $1 million for the
prior fiscal year, and a lower effective income tax rate.
•Net earnings for fiscal2006reflect the impact of early-
adopting SFAS No. 123(R), which resulted in an increase
in stock-based compensation expense of $132 million
($87 million net of tax, or $0.17per diluted share). In
addition, net earnings for fiscal 2006 included income of
$43 million ($29 million net of tax, or $0.06 per diluted
share) related to our initial recognition of gift card
breakage (gift cards soldwhere the likelihood of the gift
card being redeemed by the customer is remote). Gift
card breakage incomewas not recorded in fiscal 2005
or prior years.
•Revenue for fiscal 2006 increased 12% to $30.8 billion.
The increase reflected market share gains andwas driven
by the net addition of 103 new stores during fiscal 2006,
a full year of revenue from stores added in fiscal 2005
andthe 4.9% comparable store sales increase. The
remainder of the increase was due primarily to the
favorable effect of fluctuations in foreign currency
exchange rates.
•Our gross profit rate for fiscal 2006 increased by 1.3%
of revenue to 25.0% of revenue. The increase was driven
by the continued transformation of our supply chain,
which enabled us to improve margins through lower
product costs, more effective pricing strategies, and
increased sales of higher-margin services and private-
label products.We also benefited from better product
transition management and a more stable promotional
environment.
•Our SG&A rate for fiscal 2006 increasedby 1.3% of
revenue to 19.7% of revenue. The increase was due
primarily to increasedperformance-based incentive
compensation resulting from our strong financial
performance, a growing number of stores operating
under the higher-cost customer-centric labor model and
costs associated with supporting our services business,
and was partially offset by expense leverage resulting
fromahigher revenue base. The change in our
accounting for stock-based compensation increased our
fiscal 2006 SG&A rate by approximately0.4% of
revenue compared with the prior fiscal year.
•During fiscal 2006, we opened 70 U.S. Best Buy stores
and converted 163 existing U.S. Best Buy stores with the
customer-centric operating model (segmentedstores). At
the endof fiscal 2006, we operated300 segmented
stores, or 40% of total U.S. Best Buy stores.
•Effective with the cash dividendpaid in the third quarter
of fiscal 2006, we increased our quarterly cash dividend
by 9 percent, to $0.08 per common share. During fiscal
2006, we made fourdividend payments totaling $0.31
per common share, or $151 million in the aggregate.
•During fiscal 2006, wepurchased andretired 18.3
million shares at a cost of $772 million pursuant to our
share repurchase programs.
•In fiscal 2006, we and the Best Buy Children’s
Foundation contributed approximately $30 million to
local communities, including contributions for the
communities and people affected by Hurricanes Katrina,
Wilma and Rita.