3. Panel
• Bob Willett – CEO International & Chief
Information Officer
• David Berg – COO International
• Dan Currie – Global Supply Chain
• Jennifer Driscoll – Investor Relations
• Kevin Layden – Canada
• John Noble – CFO International
• Jeanine Thompson – Human Resources
• Redmond Yeung – China
3
4. Differentiate Through Co-Creation,
Services and Solutions
Geographic
Format / Channel Reach
Channel
New channels Services
Extension
.com Global
Geek Squad
Extension
Tesco BBY
*
New formats
ns
e.g. Five Star
io s
BBY Mobile
ut e
ol vic Europe (Geek Squad)
S er
S China, Mexico , Turkey
Call Centers Target
* (BBY, Five Star, Geek Squad)
Range
Magnolia Most Wal-Mart
*
Extension
Future Shop Canada (BBY, Future Shop, Geek
Retailers
Squad)
Core Format
US (BBY, Geek Squad)
Product and
Mass Exclusive
Private Label
Exclusive Brand Products Brands
(Insignia,
Rocketfish)
4
5. Enterprise Enablers– Supply Chain
and Global Sourcing
• We set out three years ago to develop a “best of
Customer Availability
breed” supply chain under the “Panorama Program,”
modeled after the European food industry. 94.00%
92.2% 93.0%
92.00%
• Phase I focused on the cemand side, with Phase II
looking at the physical logistics and distribution 90.00% 89.2%
• The Panorama Program has delivered substantial 88.00%
SG&A reductions and gross margin benefits through
a combination of: 86.00% 85.00%
• Space Management 84.00%
• Improved Availability
82.00%
• Forecast Accuracy
• Replenishment & Allocation 80.00%
• Collaborative Pricing and Forecasting FY04 FY05 FY06 FY07
• Purchase Path
• Tailored Market Assortment
On Time Right Quantity
• Network Optimization
• Supplier Management
• Direct Importing 80%
75%
• LEAN Project 73%
75%
72%
• Additional benefits will be realized as we continue to 70%
roll-out the capabilities to all categories and expand
OTRQ %
internationally 65%
61%
60%
• Enterprise Global Sourcing revenue up 32% YOY
55%
• SG&A reductions by partnering in goods not for resale
50%
(GNFR) FY04 FY 05 FY06 FY 07
5
6. Enterprise Enablers – Business Technology
The transformation of our IT platform started three years ago, when we began a
journey to simplify our technology environment and create a nimble, service-
oriented architecture.
– Our activities focused on five objectives:
• Adding new capabilities
• Infusing new skills
• Reducing risks
• Simplifying the IT architecture and infrastructure
• Reducing Total Cost of Ownership (TCO)
– Currently we have delivered substantial cost reductions from a simplified
environment, while enabling new capabilities:
• Service environment to support Geek Squad
• Store POS system
• HR Portal for all employees
• Enterprise Data Warehouse
• International Footprint
– Additional investment in corporate transformation is still ahead that is expected to
further reduce costs and increase speed to market
– The development of an Enterprise IT blueprint that encompasses Canada, China,
Mexico and Turkey
6
7. International - Canada
Our Canadian dual brand strategy has been built out over
the past years, and now is positioned to optimize on this
investment:
– The leadership team in Canada has shaped a very focused agenda
concentrating on the core activities and optimizing their form
– Future Shop and Best Buy are both growing market share and
producing comparable store sales growth
– Brand differentiation work is accelerating to create options for dual
brands in Canada where financially appropriate – The future Future
Shop
– Implementing new capabilities of labor and price optimization and
goods not for resale (GNFR)
– Private label global sourcing improving margin
– Infrastructure investment accelerating in parallel with clarity around
differentiation
– Source of future leaders for International
7
8. International - China
– Our dual brand strategy is building a solid foundation utilizing customer
analytics and research
– Our China leadership team is now moving into the growth phase after
initially focusing on harmonization and stabilization; building our brand;
cultures; and values
– Our Best Buy store in Shanghai is expected to enter the top 50 stores in
the first year and is expected to break even
– We expect our China operations to deliver an operating profit in FY08
– We are creating a new operating model leveraging customer centricity and
services
– Recruited local leadership team to drive the company forward
– Beginning infrastructure investments to support new store program
pipeline
– Great support has been received from the Chinese government
– Creating an Academy of Retailing to build new leaders of the future
– Reinforcing legal and integrity standards
– Applying customer centric analytics
– Five Star is meeting our expectations, including significant improvement
in same store performance
8
10. Filter the Results for Developing Markets
Developing Markets - GPI Rank vs. Ease of Setup / Operation Rank
10
11. International - Mexico
Market Demographics
We are entering the Mexican market
Average 1
in 12-18 months Mexico
Mexico is the 14th largest economy in
– Best Buy Market Size ($m) $11,416 $6,785
GDP terms and represents a relatively
low risk and ease of entry Home Office Equip Market $5,256 $2,428
– Consumer purchasing power is
growing faster than the US and Canada, Appliances Market $2,913 $1,696
sustained by rising income levels
– Interest rates and inflation have fallen Entertainment Softw are Market $1,646 $ 568
sharply in recent years as the economy
grows and matures
– The market for BBY is approximately
$14B: an organized market of $11B and Note 1: “Av erage” refers to av erage of all 36 emerging countries included in the
an informal market of $3B ATKearne y Gl obal Prioritization Index tool.
– Increasing prosperity has increased the
Mexican Shift toward Organized Retailers
availability of credit and home equity
borrowing 1991 2003
– There are no comparable retail models
to BBY in the Mexican consumer
electronics retail market Organized
Organized
– We will leverage our US Technology Retailers Informal
and supply chain Retailers
30% Retailers
Informal 50%
– Presents a future global sourcing Retailers 50%
opportunity 70%
– Track record of major retailers entering
with success
– Local leadership in place
Source: Santander, InfoAmericas
11
12. International - Turkey
Market Demographics
We are entering Turkey in 12-18 months:
Average 1
Turkey
Turkey is the 6th -fastest growing
–
Best Buy Market Size ($m) $4,921 $6,785
economy in the world and the 10th “most
important” in terms of growth in the world,
Consumer Electronics Market $791 $2,093
moving up from 19th the previous year
– GDP growth has been running at 5% since
2002; the market for our products both formal Home Office Equip Market $2,511 $2,428
and informal is approximately $7B, and
growing annual retail sales of 12% in 2005. Appliances Market $1,195 $1,696
– Turkey has approximately 70 million
people and Europe’s youngest population $ 568
Entertainment Softw are Market $ 424
with over 50% below 27 years of age
– Turkey is also a manufacturing hub with Note 1: “Average” refers to averag e of all 36 emerging countries included in
major investment increasing; today 60% of the ATKearney Glob al Prioritiz ation Index tool.
all TVs sold in Europe and 15% of all TVs
worldwide are made in Turkey The Shift toward Organized Retailers
– Future Global Sourcing Opportunities
The following retailers
– Multi-national major retailers are in the have entered the
market taking advantage of the major growth market in the last six
in shopping malls across Turkey years:
28%
37%
– A fragmented dealer CE retail market with •Tesco 55%
few comparable retail models to BBY •Carref our
•Migros
– Strategically placed geographically to •Dixons
exploit Eastern Europe, the Middle East and 72%
•Makro 64%
Russia 45%
•Harv ey Nichols
•IKEA
– Customer segment analysis being •Media Markt
undertaken 2003 2004 2010E
They represent less than
– Local leadership in place Traditional Retail Organized Retail
35% of the retail market
12
13. International Partnerships for Growth
• We are leveraging Accenture’s capabilities in all
countries, utilizing supply chain, IS infrastructure,
sourcing and accelerating our transition
• Carphone Warehouse – Jointly creating a Geek Services
model in the UK and building a BBY Mobile capability
• Dunnhumby – A fact based approach to our BBY and
Five Star operating model and Customer Centric
Strategy has been based on the analytics and
segmentation model in China, Canada and now Mexico
and Turkey
• Tait Subler – We accelerated our relationship with Tait
Subler who have helped us with our Brand Strategies in
Canada, China and now Mexico and Turkey, renowned
for their branding capabilities
13
