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Best Buy Reports Same-Store Sales Increase

5 Sep, 2002 By: Joan Villa

Growing revenue in consumer electronics and DVD movies led retailer Best Buy to a 2 percent increase in same-store sales gains for the second quarter, while the company's mall-based Musicland stores -- including Media Play, Sam Goody and Suncoast -- declined 3.4 percent.

The retailer attributed Musicland's same-store decline to continued softness in music sales, partially offset by growing revenue in video gaming and DVD software. Total sales at the Musicland division declined 2 percent from the year-ago quarter to $380 million, the company reported.

Overall, the chain showed a hefty 20 percent increase in total sales, to $5 billion, for the quarter ended Aug. 31, which was credited to a growing store base of 76 Best Buy locations and the inclusion of Future Shop, acquired last November.

Sales of consumer electronics increased in the second-quarter sales mix from the year-ago period, reflecting strength in digital televisions, DVD hardware, digital cameras and satellite systems, the company said. Video game hardware and software and sales of DVD movies continued double-digit gains, more than offsetting declines in music sales.

"In July, we saw a significant change in consumer behavior,” noted EVP and CFO Darren Jackson, referring to a previous warning of soft sales. “We already have begun to pare back expenses in reaction to slower sales growth. We expect earnings for the second quarter of 17 cents to 19 cents per diluted share, based on our modest comparable-store sales gain and the resulting decrease in expense leverage."

Best Buy had scaled back earnings expectations after July, but now store traffic has rebounded, according to vice chairman and CEO Brad Anderson.

"Comparable-store sales during August were fairly steady, as were traffic levels in our stores," he said. "We expect earnings to be within the range that we communicated on Aug. 8."

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