Best Buy Financial Analysis

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Financial Analysis|
Best Buy
FINC 5000|

Luis G Zapata Jr

Best Buy started in Minnesota in 1966 as Sound of Music, Inc. and began as an audio components retailer, but with the introduction of the videocassette recorder in the early 1980’s it expanded into video products. In 1983 Sound of Music officially changed their name to Best Buy and began using mass-merchandising techniques, which included offering a wide variety of products under a “superstore” concept. In 1989, Best Buy changed their retailing methods by introducing a self-service, noncommissioned, discount-style store designed to give customers a variety of consumer electronics, home office products, entertainment products, appliances and related services. Best Buy like many retailers make their profits on a seasonal basis, it is fact that most of their revenue and earnings happens in the fiscal fourth quarter. Currently Best Buy is a multi-national retailer that operates two reportable segments. The Domestic segment is comprised of all operations within the U.S. and its territories. The International segment is comprised of all operations outside the U.S. and its territories including China, Canada, Mexico and the U.K. Overview of Domestic Segment

Best Buy currently operates in two reportable segments which are domestic and international. The domestic segment compromises not only of Best Buy but also includes Best Buy Mobile, Geek Squad, Magnolia Audio Video, Napster and Pacific Sales. While the international segment consists of operations in Canada, Mexico, Europe, and China with companies such as Connect Pro, The Carphone Warehouse and Five Star. The domestic entities include Magnolia Home Theatre which offers customers a store within-a-store experience with high end electronics and specially trained employees. On the other hand Geek Squad provides repair, support and installation services to customers, while Best Buy Mobile provides a comprehensive assortment of mobile phones, accessories and related services that are now their own stand–alone stores in addition to being in all U.S. Best Buy stores. Best Buy has also ventured into other technological venues such acquiring Napster, this decision was made in order to provide customers with digital music downloads and on-demand streaming capabilities which is a new trend in the music industry. Best Buy Cinema Now is another service that provides customers with digital streaming of movies and TV shows, this is in response to companies such as Netflix and Hulu that have cut into the purchasing of DVD’s and Blu-Rays. Overview of International Segment

Best Buy established an international segment in 2002 with its acquisition of Future Shop LTD., which is Canada’s largest consumer electronics retailer. In 2003 Best Buy decided to go for a dual-branding strategy by introducing the Best Buy brand in hopes to not only retain the Future Shop’s brand equity but to also attract more customers by offering a choice of distinct store experiences. In 2007 Best Buy acquired 75% interest in Jiangsu Five Star Appliance Co., Five Star is one of China’s largest appliance and consumer electronics retailer, this move was made with the intention to expand international growth while increasing the knowledge of Chinese customers and to obtain an immediate retail presence in China. In 2009 Best Buy completed the acquisition of the remaining 25% interest in Five Star. On the European front Best Buy has a 50% share in “Best Buy Europe” with a partnership with CPW expansion is planned for the U.K. and Spain with the idea to introduce Best Buy Mobile and Geek Squad in these markets. During 2011 a large format Best Buy store opened up in the U.K. to establish a presence in Europe and expansion has also spilled over to Canada and Mexico. Unfortunately by fourth quarter fiscal of 2011 Best Buy announced it would exit the Turkey market and restructure the Best Buy branded stored in China during 2012....
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