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William Blair Growth Stock Conference

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William Blair Growth Stock Conference

  1. 1. William Blair Growth Stock Conference Presentation by Best Buy Co., Inc. (NYSE: BBY) June 18, 2008
  2. 2. Jim Muehlbauer Executive Vice President – Finance and CFO 2
  3. 3. Safe Harbor Best Buy’s 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 Best Buy 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: failure to receive necessary approvals for the transaction; failure to achieve anticipated benefits of the transaction; and integration challenges relating to the new venture. Other factors include 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, Best Buy’s 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 April 30, 2008. Best Buy 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. 3
  4. 4. Best Buy - A History of Growth Annual Revenue (U.S. $ in Billions) 15% $40.0 AGR $35.9 C $30.8 $27.4 $24.5 $20.9 $17.7 FY02 FY03 FY04 FY05 FY06 FY07 FY08 4
  5. 5. Steady Earnings Expansion Diluted EPS 20% $3.12 AGR $2.79 C $2.27 $1.75 $1.44 $1.11 $1.07 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY02 through FY05 have been adjusted for FAS 123 expense. All years are adjusted for stock splits. 5
  6. 6. Fiscal 2009 First Quarter: FY09 Guidance: • EPS of $0.43 vs. $0.39 in last • EPS of $3.25 to $3.40, an year’s quarter increase of 7%, before impact of European Venture & Lower • Comparable store sales gain Share Repurchase of 3.7% • Revenue of $43 billion to $44 • 599 Best Buy Mobile stores billion converted, balance of US chain completed by Dec. • Comparable store sales gain of 1% to 3% • Estimated market share rose 1.5 points, fueled by • 30-40 bps of operating notebooks, mobile phones, income de-leverage driven by flat-panel TVs, video gaming, growth investments appliances 6
  7. 7. Growth Runways Market Size New New Business Share Gain Growth Categories Models We plan to Grow BBY plans to Our Best and The Industry is Within/Outside Grow with Our Under-Served expected to Grow the Brand… Current Customers Want Businesses More… 7
  8. 8. Growth Unique Engaged Customer Employees Insights Growth Capabilities, Scale & Networks 8
  9. 9. Growth Unique Engaged Customer Employees Insights #1 Share Capabilities, Scale & Networks 9
  10. 10. Growth Unique Engaged Customer Employees Insights 4X Comps Capabilities, Scale & Networks 10
  11. 11. Growth Unique Engaged Customer Employees Insights Store #22 15% Q1 comp Capabilities, Scale & Networks 11
  12. 12. Portfolio of Growth Options Unique Engaged Customer Employees Insights Unique Engaged Customer Employees Unique Insights Engaged Customer Employees Insights Capabilities, Scale & Networks Capabilities, Unique Unique Scale & Engaged Engaged Customer Capabilities, Customer Networks Employees Employees Insights Scale & Insights Networks Unique Engaged Customer Employees Insights Capabilities, Capabilities, Scale & Scale & Networks Networks Capabilities, Scale & Unique Unique Networks Engaged Engaged Customer Customer Employees Employees Insights Insights Unique Engaged Customer Employees Unique Insights Engaged Customer Employees Insights Capabilities, Capabilities, Scale & Scale & Networks Networks Capabilities, Scale & Capabilities, Networks Scale & Networks Unique Engaged Unique Customer Engaged Employees Customer Insights Employees Insights Unique Engaged Customer Employees Insights Capabilities, Capabilities, Scale & Scale & Networks Networks Capabilities, Scale & Networks 12
  13. 13. Kevin Layden Chief Operating Officer – Best Buy International 13
  14. 14. FY09 Q1 Update - International • Total international revenue increased 26% – Canada comparable store sales gain of 4.3% – China comparable store sales gain of 6.3% • Gross margin rate increased 40 bps • SG&A rate increased as continued improvements in Canada were more than offset by growth investments in new countries • Operating profit breakeven vs. a loss of $4 million in the prior year quarter – Funding international growth investments with strong profit growth in Canada 14
  15. 15. Impact of New Venture With CPW • Provides access to estimated $175 billion European CE market – Faster – Lower risk • Outstanding cultural fit – Customer focus – Shared vision of growth in mobility • Combination of mobile phone, computing expertise • CPW deal expected to close on or about June 30, 2008 15
  16. 16. Objectives of New Venture • Continue to grow CPW’s existing retail business through physical expansion in its existing European markets, and accelerating its current evolution towards mobile and fixed line connectivity • Build a significant market share in consumer electronics retailing in Europe, through the roll-out of Best Buy stores, services and Web sites in selected markets, beginning in calendar 2009 • Bring to Best Buy’s core North American operations CPW’s expertise in sourcing mobility products, bundling services and operating smaller stores 16
  17. 17. Growth Unique Engaged Customer Employees Insights 35% Share Capabilities, Scale & Networks 17
  18. 18. Best Buy Domestic Revenues and Earnings ($ in Millions ‐ US) 18,800 15,300 12,494 460* 460* Revenues 10,065 395 395 Earnings 8,338 7,758 7,215 347 347 5,080 216 216 3,007 82 82 1,620 58 58 46 930 46 41 41 20 99 00 01* 20 02* FY 92 93 94 95 96 97 98 10 (6) 10 (6) FY02 FY94 FY01 FY93 FY96 FY99 FY97 FY00 FY92 FY95 FY98 * Analysts’ Consensus Estimate ‐ $2.14 EPS FY ‘02 18
  19. 19. New Country Start‐up Investments Canadian Key Metrics Operating Income % of Sales 1.2% 2.5% .5% 2.0% 3.6% 5.0% $6.0 $300 $250 $5.0 $200 $4.0 Operating Profit OPERATING Sales PROFIT $3.0 $150 EXPENSES $2.0 $100 $1.0 $50 $0.0 $0 FY02 FY03 FY04 FY05 FY06 FY07 Time: 19
  20. 20. Strategies - International Nation FY09 Priorities A balance of optimization, growth initiatives Measured growth as we learn about Chinese consumers and our brands Launch their greenfield entry strategy Plan launch of greenfield entry strategy in early fiscal 2010 20
  21. 21. Strategies - International CPW / BBY Mobile – Leverage our existing agreement and new venture Global Sourcing and Private Label Expansion Invest in infrastructure to support Global expansion 21
  22. 22. Our Global Opportunity CE Market CPW Retail Business Venture < 3% Share ~$175 B BBY ~ 21% Share ~$160 B Dual Brand ~ 1% Share ~$80 B Dual Brand ~ 35% Share ~$17 B Source: Verdict, Mintel, Euromonitor, OC&C analysis, and internal data 22
  23. 23. Your Questions 23

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