Morgan Stanley Global Consumer & Retail Conference
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Transcript of Morgan Stanley Global Consumer & Retail Conference
Best Buy Co., Inc.
Morgan StanleyGlobal Consumer &
Retail Conference
Nov. 14, 2006
Kal PatelExecutive Vice President,Strategy & International Development
Safe Harbor
Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995
This presentation may contain forward-looking statements, which are subject to risk and uncertainty. A variety of factorscould 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 Annual Report on Form 10-K filed with the SEC on 5/10/06. That 10-K describes additional factors that could cause actual results to differ materially from those contemplated by the forward-looking statements made in this presentation.
• 30-percent earnings growth in fiscal 2006
• Revenue exceeded $30B, net earnings exceeded $1B
• Expanding into new markets: services, small businesses, international
$30.8$27.4
$24.5$20.9
$17.7
FY02 FY03 FY04 FY05 FY06
($ in billions)
15% Compounded growthRevenue Growth
Strong History of Growth
$2.27
$1.07 $1.11$1.44
$1.75
FY02 FY03 FY04 FY05 FY06
25% Compounded growthEPS1
1Pro-forma adjusted for FAS 123 expense
Fiscal 2007Annual Guidance
(reiterated on 10/5)
• Revenue of approx. $35.5 billion
• Comparable store sales gain of 3% to 5%
• Diluted EPS of $2.65 to $2.80, up roughly 20%
• Up to 90 new stores in North America
• Operating income rate improvement of 40 bps
Revenue ($ inbillions)
Diluted EPS
FY06FY07
$12.8$14.6
$0.71
$0.94
First Half
• Net earnings growth of 30% • SG&A rate improvement of
100 basis points• Revenue of $14.6B, same
store sales up 4.2%
Fiscal 2006 Fiscal 2007 BeforeCustomer Centricity
Our Journey
HonorUnique
Customers
ProvideEnd-to-EndSolutions
Invite Employee
Ideas
Customer Centricity
Our approach:• Dream big• Start small• Learn fast• Scale profitably
Growth
$100B
$120B$50B
ServicesSmall
Businesses
China
$80B
MarketPotential
New Markets
NorthAmericanCE Market
$300B
Market sizes are internal estimates.
Chinese Retail Environment
• Different retail experience versus the U.S.• Chinese consumers are rapidly changing• Multi-pronged approach to the Chinese
market– Five Star, a traditional electronics player– Best Buy, with a U.S.-like business model– Potential opportunities in services, dot com
• Fourth-largest appliance and consumer electronics retailer (at time of acquisition) with 131 stores
• BBY acquired a 75% interest in June 2006
• 2005 revenue of US $700 million
• Strong existing management team remains intact
Five Star
Best Buy China
• 85,000-square-foot store in Times Squareof Shanghai
• Grand opening by the end of fiscal 2007
• Consumer research is driving store design; goal is an improved retail experience for the Chinese consumer
HonorUnique
Customers
ProvideEnd-to-EndSolutions
Invite Employee
Ideas
Customer Centricity
Tom HealyExecutive Vice PresidentBest Buy For Business
Customer Centricity Philosophies
Best Buy For Business
Invite employee ideas • Provide tools to connect and leverage 10,000 employees and their ideas
Honor unique customers • Deliver simple, reliable and affordable technology solutions that satisfy each business customer’s unique needs
Provide end-to-end solutions • Offer multiple brands, products and services – before, during and after the sale
Why Business Customers?
My Business Is Personal
Our Target Customer
Our customer: small business <100 employees=Our customer: small business <100 employees=
$132 billion annual technology spend$132 billion annual technology spend
Pay Me Back Make It Easy
Value 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 Model
.com
Direct Sales
Technology Consulting
Internet SalesMany Profiles
Individual Needs
Many Psyches
Commercial Sales
Retail
Stores
Our CustomerOur Customer
VoIP
VoiceData$83B Small Business Spend $49B Small Business Spend
Product Convergence
Near-Term Priorities
1) Deploying BBFB to a broader geography
2) 173 U.S. stores offer Best Buy for Business; planning to have 200+ stores by end of fiscal 2007
3) Training, development and collaboration4) Adding nearly 600 trained business
professionals5) Building outside sales and CRM capabilities6) Refining our offerings to more effectively meet
customer needs
Keys to Long-Term 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
• Community collaboration capabilities• Virtual application integration
1990 2010??
Acceleration of Innovation & Convergence
2006
Collaboration and Community are Key
Your Questions