Small Businesses and Small Businesses and International Stores:International Stores:
Key Growth Drivers For Best BuyKey Growth Drivers For Best Buy
Bear Stearns’ 12th Annual Retail, Restaurants & Consumer
ConferenceMarch 8, 2006
Tom HealyExecutive Vice PresidentBest Buy For Business
Safe HarborSafe Harbor
Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995This presentation may contain forward-looking statements, which are subject to risk and uncertainty. A variety of factors could cause our actual results to differ materially from the anticipated results expressed in such forward-looking statements, including, among other things, factors listed in our current report on Form 8-K filed with the SEC. That 8-K describes additional factors that could cause actual results to differ materially from those contemplated by the forward-looking statements made in this presentation.
28%
17%21%
38%
18%
30%
Annual Avg.Shareholder Return
Revenue (CAGR) EPS (CAGR)
5-Year 10-Year
• #1 consumer electronics retailer
• $30 billion annual revenue• $1.5+ billion operating
income for fiscal 2006• 17% U.S. market share• Fortune 100 company• Selling TVs, computers,
entertainment software, appliances
Best BuyBest Buy
TopTop--Line GrowthLine Growth
$30 BNew
Stores
Small Business
Customers
Services
Int’l
?
2006 2011
Two drivers that will extend our business: Small Business and International
Best Buy Model TransformationBest Buy Model Transformation
Employees essential to customer experience
Products marketed to the masses
Customer needs drive product selection and store experience
SEGMENT
Customer SegmentationCustomer Segmentation
Tech-savvy families
Small businesses
Busy suburban moms
Affluent professionals Young entertainmententhusiasts
Why Business Customers?Why Business Customers?
• Unique localized services and expanded assortments available via multi-channels, serving unmet needs
• Create new and improved customer experiences
Best Buy For BusinessCustomer Centricity Goals
• Trained and certified professionals catering to the needs of small business owners
• Improve overall customer satisfaction and loyalty
• Small business represents an $80 billion opportunity• These customers already shop at Best Buy for personal needs
• Identify and attract profitable customers to existing locations
Unique Position, Not Easily ReplicatedUnique Position, Not Easily Replicated
Competition• Fragmented• Inconsistent service
and product assortment
• Narrow range of capabilities and offerings
Best Buy• 900+ retail stores• Geek Squad agents• Product and service expertise• Multiple brands• Multi-channel business model• Strong brand with pre-
existing customer relationships
Changing the way small business buys IT solutions
Value PropositionValue Proposition
My Business is PersonalMake it Convenient
Pay Me Back
Business Technology
Pros andBusiness
Consultants
Geek Squad Service
Reward Zone For Business
Expanded Assortment
Community Networks
Integrated Business ModelIntegrated Business Model
.com
Direct Sales
Technology Consulting
Internet SalesMany Profiles
Individual Needs
Many Psyches
Commercial Sales
Retail
Stores
Our CustomerOur Customer
NearNear--Term PrioritiesTerm Priorities
1)Deploying BBFB to a broader geography
2)Currently 100 U.S. stores offer Best Buy for Business; planning to have 220 stores by end of fiscal 2007
3)Building our training and development capacity4)Adding nearly 600 trained business professionals5)Building outside sales capabilities6)Refining our offerings to more effectively meet
customer needs
Key to LongKey to Long--Term SuccessTerm Success
• Co-creation of technology solutions with customer and vendor partners
• Widely available technology experts in solutions for business, offering a local relationship
• Differentiated training and development capability for technology consultants and Geek Squad agents
Kevin LaydenPresident & Chief Operating OfficerBest Buy Canada
Canada is Key to Canada is Key to BBYBBY’’ss GrowthGrowth
?
$30 BNew
Stores
Small
Business
Customers
Services
Int’l
5.3%Best Buy Canada
Supply Chain
IT
OrganicGrowth
7.0%BBY Revenue BBY Operating
Income Rate
Today Goal FY’05 Goal
Best Buy Domestic & InternationalBest Buy Domestic & International
17%*144688Stores
N.M. 1.7%5.7%Operating Income Rate
3%*$49$1,393Operating Income
10%*$2,817$24,616Revenue
InternationalDomesticFiscal Year 2005($ in millions)
* Represents percentage of total Best Buy
Number of Stores
104 108 114 120
1930
95
44
8
2002 2003 2004 2005 2006
Future Shop Best Buy Canada
Future Shop:•Acquired in November 2001•Future Shop Web site is #1 consumer electronics site in Canada•Market share of approximately 20-22%
Best Buy Canada:•Opened Toronto store 8/2002•Opened stores in all major markets, including 8 bilingual stores in Montreal•Operate English and French Best Buy Web sites•Geek Squad in all stores•Market share of approximately 8-9%
Canadian Store Count and Revenue
Dual Brand Strategy Boosts ShareDual Brand Strategy Boosts Share
$2B*
$3.6B*
* Canadian dollars
Evolution of the Dual Brand StrategyEvolution of the Dual Brand Strategy
Progress so far
• 73% increase in store count by FY’06
• Revenue growth of 80% through FY’05
• Operating income rate up 150 bps
• Market share nearly doubled
Three-year goals
• Brand differentiation• Business model
optimization• Customer centricity
2001 2009
Brand DifferentiationBrand Differentiation
• Future Shop brand will retain its own imagery and customer experience
• Guiding principle: replicate U.S. Best Buy brand in Canadian marketplace
• Changes to dual brand operating structure• Brand architecture project initiated in late fiscal 2006
– Develop strategic framework to further differentiate the brands
– Ensure clear differentiation on the customer experience and employee experience
Business Model OptimizationBusiness Model Optimization
Canadian Operating Income Rate
FY ’05 Goal
1.7%Scale
Store Labor
Web,Services
Gross Profit
5.0%
Number of Stores
104 108 114 120
1930
95
44
8
2002 2003 2004 2005 2006
Future Shop Best Buy Canada
Results are EncouragingResults are Encouraging
• Initial Best Buy Canada stores’(Toronto and Edmonton) operating profits have dramatically improved
• Best Buy Canada’s operating profit lags Future Shop’s:– Higher advertising expense
and overhead due to early stage of launch
– Maturity curve of stores• Supply chain work beginning• Leveraging enterprise to
improve operating income rate
Canadian Store Count
Customer CentricityCustomer Centricity
• Best Buy Canada selectively pulling Customer Centricity elements:– Geek Squad in Best Buy stores, 6 stand-alone units– Best Buy for Business locations
• Best Buy Canada in early stages of segmentation analysis• Common tools with U.S. but different segments:
– More than 30% of greater Vancouver population is of Asian descent
– 90% of Montreal population speaks French• Building capacity for labs in fiscal 2008
Key Growth AreaKey Growth Area
?
$30 BNew
Stores
Small
Business
Customers
Services
Int’l
5.3%Best Buy Canada
Supply Chain
IT
OrganicGrowth
7.0%
BBY Revenue
BBY Operating Income Rate
Today Goal FY’05 Goal
Your QuestionsYour Questions