We plan to open or convert an additional 150 to 200 U.S. Best Buy stores to this model by the end of fiscal 2006. By year-end, we expect to operate 250 to 300 segmented stores.

Second, we will strengthen and expand our service offerings. We see opportunities in the marketplace to become the premier national provider of computer services and to support booming sales of digital televisions, which are much more complex than the analog televisions they replace. Therefore, two areas we are targeting for growth include Geek Squad services and home theater installation.

Third, we will work to boost employee retention. This effort will draw on insights from our customer centricity stores, which have higher retention than our other stores, and our strengths-based approach to management.

Fourth, we will add individualized marketing capabilities to our skills in mass marketing, as certain customer segments do not rely on the mass media for their information.

Fifth, we will simplify our internal

processes so that they can adapt to changing customer needs.

Clearly, these five goals are linked. We expect higher returns if knowledgeable and experienced employees deliver innovative products and services that suit changing lifestyles and reach new customers through individualized marketing programs…all supported by more agile supply chain and technology systems.

Increasing Our Operating Income Rate

We believe this work supports our corporate goal of achieving a 7-percent operating income rate in the next three years. We have set this aggressive profit goal to stimulate thinking and innovation in the business. Our roadmap to the 7-percent goal has four components: the organic growth fueled by our transformation to customer centricity, including the expansion of our services business; better supply chain management and merchandising; the reduction of our total cost of ownership in information technology; and expansion of the operating income rate of our stores in Canada.