In the second quarter of fiscal 2001, the Company launched its online shopping site, BestBuy.com. The Company’s clicks-and-mortar strategy is designed to empower consumers to research and purchase products seamlessly across the Best Buy retail environment – online or in retail stores. The online site initially offered consumer electronics products, music and movies. Later in the year, the product offerings were expanded to include computers and related products. While online revenues do not currently represent a significant portion of the Company’s business, the Company believes the investment in and increased expenses associated with the development, launch and operation of a comprehensive Internet strategy creates a significant future growth opportunity in serving consumers both online and in retail stores.
Fiscal 2000 revenues
increased 24% to $12.5 billion, compared with $10.1 billion in fiscal
1999, due to an 11.1% increase in comparable store sales, 47 new stores
and a full year of operations at the 28 stores opened in fiscal 1999. The
increase in comparable store sales reflected the continued strength in
consumer spending and the Company’s ability to gain market share. Higher
levels of disposable income due to the strong economy, consumers’ rapid
acceptance of digital technology products and the increased affordability
of personal computers all drove consumer demand. Internet service
providers (ISPs) offered new subscribers significant rebates on purchases
of personal computers, making them more affordable. These offers
stimulated unit sales of personal computers and sales of higher-margin
accessories and Performance Service Plans (PSPs).
Product Category Performance
The following table presents the Best Buy retail store sales mix by major
product category for each of the past three fiscal years.
* Prior-year percentages have been adjusted to reflect current year categorization of products. The primary change was to reclassify cameras and photographic equipment from the “other” category to consumer electronics – video.
Home Office
Best Buy’s home office category experienced positive comparable store
sales growth in 2001 as a whole; however, sales slowed through the latter
half of the year as consumer demand for personal computers declined.
Revenues were driven by a variety of products, including wireless
communications, computer peripherals, configure-to-order computer
offerings, notebook computers and personal digital assistants (PDAs). ISPs
continued to offer new subscribers significant rebates on the purchase of
personal computers and other products, stimulating demand. As a result of
its strategic alliance with Microsoft Corporation and Best Buy’s retail
execution, the Company signed up more than 1.3 million new ISP
subscriptions in fiscal 2001, which had a favorable impact on computer
sales and other product sales. Laptop computers and configure-to-order
computers, which generally carry a higher gross profit margin, increased
in their percentage of the computer business’ sales mix. Consumer demand
has been shifting to higher-priced, more fully featured computers. Desktop
personal computer sales declined as a result of the industry-wide decline
in unit sales volume and a slight decrease in average selling prices.
Computer peripherals, including CD drives with read/write capabilities,
generated strong sales gains during the year. Sales of PDAs increased
significantly in fiscal 2001 and contributed to the category’s positive
comparable store sales growth. The re-merchandising of wireless
communications and other digital products within this category to a more
prominent position at the front of the stores contributed to the
comparable store sales increase. 
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