Safe Harbor<br />Forward-Looking and Cautionary Statements:<br />       This presentation contains forward-looking stateme...
Executive Biography<br />Ryan Robinson – Domestic CFO<br />Senior Vice-president Finance and Treasurer <br />Ryan D. Robin...
Agenda<br />Best Buy Background<br />The Retail Growth Model<br />Retail Growth Deep Dive – Evaluating New Stores<br />Q&A...
C O N F I D E N T I A L - Do Not Duplicate<br />Best Buy Background<br />5<br />
World’s Largest Consumer Electronics RetailerFounded in 1966 | Based in Minneapolis, MN<br /><ul><li>1,140 United States</...
A Long History of Strong Growth<br />Source: Company public filings<br />-- in U.S. $ billions --<br />* Non-GAAP operatin...
Best Buy Ranks Among the Largest Retailers in the World<br />Source: Bloomberg. Data is U.S. dollars and represents the  t...
C O N F I D E N T I A L - Do Not Duplicate<br />How Do Retailers Grow?<br />9<br />
C O N F I D E N T I A L - Do Not Duplicate<br />How Do Retailers Grow?<br />New Geographies e.g. International Expansion<b...
C O N F I D E N T I A L - Do Not Duplicate<br />New Store Example– Union Square, NY<br /><ul><li>Best Buy’s first 24 hour ...
  48,000 square foot former Circuit City Box
High Quality Urban Real Estate, Part of  Urban Fill-In Strategy
In addition to Primary Trade Area of approx. 450,000 people; store will serve  young, high income, Urban Trendsetters  and...
7th Store in Manhattan bringing Population Per Store to an average of 230,000 </li></ul>Note:  Store financials are hypoth...
C O N F I D E N T I A L - Do Not Duplicate<br />Rigorous Cross-Functional Approval Process Enhances Likelihood of Selectin...
  NPV of EVA > 0
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  • Real Estate Investments are approved by a Committee of executives with cross functional representation. The committee members are drawn from: Finance Retail Operations Retail Stores (Field) Real Estate & Market AnalysisAdditional approvals up to the Board of Directors level required at specified cost thresholds. Some of the factors considered by committee include
  • Columbia Presentaion

    1. 1.
    2. 2. Safe Harbor<br />Forward-Looking and Cautionary Statements:<br /> This presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the U.S. Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that reflect management’s current views and estimates regarding future market conditions, company performance and financial results, business prospects, new strategies, the competitive environment and other events. You can identify these statements by the fact that they use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” “plan,” “outlook,” and other words and terms of similar meaning. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from the potential results discussed in the forward-looking statements. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: general economic conditions, acquisitions and development of new businesses, divestitures, product availability, sales volumes, pricing actions and promotional activities of competitors, profit margins, weather, changes in law or regulations, foreign currency fluctuation, availability of suitable real estate locations, our ability to react to a disaster recovery situation, and the impact of labor markets and new product introductions on overall profitability. A further list and description of risks, uncertainties and other matters can be found in Best Buy’s annual report and other reports filed from time to time with the U.S. Securities and Exchange Commission, including, but not limited to, Best Buy’s Annual Report on Form 10-K filed with the SEC on 30 April 2008. Management cautions that the foregoing list of important factors is not complete and assumes no obligation to update any forward-looking statement that it may make.<br />
    3. 3. Executive Biography<br />Ryan Robinson – Domestic CFO<br />Senior Vice-president Finance and Treasurer <br />Ryan D. Robinson is chief financial officer, United States, senior vice president of finance, and treasurer for Best Buy Co., Inc., a multinational retailer of technology and entertainment products and services. In this capacity, Robinson oversees the planning, performance management and development of Best Buy U.S. operations. Robinson manages the treasury functions for the global enterprise including capital structure, financing and investing needs. He also oversees the financial matters of several of the company’s emerging businesses, including Best Buy Financial Services, Best Buy for Business, Best Buy Mobile, Pacific Sales and Magnolia stand-alone stores. <br /> <br />Robinson joined Best Buy in 2002 as vice president of finance and treasurer. Robinson previously led the company’s corporate development activities, including mergers, acquisitions and new business ventures as well as the enterprise tax function.<br /> <br />Prior to joining Best Buy, Robinson spent 15 years at ABN AMRO, a leading international bank, most recently serving as senior vice president and director of the company’s North American private equity activities. Robinson also held a number of other management positions in ABN AMRO’s corporate finance, finance advisory, acquisitions and asset securitization divisions.<br />Robinson earned a bachelor’s degree from the University of Notre Dame and a master’s of business administration from the J.L. Kellogg Graduate School of Management at Northwestern University.<br />
    4. 4. Agenda<br />Best Buy Background<br />The Retail Growth Model<br />Retail Growth Deep Dive – Evaluating New Stores<br />Q&A<br />
    5. 5. C O N F I D E N T I A L - Do Not Duplicate<br />Best Buy Background<br />5<br />
    6. 6. World’s Largest Consumer Electronics RetailerFounded in 1966 | Based in Minneapolis, MN<br /><ul><li>1,140 United States</li></ul>Best Buy and Best Buy Mobile<br />Magnolia Audio Video<br />Pacific Sales Kitchen & Bath Centers<br /><ul><li>205 Canada</li></ul>Future Shop<br />Best Buy and Best Buy Mobile<br /><ul><li>171 China</li></ul>Five Star Appliance<br />Best Buy China<br /><ul><li>2,450 Europe</li></ul>The Carphone Warehouse<br />The Phone House<br /><ul><li>Multiple Web Sites and Call Centers</li></ul>Source: Company data. Numbers are as at the end of Q2 FY10<br />
    7. 7. A Long History of Strong Growth<br />Source: Company public filings<br />-- in U.S. $ billions --<br />* Non-GAAP operating income rate. Adjusted to exclude restructuring and goodwill impairment charges taken in FY09. Please see appendix.<br />
    8. 8. Best Buy Ranks Among the Largest Retailers in the World<br />Source: Bloomberg. Data is U.S. dollars and represents the trailing 12 months in each companies most recently reported period.<br />
    9. 9. C O N F I D E N T I A L - Do Not Duplicate<br />How Do Retailers Grow?<br />9<br />
    10. 10. C O N F I D E N T I A L - Do Not Duplicate<br />How Do Retailers Grow?<br />New Geographies e.g. International Expansion<br />New Offerings e.g. New Products, Services<br />New Distribution Points e.g. New Stores, Concepts, Channels<br />10<br />
    11. 11. C O N F I D E N T I A L - Do Not Duplicate<br />New Store Example– Union Square, NY<br /><ul><li>Best Buy’s first 24 hour store with all major value proposition elements opening Nov. 13
    12. 12. 48,000 square foot former Circuit City Box
    13. 13. High Quality Urban Real Estate, Part of Urban Fill-In Strategy
    14. 14. In addition to Primary Trade Area of approx. 450,000 people; store will serve young, high income, Urban Trendsetters and Tourists
    15. 15. 7th Store in Manhattan bringing Population Per Store to an average of 230,000 </li></ul>Note: Store financials are hypothetical and do not reflect Best Buy’s actual estimates.<br />11<br />
    16. 16. C O N F I D E N T I A L - Do Not Duplicate<br />Rigorous Cross-Functional Approval Process Enhances Likelihood of Selecting Most Valuable Investment Options<br />Strategic Rationale / Fit<br />Resource Constraints <br />Financial Evaluation<br /><ul><li> Long Term Value Creation
    17. 17. NPV of EVA > 0
    18. 18. IRR > WACC
    19. 19. Short Term Financial Impact
    20. 20. Y1 Impact to Total Chain Sales and NOP
    21. 21. Sensitivity of Financial Outcomes to change in key variables e.g. Sales , Margin, Project Cost
    22. 22. Financial Plan
    23. 23. Available Capital / Resources
    24. 24. Impact to Earnings and Risk Free Cash Flow
    25. 25. Rank Project Against Other Investment Alternatives
    26. 26. Financial Value
    27. 27. Strategic Fit
    28. 28. Structure of Real Estate e.g. Lease Vs. Buy Analysis, Risk Mitigation
    29. 29. Alignment with Priorities
    30. 30. Low Cannibalization Urban
    31. 31. Isolated Markets
    32. 32. Competitive Positioning
    33. 33. Reaching New Customers In New</li></ul> Markets with Relevant Value Proposition<br /><ul><li>Hispanic Markets
    34. 34. Semi rural / Suburban Markets
    35. 35. Real Estate Quality e.g. Co-tenancy, Highway Visibility, Convenience Facilities,</li></ul>Investment Decisions are where the strategic “Art” <br />meets financial “Science.”<br />12<br />
    36. 36. C O N F I D E N T I A L - Do Not Duplicate<br />US Market Penetration Through New Store Openings Has Contributed Significantly To Growing Top Line and Market Share <br />548<br />Stores<br />608<br />Stores<br />357 <br />Stores<br />~ 13% <br />Mkt Shr<br />742<br />Stores<br />481<br />Stores<br />923<br />Stores<br />668<br />Stores<br />419<br />Stores<br />822<br />Stores<br />1,023<br />Stores<br />~ 22% <br />MktShr<br /><ul><li> Over the last decade BBY US Store count has increased by almost 190% reducing US population per store by over 60%
    37. 37. Store ramp up a significant driver of 12% Sales CAGR over this period as well as market share gain of 10% </li></ul>13<br />
    38. 38.
    39. 39.
    40. 40. On Facebook: Search “Best Buy Union Square”<br />
    41. 41. 17<br />Financial Valuation Model<br />Economic Value Added (EVA) <br />measures the magnitude of<br />shareholder value created by a<br />project. Theoretically, value is <br />created when EVA greater<br />than 0<br />NPV of EVA measures the long term<br />value of a project by discounting<br />annual EVA by WACC<br />Internal Rate of Return (IRR) is a<br />measure of the efficiency of capital<br />use NOTvalue creation. It is the<br />discount rate at which NPV is 0<br />IRR of a value creating project<br />is greater than WACC<br />If Project A has an EVA of<br />$10M and IRR of 16%; and<br />Project B has an EVA of $12M<br />and IRR of 13%. Project B is a<br />better project than Project A <br />

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