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Best Buy Reports First Quarter Results

Joly added, “Beyond our financial results, we made progress against our three business imperatives, which are to improve our operational performance; build our foundational capabilities to unlock future growth strategies; and leverage our unique assets to create a differentiated value proposition that is meaningful to our customers and our vendors. This progress included (1) leveraging our new ship-from-store and digital marketing capabilities to help drive a 29% increase in Domestic comparable online sales; (2) announcing new home theater stores-within-a-store vendor partnerships with Samsung and Sony; (3) launching new mobile installment billing programs; and (4) increasing our annualized Renew Blue cost reductions by $95 million.”

Sharon McCollam, Best Buy EVP, CAO and CFO, commented, “As we look forward to the second and third quarters, we are expecting to see ongoing industry-wide sales declines in many of the consumer electronics categories in which we compete. We are also expecting ongoing softness in the mobile phone category as consumers eagerly await highly-anticipated new product launches. Consequently, absent any major product launches, we are expecting comparable sales to be negative in the low-single digits in both the second and third quarters. From an operating income rate perspective, as we outlined last quarter, we are expecting the negative P&L impacts that we have been discussing each quarter – including ongoing investments in price competitiveness, our Renew Blue SG&A investments, and the negative impact of our new credit card agreement – to continue, but to be significantly offset by our Renew Blue cost reductions.”

McCollam added, “Also as we discussed last quarter, in the first quarter, we reorganized certain foreign legal entities to simplify our overall tax structure which resulted in an accelerated non-cash tax benefit of approximately $1.01. Due to its materiality, this benefit was treated as a non-GAAP adjustment in today’s Q1 FY15 earnings. This benefit, however, has historically been recognized on a periodic basis, and as a result of the acceleration, there will be no future earnings benefit. Therefore, the company will have a higher income tax rate going forward on both a GAAP and non-GAAP basis. We estimate that the impact of this and other known discrete income tax items will affect the quarterly FY15 diluted earnings per share on a year-over-year basis as follows: (1) flat to positive $0.01 in Q2 FY15; (2) flat to negative $0.01 in Q3 FY15; and (3) negative $0.09 to $0.10 in Q4 FY15. For cash tax purposes, the benefit from the reorganization will continue to be amortized.”

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