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http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Mzk2M3xDaGlsZElEPS0xfFR5cGU9Mw==&t=1 Best Buy is feeling the recession just as much as any company. They are dealing with it pretty well though. Circuit City dropping out of the electronic market is helping them out greatly. They are also still buying out other companies and growing as much as possible. This gives the impression that they’re not just trying to stay float but trying to thrive. Their stock seems to be going up but could even out soon. Overall I would say that Best Buy is doing just about as well as they can be, however, this is not as well as it once was. Best Buy’s Annual Report The CEO is Bradbury Anderson and the COO is Brian Dunn Best Buy Co., Inc. 7601 Penn Ave S. Richfield, MN 55423 Fiscal year ended February 28, 2009 Best Buy sells consumer electronics, services such as the geek squad, home office equipment, entertainment software, and appliances. Best Buy has 1,023 locations all over the United States and has expanded to Canada, China, and Mexico. They also bought out Napster and an electronics company in Europe. Deloitte and Touche LLP are the auditors Basically what Deloitte and Touche LLP said about Best Buy’s financial statement is that they believe the company’s internal control are effective and true in their financial accounting. Recent Price: $37.59 The twelve month trading range was from $16.42 to $48.99 Best Buy currently offers 14 cents per share The above information is from September 17th 2009 In my opinion I would say that a stockholder should hold the stock. The stock had a huge dip at the beginning of the year but has since then been steadily going up since the bankruptcy of Circuit City. The electronics industry is most certainly feeling the effects of the depression. This is in large part because electronics are usually a discretionary item rather than a necessity. Another thing to look at is how much media Best Buy sells. This media is becoming more and more available over the internet. However, despite all of this Best Buy is doing rather well. Circuit City was it’s number one competition and has gone bankrupt. This has opened up opportunities to open stores in smaller cities that once had a circuit city but no longer do. Best Buy opened 285 new stores in fiscal 2009. For it’s future plans Best Buy plans on opening 65 stores in fiscal 2010. Most of what they expect to do is open stores in other countries, including Turkey. Best Buy has recently announced that they will be expanding it’s private-label electronics. Best Buy is doing this because the profit margin is greater on these items. http://articles.moneycentral.msn.com/Investing/Extra/best-buy-rolls-out-new-products.aspx http://www.forbes.com/2009/06/16/factset-research-systems-personal-finance-investing-ideas-best- buy.html http://www.forbes.com/2009/07/15/circuit-city-bankruptcy-personal-finance-investing-ideas-best- buy.html •The format is multi-step •All $ are in millions 2008 2009 Gross Profit $9,546 $10,998 Income from Operations $2,161 $1,870 Net Income $1,407 $1,003 •The table shows that gross profit increased, however when you look at the net income and income from operations you realize that these have both dropped. The reason for this is because the company has opened more stores. They are selling less per store but have many more stores. •One of the assets that had changed the most was equipment and this is probably because of the new stores that have opened. Best Buy also increased in trademarks greatly. Liabilities also increased. Short term debt was one of the main reasons for the increase in liabilities. The purchase of new stores could also be the reason for the increase in short term debt because of the rent being paid. Stockholders’ equity stayed pretty consistent. 2008 2009 Assets $12,758 $15,826 Liabilities $8,274 $11,183 Stockholders’ Equity $4,484 $4,643 All $ in millions •Cash flows have been more than net income for the past two years. •As I said in my assessment of the balance sheet equipment has grown a lot over the past year. So yes, the company is growing greatly through long lived assets. •Best Buy’s primary source of financing seems to be it’s sales of investments however in fiscal 2009 it saw a dramatic decrease. Issuance of debt was it’s biggest source of financing in 2009. •Overall cash has decreased over the past two years. Best Buy saw a decrease in sales of investments from $10.9 billion in fiscal 2008 to $246 million in fiscal 2009. •One of the significant accounting policies is that there are two reportable segments. One being domestic and one being international. Best Buy computes property and equipment depreciation based on the straight-line method. •Topics of the notes to the financial statements: 1. Summary of significant accounting policies 9. Benefit plans 2. Acquisitions 10. Income taxes 3. Investments 11. Segment and geographic information 4. Fair value measurements 12. Contingencies and commitments 5. Restructuring charges 13. Related-party transactions 6. Debt 14. Condensed and consolidating financial information 7. Shareholders’ equity 15. Supplementary financial information 8. Leases Working Capital: A negative working capital means that 2009 2008 Best Buy is not able to pay off it’s short term liabilities. However in 2008 the company had a working capital Working Capital $(243) $573 million and was able to pay off it’s short term liabilities. million Current Ratio: Since Best Buy has a current ratio of at least one for both years it means that at this point in time Current Ratio 1.0 1.1 it could pay off it’s current liabilities with it’s current assets. Receivable 45015/1868= 40023/549= Receivable turnover: Accounts receivable jumped in 2009 because Best Buy bought out some stores in Turnover 24.1 72.9 Europe. Also Best Buy did not differentiate between cash and credit sales. Average Days’ 365/24.1= 365/72.9= Average days’ sales uncollected: This is how long it would take for Best Buy to collect accounts receivable. Sales 15.2 days 5 days It has increased greatly over the last year again because Uncollected of the buyouts. Inventory turnover: Inventory turnover has increased Inventory 34017/4753= 30477/4708= which is good because it’s because sales has increased Turnover 7.2 6.5 and not because inventory has decreased. Selling it’s whole inventory over 7 times in an accounting period is reasonably good for a company. Average Days’ 365/7.2= 365/6.5= Average days’ inventory on hand: It takes about 50 days Inventory On 50.7 56.2 for Best Buy to sell all of it’s inventory in stock . It has decreased over the last year but is still relatively high. Hand Profit margin: Profit margin has decreased a lot over 2009 2008 the last year. One of the reasons for this was the sales that Best Buy was forced to have. The economy has forced Best Buy to have sales. Profit margin is Profit 1003/450 1407/400 greatest on complimentary items such as printers Margin 15= 23= and cables that are not always necessary. Consumers 2.2% 3.5% are just not buying as much of these items right now. Asset turnover: Best Buy is pretty effective at turning assets into sales. Asset 45015/15 40023/12 Return on assets: Return on assets fell greatly during Turnover 826= 758= the last year. This is probably because of the banking 2.8 times 3.1 times situation. It will be interesting to see where it is at, at the end of the next fiscal year. Return 1003/158 1407/1275 Return on equity: Return on equity also fell this year. Best Buys investors have lost money on this On 26= 8= investment, but overall the economy was down this Assets 6.3% 11% year. This number is also not nearly as bad as it could have been. For a while it wasn’t looking good at all. Return 1003/456 1407/534 The stock has also gone up since the end of the fiscal On 3.5= 2.5= year. Equity 22% 26.3% Best Buy’s debt to equity is quite a bit higher this year than last. This is probably because of the buyouts. The probably used debt to finance the buyouts. As long as the investments pay off this should be fine. 2009 2008 Debt to Equity 11183/4643=2.41 8274/4484=1.85 2009 2008 Price/Earnings per 41/2.43=16.9 41/3.2=12.8 share Dividend Yield 1.6% 1.1% Price/earnings per share: Best Buy’s price/earnings ratio grew which means that investors are willing to pay more for every unit of income. Dividend yield: The dividend yield actually increased over the last year. This means that they are paying higher dividends than last year on average.