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Best Buy Q3 Revenue Shows Leveling of DVD Sales

2 Dec, 2004 By: Holly J. Wagner

DVD sales seem to be leveling off at Best Buy, based on the company's third-quarter revenue report.

Entertainment software accounted for 21 percent of the company's third-quarter revenue last year and this year, and 20 percent of revenue for the first nine months of both years.

“Thanks to outstanding execution in the stores, which we believe drove a higher average ticket, we overcame softness in lower-priced, traffic-building categories, such as CDs and DVDs,” said Brad Anderson, vice chairman and CEO of Best Buy. “In addition, this quarter's gain came on top of a comparable-store sales gain of 8.6 percent for the third quarter of fiscal 2004.”

Comp-store sales of DVD players was slipping this year as player penetration approaches the saturation point, but Best Buy did not disclose how much. However, a decline is consistent with the Consumer Electronics Association's recent report that demand for DVD players had slipped from 31 percent last holiday season to 25 percent this year.

Computer software and video games drove the “modest” comp-store sales gain for entertainment software. The company credited popular titles like the long-awaited Halo 2, attractive pricing on video game hardware and the launch of Nintendo's DS platform. The company had a low-single-digit comp-store sales decline in DVDs, and executives said new releases underperformed expectations, with the exception of the chains' exclusive window on Elton John's Dream Ticket set, which attained platinum sales.

The company opened 43 stores during the quarter and closed one 36,000-square-foot location. Store openings included 32 U.S. Best Buy stores, six Best Buy stores in Canada and five new Future Shop stores.

Third-quarter revenue overall increased 10 percent, to $6.65 billion, and comp-store sales increased 3.2 percent. For the first nine months of the year, the company reported an overall comp-store sales gain of 5.1 percent, but did not break out revenue.

The company will report third-quarter results Dec. 15.

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