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Extending our Leadership
     into New Technologies

We had a banner year at Best Buy stores
Despite a national recession, our sales for the fiscal year increased by 12 percent to $17.0 billion, driven by new stores and comparable store sales gains of 1.9 percent. We boosted our operating margin by 120 basis points and increased our market share to 14 percent. We maintained industry-leading inventory turns at 7.5 times. We continued to excel in sales of digital products, which comprised 17 percent of sales last year, compared with 12 percent the prior year. In addition, our e-commerce site ranked third in the country, based on customer visits; nearly 40 percent of customers shopping our stores said they had visited us online prior to their purchase.

While our performance in the past year was strong, it is by no means the end of the story. Our goal is not only to be a leader, but to define what leadership means in retailing. To achieve that, we must continue to improve and to grow.
Growing Organically
In the coming year, we plan to continue our revenue growth by opening approximately 60 more stores, half of which will be in our 30,000-square-foot format and half in our 45,000-square-foot format. This year we plan to enter five states and expand our metropolitan New York presence, including our first store in Manhattan.
We also have the opportunity to increase the productivity of our existing stores. Our newest store design, called Concept 5, facilitates growth by showcasing the newest digital technologies. It offers improved placement of products to encourage the sale of services and accessories along with each device. Its flexible architecture allows us to adjust easily the space we allocate to each product category. The single-queue checkout and 
convenience store reduce waiting time and make it more fun. The transaction center lets customers sit and have a relaxed discussion during more complex purchases. In fiscal 2003 all our new stores will utilize this new design, and we expect to remodel 10 stores using this design as well.

In addition, we expect to boost store productivity by enhancing our sales training, building customer loyalty, improving our supply chain management and more closely synchronizing our e-commerce business with our stores to give customers access to us wherever, whenever and however they want it. Next Page

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