This document provides an overview of Best Buy's business including its products and services, brands, distribution system, expansion plans, competitors, income statement, ratios, current assets, inventory, long-lived assets, investments, liabilities, shareholders' equity, advantages, disadvantages, and recommendations. It compares Best Buy to competitor HHGregg and provides first-hand comments from Best Buy employees on gaining market share and resilience during economic downturns. The document analyzes Best Buy's financial performance over multiple years and notes plans for international expansion.
6. Income Statement
• For the past four year’s sales at Best Buy
has increased roughly $4-$5 billion a year.
• An increase in gross profit by
approximately a $1 billion dollars a year.
7. Income Statement
• The past four have shown increase in the net
earnings every year. But it has slowed in the last
couple years
• Net earnings are expected to decline in 2009,
that is consistent with retail in this current
economic time. Further, net earnings outpaced
expectations in the 1st
quarter by 2 cents a share.
8. Income Statement
INCOME STATEMENT 5-Feb 6-Feb 7-Feb 8-Feb
--------------------------------
----------------- -------------------- -------------------- -------------------- --------------------
Sales (Net) 27,433.00 30,848.00 35,934.00 40,023.00
Cost of Goods Sold 20,479.00 22,663.00 26,652.00 29,892.00
-------------------- -------------------- -------------------- --------------------
Gross Profit 6,954.00 8,185.00 9,282.00 10,131.00
2005 2006 2007 2008
Net Income (Loss) 984 1,140.00 1,377.00 1,407.00
In Millions
10. Current Assets
• Best Buy has billions in their current asset
category, the largest part being Inventory
• Second largest category is Cash and
Equivalents
11. Cash & Equivalents
• Between 2005 and 2007 it was consistent with
steady growth until 2008
• Best Buy ended fiscal 2008 with $1.5 billion of
cash and cash equivalents and short term
investments, compared with $3.8 billion at the
end of fiscal 2007
• Working capital was $0.6 billion at the end of
fiscal 2008, down from $2.8 billion at the end of
fiscal 2007
12. Accelerated Share Repurchase
• Decrease in cash and equivalents, short
term investments and working capital and
equivalents due to ASR program
• Liquidation of a substantial portion of
investment portfolio to repay debt and
fund ASR
13. Current Assets
STATEMENT OF FINANCIAL POSITION 2005 2006 2007 2008
------------------------------------------------- -------------------- -------------------- -------------------- --------------------
ASSETS
Cash &
Equivalents 3,506.00 3,910.00 4,175.00 1,438.00
Receivables -
Total (Net) 375 506 548 549
Inventories -
Total 2,851.00 3,338.00 4,028.00 4,708.00
Prepaid
Expenses 0 0 0 0
Current Assets
- Other 171 231 330 647
-------------------- -------------------- -------------------- --------------------
Current Assets
- Total 6,903.00 7,985.00 9,081.00 7,342.00
In Millions
14. Working Capital & Ratios
Working Capital 2005 2006 2007 2008
1944 1929 2780 573
Current Ratio 2005 2006 2007 2008
1.39 1.32 1.44 1.08
Quick Ratio 2005 2006 2007 2008
0.78 0.73 0.75 0.29
In Millions
15. HHGregg
• HHGregg, Best Buy has a far larger current
assets category.
• While HHGregg is only a regional competitor it is
a competitor taking up a good part of market
share Best Buy could have.
• HHGregg operates with current assets of $163
million in 2008 compared to $6.9 billion of Best
Buy
16. Inventory
2005 2006 2007 2008
Inventory 2851 3338 4028 4708
% of Current Assets 41.3 41.8 44.36 64.12
% of Total Assets 27.7 28.14 29.68 36.9
2006 2007 2008
Inventory
Turn Over
9.97 9.76 9.16
In Millions
17. HHGregg
• HHGregg’s current assets are mainly
inventories as well, accounting for 78%
and 82% in 2007 and 2008 respectively.
• HHGregg experienced turnover of 9.98
and 10.18 in 2007 and 2008 respectively
18. New Product Lines
• Want to go in a “Green Direction” to
increase market share
• To include electric motorcycles as a new
addition to their increasing product lines
• Other products set to be sold include:
electric-powered scooters, bicycles and
Segways
19. Music Store
• Best Buys is attempting to increase their
market to include musicians by carrying
instruments
• Also offering repair services and lessons
to coincide with the newly added product
line
20. Twelpforce
• Using Twitter, customers can “tweet” for
help and Best Buy will answer those
consumer questions
• “No matter where you bought it, no matter
where you are and even if you haven't
bought it yet”
21. Analysis of Long Lived Assets
• Property and Equipment has increased to
26% in 2008 up from 22% in 2006 of total
Assets.
Property and Equipment 2008 2007 2006 2005
Land and buildings 732 705
Leasehold improvements 1,752 1,540
Fixtures and equipment 3,057 2,627
Property under capital lease 67 32
Less accumulated depreciation 2,302 1,966 2,124 1,728
Net property and equipment 3,306 2,938 2,712 2,464
22. Analysis of Long Lived Assets
• Goodwill has significantly increased
domestically and internationally.
• Best Buy has also acquired Trade
Names.
2008 2007 2006 2005
Domestic Goodwill 450 375 6 3
International Goodwill 638 544 551 510
Total Goodwill 1,088 919 557 513
Domestic Trade Names 23 17 _ _
International Trade Names 74 64 44 40
Trade names 97 81 44 40
23. Analysis of Investments
• Short-term investments took a big hit in
early 2008.
– Due to failure of auction-rate securities.
2008 2007
Short-term investments 64 2,588
Long-term investments 417 318
Total 481 2,906
Auction-rate securities 417 2,377
Municipal debt securities — 506
Commercial paper 64 —
Variable-rate demand notes and asset-backed securities — 23
Total 481 2,906
24. Analysis of Investments
• Marketable Equity Securities rose from $4
million in 2007 to $183 million in 2008.
• Expansion into Europe (Carphone
Warehouse Group or CPW.L)
– 5 new stores in spring of 2010
– 100 stores by 2013
• Further Plans of expansion into Turkish
market
25. Liabilities
• Increase leverage in debt to finance acquisitions
D/E: 2006 in 1.25 to 2.40 in 2009
Long term debt ratio: 4% in 2006 to 17% in 2009
Debt-to-capitalization increased from 15% in 2008 to
30% in 2009.
No issues with payables (accounts and interest)
0
0.5
1
1.5
2
2.5
3
2005 2006 2007 2008 2009
Debt/Equity Current Debt/Total Assets Long Term Debt/Total Assets
26. Risks
In 2005, BusinessWeek warned Best Buy and
Circuit City about Wal-Mart.
Today, Circuit City is defunct and Wal-Mart is
the prefer retailer for those that make $50,000
or less.
27. Shareholder’s Equity
• Best Buy began paying dividends in 2004.
• Dividends increased by 30% in 2009 from
2008, compared to 8% in prior fiscal year.
• Hhgregg does not have dividends
payment.
28. Advantages
• Employees
• “An experience”
• Consumer
Preference
• New markets
–Urban
–Youth
Festivities abounded including a
guest appearance by legendary
basketball star Magic Johnson
when Best Buy formally opened its
doors to the Compton community.
30. First Hand Info
“SmarTrend's proprietary
algorithms detected bearish
price action.”
5.2% / 62 days
“I applaud Best Buy’s
Management for their
guidance and resilience.
Best Buy’s stock does not
have a lot of volatility.”
Chip Brian, CEO
