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International
The following table presents selected financial data for the International segment for each of the past two
fiscal years ($ in millions):

Segment Performance Summary (unaudited)	2003	As-Adjusted 2002⁽¹⁾	2002⁽²⁾

Revenue	$1,643	$1,391	$596
Comparable stores sales % gain⁽³⁾	4.3%	N/A	17.4%
Gross profit as a % of revenue	25.0%	25.0%	23.4%
SG&A as a % of revenue	24.5%	23.1%	19.7%
Operating income	$ 8	$ 27	$ 22
Operating income as a % of revenue	0.5%	1.9%	3.7%

⁽¹⁾ As-adjusted information presents the results of operations as though Future Shop had been acquired at the beginning of fiscal 2002 and conforms the accounting for vendor allowances to the fiscal 2003 method.
⁽²⁾ Reflects results of operations of Future Shop subsequent to its acquisition in November of fiscal 2002.
⁽³⁾ Includes revenue at stores and Internet sites operating for at least 14 full months, as well as remodeled and expanded locations. Relocated stores are excluded from the comparable store sales calculation until at least 14 full months after reopening. Acquired stores are included in the comparable store sales calculation beginning with the first full quarter following the first anniversary of the date of acquisition. The calculation of the comparable store sales gain excludes the impact of fluctuations in the foreign currency exchange rates.

The International segment generated operating income of $8 million in fiscal 2003, compared with $27 million on an as-adjusted basis in the prior fiscal year. The decline in operating income was primarily due to higher SG&A, partially offset by increased gross profits resulting from revenue growth.

International revenue increased 18% to $1.6 billion, compared with $1.4 billion last fiscal year. New store openings and a 4.3% comparable store sales gain drove the increase in revenue. Approximately four-fifths of the revenue gain was attributable to the opening of new stores in the past two fiscal years. The remainder of the revenue gain was due to the comparable store sales gain. The comparable store sales gain was driven by increased revenue from entertainment software and consumer electronics products, which includes rapidly expanding revenue from digital products.

The International gross profit rate was 25.0% of revenue in fiscal 2003, unchanged from the prior fiscal year. The gross profit rate benefited from a shift in the revenue mix to higher-margin digital products and accessories. The benefit from the higher-margin revenue mix was offset by rising costs for third-party credit in the latter part of the fiscal year and a more promotional environment.

The SG&A rate for the International segment increased to 24.5% of revenue, compared with 23.1% of revenue in the prior fiscal year. The SG&A rate increase was primarily due to expenses associated with launching Canadian Best Buy stores and strategic investments intended to improve the future efficiency and profitability of International operations. The SG&A rate increase was partially offset by expense leverage due to new store openings and the comparable store sales gain.

The following table reconciles International stores open at the beginning and end of fiscal 2003:

	Total Stores at End of Fiscal 2002	Stores Opened	Stores Closed	Total Stores at End of Fiscal 2003

Future Shop stores	95	9	—	104
Canadian Best Buy stores	—	8	—	8

Total	95	17	—	112

The following table reconciles International stores open at the beginning and end of fiscal 2002:

	Total Stores at End of Fiscal 2001	Stores Acquired Fiscal 2002	Stores Opened	Stores Closed	Total Stores at End of Fiscal 2003

Future Shop stores	—	91	4	—	95
Canadian Best Buy stores	—	—	—	—	—

Total	—	91	4	—	95

During fiscal 2003, we finalized the allocation of the Future Shop purchase price to the assets and liabilities acquired. The primary adjustments to the preliminary purchase price allocation were to assign value to the “Future Shop” trade name as a result of our decision to operate stores in Canada under both the Best Buy and Future Shop trade names and to adjust the extended service contract liability assumed as of the date of acquisition based on additional information. The final purchase price allocation resulted in a $5 million decrease to goodwill from our preliminary allocation. For more information regarding the final purchase price allocation, refer to note 3 of the Notes to Consolidated Financial Statements.

During the fourth quarter of fiscal 2003, we completed our annual impairment testing of the goodwill recorded in our International segment and determined that no impairment existed based on expectations for the business and the prevailing retail environment. >>