Business Finance HW
MUST BE NEWLY COMPLETED, NOT PREVIOUSLY SUBMITTED WORK. PLAGIARISM FREE!
Complete the following homework scenario using the Word and Excel templates and info provided:
Review the Best Buy most recent annual report attached.
Use the Excel template provided to report assets, liabilities, equity, revenue, and income for your selected company.
Determine changes in assets, liabilities, and equity.
Determine changes in total revenue and net income.
Describe the changes from the current and prior years in each of these key areas and whether the changes would be positive or negative from an investor/stockholder’s view.
2. Submit two documents for your journal assignment submission byuploading them to the assignmentsubmission area:
Completed Excel template.
Completed Word document template.
Use at least two quality references.
Note: Wikipedia and other Websites do not qualify as academic resources.
Fiscal 2020
Annual Report
Dear Fellow Shareholders:
In this letter to shareholders, my first as CEO, I am pleased to share our strong
financial results from last year and the progress we made on our Building the New
Blue Strategy.
But before that, I want to discuss the unprecedented situation caused by the COVID-
19 pandemic. Most importantly, on behalf of all of us at Best Buy, I want to extend our
sincere appreciation and gratitude to all those who are on the frontlines working to
keep us safe or maintain essential services, and we offer our heartfelt sympathy to all
who are battling the virus or have someone close to them who is.
This pandemic has changed the way we work, learn, care for ourselves and,
importantly, connect. Against that backdrop, our purpose has never been more
relevant: to enrich lives through technology. And in fulfilling that purpose we have, in
virtually every jurisdiction with a stay-at-home order in place, been designated as
essential because of the products and services we offer.
I wanted to take a moment to share how Best Buy has been responding and will
continue to respond to the crisis we all face. There are scenarios you plan for as
business leaders and then there are events that simply do not have a playbook. This is
one of those times, and our leadership team has been responding to events with a
focus on keeping our customers and our employees safe while we meet our
customers essential needs. At the same time, we are committed to ensuring that, as
this evolves, Best Buy is well positioned to thrive in what will almost certainly be a new
and very different environment.
On March 22, we moved all our stores to a contactless, curbside-only model, allowing
us to safely serve customers as they shopped us for the technology necessities that
would allow them to work and learn from home, feed their families and stay
connected. We also halted all in-home installation, repair and consultation services,
choosing to leave the product at or near the doorstep. We did this even in jurisdictions
where we were not required to because we believed it was the only way to keep our
customers and employees safe.
I am so incredibly proud of our teams execution they seamlessly implemented a
new and highly effective operating model in a matter of 48 hours across our entire
store base. We are fulfilling essential technology needs for customers in a safe and
innovative way.
This temporary model has been a remarkable success and, when combined with online
orders shipped directly to customers, has allowed us to retain approximately 70% of
sales1 in the first three weeks after we moved to this model compared to last year.
Thats 70% sales retention1 even though not a single customer set foot in our stores.
As for our employees, from the very first days of the pandemic we told anyone feeling
sick or quarantined that they would keep their job and be paid. We told any employee
whose child was home from school that they, too, would be paid. We gave all field
employees who were still serving customers or working in our distribution centers a
temporary pay increase and, for all others, we paid their normal salaries for a full
month as we took the time to determine how to move forward.
Looking forward, we are taking the steps necessary to resume providing our
customers in-home services. This includes development of a new set of safety
guidelines that follow or exceed the Centers for Disease Control and Prevention
recommendations, and were created in partnership with both medical professionals
and with the employees who make these visits to customers homes. We are also
preparing the safety guidelines necessary to re-open stores to customers as soon as it
is safe to do so, with timing and degree to vary at state and local levels based on
government orders and our own assessment of the situation.
Still, the situation remains fluid and there remains a great deal of uncertainty, particularly
as it relates to depth and duration of store closures across the country and consumer
confidence over time. Therefore, we have to make the difficult decisions necessary to
ensure that at the end of this crisis Best Buy remains a strong, vibrant company.
In that context, on April 19, we furloughed approximately 51,000 Domestic hourly
store employees, including nearly all part-time employees. We retained approximately
82% of our full-time store and field employees on our payroll, including the vast
majority of In-Home Advisors and Geek Squad Agents. Additionally, some corporate
employees are participating in voluntary reduced work weeks and resulting pay, as
well as voluntary furloughs.
In keeping with our view that all of us are in this together, I am foregoing 50% of my
base salary and the members of the Board of Directors are foregoing 50% of their
cash retainer fees. Company executives reporting directly to me are taking a 20%
reduction in base salary.
In addition, we are taking other actions to maximize liquidity:
Lowering merchandise receipts to match demand with a focus on essential
items for our customers
Extending payment terms in partnership with key merchandising vendors
Reducing promotional and marketing spend aligned to our temporary
operating model
Lowering capital spend to focus on mandatory maintenance or high-value
strategic areas
Suspending 401(k) company matching program
To bolster our cash position and maximize flexibility in this fluid environment, on
March 19, 2020, we announced that we drew the full amount of our $1.25 billion
revolving credit facility, which was undrawn as of February 1, 2020. This is in addition
to the approximately $2 billion in cash and cash equivalents held as of March 19, 2020.
We also suspended all share repurchases.
The world is likely facing a prolonged health and economic crisis. As such, I believe it
is important to articulate how the management team and I are making decisions that
affect not just our business, but the health and safety of our customers and our
employees.
Like many, we have publicly stated that the safety of our employees and customers
comes first. But what does that really mean? To us, it is about two distinct but
interrelated factors. The first is the question of how safe, on an empirical basis, we can
make any given interaction. This is not judged on a relative scale and, instead, is made
like all science-based decisions, based on the best available data, insight and
expertise we can gather. For instance, the facts tell us protective equipment, social
distancing practices and employee self-health checks help our employees stay safe
under specific circumstances. The second factor we consider is the value of a given
activity. We firmly believe, for instance, that serving customers through contactless,
curbside pickup is extremely valuable because we can immediately offer the type of
technology and appliances needed to stay at home and stay safe.
These two factors were deeply considered in the decision we made in March to
suspend in-home repair and installation activities. They were also factors in the
decision we made just this past week to return to customers homes. A month ago, we
did not believe that our existing processes would address the two factors we laid out
above. Our in-home services were clearly valuable based on customer feedback, but
we did not believe that we could meet our science-based goal of making the
experience safe. Now, a month and a great deal of insight later, we believe we have
created a safe and exceptionally valuable service, particularly as everyone is more
tethered to their homes.
There is one, final, factor we consider. While we can articulate how valuable and safe
our work is, only our customers and employees can decide how safe they actually
feel. Our strong view is that the trust these two constituencies have in us and how we
make decisions is a key asset. This means it doesnt matter to me or my colleagues if
were sure something is safe or vital, only if our customers and employees agree.
We entered the year with financial and strategic momentum and a strong balance
sheet. We have a suite of assets that allow us to uniquely and safely serve our
customers, such as curbside pickup, free next-day shipping, remote technical advice
and support, virtual consultations, and doorstep delivery. We know customers and
employees will have different shopping expectations, anchored in safe environments
and processes. We hope to set the standard for safe retailing by constantly adapting
our model, leveraging and building on our unique suite of assets. As challenging as the
current situation is, we believe we are managing through it in a way that leaves us well
positioned to deliver on our purpose and thrive in a new and different environment.
Enriching lives through technology
As I mentioned earlier in this letter, our purpose is to enrich lives through technology.
Our Building the New Blue strategy is designed to deliver on that purpose by
leveraging our unique combination of tech and touch to meet everyday human needs
and build more and deeper relationships with customers.
While it may feel distant considering todays environment, our teams delivered strong
results and materially advanced our strategy in fiscal 2020. That was only made
possible by meeting our customers when and where they want. We have achieved
true multichannel status, evidenced by this slide we shared at our Investor Update
meeting last September:
We made strategic changes to our field operations to create a more seamless
experience across channels putting leaders in a position to be accountable for
stores, services, supply chain and home propositions in their market. These leaders
are supported by a channel agnostic program centered around insights, data and
analytics to view a markets largest opportunities and fast track initiatives that both
improve the customer experience and provide a positive financial impact.
We also enhanced the in-home experience for our customers. During fiscal 2020, we
expanded our in-home consultation program from 530 to 725 advisors. This,
combined with tools to maximize their productivity, helped us decrease the amount of
time customers were waiting for an advisor appointment a key driver of customer
satisfaction and close rate and allowed us to provide more than 250,000 free, in-
home technology consultations to customers across the nation. Both employees and
customers continue to love the program the Net Promoter Score for purchasers is
high, and the advisor employee turnover remains low.
As we ended the year, we saw a growing percentage of repeat purchases as
customers develop and take advantage of their relationships with their Advisors. This,
of course, was the intent when we began the program and were delighted to see
these relationships being built as we continue to increase investment in technology
that is perfectly suited to this new kind of seamless customer interaction.
Technology support and service is another important way we are building
relationships with our customers. We grew our Total Tech Support membership
steadily through the year to end with almost 2.3 million members, versus
approximately 1.0 million members at the end of fiscal 2019. Our Total Tech Support
program provides members unlimited Geek Squad support for all their technology no
matter where or when they bought it, in addition to great discounts on installations,
protection and in-home services. The program garners strong customer reviews, and
members spend more and are twice as likely to use other services than non-members.
In addition, last year we became the nations largest physical destination in terms of
points-of-presence for Apple-authorized repair services, including same-day iPhone
repairs. Almost 40% of these Apple repair customers are either new to Best Buy or
havent made a purchase in the last year.
We continued to advance our health strategy. Our focus on health, in particular
helping seniors live longer in their homes with our unique combination of tech and
touch, has become even more relevant as the world responds to the impacts of
COVID-19. In fiscal 2020, we successfully integrated two additional acquisitions that
have given us unique and essential capabilities and infrastructure, talent and a base of
customer relationships to build from. We serve more than 1 million seniors today and
are encouraged by the conversations we are having with potential partners to grow
that significantly over time.
During fiscal 2020, we continued to build on our already strong multichannel
capabilities. We innovated and designed digital experiences that solve customer
needs across online and physical shopping. This includes enhancing our digital
shopping platforms with new functionality and evolving our marketing strategies to
drive engagement with our customers, with a particular focus on our app. At the same
time, we continued to transform our supply chain, using automation and process
improvements to expand fulfillment options, increase delivery speed and improve the
delivery and installation experience.
As a result, our online sales grew 17% to make up almost 20% of our Domestic revenue
in fiscal 2020. Furthermore, online sales are up more than 250% compared to last year
since we moved to our interim curbside-only model, driving the 70% overall sales
retention.1
As we have reiterated many times, our ongoing focus on reducing cost and driving
efficiencies in order to fund investments and help offset pressures is a key element of
our long-term strategy. Last year, we completed the $600 million cost reduction
target that we had set in fiscal 2018.
Of course, our success with customers and the progress we are making on our
Building the New Blue strategy is driven by the enthusiasm, talent and purposeful
leadership of our employees. Last year we announced our goal of becoming one of
the best companies to work for in the United States. To that end, we continued to
invest in wages, training and many new employee benefits, including paid time off for
part-time employees, paid caregiver leave, expanded mental health benefits,
enhanced adoption assistance and a new surrogacy-assistance benefit.
Our progress has also been noticed outside the company. We are proud of the
breadth of recognition we have received including ranking Number 66 on Forbes
list of the Worlds Best Employers, and being named the Number 1 Best Company to
Work for During the Holiday Season by Glassdoor. We are also honored to be ranked
one of the top employers for students and graduates of Historically Black Colleges
and Universities.
Board of Directors Involvement
Our Board of Directors plays a critical role in shaping and supporting our strategy and,
more broadly speaking, the future of Best Buy. Our Board is actively engaged in
discussing and helping advance the strategy of the company, ensuring that the
companys talent and resources are aligned with the strategy, and overseeing our
corporate social responsibility and sustainability.
Over the past few months, we have had numerous interactions with our Board on the
topic of the COVID-19 pandemic as we update them on our business and solicit
counsel and feedback.
I am particularly proud of the strength of our Board. Our Board composition
represents a rich, highly relevant and diverse mix of career experiences, expertise,
ethnicities and genders, as our Board will be comprised of more than 50% women as
of June 2020.
Fiscal 2020 Financial Results
Our fiscal 2020 financial performance included Enterprise comparable sales growth
of 2.1%, marking our sixth straight year of positive comparable sales. In addition, our
non-GAAP operating income rate increased by approximately 30 basis points.*
Non-GAAP diluted earnings per share (EPS) were $6.07, up 14.1 % from $5.32 in fiscal 2019.*
And our non-GAAP ROI increased to 22.4%, up from 22.3% in fiscal 2019. *
Capital Allocation and Return to Shareholders
Our capital allocation strategy has remained consistent: 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.
In fiscal 2020, we returned a total of $1.5 billion to shareholders through dividends and
share repurchases.
Corporate Social Responsibility & Sustainability
We strive to be a good corporate citizen in all our interactions with stakeholders,
including customers, employees, vendor partners, shareholders, the environment and
communities in which we operate.
For our business to succeed, we need to hire and retain the best employees. To
accomplish this, we must maintain a supportive and inclusive culture that values
everyones talents, life experiences and backgrounds and offer compensation and
benefits that maintain our competitiveness and reflect our values.
Best Buy has continued to publicly show commitment to equality and non-
discrimination. We joined the Human Rights Campaign and 160 leading U.S.
companies to support the Equality Act, federal legislation that would add protections
for lesbian, gay, bisexual, transgender and queer (LGBTQ) people to U.S. civil rights
laws. We also signed an amicus brief with the U.S. Supreme Court to show support for
Deferred Action for Childhood Arrivals (DACA) recipients.
In addition, in order to help employees financially impacted by the COVID-19
pandemic, we partnered with our founder, Dick Schulze, to establish a $10 million
employee assistance fund, available to all part- and full-time hourly employees who
have been with the company longer than one year. Best Buy and Mr. Schulze shared
equally in the creation of the fund, and our portion was paid by repurposing the
majority of our annual corporate giving budget.
We are committed to supporting teens from underserved communities as they build
brighter futures through technology, training and mentorship. The primary way we do
this is through our network of Best Buy Teen Tech Centers. The centers are safe, after-
school learning spaces equipped with cutting-edge technology where youth learn
new tech skills, stay on track with school, gain exposure to new career possibilities
and benefit from positive adult and peer relationships. We had 33 Teen Tech Centers
operating at the end of fiscal 2020 and are determined to ensure this network is not
adversely affected by the current crisis.
Minimizing carbon emissions in our operations is a priority at Best Buy. We have
achieved significant progress toward our carbon reduction goal of 75 percent by
2030 (over a 2009 baseline), from both operational reductions and renewable
sourcing. In fiscal 2020, we made an investment in partnership with U.S. Bank and X-
Elio to build a solar field that is expected to produce 174,000 MWh of clean electricity
per year.
We also set a new goal to help our customers cut carbon emissions by 20 percent by
2030 through purchasing ENERGY STAR certified products, which will save them $5
billion on utility bills. In addition, we collected more than 204 million pounds of
consumer electronics and appliances for recycling last year, bringing our total to
more than 2.1 billion pounds. We continue to earn recognition from prestigious
organizations, including being named to CDPs Climate A List and ranking among
Barrons Most Sustainable Companies.
For more detailed information about our efforts, we encourage you to refer to our
annual Corporate Responsibility & Sustainability Report at investors.bestbuy.com. Our
fiscal 2020 report is expected to be published in June 2020, and will include
disclosures aligned with the Sustainability Accounting Standards Board (SASB).
***
In summary, we are proud of the progress made in fiscal 2020 and are confident in
our strategy, even in the face of this pandemic and the accompanying economic
upheaval.
It is true the COVID-19 pandemic is a tragic situation that is causing significant
disruption to life as we all know it. However, I am confident that through this time, Best
Buy will remain a strong and vibrant company. Our purpose as a company is only
underscored by our collective reliance on the technology in our homes. And we
deliver on this purpose uniquely through our operational assets and, importantly, the
Best Buy culture, which is human and passionate, with an amazing ability to manage
through difficult times and a huge capacity to learn and change.
Every day I am in awe of the work our employees do on behalf of our customers. I am
deeply grateful to them all and wish to thank each and every one of them.
I also would like to thank you, our shareholders, for your continued support,
confidence and partnership.
Respectfully,
Corie Barry, CEO
Best Buy Co., Inc.
(1) As reported in a company press release on April 15, 2020, represents the year-over-year sales
retention during the time period of March 21, 2020, when the company announced its decision to
shift to the interim operating model and close all of its Domestic stores to customer traffic,
through April 11, 2020. Please refer to the last three pages of the companys fiscal 2020 Annual
Report for more information. Our fiscal 2020 Annual Report is available on our website at
www.investors.bestbuy.com.
* Please refer to the last three pages of the companys fiscal 2020 Annual Report for (a) definitions
and reconciliations of GAAP to non-GAAP, (b) information about interim sales retention and
comparable sales, and (c) information about the forward-looking statements in this letter.
(Registrants telephone number, including area code)
company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b
Composite Index. (For purposes of this calculation, all of the registrants directors and executive officers are deemed affil
“expect,” guidance, “intend,” “foresee,” “outlook,” “plan,” “project” and other words and terms of similar meaning. Such st
our combination of tech and a human touch to meet our customers everyday needs, whether they come to us online, visit
On May 9, 2019, we acquired all of the outstanding shares of Critical Signal Technologies, Inc. (CST), a health services co
ctive healthcare technology business of BioSensics, LLC (BioSensics).
inclusive culture that values everyones talents, life experiences and backgrounds
organizations, including being named to CDPs Climate A List and ranking among Barrons
Described below are certain risks that we believe apply to our business and the industry in which we operate. Each of the following risk
factors should carefully be considered in conjunction with other information provided in this Annual Report on Form 10-K and in our
other public disclosures. The risks described below highlight potential events, trends or other circumstances that could adversely affect
our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing and, consequently, the
market value of our common stock and debt instruments. These risks could cause our future results to differ materially from historical
results and from guidance we may provide regarding our expectations of future financial performance. The risks described below are
not an exhaustive list of all the risks we face. There may be others that we have not identified or that we have deemed to be immaterial.
All forward-looking statements made by us or on our behalf are qualified by the risks described below.
We face strong competition from multi-channel retailers, e-commerce businesses, technology service providers, traditional
store-based retailers, vendors and mobile network carriers, which directly affects our revenue and profitability.
While we constantly strive to offer consumers the best value, the retail sector is highly competitive. Price is of great importance to most
customers, and price transparency and comparability continues to increase, particularly as a result of digital technology. The ability of
consumers to compare prices on a real-time basis puts additional pressure on us to maintain competitive prices. We compete with
many other local, regional, national and international retailers and technology service providers, as well as some of our vendors and
mobile network carriers that market their products directly to consumers. Competition may also result from new entrants into the
markets we serve, offering products and/or services that compete with us.
The retail sector continues to experience a trend towards an increase in sales initiated online and using mobile applications, and some
online-only businesses have lower operating costs. Online and multi-channel retailers continue to focus on delivery services, with
customers increasingly seeking faster, guaranteed delivery times and low-price or free shipping. Our ability to be competitive on
delivery times and delivery costs depends on many factors, and our failure to successfully manage these factors and offer competitive
delivery options could negatively impact the demand for our products and our profit margins. Because our business strategy is based
on offering superior levels of customer service and a full range of services to complement the products we offer, our cost structure might
be higher than some of our competitors, and this, in conjunction with price transparency, could put pressure on our margins. As these
and related competitive factors evolve, we may experience material adverse pressure on our revenue and profitability.
Our strategy to expand into new products, services and technologies brings new business, financial and regulatory risks.
As we introduce new products and services, using new technologies and applications, we may have limited experience in these newer
markets and regulatory environments and our customers may not like our new value propositions. These offerings may present new
and difficult technology challenges, and we may be subject to claims if customers of these offerings experience service disruptions,
failures or other issues. For example, as our value proposition evolves to support the healthcare industry with technology, we may be
subject to privacy and information security rules, such as the Health Insurance Portability and Accountability Act, and/or subject to
increased potential liability risk.
This expanded risk increases the complexity of our business and places significant responsibility on our management, employees,
operations, systems, technical expertise, financial resources, and internal financial and regulatory control and reporting functions. In
addition, new initiatives we test through trials and pilots may not scale or grow effectively or as we expected, which could limit our
growth and negatively affect our operating results. They may also involve significant laws or regulations that are beyond our current
expertise.
In fiscal 2020, we continued to invest in our health strategy and our underlying purpose to enrich lives through technology. The new
health-related services offered might expose us to liability risk resulting from failures in the fulfillment of these services. In addition, the
services and systems used could expose us to customer data privacy and information security risks, as well as business or system
interruption risks. These and other related issues could have a material adverse impact on our financial results.
Our focus on services as a strategic priority exposes us to certain risks that could have a material adverse impact on our
revenue and profitability as well as our reputation.
We offer a full range of services that complement our product offerings, including consultation, delivery, design, installation,
memberships, protection plans, repair, set-up, technical support, and health, safety and caregiving monitoring and support. Designing,
marketing and executing these services is subject to incremental risks. These risks include, for example:
increased labor expense to fulfill our customer promises;
pressure on traditional labor models to meet the evolving landscape of offerings and customer needs;
increased risk of errors or omissions in the fulfillment of services;
unpredictable extended warranty failure rates and related expenses;
employees in transit using company vehicles to visit customer locations and employees being present in customer homes,
which may increase our scope of liability;
the potential for increased scope of liability relating to managed services offerings;
employees having access to customer devices, including the information held on those devices, which may increase our
responsibility for the security of those devices and privacy of the data they hold;
the engagement of third parties to assist with some aspects of construction and installation, and the potential responsibility for
the actions they undertake;
the risk that in-home services could be more adversely impacted by inclement weather, health and safety concerns, and
catastrophic events; and
increased risk of non-compliance with new laws and regulations applicable to these services.
We are subject to risks associated with company transformation.
Our transformational activities within the organization are necessary to fully support our strategic vision for future customer and income
growth, including our Building the New Blue strategy, and any decreased capability to undertake those activities may have a material
impact on achieving that strategy.
Any limitations in organizational, financial or operational infrastructure could decrease our ability to realize transformational objectives
supporting our key strategic initiatives relating to our development of competitive advantages, creating solutions for customers and
providing differentiated value. If we do not have access to, or fail to dedicate, the appropriate people, management focus and resources
to implementing these transformational objectives, our long-term growth and profitability could be adversely affected.
Our reliance on key vendors and mobile network carriers subjects us to various risks and uncertainties which could affect our
revenue and profitability.
We source the products we sell from a wide variety of domestic and international vendors. In fiscal 2020, our 20 largest suppliers
accounted for approximately 79% of the merchandise we purchased, with five suppliers – Apple, Samsung, Hewlett-Packard, Sony and
LG – representing approximately 56% of total merchandise purchased. We generally do not have long-term written contracts with our
vendors that would require them to continue supplying us with merchandise. Our profitability depends on our securing acceptable terms
with our vendors for, among other things, the price of merchandise we purchase from them, funding for various forms of promotional
programs, payment terms, allocations of merchandise, development of compelling assortments of products, operation of vendor-
focused shopping experiences within our stores and terms covering returns and factory warranties. While we believe we offer
capabilities that these vendors value and depend upon to varying degrees, our vendors may be able to leverage their competitive
advantage
