Best Buy 2007 Annual Report Download - page 46

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31
PART II
within the next 12 to 18 months, and by opening test stores
in Mexico and Turkey, also within the next 12 to 18 months.
Results of Operations
Fiscal 2007 Summary
•Net earnings in fiscal 2007 increased 21% to $1.4
billion, or $2.79 per diluted share, compared with $1.1
billion, or $2.27 per diluted share, in fiscal 2006. The
increase was driven by revenue growth, including the
addition of new stores during fiscal 2007 and a
comparable store sales gain of 5.0%, and a decrease in
our SG&A rate. These factors were partially offset by a
decrease in our gross profit rate and a higher effective
income tax rate.
•Revenue in fiscal 2007 increased 16% to $35.9 billion.
The increase reflected market share gains and was driven
by the addition of new Best Buy and Future Shop stores
during fiscal 2007, a full year of revenue from stores
added in fiscal 2006, a 5.0% comparable store sales
increase, and the acquisitions of Five Star and Pacific
Sales. The remainder of the increase was due primarily to
the inclusion of an extra week of business in fiscal 2007
and the favorable effect of fluctuations in foreign
currency exchange rates.
•Our gross profit rate in fiscal 2007 decreased by 0.6% of
revenue to 24.4% of revenue. The decrease was due
primarily to a lower-margin revenue mix, including
increased revenue from notebook computers and video
gaming hardware. Also contributing to the decrease, in
order of impact, were a more promotional environment
in the consumer electronics and home-office product
groups, and the inclusion of our China operations for a
portion of the year.
•Our SG&A rate in fiscal 2007 decreased by 0.9% of
revenue to 18.8% of revenue. The decrease was due
primarily to the leveraging effect of the 16% growth in
revenue and reduced performance-based incentive
compensation. Also contributing to the decrease in our
SG&A rate in fiscal 2007, in order of impact, were
controlled expenses related to our strategic initiatives and
expense reduction efforts. These factors were partially
offset by increased expenses related to asset
impairments, litigation and business closure costs.
•Net earnings in fiscal 2007 included income of $20
million ($13 million net of tax, or $0.03 per diluted
share) related to the gain from the sale of our investment
in Golf Galaxy, Inc. In addition, net earnings in fiscal
2007 included income of $19 million ($12 million net of
tax, or $0.02 per diluted share) related to additional
recognition of gift card breakage (gift cards sold where
the likelihood of the gift card being redeemed by the
customer is remote). The gift card breakage was
recorded as a result of determining our legal obligation
to remit the value of unredeemed gift cards to certain
states not reflected in our initial fiscal 2006 gift card
breakage recognition.
•During fiscal 2007, we added Magnolia Home Theater
rooms to nearly 200 new and existing U.S. Best Buy
locations, bringing the total number of Magnolia Home
Theater rooms inside U.S. Best Buy stores to more than
300 at the end of fiscal 2007.
•Effective with the cash dividend paid in the third quarter
of fiscal 2007, we increased our quarterly cash dividend
per common share by 25%, to $0.10 per common
share. During fiscal 2007, we made four dividend
payments totaling $0.36 per common share, or $174
million in the aggregate.
•During fiscal 2007, we purchased and retired 11.8 million
shares of our common stock at a cost of $599 million
pursuant to our share repurchase programs.
•In fiscal 2007, we and The Best Buy Children’s
Foundation contributed approximately $25 million to
local communities. The Best Buy Children’s Foundation
supports educational programs that integrate and
leverage today’s technology.