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MD&A pg 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 |
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The Domestic gross profit rate increased to 25.0% of revenue in fiscal 2003, compared with 24.9% of revenue the prior fiscal year. The gross profit rate improvement was mainly due to a more profitable revenue mix at U.S. Best Buy stores. Revenue in the higher-margin consumer electronics category experienced larger increases than revenue in the home office category, which generally includes lower-margin products. In addition, the gross profit rate benefited modestly from improved supply chain management. The gross profit rate was negatively impacted by gross profit rate declines in the home office product category, partially due to promotional pressure on desktop computers, the largest product group in the category.
The fiscal 2003 SG&A rate for the Domestic segment was 19.8% of
revenue, consistent with the prior fiscal year. The SG&A rate
was negatively impacted by the deleveraging effect of a modest
comparable store sales increase; increased depreciation expense
related to technology investments; and investments in personnel
and outside consultants to support strategic initiatives and
business growth. In addition, the SG&A rate was impacted by
lease termination and asset impairment charges associated with
vacating existing corporate facilities in connection with the
relocation to our new corporate campus in fiscal 2004. These
factors were offset by expense reductions initiated in the
second half of fiscal 2003 and additional expense leverage
resulting from opening new stores in existing markets. |
| The following table reconciles Domestic stores open at the beginning and end of fiscal 2003: |
|
Total Stores at |
Stores |
Stores |
Total Stores at |
|
| U.S.Best Buy stores |
481 |
67 |
— |
548 |
| Magnolia Hi-Fi stores |
13 |
6 |
— |
19 |
| Total |
494 |
73 |
— |
567 |
|
The following table reconciles Domestic stores open at the beginning and end of fiscal 2002: |
|
Total Stores at |
Stores |
Stores |
Total Stores at |
|
| U.S.Best Buy stores |
419 |
62 |
— |
481 |
| Magnolia Hi-Fi stores |
13 |
— |
— |
13 |
| Total |
432 |
62 |
— |
494 |
| During fiscal 2003, we opened 67 new U.S. Best Buy stores, including 33 stores in our 45,000-square-foot format and 34 stores in our smaller market formats. At the end of fiscal 2003, we operated 548 U.S. Best Buy stores compared with 481 stores at the end of fiscal 2002. In addition, we remodeled three U.S. Best Buy stores and expanded one U.S. Best Buy store during fiscal 2003, compared with three remodeled stores and two expanded stores in fiscal 2002. Magnolia Hi-Fi opened six new stores during fiscal 2003 and operated 19 stores at the end of the fiscal year. Magnolia Hi-Fi did not remodel or expand any stores during fiscal 2003 or 2002. >> |
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