Best Buy Co., Inc. · NYSE:BBY
Best Buy — H1 2010-11 Earnings Presentation
62 slides from Best Buy's earnings presentation, Nov 5, 2010
Slide 1: Carphone Warehouse Group plc Interim Results 5th Nov 2010
Carphone Warehouse Group plc Interim Results 5th Nov 2010
Slide 2: Agenda
Agenda H1 Highlights Best Buy Europe: CPW Europe Wireless World Strategy Best Buy UK On-line launch Best Buy Mobile Virgin Mobile Financials Charles Dunstone Roger Taylor / Andrew Harrison / Andrew Brem Roger Taylor Nigel Langstaff
Slide 3: Charles Dunstone, Chairman Highlights
Charles Dunstone, Chairman Highlights
Slide 4: A successful start to the year
A successful start to the year.... Highlights: - CPW Europe: H1 LFL 2.4% and 56% uplift in H1 EBIT to £44m - Significant out-performance at Best Buy Mobile, with H1 profit share of £43m and full year guidance raised to £85-95m - Additional investment planned in Best Buy UK, with full year EBIT loss
Slide 5: Roger Taylor, CEO Best Buy Europe
Roger Taylor, CEO Best Buy Europe
Slide 6: Carphone Warehouse Group plc structure
Carphone Warehouse Group plc + Virgin Mobile France 47.1% Freehold and Cash 100% Best Buy Europe 50% + ‘Big Box’ = + + (JV with Best Buy Inc)
Slide 7: The home of smartphones
The home of smartphones
Slide 8: Becoming the Smart home for the Connected World
.....becoming the Smart home for the “Connected World”
Slide 9: Pay as you go Christmas range and smartphone sale pricing
“Our pay as you go Christmas range from 99p” “Smartphone SALE from £59.95” 2009 price range: £9.95 - £19.95 2010 price range: £0.99 - £4.95 £59.95 £99.95 £89.95 £99.95 £149.95 £149.95 £0.99 £3.95 £4.95 £4.95 Traditional Prepay New Smart Prepay
Slide 10: CPW across Europe
CPW across Europe Market Footfall from March 08 % Smartphone (postpay) Q2 10/11 -5.3% 75% -14.9% 61% -22.7% 31% -28.9% 43% -1.3% 59% -5.7% 64% -17.7% 21% -16.9% 42% -22.6% 15% Network commercials Remove sales commission European Wide ‘Go To Market’ Roll out of ‘Wireless Stores’ (by 31 March 2011): U
Slide 11: Developed Strategy for Wireless World Stores
Developed Strategy for ‘Wireless World’ Stores
Slide 12: Wireless World Strategy
Andrew Harrison, COO, Best Buy Europe ‘Wireless World’ Strategy
Slide 13: The Connected World
The Connected World oy mubile
Slide 14: HACCS at the centre of our strategy
Hardware Connections Content Services Accessories Smartphones Netbooks Laptops Tablet/slate HACCS at the centre of our strategy
Slide 15: Our journey to a connected world
Our journey to a connected world
Slide 16: Media Tablets likely to sell more volume than netbooks in 2011
Media Tablets are likely to sell more volume than netbooks in 2011 The market forecast from Gartner for 2011 now stands at 55m units worldwide (vs. 38m netbooks) rising to 154m units in 2013 and 208 million in 2014 55m units would equate to 44% more volume than netbooks but less than 20% of the Smar
Slide 17: Wireless Store Format 3.0
Coming to life across our business: Wireless Store Format 3.0
Slide 18: Wireless World launched in Spain and Germany
Successfully launched across Europe: ‘Wireless World’ in Spain and Germany
Slide 19: Bringing the best of CPW and Best Buy together
Bringing the best of CPW and Best Buy together Mobile-On the Go In the Home
Slide 20: A Proven Format
A Proven Format Cost of a refit c.£0.1m Payback 1-2 yrs Footfall up c.15-20% Trading margin up +20% The Wireless format has delivered growth in all core categories
Slide 21: Plan to transform the estate
Plan to transform the estate Number of ‘wireless world’ stores today 43 UK 14 Spain 1 Germany 100 target by March 2011 A further 300 across UK and Europe FY 2011/12 (taking the total to c.400 by March 2012) Exporting the best of the ‘Wireless World’ to even the smallest stores Key growth driver
Slide 22: CPW Europe: H1 Highlights
CPW Europe: H1 Highlights Smartphones driving postpaid segment UK driving LFL performance New store strategy developed and launched ‘Connected World’ gathering pace Reiterating guidance of 15-20% EBIT growth
Slide 23: Best Buy UK Big Box
Best Buy UK ‘Big Box’
Slide 24: Best Buy UK Big Box stores now open
Best Buy UK ‘Big Box’ 6 stores now open (selling area sq ft shown) Thurrock 44,000sq ft, Southampton 29,000 sq ft, West Midlands 33,000 sq ft, Liverpool 36,000 sq ft, Croydon 26,000 sq ft, Derby 30,000 sq ft
Slide 25: Best Buy UK: Technology store centred around the Connected World
Best Buy UK : Technology store centred around the Connected World Focus on customers: service and experience Performance to date encouraging Brand awareness key to success
Slide 26: Brand awareness is key
Brand awareness is key Spontaneous Awareness - In catchment 0 0.2 0.4 0.6 0.8 1 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Best Buy
Slide 27: Knowledge of what Best Buy sells is improving
Knowledge of what Best Buy sells is improving month on month In store perception is very positive % of those aware of Best Buy who know what we sell 41% 42% 61% 68% 83% April May June July August Verbatim comments in store 95% 5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Positive comments Negative
Slide 28: Online has launched
Online has launched: Best Buy is now an established retailer with national reach Online share of electricals market was 24% in 2009 (online spend £5.5bn, market size £22.7bn) Forecast to grow to 38% by 2014 (online spend £9bn, market size £23.5bn) Source: Verdict, datamonitor group Electricals marke
Slide 29: Andrew Brem, Multichannel Director Online Launch
Andrew Brem, Multichannel Director Online Launch
Slide 30: Online store welcome page
> Welcome too online store Latest Deals Computing Inspiration & Advice TWaHome cinems Find your nearest store Masi Movies Cameras & Mobile od Green Tech Services napa Goncwders "GPS" Adio. Energy whdviee ot GALAXY TAB 7" screen &Adobe flash support 32GB totalmemory £529.99
Slide 31: OMe Servone
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Slide 32: Callus.on 0333777777 | > Find your nearest store Gp ape
Callus.on 0333777777 | > Find your nearest store Gp ape TiiHome Home Computing Gaming Mus ‘laema Appliances Movies Comeorders GPS MRiechXpert — siogs | Forum | community iia Get started ich Comeras & Mable & “Pod GreenTech Shop by ‘audio Energy Brand
Slide 33: Video guided selling
Video guided selling (Dest by ideo Guided Seng Toot. What size of television do yourequire? 26t042inches Question 1 of 8 Products 110 0f82@2 >< ss 7 5 0u Europe Ws 5
Slide 34: Best Buy UK Big Box: H1 Highlights
Best Buy UK ‘Big Box’: H1 Higlights Successful launch Customer experience excellent Brand awareness now c.15% in catchment areas On-line launched Focus on ‘Connected World’ and technology in store Further investment in proposition and brand in 2010/11
Slide 35: Best Buy Mobile
Best Buy Mobile 8 mubile
Slide 36: Strong Performance: full year guidance raised to £85-£95m
Strong Performance: full year guidance raised to £85-£95m Connections volumes - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Q1 Q2 Q3 Q4 000 s 2008-09 2009-10 2010-11
Slide 37: Best Buy Mobile Store-Within-A-Store
Best Buy Mobile Store-Within-A-Store (SWAS) In all Best Buy stores (1,093) Average space: 1,100 sq ft Primarily located in front of store Current
Slide 38: BBY Mobile SWAS expansion
Approximate 25% increase to SWAS square footage: BBY Mobile SWAS expansion Format of ~ 175 SWAS locations by Thanksgiving Expanded accessory & prepay space Showcasing smartphones & 7 inch tablets
Slide 39: Best Buy Mobile Standalone Stores
Best Buy Mobile Standalone Stores (SAS) Store count End of FY10: 77 End of fiscal 2nd quarter: 120 As of Thanksgiving: ~160 End of FY11: ~175 Further significant store growth Average store size of: ~1,500 sq ft Learning small box capability in the US Introducing the tablet (Samsung Galaxy, Huawei S7
Slide 40: Best Buy Mobile Multichannel Capabilities
Best Buy Mobile Multichannel Capabilities BestBuy.com/Mobile Fully transactional site Recently rolled out “Instant Ship” BestBuyMobile.com Branded as Best Buy Mobile Magazine Content is sourced by Best Buy Mobile employees Features include news and reviews, blogs, mobile phone ‘Tips and Tricks’ vide
Slide 41: Marketing investments helping unaided awareness
Marketing Investments helping unaided awareness DEC 2009 43% MAR 2010 46% JULY 2010 51% SEPT 2010 59% Gen Pop BBYM Unaided Awareness
Slide 42: Tapping Best Buy Brand Assets
Tapping Best Buy Brand Assets Starting in November, the 50m circ weekly insert will feature a special mobile call out...alerting core customers that the brand has the latest & greatest phones & plans This holiday, the 4m packages that BBY.com ships will include a simple flyer inviting customers to c
Slide 43: BBM Draw Rate by Mobile Handset Category
BBM Draw Rate by Mobile Handset Category Definition: Draw rate is % of mobile phone purchasers who visited BBYM before making a purchase
Slide 44: Free Phone Friday
‘Free Phone Friday’ Establish price leadership position heading into Thanksgiving by promoting smartphones on all major networks that have never been free in the US.
Slide 45: Best Buy Mobile US: H1 highlights
Best Buy Mobile US: H1 highlights Continued strong growth Further investment in SWAS and SAS Customer experience and retail execution very strong Significant uplift in H1 profit share Increasing guidance for the full year
Slide 46: Virgin Mobile France
Virgin Mobile Fra .BES UY | AP sos Carphone Warehouse Ge
Slide 47: Virgin Mobile France: a game of two halves
Virgin Mobile France.....a game of two halves H1: Continued revenue growth Strong cashflow Profit generation Tele2 integration Customer service focus Virgin quarterly revenue - 10 20 30 40 50 60 70 80 90 100 FY10 Q1 FY10 Q2 FY10 Q3 FY10 Q4 FY11 Q1 FY11 Q2 Revenue (€ m) Organic Tele2
Slide 48: Virgin Mobile France: H2 renewed focus on customer growth
Virgin Mobile France.....a game of two halves H2, renewed focus on customer growth: Customer recruitment Focus on ARPU Strong product range
Slide 49: Best Buy Europe financials - EBIT
Best Buy Europe financials - EBIT Best Buy Europe EBIT £’m H1 2010-11 H1 2009-10 YoY Revenue 1,668 1,674 -0.4% Gross margin 484 481 GM % 29.0% 28.7% 30bp Opex (424) (413) Best Buy Mobile US 43 11 EBITDA 103 79 31% D&A (45) (47) EBIT 58 32 81% EBIT % 3.5% 1.9% 160bp
Slide 50: Best Buy Europe financials - PAT
Best Buy Europe financials - PAT Best Buy Europe PAT £’m H1 2010-11 H1 2009-10 YoY CPW Europe 44 28 56% Best Buy Mobile US 43 11 299% Best Buy UK (29) (7) EBIT 58 32 81% Interest (7) (6) Tax (13) 3 PAT 38 29 29%
Slide 51: Best Buy Europe financials - cash flow
Best Buy Europe financials - cash flow Best Buy Europe cash flow £’m H1 2010-11 H1 2009-10 EBITDA pre Best Buy UK 129 86 Working capital (80) (91) Capex (26) (26) OFCF pre Best Buy UK 23 (31) Best Buy UK (41) (16) Other (18) (35) Net funds (debt) b/f 57 (47) Net funds (debt) c/f 21 (129)
Slide 52: Virgin Mobile France financials - PAT
Virgin Mobile France financials - PAT Virgin Mobile France PAT £’m H1 2010-11 H1 2009-10 YoY Revenue 158 88 79% EBITDA 22 (17) D&A (2) (2) EBIT 20 (19) EBIT % 12.6% -21.0% Interest (1) (0) Tax (5) 5 PAT 13 (14)
Slide 53: Virgin Mobile France financials - cash flow
Virgin Mobile France financials - cash flow Virgin Mobile France cash flow £’m H1 2010-11 H1 2009-10 EBITDA 22 (17) Working capital 11 (3) Capex (4) (1) OFCF 29 (21) Other 8 1 Net debt b/f (88) (29) Net debt c/f (51) (49) Funds ex-shareholder loans 29 -
Slide 54: Group financials - net funds
Group financials - net funds CPW plc financials - net funds £’m H1 2010-11 H1 2009-10 Net funds b/f 100 n/a VMF loan repayments 11 n/a Other 3 n/a Net funds c/f 114 n/a VMG loans receivable 39 Net funds inc. loans 153
Slide 55: Dividend strategy
Dividend strategy Expecting to commence regular dividend policy in 2011 - Final dividend in August 2011, subject to shareholder approval - Funded initially by Virgin Mobile France loan repayments and reduced commitments to Best Buy Europe - Minimum 3 x cover Regular dividends may be supplemented by
Slide 56: Update on financial guidance - CPW Europe
Update on financial guidance - CPW Europe CPW Europe 2010-11 2009-10 April guidance Update Actual (£’m) (£’m) EBIT 131 to 137 Maintained 114 CPW Europe 2010-11 April guidance H1 performance Full year expectation Space Up 0 to 1% In line As April LFL revenue Up 0 to 3% Up 2.4% As April Connections Do
Slide 57: Update on financial guidance - Best Buy Mobile US
Update on financial guidance - Best Buy Mobile US Best Buy Mobile US 2010-11 2009-10 April guidance Update Actual (£’m) (£’m) Profit share 53 to 55 85 to 95 46 Best Buy Mobile US 2010-11 April guidance H1 performance Full year expectation Connections Up 15 to 20% Up 25.7% Similar trend
Slide 58: Update on financial guidance - Best Buy UK
Update on financial guidance - Best Buy UK Best Buy UK 2010-11 2009-10 April guidance Update Actual (£’m) (£’m) EBIT (40) to (45) (50) to (55) (21) OFCF (70) to (80) Maintained (44)
Slide 59: Update on financial guidance - Virgin Mobile France
Update on financial guidance - Virgin Mobile France Virgin Mobile France 2010-11 2009-10 April guidance Update Actual EBIT €19m to €24m Maintained Loss €25m Virgin Mobile France 2010-11 April guidance H1 performance Full year expectation Revenue €385m to €400m On track As April EBIT margin 5% to 6%
Slide 60: Update on financial guidance - EPS
Update on financial guidance - EPS Earnings 2010-11 April guidance Update (£m) Best Buy Europe - CPW Europe 131 to 137 On track - Best Buy Mobile US 53 to 55 85 to 95 - Best Buy UK (40) to (45) (50) to (55) - Interest (16) On track - Tax 24% to 25% c.26% Virgin Mobile France €19m to €24m Maintained
Slide 61: Update on reporting timetable
Update on reporting timetable Q3 trading 18 January 2011 Q4 trading 5 May 2011 Prelims and strategy day 8 June 2011
Slide 62: Q&A
Q&A