Global Growth and Infrastructure

Transcription

1 Global Growth and Infrastructure

2 Agenda International Expansion Strategy Our Differentiation Enterprise Enablers Supply Chain Business Technology Partnerships 2

3 Panel Bob Willett CEO International & Chief Information Officer David Berg COO International Dan Currie Global Supply Chain Jennifer Driscoll Investor Relations Kevin Layden Canada John Noble CFO International Jeanine Thompson Human Resources Redmond Yeung China 3

4 Differentiate Through Co-Creation, Services and Solutions Format / Channel New channels.com New formats e.g. Five Star BBY Mobile Call Centers Magnolia Future Shop Core Format Product and Exclusive Brand Channel Extension Tesco * Most Retailers Mass Products Solutions Service s Private Label (Insignia, Rocketfish) BBY Range Extension * Services Geek Squad * Target Wal-Mart Exclusive Brands Global Extension US (BBY, Geek Squad) Geographic Reach Europe (Geek Squad) China, Mexico, Turkey (BBY, Five Star, Geek Squad) Canada (BBY, Future Shop, Geek Squad) 4

5 Enterprise Enablers Supply Chain and Global Sourcing We set out three years ago to develop a best of breed supply chain under the Panorama Program, modeled after the European food industry. Phase I focused on the cemand side, with Phase II looking at the physical logistics and distribution The Panorama Program has delivered substantial SG&A reductions and gross margin benefits through a combination of: Space Management Improved Availability Forecast Accuracy Replenishment & Allocation Collaborative Pricing and Forecasting Purchase Path Tailored Market Assortment Network Optimization Supplier Management Direct Importing LEAN Project Additional benefits will be realized as we continue to roll-out the capabilities to all categories and expand internationally OTRQ % 94.00% 92.00% 90.00% 88.00% 86.00% 84.00% 82.00% 80.00% 80% 75% 70% 65% Customer Availability 92.2% 93.0% 89.2% 85.00% FY0 4 FY05 FY0 6 FY07 On Time Right Quantity 75% 73% 72% 61% Enterprise Global Sourcing revenue up 32% YOY 60% SG&A reductions by partnering in goods not for resale (GNFR) 55% 50% FY04 FY05 FY06 FY07 5

6 Enterprise Enablers Business Technology The transformation of our IT platform started three years ago, when we began a journey to simplify our technology environment and create a nimble, serviceoriented architecture. Our activities focused on five objectives: Adding new capabilities Infusing new skills Reducing risks Simplifying the IT architecture and infrastructure Reducing Total Cost of Ownership (TCO) Currently we have delivered substantial cost reductions from a simplified environment, while enabling new capabilities: Service environment to support Geek Squad Store POS system HR Portal for all employees Enterprise Data Warehouse International Footprint Additional investment in corporate transformation is still ahead that is expected to further reduce costs and increase speed to market The development of an Enterprise IT blueprint that encompasses Canada, China, Mexico and Turkey 6

7 International - Canada Our Canadian dual brand strategy has been built out over the past years, and now is positioned to optimize on this investment: The leadership team in Canada has shaped a very focused agenda concentrating on the core activities and optimizing their form Future Shop and Best Buy are both growing market share and producing comparable store sales growth Brand differentiation work is accelerating to create options for dual brands in Canada where financially appropriate The future Future Shop Implementing new capabilities of labor and price optimization and goods not for resale (GNFR) Private label global sourcing improving margin Infrastructure investment accelerating in parallel with clarity around differentiation Source of future leaders for International 7

8 International - China Our dual brand strategy is building a solid foundation utilizing customer analytics and research Our China leadership team is now moving into the growth phase after initially focusing on harmonization and stabilization; building our brand; cultures; and values Our Best Buy store in Shanghai is expected to enter the top 50 stores in the first year and is expected to break even We expect our China operations to deliver an operating profit in FY08 We are creating a new operating model leveraging customer centricity and services Recruited local leadership team to drive the company forward Beginning infrastructure investments to support new store program pipeline Great support has been received from the Chinese government Creating an Academy of Retailing to build new leaders of the future Reinforcing legal and integrity standards Applying customer centric analytics Five Star is meeting our expectations, including significant improvement in same store performance 8

9 International Expansion plans were developed using the Global Prioritization Index, among other things 9

10 Filter the Results for Developing Markets Developing Markets - GPI Rank vs. Ease of Setup / Operation Rank 10

11 International - Mexico We are entering the Mexican market in months Mexico is the 14 th largest economy in GDP terms and represents a relatively low risk and ease of entry Consumer purchasing power is growing faster than the US and Canada, sustained by rising income levels Interest rates and inflation have fallen sharply in recent years as the economy grows and matures The market for BBY is approximately $14B: an organized market of $11B and an informal market of $3B Increasing prosperity has increased the availability of credit and home equity borrowing There are no comparable retail models to BBY in the Mexican consumer electronics retail market We will leverage our US Technology and supply chain Presents a future global sourcing opportunity Track record of major retailers entering with success Local leadership in place Market Demographics Mexico Average 1 Best Buy Market Size ($m) $11,416 $6,785 Home Office Equip Market $5,256 $2,428 Appliances Market $2,913 $1,696 Entertainment Softw are Market $1,646 $ 568 Note 1: Av erage refers to av erage of all 36 emerging countries included in the ATKearne y Gl obal Prioritization Index tool. Mexican Shift toward Organized Retailers Organized Retailers 30% Informal Retailers 70% Source: Santander, InfoAmericas Organized Retailers 50% Informal Retailers 50% 11

12 International - Turkey We are entering Turkey in months: Turkey is the 6 th -fastest growing economy in the world and the 10th most important in terms of growth in the world, moving up from 19 th the previous year GDP growth has been running at 5% since 2002; the market for our products both formal and informal is approximately $7B, and growing annual retail sales of 12% in Turkey has approximately 70 million people and Europe s youngest population with over 50% below 27 years of age Turkey is also a manufacturing hub with major investment increasing; today 60% of all TVs sold in Europe and 15% of all TVs worldwide are made in Turkey Future Global Sourcing Opportunities Multi-national major retailers are in the market taking advantage of the major growth in shopping malls across Turkey A fragmented dealer CE retail market with few comparable retail models to BBY Strategically placed geographically to exploit Eastern Europe, the Middle East and Russia Customer segment analysis being undertaken Local leadership in place Market Demographics Turkey Average 1 Best Buy Market Size ($m) $4,921 $6,785 Consumer Electronics Market $791 $2,093 Home Office Equip Market $2,511 $2,428 Appliances Market $1,195 $1,696 Entertainment Softw are Market $ 424 $ 568 Note 1: Average refers to averag e of all 36 emerging countries included in the ATKearney Glob al Prioritization Index tool. The following retailers have entered the market in the last six years: Tesco Carref our Migros Dixons Makro Harvey Nichols IKEA Media Markt They represent less than 35% of the retail market The Shift toward Organized Retailers 28% 72% 37% 64% 55% 45% E Traditional Retail Organized Retail 12

13 International Partnerships for Growth We are leveraging Accenture s capabilities in all countries, utilizing supply chain, IS infrastructure, sourcing and accelerating our transition Carphone Warehouse Jointly creating a Geek Services model in the UK and building a BBY Mobile capability Dunnhumby A fact based approach to our BBY and Five Star operating model and Customer Centric Strategy has been based on the analytics and segmentation model in China, Canada and now Mexico and Turkey Tait Subler We accelerated our relationship with Tait Subler who have helped us with our Brand Strategies in Canada, China and now Mexico and Turkey, renowned for their branding capabilities 13