Best Buy Co., Inc. (BBY)

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Best Buy Co., Inc. (BBY)

Sanford C Bernstein Strategic Decisions Conference Call

May 29, 2013 8:00 am ET

Executives

Hubert Joly – President and Chief Executive Officer

Sharon McCollam – Chief Administrative Officer and Chief Financial Officer

Analysts

Colin McGranahan – Sanford Bernstein

Presentation

Colin McGranahan – Sanford Bernstein

As way of introduction, we are thrilled to have Best Buy at the Strategic Decisions conference this year, the first time in many, many years may be ever because you move the end of the fiscal year back a month, you can now come to our conference. With me today is Best Buy’s President and CEO, Hubert Joly and CFO and CAO, Sharon McCollam. As I am sure many of you are aware, Hubert joined Best Buy in late 2012. And I would say sometimes the new CEO brings a breath of fresh air to a company. I think in this case, Hubert has brought a hurricane of fresh air to the company. And prior to Best Buy, Hubert was the CEO of Carlson and previously have a long career at McKinsey and then turnaround experience at Vivendi’s video game business and EDS in France.

And one of Hubert’s key heirs is Sharon McCollam as the CFO and CAO. Again, I am sure many of you are aware, Sharon was previously the CFO and COO at Williams-Sonoma where she led strategic planning as well as the key operating and finance functions, and I think we can all agree as widely regarded as one of the best operating CFO's anywhere in retail today. I believe that Hubert is going to start with some opening comments, so I’ll turn the floor over to you.

Hubert Joly

Well thank you, Colin, and thank you for hosting us, and thank you for attending this session this morning. Evidently these are exciting times for us at Best Buy, I would highlight three things in our floor that’s in contrast with the situation, the perspective that existed just back in the fall, when it was quite different.

So the three points I would highlight is number one, we continue to be impressed by the strengths of the company. From a customer perspective, we offer a very unique value proposition with the broad assortment, noticeable objective advice, competitive prices and then the Geek Squad services.

And importantly that may be something that surprised everyone vis-a-vis the vendors of course right now probably have met with many of the CEOs, most are vendors. We are so critical to them and we offer something that’s very unique. We are the only place of scale in the U.S, where they can showcase the billions of dollars, the fruit of the billions of dollars of R&D investment they make every year, and this is the only place where it can be showcased in a real way with advice and so forth, and of course the Samsung deal that we announced at the beginning of April that we are in the process of rolling out signals, so that’s a very strong strategic platform.

Number two, I think we can all agree that we've been making some progress. We are very pleased with the fact that for two consecutive quarters we've had flat comps in the U.S. In Q1 you have to adjust for the moving Super Bowl and a couple of other things, but we're very proud of that. And also very proud of the fact that we're making significant progress on our key renewable priority, so let me just highlight a few of them.

Number one, the fact that we grew our online business in Q1 by 16% year-over-year. We’ve made online a huge priority with – our market share online is only 7% compared to 18% in the physical world. There is no reason why it should be lower. We’ve improved and it was a big area of focus on net promoter score by 300 basis points since November.

The company used to measure customer satisfaction of course, but only with buyers. And of course once you’ve bought your TV or your computer or your phone at Best Buy you are happy. We are now also asking the non-buyers and of course they have a different perspective, and we are doing this across channels. What this has allowed us, and of course if you look at the fans and the detractors, which gives us a more sober perspective.

What this has done is it has established a burning platform for every one at the company to improve that and we are proud of the fact that we’ve improved by 300 basis points. The Samsung Viera is a very significant milestone also for us, great reaction from the customers. And I think that it’s triggering of course interest in a dozen number of vendors, $325 million of cost take-out.

Back in November, we announced that we would take out a total of $725 million of cost versus SG&A and cost of gross profit margin improvement opportunities. And then we are announcing every quarter what we’ve done and we are now at $325 million, so that’s pleasing. And of course we concluded a definitive agreement to exit Europe, which allows us to simplify the company, reduce the leverage and strengths in our balance sheet. So a set of accomplishments.

And the third point I would highlight is beyond strengths and accomplishment of progress is the amazing opportunities we have in front of us. And many of them have a great operational incremental, very concrete, very tangible, improvement nature. So no star wars, no shiny objects and they are focused on the six elements we’ve been talking about on our March 1 earnings call and in our call last week.

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