Best Buy 2019
Dollar General 2018
You select a 3rd company for 2019 or 2020
Using Excel, develop a spreadsheet detailing their; Annual Cost of Goods Sold $, Inventory Level $, and then calculate their Inventory Holding $ (use 25% of their inventory level $) and their Inventory Turnover Ratio. Cost of Goods Sold $ can be found on the Income Statement and Inventory $ can be found on the Balance Sheet. The Inventory holding cost and Turnover Ratio calculations must be performed in Excel using a formula. Format your spreadsheet to look professional.
BE SURE TO INCLUDE ALL 000’S IN YOUR NUMBERS. OFTEN THE ANNUAL REPORT WILL LIST VALUES IN THOUSANDS OR MILLIONS. Then in a ONE PAGE EXECUTIVE SUMMARY (double spaced, Times New Roman, 12 pt font), report the amount of money each company is currently holding in Inventory (that is your Inventory Level value) and how much they spent on inventory during an entire year (that is your Cost of Goods Sold value). Briefly explain why Supply Chain jobs are so important to companies related to the amount of money the companies have invented in inventory.
Fiscal 2019 Annual Report
Dear Fellow Shareholders:
On April 15, we announced an evolution of leadership roles at Best Buy. At our annual
shareholder meeting on June 11, I will transition to the newly created role of executive
chairman of the board, and Ms. Corie Barry, our current chief financial and strategic
transformation officer, will become the fifth CEO in Best Buy’s 53-year history. Also
elevated to a broader role will be Mike Mohan, who moves from being our domestic chief
operating officer to the company’s president and chief operating officer.
In this context, I want to share with you my pride in what we have accomplished in the
last seven years, my confidence in the future and my excitement about my new role as
executive chairman of the board.
Before I do this, let me say a few words about the evolution of leadership roles at the
company we recently announced.
First, I am very proud of the seamless transition we have decided to implement, as it
reflects positively on our momentum as well as our focus on executive development and
succession planning. It is clearly designed to ensure strategic and leadership continuity. I
am grateful to the members of our Board of Directors for their diligence and care in
overseeing this critical process. In many ways, I believe their work on this transition was
world class and can stand as a model for effective CEO transitions.
The choice of timing of a CEO transition is probably more of an art than a science. I
personally felt it was the right time for me to trigger this leadership transition for several
First, I felt we had achieved what I had hoped to accomplish when I joined the company
in 2012. As you will see below, I am proud of what we have delivered for our customers,
employees, vendors, shareholders and communities.
Second, I felt we had built the depth and breadth of talent necessary to carry Best Buy
into the future. Last September, we put in place a new leadership organization by
elevating Corie and Mike to new roles with greater responsibilities. In the time since, I
have been impressed by the effectiveness of our team and these leaders.
Third, with a clear and exciting purpose to enrich lives through technology, we set out
two years ago to implement a strategy focused on addressing key human needs in
entertainment, productivity, communication, food, security and health and wellness. I
am pleased to report that we have essentially achieved our fiscal 2021 revenue and non-
GAAP operating income targets two years ahead of plan. While we still have a lot to do
from a transformation standpoint, it is clear we are on the right path.
Fourth, we have announced plans to host a meeting with the investment community
later this year. I thought it was important that the leaders who stand in front of this
important audience and lay out our road map for the future be the team that is
responsible for carrying that strategy forward.
Proud of our accomplishments
I am extremely proud of what we have achieved collectively since I joined the company
in September 2012, a time when we were facing a range of challenges. We have made
progress on multiple fronts in ways that have positively impacted all of our stakeholders.
We reconnected with our customers in a meaningful way through a set of key decisions
aimed at improving the experience for people no matter how they chose to engage with
Best Buy. We took price off the table with a price-match policy and have made significant
investments in our online and in-store shopping experiences — and our customers have
noticed. In fact, our Net Promoter Score has increased more than 1,500 basis points
since 2012, and we have more than doubled our U.S. online sales to $6.5 billion and 17%
As a part of our growth strategy, we launched our In-Home Advisor program, which
provides free in-home technology consultations. During fiscal 2019, we expanded to
more than 500 advisors, and they made, collectively, more than 175,000 visits to
customers’ homes, where they are able to address customer needs in a more human and
effective fashion, unlocking latent, incremental demand.
Moving even more boldly into the home, last summer we launched our Total Tech
Support program, which provides 24/7 support for all of a customer’s technology
regardless of when and where they bought it. At the end of fiscal 2019, we had more
than one million members in this program.
Our work in the health space is another example of our intention to deepen our
relationships with consumers by addressing their key human needs. Late last year, we
formed Best Buy Health and acquired GreatCall, a leading connected health services
provider for aging consumers, in order to accelerate our strategy to help seniors live
longer in their homes with the help of technology. The integration of GreatCall into our
business has met, if not exceeded, our expectations.
Our success with our customers is driven by the enthusiasm and talent of our
employees. Over the past several years, we have invested in our workforce in a number
of ways, including by providing enhanced employee training that has won praise and
awards for its quality. In addition, we repurposed some of the savings from last year’s
corporate tax reform to fund one-time bonuses for employees, as well as expand
employee benefits to include paid caregiver leave, expanded mental health benefits,
paid time off for part-time employees and backup childcare.
More broadly, we have also worked hard to instill a culture built on purposeful leadership.
Put simply, purposeful leadership recognizes that all companies are human organizations
composed of individuals working together for a collective purpose and that “magic”
happens if you can connect what drives individual employees and the purpose of the
company in an authentic fashion.
As a result of these and many other actions, our employee engagement scores have
improved and employee turnover rates in our stores are at record lows.
We continue to partner with our vendors (i.e., the world’s foremost technology
companies) to help them commercialize their technology. Over the last seven years, our
vendors have invested with us to improve the customer experience through stores-
within-stores and other unique vendor experiences. We ended fiscal 2019 with more
than 5,000 of these experiences across our U.S. stores.
We also have created significant shareholder value, improved our profitability and
returned capital to shareholders.
We have generated five consecutive years of comparable sales growth and increased
our non-GAAP operating income rate by more than 100 basis points to 4.6%.* Our
commitment to reduce costs and drive efficiencies is a crucial factor in our improved
financials. In fact, in the past seven years we have achieved $1.9 billion in cost savings
and efficiencies that have helped us fund investments and offset pressures in the
Our non-GAAP return on invested capital now stands at 25.8%, up from 10.5% in fiscal
2013, indicating that our formula of investments in our future, revenue growth and cost
takeout is producing attractive returns.*
We have generated substantial free cash flow, which has allowed us to continue to
reinvest in our business and return capital to shareholders through dividend payments
and share buybacks.
Our capital allocation strategy is to fund operations and investments in growth, including
potential acquisitions, and then return excess free cash flow over time to shareholders
through dividends and share repurchases. We continue to target a non-GAAP dividend
payout ratio between 35% and 45%.*
In the past seven years, we have returned more than $8 billion to shareholders through a
combination of share repurchases and dividends. Since the end of fiscal 2013, our total
shareholder return is 335%, compared to 104% for the S&P 500.
At the core of our turnaround and growth strategy was the decision to operate the
company with the belief that we will do well by doing good. Specifically, we seek to be a
responsible corporate citizen in our interactions with all of our stakeholders, including
our customers, employees, vendors, shareholders, communities and the environment.
As it relates to our impact on the communities in which we work and live, and the planet
more broadly, we have focused on three initiatives.
• Teen Tech Centers expansion: I am proud to say that, in cooperation with our
partners, we are well on our way toward creating a national network of 60 Best
Buy Teen Tech Centers as part of our broader effort to train hundreds of
thousands of underserved teens each year for the tech-related jobs of our modern
• Carbon footprint reduction: We are determined to do our part in addressing global
climate change and have pledged to reduce our carbon footprint by 60% (over a
2009 baseline) by 2020. We are currently at 51% and expect to meet our pledge.
• Recycling: We operate the largest consumer electronics recycling program in the
country and are well on our way toward meeting our goal of recycling two billion
pounds of electronics by 2020.
All of this work has been recognized through a number of awards this year. The most
notable was being named No. 1 on Barron’s annual 100 Most Sustainable Companies list,
which is based on 200 data points, including community engagement, human rights, carbon
emissions, business ethics and more.
Confident in our future
As we look ahead, there are several reasons why we are excited about the future of Best
We are excited by the opportunities related to technology innovation that have the
potential to drive customer demand over the next several years. These come in three
shapes: expanded penetration of existing technology, introduction of new technology in
existing categories and expansion of consumer technologies in new areas.
Notably, we see opportunities in existing categories like home theater, related to the
increasing penetration of large screen sizes, 4K and OLED, and the introduction of new
technologies, such as 8K. In mobile, we will be actively participating in the rise of 5G,
which has the potential to unlock very interesting use cases over the next several years.
In computing, the interest in gaming continues to accelerate, and the performance
necessary for this is driving innovation across both hardware and accessories. We see
significant opportunities in smart home technology. Notably, the U.S. retail market size of
“internet of things” connected hardware is forecasted to triple by 2025. This growth is
buoyed by products like connected cameras which are expected to grow from 18%
penetration of U.S. homes in 2018 to more than 50% by 2022, according to a recent
report from Activate. We also believe that digital health is an exciting area with enormous
opportunity from the use of technology to help customers with their health, fitness and
sleep, among others things, across multiple age groups, from babies to seniors. As an
illustration of the opportunity, the number of digital health exhibitors at the Consumer
Electronics Show in January was up almost 25% versus last year.
The next reason we are excited about the opportunities ahead of us is that we believe
that the purpose driving our strategy is extremely relevant. Our purpose is to enrich lives
through technology by addressing key customer needs in areas such as entertainment,
productivity, communication, food, security and health and wellness. We are
encouraged by the steps we have taken in this direction and see the potential from
expanding this focus to build deeper, lasting customer relationships.
In parallel to this, we continue to be excited by the potential for further cost-reduction
opportunities that can help us fund the investments in our strategy and offset pressures
in the business. During fiscal 2019, we achieved $265 million in annualized cost
reductions and efficiencies, bringing the cumulative total to $500 million since the
second quarter of fiscal 2018. This is towards our fiscal 2021 goal of $600 million. Since
the launch of Renew Blue in 2012, we have taken out $1.9 billion of costs.
Finally, we continue to be excited by the power of our incredibly talented people, who
are engaged, customer-oriented and aligned with our purpose and strategy. Not only
have we built a broad and deep talent pool, but we have also built a strong culture which
is based on a handful of powerful beliefs. We believe that:
1. Work can be an instrument for doing good things in the world.
2. A company is a human organization – a group of individuals working together in
pursuit of a goal, not a soul-less body.
3. The purpose of a corporation is to contribute to the common good, by having a
positive impact on its customers, employees, vendors, shareholders and the
communities in which it operates. A business is more than for profit. It is about
doing well by doing good.
4. “Magic” happens if you can connect what drives the individuals working at the
company to the purpose of the company. More broadly, we believe that great
things happen at companies where the individuals who work there can feel a
sense of purpose, develop personal connections, have autonomy, develop a
certain mastery and feel they are in a growth environment.
5. Work is not about attempting to achieve perfection, but about human
connections. We believe performance and growth come from accepting and
embracing our imperfections and vulnerabilities.
6. Leadership is not about power, fame, glory or money. Leadership is about
purposeful, authentic, human service.
Altogether, this gives us the sense that now is the time to play offense — to play to win —
and accelerate our transformation, both from a customer and revenue standpoint and
from an efficiency standpoint.
Looking forward to my new role
As the executive chairman, I will focus on a couple of areas, with the overriding goal to
continue to ensure the success of the company.
First, I will continue to chair our board. Our board is a fantastic resource for our
leadership team, and it plays a critical role in shaping and supporting our strategy and,
more broadly, the future of Best Buy. Our board has evolved over the last seven years,
with approximately 85% of directors new since 2012. As a company, we believe that
diversity is crucial to our business, our employees, our customers and our shareholders.
In support of this belief, the board has sought director candidates who not only had the
skill sets to support our current and future strategies, such as health technology, but
were also diverse. As a result, our current board is comprised of six women and six men
with a diverse mix of skill sets and ethnicities. Notably, when our new CEO joins the
board in June, it will become majority female!
Second, I will do whatever I can to support Corie and the management team in the
context of the CEO transition. To that end, I will provide advice and support on topics
ranging from strategy and M&A to capability building and leadership development. In
addition, and at the direction of the new CEO, I will continue to be focused on helping
the company in the areas of government relations and public affairs.
In conclusion, we are energized by our results, our momentum and our opportunities. It
is an exciting and momentous time for our company.
On a personal level, I want to thank you, our shareholders, for your support over the past
seven years. Likewise, I want to thank my colleagues for our collaboration and their
friendship. Working together, we turned around and then grew this wonderful company,
and it has been the honor of my professional lifetime to work with all of you. The
company is in good hands with our new leadership, and I am confident that the journey
we began in 2012 will continue well into the years ahead.
Hubert Joly, Chairman and CEO
Best Buy Co., Inc.
* Please refer to the last three pages of the company’s fiscal 2019 Annual Report for (a)
definitions and reconciliations of “GAAP to non-GAAP” and “non-GAAP return on
invested capital”, (b) information about forward looking non-GAAP financial measures,
and (c) information about the forward-looking statements in this letter. Note that fiscal
2018 had an extra week, which we estimate was approximately $760 million in revenue
and approximately $0.20 of non-GAAP diluted EPS. When removing the extra week from
fiscal 2018, our fiscal 2019 non-GAAP operating income rate expanded approximately 10
basis points and our non-GAAP diluted EPS increased approximately 26% on a year-over-
FY131,2 FY142 FY152 FY162 FY172 FY18 FY19 Enterprise – Continuing Operations Operating income as a % of revenue 0.9% 2.8% 3.6% 3.5% 4.7% 4.4% 4.4%
Restructuring charges 1.0% 0.4% 0.0% 0.5% 0.1% 0.0% 0.1% Goodwill impairment 1.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Intangible asset amortization3 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1%
Net CRT/LCD settlements4 0.0% (0.6%) 0.0% (0.2%) (0.4%) 0.0% 0.0%
Tax reform-related item – employee bonus5 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% Non-GAAP operating income as a % of revenue 3.4% 2.7% 3.6% 3.8% 4.4% 4.6% 4.6%
*Note – percentages may not foot due to rounding
Enterprise – Continuing Operations FY131,2 FY142 FY152 FY162 FY172 FY18 FY19 Diluted EPS (0.16)$ $ 2.00 $ 3.53 $ 2.30 $ 3.74 $ 3.26 $ 5.20
Restructuring charges 1.24 0.43 0.01 0.58 0.12 0.03 0.16
Goodwill impairment 1.80 – – – – – –
Intangible asset amortization3 – – – – – – 0.08
Acquisition-related transaction costs3 – – – – – – 0.05
Net CRT/LCD settlements4 – (0.66) – (0.22) (0.50) – –
(Gain) loss on investments, net – (0.06) (0.03) 0.01 (0.01) 0.02 (0.04)
Best Buy Europe sale6 – 0.05 – – – – –
Europe legal entity reorganization7 – – (1.00) – – – –
Other Canada brand consolidation charges – SG&A8 – – – 0.02 0.01 – –
Restructuring charges – COGS – – – 0.01 – – –
Tax reform-related item – employee bonus5 – – – – – 0.26 0.02
Tax reform-related item – charitable contribution5 – – – – – 0.07 –
Tax reform – repatriation tax5 – – – – – 0.68 (0.07)
Tax reform – deferred tax rate change5 – – – – – 0.24 (0.02)
Income tax impact of non-GAAP adjustments9 (0.43) 0.12 0.01 (0.03) 0.15 (0.14) (0.06) Non-GAAP diluted EPS $ 2.45 $ 1.88 $ 2.52 $ 2.67 $ 3.51 $ 4.42 $ 5.32
Best Buy Co., Inc. Non-GAAP Reconciliation
($ in millions, except per share amounts) (Unaudited and subject to reclassification)
The following information provides reconciliations of the most comparable financial measures from continuing operations calculated and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”) to presented non-GAAP financial measures. The company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP measures. Generally, presented non-GAAP measures include adjustments for items such as restructuring charges, goodwill impairments, gains and losses on investments, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when the company believes this provides greater clarity to management and investors. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, the GAAP financial measures presented in the company’s earnings releases, financial statements and other publicly filed reports. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.
The following tables reconcile operating income and diluted earnings per share (“EPS”) for the periods presented for continuing operations (GAAP financial measures) to non-GAAP operating income and non-GAAP diluted EPS for continuing operations (non-GAAP financial measures) for the periods presented.
(1) FY13 represents the recast 12-months ended February 2, 2013, which included 53 weeks. (2) In Q1 FY18, the company stopped excluding non-restructuring property and equipment impairment charges from its non-GAAP financial measures. To ensure its financial results are comparable, the company has recast prior periods to reflect the previously excluded impairments now being included in non-GAAP SG&A. (3) Represents charges associated with the acquisition of GreatCall, including (1) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and technology, and (2) acquisition-related transaction costs primarily comprised of professional fees. (4) Represents cathode ray tube (“CRT”) and LCD litigation settlements reached, net of related legal fees and costs. Settlements related to products purchased and sold in prior fiscal years. (5) Represents charges and subsequent adjustments resulting from the Tax Cuts and Jobs Act of 2017 (“tax reform”) enacted into law in Q4 FY18, including amounts associated with a deemed repatriation tax and the revaluation of deferred tax assets and liabilities, as well as tax reform-related items the company announced in response to future tax savings created by tax reform, including a one-time bonus for certain employees and a one-time contribution to the Best Buy Foundation. (6) Represents the tax impact of the Best Buy Europe sale and resulting required tax allocation between continuing and discontinued operations. (7) Represents the acceleration of a non-cash tax benefit as a result of reorganizing certain European legal entities to simplify our overall structure. (8) Represents charges related to the Canadian brand consolidation initiated in the Q1 FY16, primarily due to retention bonuses and other store-related costs that were a direct result of the consolidation but did not qualify as restructuring charges. (9) Represents the summation of the calculated income tax charge related to each non-GAAP non-income tax adjustment. The non-GAAP adjustments relate primarily to adjustments in the United States, Canada and Europe and as such, the income tax charge is calculated using the statutory tax rates of each country in effect during the period of the related non-GAAP adjustment.
February 2, 20131
February 1, 20141
January 31, 20151
January 30, 20161
January 28, 20171
February 3, 20181
February 2, 20191
Net earnings including noncontrolling interests (233)$ 523$ 1,235$ 897$ 1,228$ 1,000$ 1,464$ Total assets 16,551 14,174 14,819 13,995 13,638 13,558 12,994 ROA (1.4%) 3.7% 8.3% 6.4% 9.0% 7.4% 11.3%
February 2, 20131
February 1, 20141
January 31, 20151
January 30, 20161
January 28, 20171
February 3, 20181
February 2, 20191
Net Operating Profit After Taxes (NOPAT) Operating income – continuing operations 391$ 1,144$ 1,450$ 1,375$ 1,854$ 1,843$ 1,900$ Operating income (loss) – discontinued operations (236) (210) (19) 90 27 1 – Total operating income 155 934 1,431 1,465 1,881 1,844 1,900
Add: Operating lease interest2 352 310 275 240 232 235 227 Add: Non-GAAP operating income adjustments3 1,288 115 23 130 (147) 110 88 Add: Investment income 50 53 35 15 34 49 49 Add: Net earnings (loss) attributable to noncontrolling interest
(16) 9 (2) – – – –
Less: Income taxes4 (686) (531) (660) (697) (750) (810) (560) Non-GAAP NOPAT 1,143$ 890$ 1,102$ 1,153$ 1,250$ 1,428$ 1,704$
Average Invested Capital Total assets 16,551$ 14,174$ 14,819$ 13,995$ 13,638$ 13,558$ 12,994$
Less: Excess cash5 (554) (1,564) (2,922) (3,068) (2,995) (2,969) (1,633) Add: Capitalized operating lease obligations2 5,862 5,173 4,583 3,995 3,872 3,914 3,790
Total liabilities (12,485) (10,453) (10,188) (9,365) (9,210) (9,406) (9,763) Exclude: Debt6 2,140 1,674 1,635 1,648 1,373 1,346 1,226 Less: Noncontrolling interest (627) (160) (4) – – –
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