Docstoc

LER_Best_Buy

Document Sample
LER_Best_Buy Powered By Docstoc
					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.

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:8
posted:12/24/2010
language:English
pages:14