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Tag: Best Buy

  • Best Buy Plans To Price-Match Internet Competitors This Holiday Season

    In order to stop the growing trend of people exclusively using the internet for their holiday shopping needs (and hopefully draw some straying customers back in), Best Buy is planning on price-matching internet prices on the goods offered in their storeroom.

    The Wall Street Journal quotes a source “familiar with the matter,” who says that the company will match the prices of online competitors like Amazon to curb the practice of “showrooming.” That, of course, is when potential buyers visit a brick and mortar store to search for products, and then go home and buy them for a reduced price online – thus using Best Buy as their own personal showroom.

    Best Buy has recently said that the problem of “showrooming” has been widely over-reported, but it’s apparently enough of an issue to warrant this sort of semi-drastic measure. It’s currently unclear exactly which online properties Best Buy plans to price match. Amazon is an obvious choice, but the company could run into some real problems if include some of the cheaper online electronics retailers like NewEgg in the program.

    Best Buy has had a rough couple of months on multiple fronts. In August, the company reported a 90% drop in profits in their second-quarter earnings. They’ve also had to hire a new CEO following a scandal involving the previous CEO Brian Dunn and allegations of an inappropriate relationship with a subordinate.

    According to WSJ, Best Buy will also offer free home delivery on out-of-stock products as well this holiday season in another attempt to make sure people keep coming through the doors.

  • iPhone 5 Best Buy Pre-Orders Not Being Fulfilled

    Best Buy today sent out emails to some customers who pre-ordered the iPhone 5 from their stores, informing them that they might not actually be receiving the device for quite some time.

    9 to 5 Mac also obtained a copy of a Best Buy internal memo that states: “Based on current inventor allocation, we understand we will not have enough iPhone 5 devices to fulfill all pre-orders this weekend.” It goes on to say that Best Buy is dedicated to getting the iPhone’s into customers’ hands “no later than 28 days from launch.”

    The email sent to customers took a decidedly more personal tone than the memo, calling the customer by name and using empathetic language. A screenshot of an email provided by a 9 to 5 Mac reader read:

    I know that you’re excited to get your new iPhone 5 and you can be sure we are as excited to sell it to you. Unfortunately, as of the night before the official launch, Best Buy has not received enough of the specific model phone you ordered, and we will not have it available on launch day. You can be certain that we are working very hard to get you, as quickly as possible, the exact iPhone 5 model you pre-ordered. It could take as long as 28 days to find the iPhone you want. However, there is no doubt that the fact you pre-ordered a phone from Best Buy means you will be able to buy it before any consumer trying to find one on their own.

    Trust us, we will be able to get you the phone you want – maybe not as fast as you might want, but likely as fast as anyone else at this point.

    I really appreciate your patience and willingness to shop Best Buy. We look forward to getting you the phone you ordered with us.

    So, did Apple promise Best Buy more iPhone 5s than they delivered, or has Best Buy been selling pre-orders to customers without knowing whether they would be able to fulfill them? Well, consider that this isn’t the first time iPhones at Best Buy haven’t been available on launch day. According to Consumer Reports, the company pulled the same move last year, and some customers ended up having to wait weeks for their iPhone 4S.

  • Best Buy, Schulze Agree to Move Forward With Due Diligence

    Best Buy announced today that it has reached an agreement with founder Richard Schulze, which will enable Schulze to conduct due diligence, as he tries to acquire the company.

    Specifically, he’s been granted acces to certain info and permission to form an investment group with private equity sponsors, to help in the process of making a fully financed proposal to acquire the company.

    Schulze, his advisors and potential private equity partners and debt financing sources are granted immediate due diligence access to non-public company info, under the agreement. Schulze has been given the opportunity to bring forward a fully financed proposal within 60 days of the due diligence period start date.

    According to Best Buy, the agreement establishes a non-exclusive, “orderly” process which “satisfies the requests made by Mr. Schulze, while at the same time protecting the interests of shareholders.”

    Schulze has agreed not to pursue an acquisition until January at the earliest, should the Board reject a proposal, following the due diligence. The Board would have 30 days to review a second proposal. If Schulze still can’t get the Board to accept a proposal, he’ll not pursue an acquisition until the expiration of the one year term of the agreement.

    The Board has offered Schulze two Board seats, though if he presents a proposal or if he violates the provisions of the agreement, he won’t be able to obtain them.

    Schulze first announced his intent to acquire Best Buy back earlier this month, when he offered a price of $24.00 to $26.00 per share in cash (about $8 billion).

  • Best Buy Buyout Bid Talks Said To Resume

    Best Buy Buyout Bid Talks Said To Resume

    Talks between Best Buy and its founder, who has expressed interest in buying back the company, are reportedly back on, after a brief hiatus.

    Earlier this month, Best Buy Founder Richard Schulze announced an offer to buy back the company he started in 1966 under the name Sound of Music. The offer, estimated at $8 billion,was for a price of $24.00 to $26.00 per share in cash.

    Best Buy has since released its quarterly earnings report, which included a 90% drop in net income. Best Buys stock, likewise, has been on the downward trend, though it’s up a bit from yesterday, currently at $17.91 as of the time of this writing. Well below Schulze’s offering price.

    A week ago, Schulze sent the Board Of Directors a letter affirming his commitment to the offer, but Best Buy put out a press release on Sunday, saying that it had offered a Due Diligence plan to Schulze, but that he had declined. The release said:

    On Friday, Aug. 17, the Board convened to evaluate Mr. Schulze’s indication of interest in the company. The Board authorized its advisers to initiate discussions with Mr. Schulze on a cooperation agreement that would establish an orderly process under which Mr. Schulze would both gain access to certain financial, operational and legal information and be able to move forward with discussions with private equity partners and debt financing sources, as he had requested.

    Included in the proposal was a routine and customary request that Mr. Schulze agree to certain protections for Best Buy and its shareholders, with the goal of limiting outside distractions, in return for access to non-public information and the ability to form an investor group.

    Best Buy said it would have provided: a waiver of Minnesota law, in order to provide Schulze the ability to work with his private equity partners to develop a definitive proposal for the outstanding shares of the company, due diligence access to Schulze to the company’s non-public info, due diligence access for his private equity partners, due diligence access for his advisers and debt-financing sources, and an opportunity to bring forward a fully financed proposal within 60 days.

    Bloomberg reports today, that Best Buy, which has since appointed Hubert Joly to the CEO position, has resumed talks with Schulze about an agreement that would enable him to conduct due diligence. The publication cites “two people with knowledge of the matter.”

    According to Bloomberg, Schulze had resisted Best Buy’s previous offer because of unspecified restrictions, according to “people familiar with the negotiations.”

  • Best Buy Earnings: Net Income Down 90%

    Best Buy just released its earnings report for the second quarter, a day after announcing its new CEO. Of course, this transition is happening as Founder Richard Schulze has been trying to buy back the company. Last week, he sent a letter to the Board of Directors, affirming his offer, which was initially estimated at $8 billion (though shares have been on a downward trend). On Sunday, Best Buy announced that Schulze had declined an opportunity from the company to conduct due diligence.

    Anyhow, Hubert Joly is the CEO now, coming in as the company reports a 90% profit drop thanks to less-than-stellar sales, and restructuring expenses.

    “Hubert was an outstanding candidate for this position and I am confident he will be a great fit for Best Buy,” said Hatim Tyabji, chairman of the Best Buy Board. “Hubert’s range and depth of experience in transforming companies is exactly what the company needs at the moment, as is his energetic, imaginative and experienced leadership in executing strategies.”

    Here’s the earnings release in its entirety:

    Best Buy Reports Fiscal Second Quarter 2013 Results

    Hubert Joly named Best Buy Chief Executive Officer
    Improved sequential sales trends and stable Domestic market share
    GAAP diluted EPS of $0.04; adjusted (non-GAAP) diluted EPS of $0.20
    Company expects annual free cash flow of $1.25 billion to $1.5 billion and suspends earnings guidance

    FISCAL SECOND QUARTER PERFORMANCE SUMMARY
    (U.S. dollars and square footage in millions, except per share and per square foot amounts)
    Three Months Ended
    Aug. 4, 2012 July 30, 2011 Change
    Revenue $10,547 $10,856 (3%)
    Comparable store sales % change1 (3.2%) (3.8%) 60bps
    Gross profit as % of revenue 24.3% 25.4% (110bps)
    SG&A as % of revenue 23.1% 23.0% 10bps
    Restructuring charges $91 $0 N/A
    Operating income $33 $260 (87%)
    Operating income as a % of revenue 0.3% 2.4% (210bps)
    Diluted EPS from continuing operations $0.04 $0.39 (90%)
    Adjusted (non-GAAP) Results2
    Operating income $124 $260 (52%)
    Operating income as a % of revenue 1.2% 2.4% (120bps)
    Diluted EPS from continuing operations $0.20 $0.39 (49%)
    Key Metrics3
    Total U.S. big box retail square feet              41.0                 42.6 (4%)
    Revenue per square foot (Domestic segment) $857 $846 1%
    Adjusted operating income per square foot (Domestic segment) $41 $45 (9%)
    Adjusted return on invested capital4 11.1% 10.7% 40bps

    Fiscal Second Quarter 2013 Highlights

    • Domestic comp store sales decline of 1.6 percent improved compared to fiscal first quarter decline of 3.7 percent
    • Domestic estimated market share maintained year-over-year
    • U.S. big box square footage reduced by 4 percent year-over-year; Domestic revenue per square foot up 1 percent year-over-year
    • Similar to the first quarter of fiscal 2013, International segment year-over-year operating income decline driven primarily by lower revenue in China, Canada and increased competitive conditions in Europe
    • Domestic segment total Services category revenue increased approximately 6 percent
    • Momentum grows in Domestic services with key partnerships announced recently: AARP, Verizon and Target
    • Domestic segment online revenue growth of 14 percent
    • Domestic segment connections growth of 11 percent
    • Domestic segment mobile phones comparable store sales growth of 35 percent
    • Domestic segment comparable store sales growth in tablets, mobile phones, appliances and eReaders more than offset by declines in gaming, digital imaging, televisions and notebooks
    • Adjusted (non-GAAP) Domestic segment year-over-year operating income decline driven primarily by lower gross margins in computing, mobile phones and televisions

    MINNEAPOLIS, August 21, 2012 — Best Buy Co., Inc. (NYSE: BBY) today announced GAAP net earnings from continuing operations were $12 million, or $0.04 per diluted share, for the three months ended August 4, 2012 compared to net earnings from continuing operations of $150 million, or $0.39 per diluted share for the prior-year period. Excluding previously announced restructuring charges, adjusted (non-GAAP) net earnings from continuing operations for the second quarter of fiscal 2013 were $68 million, or $0.20 per diluted share.

    On August 20, 2012, the company’s Board of Directors appointed Hubert Joly, a leading global CEO with expertise in turnaround and growth across the media, technology and service sectors, as Best Buy’s President and Chief Executive Officer and a member of its Board of Directors. He is expected to begin his new role in early September.

    Revenue

    Three Months ended Aug. 4, 2012 Prior-Year Period
    ($millions) Revenue Change YOY Comp. Store Sales Comp. Store Sales
    Domestic $7,803 (2.2%) (1.6%) (4.1%)
    International 2,744 (4.7%) (8.2%) (2.8%)
    Total $10,547 (2.8%) (3.2%) (3.8%)

    The Domestic segment comparable store sales decline of 1.6 percent was driven by declines in gaming within the Entertainment revenue category, digital imaging and televisions within the Consumer Electronics revenue category and notebooks within the Computing and Mobile Phones revenue category. These declines were partially offset by comparable store sales growth in tablets and mobile phones within the Computing & Mobile Phones revenue category, the Appliances revenue category, and eReaders within the Consumer Electronics revenue category. The Domestic segment online channel revenue grew 14 percent compared to the prior-year period.

    The International segment comparable store sales decline of 8.2 percent was driven by the lower growth in consumer spending in China and the continued impact from the expiration of government sponsored programs, which negatively impacted sales in Five Star. Market softness in notebooks, digital imaging and home theater in Canada also contributed to the International comparable store sales decline.

    Gross Profit

    Three Months ended Aug. 4, 2012
    ($millions) Gross Profit Change YOY % of Revenue
    Domestic $1,896 (6%) 24.3%
    International 668 (9%) 24.3%
    Total $2,564 (7%) 24.3%

    Domestic segment gross profit decreased 6 percent, reflecting a rate decline of 110 basis points compared to the prior-year period. The Domestic segment rate decline was primarily due to three factors. In mobile phones, connection growth and a mix into higher price point smart phones resulted in strong comp sales and gross profit dollar growth, although at a lower overall rate. Second, industry softness in computing resulted in increased promotional activity in the quarter to stimulate consumer demand ahead of the second half of fiscal 2013, which will include the Windows 8 launch. Finally, there was less favorable product mix within the television category.

    International segment gross profit declined 9 percent, reflecting a rate decline of 130 basis points compared to the prior-year period. This rate decline was driven by Best Buy Europe and due primarily to increased mix of lower margin wholesale sales and promotional activity within a price competitive environment for mobile phones.

    Selling, General and Administrative Expenses (“SG&A”)

    Three Months ended Aug. 4, 2012
    ($millions) SG&A Change YOY % of Revenue
    Domestic $1,722 (4%) 22.1%
    International 718 0% 26.2%
    Total $2,440 (2%) 23.1%

    Total SG&A spending declined 2 percent compared to the prior-year period as the company executed on previously announced actions to reduce costs through changes in its corporate and field operating models, adjusting labor to match demand and from store closures. As a reminder, year-over-year SG&A comparisons for both Domestic and International segments were impacted by the absence of the Best Buy Mobile profit share payment in fiscal 2013 as a result of the purchase of Carphone Warehouse Group plc’s (“CPW”) share of the Best Buy Mobile profit share agreement in the fourth quarter of fiscal 2012. These intercompany profit share payments previously increased Domestic segment SG&A expense while lowering International segment SG&A and had no impact on the company’s consolidated operating income.

    Operating Income

    Three Months ended Aug. 4, 2012
    ($millions) Operating Income Change YOY % of Revenue
    Domestic $83 (65%) 1.1%
    International (50) n/a (1.8%)
    Total $33 (87%) 0.3%
    Adjusted operating income – Domestic $174 (27%) 2.2%
    Adjusted operating income – International (50) n/a (1.8%)
    Adjusted operating income2 $124 (52%) 1.2%

    Operating income of $33 million included $91 million of restructuring charges primarily related to store closure costs. Excluding these charges, adjusted operating income for the quarter declined 52 percent to $124 million.

    Please see the table titled “Reconciliation of Non-GAAP Financial Measures” attached to this release for more detail.

    Share Repurchases and Dividends 
    The company repurchased $122 million, or 6.3 million shares, of its common stock at an average price of $19.28 per share during the fiscal second quarter. The company has suspended its share repurchases for fiscal 2013 as it goes through the transition to a new CEO. On July 3, 2012, the company paid a quarterly dividend of $0.16 per common share outstanding, or $54 million in the aggregate.

    Fiscal 2013 Financial Guidance 
    Based on the normal seasonality of the business, the majority of the company’s annual earnings occur in the second half of the year. Due to lowered expectations for industry wide sales and the uncertainty associated with several key product launches expected in the second half of fiscal 2013, the company has reduced its annual earnings expectations. In addition, the company has just announced a new CEO who will start in early September. Given these factors, the company does not intend to further provide or update earnings guidance for fiscal 2013. The company will continue to provide forward looking commentary on business trends. The company continues to expect to achieve its domestic market share goals for the fiscal year and expects to generate free cash flow5 in the range of $1.25 billion to $1.5 billion for fiscal 2013.

    Conference Call
    Best Buy is scheduled to conduct an earnings conference call at 9:00 a.m. Eastern Time (8:00 a.m. Central Time) on August 21, 2012. A webcast of the call is expected to be available on its Web site at http://www.investors.bestbuy.com/ both live and after the call. A telephone replay is also available starting at approximately 12:30 pm Eastern Time (11:30 a.m. Central Time) on August 21 through August 28. The dial-in number for the replay is 800-406-7325 (domestic) or 303-590-3030 (international), and the access code is 4559359.

    (1)Best Buy’s comparable store sales is comprised of revenue at stores, call centers, and websites operating for at least 14 full months as well as revenue related to other comparable sales channels. Relocated stores, as well as remodeled, expanded, and downsized stores closed more than 14 days, are excluded from the comparable store sales calculation until at least 14 full months after reopening. Acquired stores are included in the comparable store sales calculation beginning with the first full quarter following the first anniversary of the date of the acquisition. The portion of the calculation of the comparable store sales percentage change attributable to the International segment excludes the effect of fluctuations in foreign currency exchange rates. The method of calculating comparable store sales varies across the retail industry. As a result, Best Buy’s method of calculating comparable store sales may not be the same as other retailers’ methods.

    (2) The company defines adjusted operating income for the periods presented as its reported operating income for those periods calculated in accordance with accounting principles generally accepted in the U.S. (“GAAP”) adjusted to exclude the effects of restructuring charges. In addition, the company defines adjusted net earnings and adjusted diluted earnings per share for the periods presented as its reported net earnings and diluted earnings per share calculated in accordance with GAAP adjusted to exclude the effects of restructuring charges.

    These non-GAAP financial measures provide investors with an understanding of the company’s operating income, net earnings, and diluted earnings per share adjusted to exclude the effect of the items described above. These non-GAAP financial measures assist investors in making a ready comparison of the company’s operating income, net earnings, and diluted earnings per share for its fiscal quarter ended August 4, 2012, against the company’s results for the respective prior-year periods and against third party estimates of the company’s diluted earnings per share for those periods that may not have included the effect of such items. Additionally, management uses these non-GAAP financial measures as an internal measure to analyze trends, allocate resources, and analyze underlying operating performance. Please see “Reconciliation of Non-GAAP Financial Measures” attached to this release for more detail.

    (3) Total U.S. big box retail square feet is equal to the total retail square footage of our U.S. Best Buy big box stores at fiscal quarter end. Revenue per square foot is equal to the sum of Domestic segment trailing twelve months revenue divided by the average quarterly retail square footage for all U.S. stores, over the same period. Adjusted operating income per square foot is equal to the sum of Domestic segment trailing twelve months adjusted operating income divided by the average quarterly retail square footage for all U.S. stores, over the same period.

    (4) The company defines adjusted return on invested capital (“ROIC”) as adjusted net operating profit after taxes divided by average invested capital for the periods presented (including both continuing and discontinued operations). Adjusted net operating profit after taxes is defined as our operating income for the periods presented calculated in accordance with GAAP adjusted to exclude the effects of: (i) operating lease interest; (ii) investment income; (iii) net earnings attributable to noncontrolling interests; (iv) income taxes; (v) all restructuring charges in costs of goods sold and operating expenses, goodwill and tradename impairments, and costs related to the purchase of CPW’s share of the Best Buy Mobile profit share agreement (“Best Buy Europe transaction costs”); and (vi) the noncontrolling interest impact of the restructuring charges, Best Buy Europe transaction costs and the purchase of CPW’s share of the Best Buy Mobile profit share agreement. Average invested capital is defined as the average of our total assets for the trailing four quarters in relation to the periods presented adjusted to: (i) exclude excess cash and cash equivalent and short-term investments; (ii) include capitalized operating lease obligations calculated using a multiple of eight times rental expenses; (iii) exclude our total liabilities, less our outstanding debt; and (iv) exclude equity of noncontrolling interests

    This non-GAAP financial measure provides investors with a supplemental measure to evaluate how effectively the company is investing its capital and deploying its assets. Management uses this non-GAAP financial measure to assist in allocating resources, and trends in the measure may fluctuate over time as management balances long-term initiatives with possible short-term impacts. Our ROIC calculation utilizes total operations in order to provide a measure that includes the results of and capital invested in all operations, including those businesses that are no longer continuing operations. Please see “Reconciliation of Non-GAAP Financial Measures” attached to this release for more detail.

    (5) Best Buy defines free cash flow as total cash (used in) provided by operating activities less additions to property and equipment. This non-GAAP financial measure assists investors in making a ready comparison of the company’s expected free cash flow for the year ended February 2, 2013, against the company’s results for the respective prior-year periods and against management’s previously provided expectations.

    Forward-Looking and Cautionary Statements:
    This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the 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,” “guidance,” “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, changes in consumer preferences, credit market constraints, acquisitions and development of new businesses, divestitures, product availability, sales volumes, pricing actions and promotional activities of competitors, profit margins, weather, natural or man-made disasters, 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, integration challenges relating to new ventures and unanticipated costs associated with previously announced or future restructuring activities.  A further list and description of these risks, uncertainties and other matters can be found in the company’s annual report and other reports filed from time to time with the Securities and Exchange Commission, including, but not limited to, Best Buy’s Annual Report on Form 10-K filed with the SEC on May 1, 2012. Best Buy cautions that the foregoing list of important factors is not complete, and any forward-looking statements speak only as of the date they are made, and Best Buy assumes no obligation to update any forward-looking statement that it may make.

    About Best Buy Co., Inc.
    Best Buy Co., Inc. (NYSE: BBY) is a leading multi-channel global retailer and developer of technology products and services. Every day our employees – 167,000 strong – are committed to helping deliver the technology solutions that enable easy access to people, knowledge, ideas and fun. We are keenly aware of our role and impact on the world, and we are committed to developing and implementing business strategies that bring sustainable technology solutions to our consumers and communities. For additional information about Best Buy, visit www.investors.bestbuy.com.

    Investor Contacts:
    Bill Seymour, Vice President, Investor Relations
    (612) 291-6122 or  bill.seymour@bestbuy.com

    Adam Hauser, Director, Investor Relations
    (612) 291-4446 or  adam.hauser@bestbuy.com

    Mollie O’Brien, Director, Investor Relations
    (612) 291-7735 or  mollie.obrien@bestbuy.com

    Media Contacts:
    Matt Furman, Senior Vice President, Communications & Public Affairs
    (612) 291-3695 or matt.furman@bestbuy.com

    Susan Busch, Senior Director, Public Relations
    (612) 291-6114 or  susan.busch@bestbuy.com

    BEST BUY CO., INC.
    CONSOLIDATED STATEMENTS OF EARNINGS
    ($ in millions, except per share amounts)
    (Unaudited and subject to reclassification)
    Three Months Ended Six Months Ended
    Aug. 4, 2012 July 30, 2011 Aug. 4, 2012 July 30, 2011
    Revenue  $      10,547 $      10,856  $      22,157 $      22,225
    Cost of goods sold           7,983            8,094          16,686          16,542
    Gross profit            2,564            2,762            5,471            5,683
    Gross profit % 24.3% 25.4% 24.7% 25.6%
    Selling, general and administrative expenses            2,440 2,502            4,958 4,959
    SG&A % 23.1% 23.0% 22.4% 22.3%
    Restructuring charges                 91                   –               218                   4
    Operating income                33               260               295               720
    Operating income % 0.3% 2.4% 1.3% 3.2%
    Other income (expense):
    Investment income and other                   6                   8                 12                 25
    Interest expense               (30)               (33)               (63)               (61)
    Earnings from continuing operations before income tax                   9               235               244              684
    expense and equity in loss of affiliates
    Income tax expense                 14                 87                 86               242
    Effective tax rate 156.1% 36.8% 35.4% 35.3%
    Equity in loss of affiliates                 (2)                   –                 (4)                 (1)
    Net (loss) earnings from continuing operations                 (7)              148               154               441
    Loss from discontinued operations, net of tax                   –               (37)                 (9)               (91)
    Net (loss) earnings including noncontrolling interest                 (7)              111               145               350
    Net loss (earnings) from continuing operations
    attributable to noncontrolling interests    		                 19                   2                 19              (36)
    Net loss from discontinued operations attributable to
    noncontrolling interests    		                   –                 15                   6                 26
    Net earnings attributable to Best Buy Co., Inc.  $             12  $           128  $           170  $           340
    Basic earnings (loss) per share attributable to Best Buy Co., Inc.
    Continuing operations  $          0.04  $          0.40  $          0.51  $          1.06
    Discontinued operations  $               –  $       (0.06)  $       (0.01)  $       (0.17)
    Basic earnings per share  $          0.04  $          0.34  $          0.50  $          0.89
    Diluted earnings (loss) per share attributable to Best Buy Co., Inc. 1
    Continuing operations  $          0.04  $          0.39  $          0.51  $          1.04
    Discontinued operations  $               –  $       (0.05)  $       (0.01)  $       (0.17)
    Diluted earnings per share  $          0.04  $          0.34  $          0.50  $          0.87
    Dividends declared per Best Buy Co., Inc. common share  $          0.16  $          0.15  $          0.32  $          0.30
    Weighted average Best Buy Co., Inc. common shares outstanding (in millions)
    Basic            338.2            376.0            340.3            383.6
    Diluted            338.6            385.6            341.0            393.3
    (1) The calculation of diluted earnings per share assumes the conversion of the company’s previously outstanding convertible debentures due in 2022 into 8.8 million shares common stock in the three and six months ended July 30, 2011, and adds back the related after-tax interest expense of $1.4 and $2.8 for the three and six months ended July 30, 2011, respectively.
    BEST BUY CO., INC.
    CONDENSED CONSOLIDATED BALANCE SHEETS
    ($ in millions)
    (Unaudited and subject to reclassification)
    Aug. 4, 2012 July 30, 2011
    ASSETS
    Current assets
    Cash and cash equivalents  $             680  $           2,079
    Short-term investments                   –                   80
    Receivables              2,135              1,868
    Merchandise inventories              6,299              6,784
    Other current assets              1,070              1,080
    Total current assets             10,184             11,891
    Net property & equipment              3,407              3,781
    Goodwill              1,342              2,507
    Tradenames                 130                 136
    Customer relationships                 221                 179
    Equity and other investments                   91                 316
    Other assets                 474                 486
    TOTAL ASSETS  $         15,849  $         19,296
    LIABILITIES & EQUITY
    Current liabilities
    Accounts payable  $           6,055  $           6,178
    Accrued liabilities              2,332              2,526
    Short-term debt                 519                 392
    Current portion of long-term debt                 542                 444
    Total current liabilities              9,448              9,540
    Long-term liabilities              1,125              1,168
    Long-term debt              1,165              1,701
    Equity              4,111              6,887
    TOTAL LIABILITIES & EQUITY  $         15,849  $         19,296
    BEST BUY CO., INC.
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    ($ in millions)
    (Unaudited and subject to reclassification)
    Six Months Ended
    Aug. 4, 2012 July 30, 2011
    OPERATING ACTIVITIES
    Net earnings including noncontrolling interests  $             145  $             350
    Adjustments to reconcile net earnings to total cash (used in)
    provided by operating activities:
    Depreciation and amortization of definite-lived intangible
    assets    		                 465                 478
    Other, net                 220                   50
    Changes in operating assets and liabilities, net of acquired assets
    and liabilities:
    Receivables                 300                 476
    Merchandise inventories                 512                 659
    Accounts payable                (834)                (501)
    Other assets and liabilities             (1,030)                (343)
    Total cash (used in) provided by operating activities               (222)              1,169
    INVESTING ACTIVITIES
    Additions to property and equipment                (316)                (377)
    Other, net                 121                 (65)
    Total cash used in investing activities               (195)               (442)
    FINANCING ACTIVITIES
    Repurchase of common stock                (255)                (737)
    Borrowings of debt, net                   23                 809
    Other, net               (102)                 (76)
    Total cash used in financing activities                (334)                    (4)
    EFFECT OF EXCHANGE RATE CHANGES ON CASH                   30                   18
    ADJUSTMENT FOR CHANGE IN FISCAL YEAR                 202                 235
    (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS               (519)                 976
    CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD              1,199              1,103
    CASH AND CASH EQUIVALENTS AT END OF PERIOD  $             680  $           2,079
    BEST BUY CO., INC.
    SEGMENT INFORMATION
    ($ in millions)
    (Unaudited and subject to reclassification)
    Domestic Segment Performance Summary
    Three Months Ended
    Aug. 4, 2012 July 30, 2011 Change
    Revenue $7,803 $7,977 (2%)
    Gross profit $1,896 $2,026 (6%)
    SG&A $1,722 $1,787 (4%)
    Restructuring charges $91 $0 N/A
    Operating income $83 $239 (65%)
    Key Metrics:
    Comparable store sales % change1 (1.6%) (4.1%) 250bps
    Gross profit as % of revenue 24.3% 25.4% (110bps)
    SG&A as % of revenue 22.1% 22.4% (30bps)
    Operating income as % of revenue 1.1% 3.0% (190bps)
    Adjusted (non-GAAP) Results2
    Operating income $174 $239 (27%)
    Operating income as % of revenue 2.2% 3.0% (80bps)
    International Segment Performance Summary
    Three Months Ended
    Aug. 4, 2012 July 30, 2011 Change
    Revenue $2,744 $2,879 (5%)
    Gross profit $668 $736 (9%)
    SG&A $718 $715 0%
    Restructuring charges $0 $0 N/A
    Operating (loss) income ($50) $21 N/A
    Key Metrics:
    Comparable store sales % change1 (8.2%) (2.8%) (540bps)
    Gross profit as % of revenue 24.3% 25.6% (130bps)
    SG&A as % of revenue 26.2% 24.8% 140bps
    Operating (loss) income as % of revenue (1.8%) 0.7% N/A
    Adjusted (non-GAAP) Results2
    Operating (loss) income ($50) $21 N/A
    Operating (loss) income as % of revenue (1.8%) 0.7% N/A
    (1) Best Buy’s comparable store sales is comprised of revenue at stores, call centers, and Web sites operating for at least 14 full months as well as  revenue related to other comparable sales channels. Relocated stores, as well as remodeled, expanded and downsized stores closed more than 14 days, are excluded from the comparable store sales calculation until at least 14 full months after reopening. Acquired stores are included in the comparable store sales calculation beginning with the first full quarter following the first anniversary of the date of the acquisition. The portion of the calculation of the comparable store sales percentage change attributable to the International segment excludes the effect of fluctuations in foreign currency exchange rates. The method of calculating comparable store sales varies across the retail industry. As a result, Best Buy’s method of calculating comparable store sales may not be the same as other retailers’ methods.
    (2) Excludes the impact of previously announced restructuring charges. Please see table titled “Reconciliation of Non-GAAP Financial Measures” at the back of this release.
    BEST BUY CO., INC.
    REVENUE CATEGORY SUMMARY
    (Unaudited and subject to reclassification)
    Domestic Segment Summary
    Revenue Mix Summary Comparable Store Sales
    Three Months Ended Three Months Ended
    Aug. 4, 2012 July 30, 2011 Aug. 4, 2012 July 30, 2011
    Consumer Electronics 33% 36% (9.6%) (8.6%)
    Computing and Mobile Phones 44% 40% 8.2% 2.2%
    Entertainment 8% 10% (22.1%) (18.2%)
    Appliances 7% 6% 9.0% 5.4%
    Services(1) 7% 7% 1.2% 3.4%
    Other 1% 1% n/a n/a
    Total 100% 100% (1.6%) (4.1%)
    International Segment Summary
    Revenue Mix Summary Comparable Store Sales
    Three Months Ended Three Months Ended
    Aug. 4, 2012 July 30, 2011 Aug. 4, 2012 July 30, 2011
    Consumer Electronics 17% 19% (14.3%) (11.3%)
    Computing and Mobile Phones 59% 54% (0.8%) (0.2%)
    Entertainment 3% 4% (13.3%) (18.5%)
    Appliances 13% 14% (19.0%) 7.7%
    Services(1) 8% 9% (14.4%) (3.7%)
    Other <1% <1% n/a n/a
    Total 100% 100% (8.2%) (2.8%)
    (1) The “Services” revenue category consists primarily of service contracts, extended warranties, computer related services, product repair and delivery and installation for home theater, mobile audio and appliances.
    BEST BUY CO., INC.
    RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
    CONTINUING OPERATIONS
    ($ in millions, except per share amounts)
    (Unaudited and subject to reclassification)
    The following information provides reconciliations of non-GAAP financial measures from continuing operations to the most comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The company has provided non-GAAP financial measures, which are not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measures presented in the accompanying news release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the news release. The non-GAAP financial measures in the accompanying news release may differ from similar measures used by other companies.
    The following tables reconcile operating income, net earnings and diluted earnings per share for the periods presented for continuing operations (GAAP financial measures) to adjusted operating income, adjusted net earnings and adjusted diluted earnings per share for continuing operations (non-GAAP financial measures) for the periods presented.
    Three Months Ended Three Months Ended
    August 4, 2012 July 30, 2011
    $ % of Rev. $ % of Rev.
    Domestic – Continuing Operations
    Operating income $83 1.1% $239 3.0%
    Restructuring charges 91 1.2% 0 n/a
    Adjusted operating income $174 2.2% $239 3.0%
    Consolidated – Continuing Operations
    Operating income $33 0.3% $260 2.4%
    Restructuring charges 91 0.9% 0 n/a
    Adjusted operating income $124 1.2% $260 2.4%
    Net earnings $12 $150
    After-tax impact of restructuring charges 56 0
    Adjusted net earnings $68 $150
    Diluted EPS $0.04 $0.39
    Per share impact of restructuring charges 0.16 0.00
    Adjusted diluted EPS $0.20 $0.39
    Six Months Ended Six Months Ended
    August 4, 2012 July 30, 2011
    $ % of Rev. $ % of Rev.
    Domestic – Continuing Operations
    Operating income $378 2.3% $605 3.7%
    Restructuring charges 218 1.3% 5 0.0%
    Adjusted operating income $596 3.6% $610 3.7%
    International – Continuing Operations
    Operating (loss) income ($83) (1.5%) $115 2.0%
    Restructuring charges 0 n/a (1) (0.0%)
    Adjusted operating (loss) income ($83) (1.5%) $114 1.9%
    Consolidated – Continuing Operations
    Operating income $295 1.3% $720 3.2%
    Restructuring charges 218 1.0% 4 0.0%
    Adjusted operating income $513 2.3% $724 3.3%
    Net earnings $173 $405
    After-tax impact of restructuring charges 141 3
    Adjusted net earnings $314 $408
    Diluted EPS $0.51 $1.04
    Per share impact of restructuring charges 0.41 0.00
    Adjusted diluted EPS $0.92 $1.04
    BEST BUY CO., INC.
    RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
    ($ in millions)
    (Unaudited and subject to reclassification)
    The following information provides a reconciliation of a non-GAAP financial measure to the most comparable financial measure calculated and presented in accordance with GAAP. The company has provided the non-GAAP financial measure, which is not calculated or presented in accordance with GAAP, as information supplemental and in addition to the financial measure that is calculated and presented in accordance with GAAP. Such non-GAAP financial measure should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measure. The non-GAAP financial measure in the accompanying news release may differ from similar measures used by other companies.
    The following table includes the calculation of Adjusted ROIC for total operations, which includes both continuing and discontinued operations (non-GAAP financial measures), along with a reconciliation to the calculation of return on total assets (“ROA”) (GAAP financial measure) for the periods presented.
    Calculation of Return on Invested Capital1
    Aug. 4, 20122 July 30, 20112
    Net Operating Profit After Taxes (NOPAT)
    Operating income – continuing operations  $              555  $             2,274
    Operating income – discontinued operations                 (312)                     (276)
    Total operating income                   243                    1,998
    Add: Operating lease interest3                   597                       596
    Add: Investment income                     33                         55
    Less: Net earnings attributable to noncontrolling interest (NCI)              (1,219)                       (71)
    Less: Income taxes4                (940)                  (1,026)
    NOPAT  $          (1,286)  $                 1,552
    Add: Restructuring charges and impairments5                1,752                        225
    Add: NCI impact of BBYM profit share buyout and restructuring charges                1,202                           –
    Adjusted NOPAT  $           1,668  $                 1,777
    Average Invested Capital
    Total assets  $         17,308  $               19,426
    Less: Excess Cash6                 (889)                  (1,261)
    Add: Capitalized operating lease obligations7                9,547                     9,530
    Total liabilities            (12,502)                (12,465)
    Exclude: Debt8                2,190                     2,027
    Less: Noncontrolling interests                 (639)                     (703)
    Average invested capital  $         15,015  $               16,554
    Adjusted Return on invested capital (ROIC) 11.1% 10.7%
    Calculation of Return on Assets1
    Aug. 4, 20122 July 30, 20112
    Net earnings including noncontrolling interests9  $            (274)  $                 1,298
    Total assets             17,308                  19,426
    Return on assets (ROA)  (1.6%) 6.7%
    (1) The calculations of Return on Invested Capital and Return on Assets use total operations, which includes both continuing and discontinued operations.
    (2) Income statement accounts represent the activity for the 12 months ended as of each of the balance sheet dates. Balance sheet accounts represent the average account balances for the 4 quarters ended as of each of the balance sheet dates.
    (3) Operating lease interest represents the add-back to operating income driven by our capitalized lease obligations and represents fifty percent of our annual rental expense which is the multiple used for the retail sector by one of the nationally recognized credit rating agencies that rates our creditworthiness, and we consider it to be an appropriate multiple for our lease portfolio.
    (4) Income taxes are calculated using a blended statutory rate at the enterprise level based on statutory rates from the countries we do business in.
    (5) Includes all restructuring charges in costs of goods sold and operating expenses, goodwill and tradename impairments, and the Best Buy Europe transaction costs.
    (6) Cash and cash equivalents and short term investments are capped at the greater of 1% of revenue or actual amounts on hand.  The cash and cash equivalents and short term investments in excess of the cap are subtracted from our calculation of average invested capital to show their exclusion from total assets.
    (7) The multiple of eight times annual rental expense in the calculation of our capitalized operating lease obligations is the multiple used for the retail sector by one of the nationally recognized credit rating agencies that rates our creditworthiness, and we consider it to be an appropriate multiple for our lease portfolio.
    (8) Debt includes short-term debt, current portion of long-term debt and long-term debt and is added back to our calculation of average invested capital to show its exclusion from total liabilities.
    (9) Net earnings including noncontrolling interests for the twelve months ended August 4, 2012 include the $1.3 billion purchase of CPW’s share of the Best Buy Mobile profit share agreement, a $1.2 billion non-cash impairment charge to reflect the write-off of Best Buy Europe goodwill and $499 million in restructuring charges.

  • Best Buy Hires New CEO Following Scandal

    Best Buy Hires New CEO Following Scandal

    Best Buy today announced that it has appointed Hubert Joly as the company’s CEO. Joly is currently the CEO of Carlson, a worldwide hospitality and travel company.

    “Hubert was an outstanding candidate for this position and I am confident he will be a great fit for Best Buy,” said Hatim Tyabji, chairman of the Best Buy Board. “Hubert’s range and depth of experience in transforming companies is exactly what the company needs at the moment, as is his energetic, imaginative and experienced leadership in executing strategies.”

    Retailers with large, physical stores have had a tough decade-long confrontation with internet-only retailers such as Amazon. Retailers who relied significantly on selling physical copies of media such as movies, music, and video games have, perhaps, been hit the hardest. The combination of lower online prices, subscription services such as Netflix and new video streaming services helped make Circuit City stores a thing of the past.

    In addition to these same pressures, Best Buy has dealt with a recent scandal causing a significant shift in the company’s top management. In April, Best Buy CEO Brian Dunn resigned following allegations of an inappropriate relationship with a subordinate. Best Buy founder and Chairman of the Board Richard Schulze was forced out soon after when it was discovered that he had known about Dunn’s relationship for some time. Schulze has since offered to buy back the company.

    In the midst of these changes, Best Buy began to focus more on services rather than products. The company has taken steps to reduce the number of big box stores that it operates, instead building smaller, more targeted stores.

    “I am honored and excited to lead Best Buy,” said Joly. “Best Buy has extraordinary assets — including its 167,000 employees, its huge customer base, its distribution and service capabilities, its well-recognized brands, and its history of innovation. I look forward to working with the Company’s management team and employees to pursue what are exciting growth opportunities for Best Buy – both online and offline, through a combination of competitive prices, superior service, new growth engines, and innovations, as we deliver to millions of customers the technology solutions that enable easy access to people, knowledge, ideas and fun.”

  • Best Buy Founder Schulze Makes Sure Board Knows He’s Serious About That Acquisition

    Last week, Best Buy Founder Richard Schulze announced an offer to buy back the company he started for an estimated $8 billion. Today, he sent a letter to the Board of Directors affirming his commitment to the acquisition, and urging the Board to grant him permission to form a group and conduct due diligence, so he can present a fully financed offer.

    So, just in case you thought the recently demoted executive was playing around, let this provide you with evidence to the contrary.

    Schulze, who founded the company in 1966 (then, called Sound of Music), was recently cut from his role as Chairman, and reduced to the honorary position “Founder and Chairman Emeritus,” following an investigation, which found ousted CEO Brian Dunn in violation of company policy for engaging in “an extremely close personal relationship with a female employee that negatively impacted the work environment.”

    The investigation found that Schulze had “acted inappropriately,” by not bringing the matter to the Audit Committee of the Board of Directors.

    Schulze sent his initial offer to Board Chairman Hatim Tyabji on August 6.

    Here’s his new letter to the entire Board in its entirety:

    Ladies and Gentlemen:

    This is a critical time for Best Buy. The decisions that you make over the next few days and weeks may well determine the fate of this great company. As such, the Board has a duty to ensure it is fully informed about all available options as it seeks to achieve the best outcome for Best Buy and its shareholders.

    On August 6, after repeated requests to the Board to provide me with due diligence information and the consent to form a group required under Minnesota law, I made public my proposal to acquire all of the common stock of Best Buy for $24.00 to $26.00 per share in cash. In response, you dismissed my carefully considered proposal as a “highly conditional indication of interest.” I would have preferred to have a constructive private dialogue with the Board, but once having made my proposal, I was required as a 13D filer to make it public.

    You can easily test how real my proposal is by granting me permission to form a group and by providing basic due diligence information necessary to present a fully financed offer and allow shareholders the opportunity to receive a substantial cash premium for their shares.

    I am deeply concerned about the direction of the company and, as Best Buy’s largest shareholder, I cannot simply stand aside. I still hope to work with the Board on a mutually beneficial transaction – but you should know that I am not going away.

    All I am asking is your permission to conduct due diligence and form a group so that I can quickly be in a position to give the Board a fully financed offer for your consideration. My need for due diligence is limited to financial data and the standard corporate information necessary to secure financing. There would be no burden on management as I do not need any presentations to me or potential partners interested in investing with me in Best Buy. I am confident due diligence can be completed quickly.

    The transaction I have proposed would be financed through a combination of private equity investment, my own substantial equity investment and debt financing. A number of leading private equity firms have informed me that they are prepared to make significant commitments, subject to due diligence. I am prepared to roll over into this transaction at least $1 billion of my own equity — and potentially all of my existing stake depending on the ultimate terms of the agreements with the private equity firms regarding the new ownership structure. Credit Suisse is also highly confident it can arrange the necessary debt financing, and since August 6, a number of major banks have contacted Credit Suisse to express their interest in participating in the debt financing.

    Best Buy faces enormous challenges, not the least of which is an erosion of its culture and values. It is critical that the company have leadership with the retail experience, knowledge, insight, and passion needed to win back customers, inspire employees, and reinvigorate Best Buy’s trusted brand and culture of valued employees working together to satisfy our customers.

    I believe bold and fundamental changes are needed to return Best Buy to market leadership, and I have done extensive work to develop a plan focused on renewed growth and increased efficiency to address Best Buy’s challenges. I have identified a leadership team, including Brad Anderson, Allen Lenzmeier and others, with the wisdom, experience and sound judgment needed for the company to succeed once again. This team has a history of successfully growing and reinventing Best Buy in response to ever-changing industry conditions. I have shared this plan in depth with the private equity firms prepared to partner with me — and they believe it is the right plan and the right leadership.

    The transaction I am proposing would be a “win-win” for all involved. It would deliver compelling value for shareholders through a significant cash premium, provide new opportunities for customers and create a future for Best Buy employees — while allowing the company to take the strong actions that will be required to get back on track.

    I am confident we can bring back Best Buy. With your cooperation, due diligence can be completed quickly and a fully financed offer can be presented for the Board’s consideration.

    Value is eroding every day. I look forward to your timely response.

    Sincerely,

    Richard Schulze

  • Mobile Pay Options About To Increase With Merchant Customer Exchange

    A group of retailers, including Walmart, Target, 7-Eleven, Best Buy, CVS, Lowe’s, Shell, Publix, Sears, Alon, Darden, HyVee, Michael’s and Sunoco are teaming up to offer customers another mobile payments option. The initiative is called Merchant Customer Exchange (MCX).

    The group of retailers behind MCX, which will grow, seems to think that they have an edge over mobile payments competitors (like Google, Isis, etc.), in that they are retail, and therefore understand customers habits better. They will use this knowledge of customers to run their kinds of offers and promotions.

    “MCX will leverage mobile technology to give consumers a faster and more convenient shopping experience while eliminating unnecessary costs for all stakeholders,” said Mike Cook, corporate vice president and assistant treasurer at Walmart. “The MCX platform will employ secure technology to deliver an efficiency-enhancing mobile solution available to all merchant categories, including retail stores, casual dining, petroleum and e-commerce.”

    “We believe MCX is uniquely qualified to offer the most comprehensive mobile payment options for consumers,” said Terry Scully, president of financial and retail services at Target. “By participating in MCX, merchants are in a position to effectively deliver innovative payment approaches that aren’t available today.”

    “As merchants, no one understands our customers’ shopping and payment experience better than we do, and we’re confident that together we can develop a technology solution that makes that experience more engaging, convenient and efficient,” said Mark Williams, president of financial services for Best Buy.

    There’s no launch date or CEO for the MCX yet, but the companies are reportedly looking for a leader. The group says it expects to announce additional members during the coming months.

  • Best Buy Offer: Founder Wants To Buy His Company Back For $24 To $26 Per Share

    Best Buy founder Richard Schulze has made an offer to buy Best Buy back, and to take it private. The offer, estimated at $8 billion, is for a price of $24.00 to $26.00 per share in cash.

    Best Buy stock is up on this news. At the time of this writing, it’s at: 19.91 +2.27‎ (12.87%‎).

    “There is no question that now is the moment of truth for Best Buy and that immediate and substantial changes are needed for the company to return to its market-leading ways,” Schulze said in his announcement. “After assessing all of my options, it is my strong belief that Best Buy’s best chance for renewed success is to implement with urgency the necessary changes as a private company.”

    “It is my strong preference to pursue an acquisition cooperatively with the Best Buy Board of Directors,” he continued. “I have made repeated requests to the Board for several weeks to provide me with due diligence information and the consent to form a group required under Minnesota law, both of which will be necessary to reach a definitive agreement. While I preferred a private negotiation, time is of the essence. I am deeply concerned that further delay and indecision will cause additional loss of both value and talented leaders who are now uncertain of the company’s future. In order to move forward, I am today submitting a concrete proposal for the Board to consider and publicly disclosing it consistent with my obligations as a 13D filer.”

    Schulze says the proposal is “a unique win-win opportunity for everyone involved,” and that it would “create a new day for Best Buy employees and provide public shareholders with a significant all-cash premium for their shares.”

    “Importantly, it would eliminate the market and execution risk for Best Buy shareholders associated with a turnaround under an interim CEO, while giving the company the time and flexibility to take the steps it needs to win back customers and reinvigorate Best Buy’s trusted brand and culture of valued employees working together to satisfy our customers,” he said.

    Schulze, who founded the company all the way back in 1966 under the name Sound of Music (it became Best Buy in 1983), was recently cut from his role as Chairman, and reduced to the honorary position “Founder and Chairman Emeritus,” following an investigation, which found ousted CEO Brian Dunn in violation of company policy for engaging in “an extremely close personal relationship with a female employee that negatively impacted the work environment.”

    The investigation found that Schulze had “acted inappropriately,” by not bringing the matter to the Audit Committee of the Board of Directors.

    Schulze’s response was, “In December, when the conduct of our then-CEO was brought to my attention, I confronted him with the allegations (which he denied), told him his conduct was totally unacceptable and contrary to Best Buy’s policies and everything I, and the Company, stand for. I understand and accept the findings of the Audit Committee.”

    Following is Schulze’s letter to Hatim Tyabji, Chairman of the Board of Directors:

    Dear Hatim:

    Since founding the Sound of Music in 1966 and opening the first Best Buy branded store in 1983, I have believed in Best Buy and its future. It goes without saying that I care deeply about the company’s customers, employees and shareholders – and I will always do so. As you know, since stepping down from the Board on June 7th, I have been actively exploring all available options for my ownership stake. That exploration has reinforced my belief that bold and extensive changes are needed for Best Buy to return to market leadership and has led me to the conclusion that the company’s best chance for renewed success will be to implement these changes under a different ownership structure.

    Over the last two months, I have done an extensive amount of work to develop a plan to address the company’s challenges, and I have had conversations with several premier private equity firms with deep experience in retail who are interested in a possible acquisition of Best Buy. In addition, I have had discussions with highly-regarded former Best Buy senior executives, including Brad Anderson and Allen Lenzmeier, who have expressed an interest in rejoining Best Buy in this context. As you are aware, Minnesota law requires that I receive permission from the Board of Directors before I reach any agreement with potential partners in this effort. While I have not yet reached any such agreements, I am confident, based on my discussions to date, that I could in short order if the Board allows me to do so.

    As you know, Hatim, I have made repeated requests to the Board for several weeks now to provide me with due diligence information and the consent to form a group required under Minnesota law. In your most recent communication to my advisors, you indicated that the Board would need an additional three weeks before it could consider my requests. I am submitting this letter in the hope that, with a concrete proposal in front of it, the Board will have a compelling basis on which to grant my requests and avoid further delay.

    Based on my analysis of publicly available information, and subject to due diligence, I would propose to acquire all of the common stock of Best Buy for a purchase price in the range of $24.00 to $26.00 per share in cash. This represents a very compelling opportunity for Best Buy shareholders, who would receive the certainty of an immediate all-cash premium of 36% to 47% for their shares based on the latest closing stock price of $17.64 on August 3, 2012.

    The transaction would be financed through a combination of investments from private equity firms, my equity investment of approximately $1 billion, and debt financing. Based on significant work done to date, Credit Suisse, who I have retained as my financial advisor, is highly confident that it can arrange the necessary debt financing.

    With the Board’s agreement that I may work together with potential private equity partners and former senior executives, and with timely access to relevant non-public company information, I am confident that the necessary due diligence could be completed expeditiously and a binding agreement to acquire Best Buy could be reached quickly. Of course, I am prepared to enter into a customary confidentiality agreement and begin work immediately.

    Hatim, I cannot emphasize strongly enough how much I believe in Best Buy and its future, and how much I would welcome the opportunity to do what is best for shareholders and Best Buy. I believe there is an urgent need for Best Buy to reinvigorate growth by reconnecting with today’s customers and building pathways to the next generation of consumers. I feel that the transaction I am proposing would be a “win-win”, as it would allow shareholders to receive compelling value for their shares, and it would allow Best Buy to take the actions that it needs to take outside of the public sphere. I believe that it is in our mutual interest to move as quickly and efficiently as possible and appreciate your prompt attention to this matter.

    Of course, neither Best Buy nor I shall be subject to any binding obligation with respect to any transaction unless and until a definitive agreement is executed and delivered.

    I look forward to your response at your earliest convenience.

    Sincerely, Richard Schulze

  • Best Buy Stores Makeover: Retailer Starts to Think Smaller

    Best Buy Stores Makeover: Retailer Starts to Think Smaller

    Best Buy stores makeover: Expect the size of the retail giant’s stores to shrink considerably in the near future. In an effort to combat the shrinking revenue from their numerous oversized locations, Best Buy is building a new prototype store near its Minnesota headquarters that will pull a page straight out of the Apple playbook. Instead of carrying every possible electronic gadget under the proverbial sun, the company will think smaller, carrying a more concentrated selection of devices in an effort to turn the tide of their floundering business.

    In addition to scaling down the number of items in their showroom, Best Buy will also feature something called Solution Central, which is essentially their version of Apple’s Genius Bar. Staffed by Geek Squad employees, customers can, in theory, bring their electronic problems to the location and have them apply their endless knowledge to the issues at-hand. However, despite their plan to implement a solution center for consumers, the company is rumored to be laying off over 650 Geek Squad employees across the nation.

    Since the company is saying goodbye to some of its technicians, does that mean Best Buy is getting out of of the at-home support business? According to company, “Best Buy 2.0” will still offer these service to its customers, though it, too, will become more streamlined. “We know that clients will always need us to come to their homes, and increasingly their needs are more complex. That’s why we’re evolving in-home support for a more specific customer segment,” the company said in a statement.

    According to the Wall Street Journal, all of these significant changes are a concentrated effort to save the company nearly $800 million over the next three years. And if they manage to regain some marketshare, that would be a positive, as well. In addition to possibly rolling out smaller versions of their stores, Best Buy will close nearly 50 underperforming locations.

    Smaller stores, less Geek Squad employees, limited in-home support — the Best Buy as its currently known may become a thing of the past. As brick-and-mortar retailers continue to struggle against their online counterparts, implementing such changes are the only way these companies can compete. Although I’ll miss the days of mindlessly browsing the store’s seemingly endless selection of movies, DVDs, and computer games, that time has admittedly come and gone. Best Buy is dead; long live Best Buy 2.0.

  • Google Chromebooks Now Available At 100 Best Buy Stores

    Now, before someone snipes me with a “Chromebooks are already available at Best Buy’s online store,” the significance of this is Google’s portable computer will be available in Best Buy’s brick-and-mortar stores, meaning you can go in and get a hands-on perspective before you lay your money down.

    Naturally, this directly affects American consumers. While there are international Best Buy outlets–Puerto Rico, Mexico, Canada and China–as you can see, Europe is lacking Best Buy stores. To address that, Google is making their Chromebooks available in the brick-and-mortar versions of Dixon’s, an electronics retailer in the United Kingdom. During the second day of their I/O presentation, it was also revealed that more stores will be added before the holiday season.

    For those of you who have been interested in buying one of Google’s Chromebooks, but were unsure of making your purchase because you haven’t had an opportunity to play with one, the inclusion of these devices in physical stores should help you in your pursuit of an inexpensive laptop. In case you’re wondering the locations of the participating Best Buys, Google has you covered there, too, thanks to a neat little filter applied to Google Maps:

    Chromebooks Google Maps

    If you can’t read the text at the bottom of the map, it says, “Best Buy stores currently stock the Samsung Chromebook Series 5 550 (Wi-Fi).” If you want another version, you’re going to have to buy it online.

    [Lead image courtesy]

  • Subsidized Xbox 360 Coming to Best Buy and GameStop

    Larry “Major Nelson” Hryb, announced this morning that the subsidized $99 Xbox 360 will be coming to Best Buy and GameStop stores later this month. Hyrb, a member of the Xbox team at Microsoft and former host of the recently cancelled Major’s Minute Inside Xbox show, announced the expansion of the $99 Xbox program over on his blog. From the blog post:

    Today, I’m happy to announce that we’re expanding the pilot to all U.S. Best Buy stores and select GameStop locations later this month. This next phase of the pilot program will be limited in terms of both timing and the number of units available—we’re excited to forge new ground and explore a new retail model for Xbox 360, but also want to emphasize that this is a pilot period for the program.

    Microsoft announced the subsidized $99 Xbox 360 and Kinect bundle one month ago, and began selling the consoles in Microsoft Stores around the country. To purchase the bundle for $99, customers must commit to a subscription to Microsoft’s Xbox LIVE service for 2 years at a price of $15 per month. A normal subscription for Xbox LIVE is $60 for one year, making the normal price for the service $5 per month. Still, this deal might end up being cost effective for consumers who find it hard to save up hundreds of dollars at a time for a videogame console. Though Hyrb emphasizes that the bundle is only a pilot program, this could end up being the future of how video game consoles are bought.

  • Samsung, Sony Barring Retailers from Discounting TVs

    Samsung, Sony Barring Retailers from Discounting TVs

    Samsung and Sony have both commenced barring retailers from discounting television sets to protect profits, in an attempt to cut down on ‘showrooming.’ Showrooming is the practice of consumers going into a big box retailer and then likewise buying the tested product online for cheaper.

    The practice of showrooming has affected the business of Best Buy, which has shut down some stores recently, and is also rumored to be the reason why Target stopped carrying Amazon’s Kindle tablet. The retailer likely became weary of shoppers being able to use the device to instantaneously order most products sold in its stores by logging on to Amazon for some one-click purchases.

    Apple has historically maintained strict pricing policies, and Sony has had a hand in controlling the lowest retail prices merchants can allow. Still, LG and Panasonic allow discounting, which can add a competitor threat to the existing problem with showrooming. Consumers should’ve expect to see any discounted Sony or Samsung TVs in the bear future, though one shouldn’t hold their breath on any sort of deal regarding Panasonic’s upcoming 145″ 8K Plasma TV.

  • Best Buy Chairman Ousted Following Investigation Of Former CEO

    Back in early April, Best Buy CEO Brian Dunn resigned amid allegations of improper conduct with a female subordinate. When the resignation was first announced, Best Buy claimed that Dunn and the board agreed on the severance in order to “address the challenges that face the company.”

    Back in March, when the allegations first surfaced internally, the company hired an independent law firm to conduct an investigation into the matter. And today, Best Buy has released the results of that investigation. Apparently, former CEO Dunn did violate company policy, but he didn’t misuse company resources.

    The CEO violated Company policy by engaging in an extremely close personal relationship with a female employee that negatively impacted the work environment.

    The CEO’s relationship with the female employee demonstrated extremely poor judgment and a lack of professionalism, but the inquiry revealed no misuse of Company resources. The inquiry also revealed no misuse of aircraft.

    Another casualty of the investigation appears to be the current Chairman Richard Schulze. The investigation revealed that the “Chairman of the Board of Directors acted inappropriately when he failed to bring the matter to the Audit Committee of the Board of Directors in December 2011, when the allegations were first raised with him.”

    “In December, when the conduct of our then-CEO was brought to my attention, I confronted him with the allegations (which he denied), told him his conduct was totally unacceptable and contrary to Best Buy’s policies and everything I, and the Company, stand for. I understand and accept the findings of the Audit Committee,” said Mr. Schulze.

    At the conclusion of an annual board meeting on June 21st, current Audit Committee Chairman Hatim Tyabji will step in as Chairman of the company. Schulze will then be known as “Founder and Chairman Emeritus,” which is an honorary position. Schultze has served as an officer within the company since founding the company in 1966.

  • Best Buy Founder Resigns

    It was just reported that former Yahoo CEO Scott Thompson resigned after being called out by Dan Loeb and Third Point for padding his resume. Thompson, who had been peddling a fake computer science degree for some time, made national news in a society that is very fascinated with the misgivings of 1%-ers, and then claimed to all the sudden be suffering from a serious illness before stepping down. And, Thompson was also able to bypass forced crying on television or the entering some sort of rehab center to bolster PR. Surely he’d arranged his contract in a way that will afford him millions of dollars for fraudulently taking the reigns at the embattled company for roughly four months, so, case closed.

    In another instance of a top executive behaving badly, Best Buy’s founder and chairman Richard Schulze has stepped down, after a probe revealed that he was aware of ex-CEO Brian Dunn’s inappropriate relationship with a female employee. Dunn resigned in April, and there were no disagreements between he and the board on anything relating to operations, financial controls, policies, or procedures. Best Buy had hired an outside legal firm to take a look at Dunn’s dealings, and revealed that no misuse of company resources or aircraft occurred during the ongoing tryst, but indicated that Schulze “acted inappropriately” when he found out about the relationship.

    Best Buy has been having some big problems as of late, and was forced to close several of its stores and lay off hundreds of employees. Leadership had already been on thin ice, and Schulze, who founded the company since 1966, made a misstep in possibly protecting Dunn’s misconduct. As Schulze resigns, he will be replaced by Hatim Tyabji, chairman of its audit committee. Schulze will be fine – In 2011 he was ranked 157th richest person in America, according to Forbes, with an estimated worth of $2.5 billion.

  • U.S. Consumers Expect Integrated Retail

    U.S. Consumers Expect Integrated Retail

    With the expansion of mobile retail, multichannel shopping has become commonplace, and a recent study has shown that U.S. consumers identified “entering payment, billing and shipping information” as one of the main pain points of the online shopping experience. Now hybris, a leading provider of multichannel commerce and communication software, has conducted their U.S. 2012 Multichannel Shopping Survey, which sheds some light upon consumer behavior when it comes to making a purchase online, in relation to a company’s physical, brick and mortar storefront. Below is some of the findings of the survey:

    – 82 percent of respondents would shop again at a retailer who accepted in-store returns for online purchases

    – 73 percent were more likely to become a repeat customer if a store offers in-store pickup of online orders

    – 59 percent indicate ease of website navigation as the most important factor for following through with an online purchase

    Consumers are using mobile devices more and more to help command the points of purchase while shopping online or in-store, and are likewise relying upon an integrated shopping experience, and have come to expect it. Though, there can be a downside to the activity for retailers – Best Buy stores have been closing, and one of the problems the company has had is customers using to their big box locations as show rooms to test out items in person, only to buy them from cheaper vendors online. Still, a larger vendor is now almost expected to merge said physical and online shopping experience.

    Steven Kramer, President of North America at hybris, states, “Consumers are shopping on a variety of channels and devices, often simultaneously, with new technology introduced virtually every day. What we have found is that consumers have expectations that their favorite retailers will be accessible to them anytime and anywhere. Retailers who aren’t keeping up with the latest technology will find their customers moving to a retailer who will.”

  • Sneaky Best Buy Employee Updates Man’s Facebook Status

    I don’t put anything past people nowadays. Leaving your phone, laptop, or tablet unattended for any length of time is sure-fire recipe for all sorts of embarrassing and humiliating situations. So the next time you decide to have someone, even a seemingly innocent employee at a reputable national chain, have a look at your faulty mobile device, you might want to make sure that all of your personal information has been removed from the gadget beforehand.

    Otherwise, you might end up like Rich Dewberry.

    After experiencing some problems with his cell phone, Dewberry took the device to a local Best Buy in hopes that someone there could correct the issue. Unfortunately, the phone was beyond repair, though the company was more than happy to provide their customer with a new one. Sadly, Dewberry didn’t wipe his personal information from his previous phone, allowing someone at the store to access his Facebook account. Since people will always be people, an employee thought it would be funny to post something hilarious on the guy’s wall.

    The post in question: “I am gay. Im coming out.” This two line comment was enough to send Rich Dewberry’s world spiraling out of control. Friends and family alike began flooding his phone with calls, wondering if the declaration was, in fact, true.

    “I feel I’ve been humiliated, you know? I mean, my reputation has been tarnished,” the disgruntled and red-faced Best Buy customer told ABC7 News Denver.

    Dewberry would also like everyone to know that he’s not gay.

    Although Best Buy wouldn’t officially comment on the situation, they assured Dewberry that the culprit had, in fact, been fired from his position with the company. They also went on to say that all of their employees are required to sign a Code of Ethics contract regarding the handling of customers’ personal information.

    Let Dewberry’s experience be an important lesson: If you don’t want people to have access to your private accounts, make sure everything has been properly secured and/or erased BEFORE taking your device in to be serviced. Otherwise, you may have a lot of explaining to do.

    (image)@jaypsyd
    Jason Evan Mihalko    When equality is truly reached, it won’t be ‘humiliating’ to be called gay. @huffpostgay employee allegedly “outs”… http://t.co/clMa0XTH(image) 14 minutes ago via Twitter for iPad ·  Reply ·  Retweet ·  Favorite · powered by @socialditto

  • Call Of Duty: Black Ops II Pre-Order Bonuses Announced

    Well, that didn’t take long. The first trailer for Black Ops II hit the airwaves yesterday and we already have the retailer specific pre-order bonuses lined up for gamers who can’t wait to get their hands on the latest Call of Duty title. This year’s pre-order bonuses are a little odd though.

    First up is GameStop’s offer which has pre-order bonuses unlocking in tiers. For gamers who pre-order now, you’ll be able to get a double-sided poster featuring artwork from the game. Through the monts leading up to the game’s release, three more bonuses will unlock presumably with more pre-order bonuses. As an added bonus, you will also get a Modern Warfare 3 prestige token if you’re a PowerUp Rewards member.

    GameStop obviously has the best offer, but other retailers are offering some pretty sweet deals as well. UK retailer GAME, recently saved from destruction, will also be offering a prestige token for anybody who pre-orders the title. The token will be delivered to all who pre-order within a week.

    Best Buy will be offering the same reward they offered with the first Black Ops – dog tags. Only this time, the dog tags will have the game’s logo printed on them. It’s important to note that the dog tags will be delivered at the time of the game’s launch for online pre-orders whereas in store pre-orders will receive the dog tags at the time of transaction.

    Call of Duty Black Ops 2 Pre-Order Bonuses

    Unfortunately, Amazon seems to have gotten the worst deal out of the bunch. Their only offer right now is a downloadable wallpaper for your PC. It’s odd since Amazon usually gets great pre-order offers so there might be something better down the road. If all else fails, they might offer Amazon credit that can be applied to other game purchases.

    If you feel that you must pre-order the game, it seems that GameStop has the best deal. Of course, we don’t know what those last three bonuses are going to be. There will also probably be a provision that says you can’t get the previous rewards if you pre-order late just to make sure that you aren’t getting cheated.

    [h/t: DigitalWarfare24/7]

  • Apple Does 17 Times Better Than the Average Retailer

    Retail industry analysts Retail Sails have complied some data which reveals that Apple Stores generally do roughly 17 times better performance-wise than the average retailer in a mall environment in the U.S. Here is some information on the top 20 retail chains:

    apple store sales

    The data was taken from 160 store chains across the U.S. Sales per square foot is the typical standard by which store success is measured, with $300 per square foot considered to be satisfactory. The national average for mall retail space is $341, while the average for specialty clothing stores is $400. Jewelers do about $600 on average, and the median for the top 20 retails is $787. Apple stores do about twice as well as second place Tiffany and Company, and about 17 times better than the average mall retailer, coming in at $5,626 in sales per square foot, more than 10 times that of #20, Guess?

    apple store sales

    The only other store that seems to offer comparable services in the top 20 is Best Buy, which hasn’t been doing too well as of late, though it’s not clear whether or not the Apple kiosks that exist in some of their big box locations contributed to their performance as indicated in the chart.

    Interestingly, it’s been recently reported that so far 22 completely fake Apple stores have been uncovered in China, featuring employees that actually believe their paychecks are coming from Cupertino, and there is no word on whether the fronts are selling real iOS products, Shanzhai knock-offs or straight counterfeits.

  • Best Buy: Number of Closing Locations by State

    We reported to you earlier that Best Buy Co. Inc. will be closing 50 big box stores and eliminating 400 positions. At that point the electronics retailer had yet to announce what locations would be closing. Today TG Daily released counts of how many stores will be closed by state.

    The decision to close its doors is part of Best Buy’s plan to reduce costs by about $800 million and adjust to a changing marketplace by reducing the size of their stores; the retailer will now focus on establishing businesses with less overhead like the 100 smaller Best Buy Mobile stores they will be opening across the country.

    Two of the stores have already closed and another location in Puerto Rico will also cease to be.

    Best Buy CEO Brian Dunn resigned abruptly amid what the company described as a board probe into his personal conduct. Dunn’s alleged range of offenses include lying and cheating.

    Dunn worked his way up in the company over three decades; he started out as a sales clerk and never attended college. His humble beginnings and considerable success were considered exemplary and even proof that people can achieve considerable economic mobility in America.

    Best Buy Director G. Mike Mikan will be taking over as interim CEO during the search for a new CEO. Richard Schulze, the founder of Best Buy, continues to serve as chairman.

    Should we be leery of the CEO that is lauded as a hero?

  • Resident Evil 6 Pre-Order Bonuses Detailed

    It was inevitable. After Capcom announced that they were pushing up the release date for Resident Evil 6 to October, the pre-order bonuses were quick to follow. Thankfully, it seems that the pre-order bonuses this time are not game changing additions that lessen the experience for other players.

    The pre-order bonuses are coming in the form of maps for Mercenaries mode according to the Capcom Unity blog. Each retailer – GameStop, Amazon and Best Buy – will be getting one map each for your pre-order. It’s nice since it doesn’t give any one retailer the better bonus, so it’s up to the player to decide which one they want.

    For those who aren’t acquainted with the super fun Mercenaries mode, here’s the description from Capcom:

    The super-intense Mercenaries Mode lets you play as your favorite characters from Resident Evil 6 as you fight your way through hordes of enemies within a given time limit. Chaining together multiple kills and finding other surprises will help you reach the highest score and prove that you’re the world’s greatest mercenary!

    Now onto the bonuses with GameStop’s map – The Catacombs – coming up first. While dark tunnels would already be bad enough in Mercenaries, the map has the added bonus of booby traps. One of the screens features a spike trap on the floor with a level that may control it. Maybe players will be able to use the traps to their advantage.

    Resident Evil 6 Pre-Order Bonuses Detailed

    Next up is the High Seas Fortress from Amazon. This map seems huge with it taking place on top of an aircraft carrier as well as inside the ship. Interestingly enough, the post says that players will “hone [their] martial arts skills inside the narrow confies of the hangers.” Did Capcom just hint at there being more of an emphasis on melee combat in Resident Evil 6?

    Resident Evil 6 Pre-Order Bonuses Detailed

    The final map coming from Best Buy is the Rail Yard. As you can probably guess, the map is set on a railroad yard. The description says that it’s a multilayer stage which should make things more interesting. The screens make it look more like a subway system, but the post says that players will be fighting on the “roof of the yard” so we’ll see where it takes us.

    Resident Evil 6 Pre-Order Bonuses Detailed

    As always, you can expect this DLC to not remain retailer exclusive after the launch of the game. The maps you miss out on will be available at a later date for a price. I will be pre-ordering from Amazon personally because I really like that aircraft carrier stage.

    Resident Evil 6 will launch on October 2 for the Xbox 360 and PlayStation 3. Capcom announced a PC version as well with this post saying that the company will be revealing more on that later. Knowing Capcom’s track record, we won’t be seeing a PC version until a month later.

    Are you going to pre-order Resident Evil 6? If so, which Mercs map do you want? Let us know in the comments.