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Best Buy Investor Relations Deck






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  • As we have grown our customer base, we have also continued to transform our business model to generate a larger proportion of our profits from new categories other than just hardware. Common theme – we are a customer acquisition machine – with our customers – but also with our vendors’ customers. We are the logical choice for vendors to acquire customers – we bring a lot of value to our vendors. Win-Win-Win.A few examples of how we intend to capitalize on our position in this $325 billion digital content and connections marketplace and get paid for doing so include:Hardware & accessories: (~$165B in annual sales). Content : Best Buy CinemaNow (embedded on PCs, TVs or Blu-ray players) access new release movies and TV shows. We receive a portion of the proceeds for each of the movies and TV shows that are watched.Netflix: Setting up or upgrading a customers’ Netflix subscription – which also gives customers access to movies and TV shows delivered directly to their TVs.Services:Geek Squad: break fix, black tie protection or install. Financial services enables customers to finance their dreams on very attractive terms, often 0% interest over a standard 18 months.Connections:Best Buy Mobile (industry is 150M units in the U.S.). Spearhead of our CW efforts. Offers customers the best combination of smartphones, service plans, accessories and knowledgeable unbiased sales assistance . We get paid through the sales of these devices and through upfront and ongoing payments from carriers for signing up and upgrading customers. Broadband connected computers: Upfront and ongoing payments from carriers for signing up and upgrading customers. Broadband or HD upgrade at home: i.e. DirectTVotr Comcast . We have their labor in many of our stores. In both cases, we get an upfront payment every time we generate a new subscription.

Best Buy Investor Relations Deck Best Buy Investor Relations Deck Presentation Transcript

  • Best Buy Road Show Presentation
    October, 2010
  • Safe Harbor Statement
    Forward-Looking and Cautionary Statements:
    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, the company’s ability to react to a disaster recovery situation, the impact of labor markets and new product introductions on overall profitability, failure to achieve anticipated benefits of announced transactions and integration challenges relating to new ventures. A further list and description of these risks, uncertainties and other matters can be found in Best Buy’s annual report and other filings made 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 April 28, 2010. 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
  • Store Counts
  • Second Quarter Results
    2nd Quarter Financial Performance
    Strategic Results
    FY11vs. LY
    Revenue Growth 2.9%
    Comp Growth % (1) (0.1%)
    Gross Profit % 25.7%
    SG&A % 22.1%
    Operating Inc. % 3.6%
    EPS $0.60
    Employee Retention
    Customer Satisfaction
    Market Share
    Domestic (1.4%), International 4.3%
  • Margin Expansion
    Domestic Gross Margins have been bolstered by strong rate improvements as well as enhanced mix given the strong growth of BBY Mobile, leading to a H1 YOY GM rate increase of 110bps.
    Gross Margin strength has driven strong enterprise level Operating Income rate performance.
  • Exciting product cycle for 2nd half
  • How Does Best Buy Make Money in the Connected World?
  • Connections – High level business model
    Through helping customers solve their Connected World needs, Best Buy is positioned as an extremely valuable customer acquisition engine for carrier partners
    1B+ annual traffic to stores & BBY.com
    Blue shirt expertise and assistance
    Millions in unit sales of connectable hardware
    Significant opportunity to connect customers to necessary video, voice, & broadband solutions.
    Resulting in economics shared with BBY
    Ongoing payment: BBY receives a portion of recurring monthly revenue paid to carriers or entire monthly revenue paid directly to BBY (e.g. BBY Connect)
    Bounty Model (majority): Portion of expected lifetime value of customer is shared with BBY via an upfront bounty
  • Connections – Examples
    New Customer or Upgrade
    Mobile Phone Contracts
    Faster Home Connection
    Wireless Broadband
  • Services - examples
    • Up-front
    • Monthly
  • Content – Examples
    New Customer or Upgrade
  • Holiday Store Activities
    Primary goal:
    Better optimization of the space within the entertainment area
    Reduce the space dedicated to physical music & movies with the first meaningful reduction since the shift to digital music.
    Improve inventory turns and eliminate &/or redeploy a significant amount of physical media “tasking” SG&A costs.
    Give more space to gaming…
    To provide the in store environment to experience new motion based gaming launches.
    To assort pre-owned video games.
    Free up space for expanded BBY Mobile SWAS
    Free up space for eReaders and Gadgets.
  • Holiday Store Activities - responds to the continued declines in physical media
    Center of Store in typical 45k format
    Significantly reduce the space dedicated to physical music & movies this year
    Use the space for growth opportunities
  • Holiday Store Activities - BBY Mobile SWAS expansion
    Format of over 150 SWAS locations by holiday
    Approximate 25% increase to SWAS square footage
    Expanded accessory & no contract space
    Showcasing smart phones (8 end caps vs. current 4) & 7 inch tablets
    Displaying a 3 screen solution.
  • Holiday Store Activities - Used Gaming
    Game trade in & pre-owned games will be in nearly all stores before Holiday.
    In a select number of stores there will be a dedicated trade in desk (pictured above), but in most stores the trade in will occur at the customer service desk.
    Customer receives a BBY gift card that can be used for anything in the store.