Best Buy 2007 Annual Report Download - page 47

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32
Consolidated Results
The following table presents selected consolidated financial data for each of the past three fiscal years ($ in millions, except
per share amounts):
Consolidated Performance Summary 2007(1) 2006 2005(2)
Revenue $35,934 $30,848 $27,433
Total revenue gain % 16% 12% 12%
Comparable store sales % gain(3) 5.0% 4.9% 4.3%
Gross profit as % of revenue 24.4% 25.0% 23.7%
SG&A as % of revenue 18.8% 19.7% 18.4%
Operating income $ 1,999 $ 1,644 $ 1,442
Operating income as % of revenue 5.6% 5.3% 5.3%
Earnings from continuing operations $ 1,377 $ 1,140 $ 934
Gain on disposal of discontinued operations, net of tax $ —$ —$ 50
Net earnings $ 1,377 $ 1,140 $ 984
Diluted earnings per share — continuing operations $ 2.79 $ 2.27 $ 1.86
Diluted earnings per share $ 2.79 $ 2.27 $ 1.96
Note: All periods presented reflect the classification of Musicland’s financial results as discontinued operations.
(1) Fiscal 2007 included 53 weeks. Fiscal 2006 and 2005 each included 52 weeks.
(2) During the fourth quarter of fiscal 2005, following a review of our lease accounting practices, we recorded a cumulative pre-tax
charge of $36 ($23 net of tax, or $0.05 per diluted share) to correct our accounting for certain operating lease matters. Additionally,
we established a sales return liability which reduced revenue by $65 and gross profit by $15 ($10 net of tax, or $0.02 per diluted
share). Finally, based on the favorable resolution of outstanding tax matters with the Internal Revenue Service regarding the disposition
of our interest in Musicland, we recorded a $50 tax benefit. The tax benefit is included in gain on disposal of discontinued operations.
(3) Comprised of revenue at store and Web sites operating for at least 14 full months, as well as remodeled and expanded locations.
Relocated stores are excluded from the comparable store sales calculation until at least 14 full months after reopening. Acquired
stores are included in the comparable store sales calculation beginning with the first full quarter following the first anniversary of the
date of acquisition. The calculation of the comparable store sales percentage gain excludes the effect of fluctuations in foreign
currency exchange rates. All comparable store sales percentage calculations reflect an equal number of weeks. The method of
calculating comparable store sales varies across the retail industry. As a result, our method of calculating comparable store sales may
not be the same as other retailers’ methods.
Continuing Operations
Fiscal 2007 Results Compared With Fiscal 2006
Fiscal 2007 net earnings were $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. Net earnings in fiscal 2007
also benefited from net interest income of $111 million,
compared with net interest income of $77 million in the
prior fiscal year.
Revenue in fiscal 2007 increased 16% to $35.9 billion,
compared with $30.8 billion in fiscal 2006. The increase
resulted primarily from the addition of 87 new Best Buy and
Future Shop stores during fiscal 2007, a full year of
revenue from new stores added in fiscal 2006, a 5.0%
comparable store sales gain, and the acquisitions of Five
Star and Pacific Sales. The remainder of the revenue
increase was due primarily to the inclusion of an extra week
of business in fiscal 2007, the favorable effect of
fluctuations in foreign currency exchange rates and income
related to our additional recognition of gift card breakage.
The addition of new Best Buy and Future Shop stores during
the past two fiscal years accounted for nearly four-tenths of
the revenue increase in fiscal 2007; the comparable store
sales gain accounted for three-tenths of the revenue
increase; the acquisitions of Five Star and Pacific Sales
accounted for nearly two-tenths of the revenue increase; the
inclusion of an extra week of business in fiscal 2007
accounted for one-tenth of the revenue increase; and the
remainder of the revenue increase was due to the favorable
effect of fluctuations in foreign currency exchange rates, as
well as income related to our additional recognition of gift
card breakage.
Our comparable store sales gain in fiscal 2007 benefited
from a higher average transaction amount driven by the
continued growth in higher-ticket items, including flat-panel