Dear Shareholders

Over the years, our most significant advances as a company generally have resulted from periods of stress. For example, our move to a superstore format with great brands at fair prices was precipitated by a 1981 tornado that nearly demolished our most profitable store. Similarly, our “process to profits” initiative, which enabled us to lead the industry with a 5-percent operating income rate, was born in the aftermath of a major financial crisis in 1996.

Today, in contrast, we are transforming the company despite being at the top of our game. We are the No.1 retailer of consumer electronics in North America. Our sales productivity per square foot exceeds that of many other retailers. Our earnings growth in the past decade has averaged 36 percent. Yet we believe that we can accelerate our organic growth and boost our returns for shareholders by investing in our two greatest assets, our customers and our employees.

The idea was grounded in insights gleaned from data we had collected on 60 million U.S. households, spanning more than five years. Our analysis showed thatthe top 20 percent of customers

generated more than 100 percent of the profits, and that our customers are hardly a monolithic group. These insights come alive when paired with employee training in financial acumen and an owner/ operator culture. Our new operating model, which we call customer centricity, gives our employees more power to tailor their store, their product assortments and their service to the unique needs of specific customer segments who shop in our stores. We believe that this operating model further differentiates Best Buy from mass merchants, direct retailers and online players. These competitors generally do not offer our assortments of brands, our level of services, our expertise on digital lifestyles or a fun in-store experience.

At the same time, customer centricity enables us to take advantage of current gaps in the marketplace. For example, changing competitive dynamics have left a gap in the marketplace for serving affluent, early adopters of technology. Nor do we see an integrated, holistic provider of services to small businesses with fewer than 20 employees. Upscale suburban moms represent another growth opportunity for us. Finally, we know we also must protect the customer segments we have served for years, including families that are practical adopters of technology as well as young technology enthusiasts.