The first Best Buy store in China is projected to finish the year with revenue that ranks it amongst the top stores globally.

- The Five Star stores are above plan in revenue, despite pressure on the gross profit rate, as the firm is focusing on growing both comparable store sales and operating profits through the lens of customer centricity.
- The firm continues to pursue a realistic number of new store openings as a part of a controlled growth strategy, which is intentionally measured.
- To enable success on a global basis and in the U.S., the company will continue to invest in supply chain and IT infrastructure.
- Three of the major initiatives that have already commenced include active space management, clearance price optimization and the continued rollout of collaborative planning forecasting and replenishment, or CPFR aimed at improving both the customer experience and the bottom line.

Brand Performance:

- In financial services and Best Buy Mobile, the firm continues to move full speed ahead to provide the services customers need to make all the stuff work together and make their lives richer.
- Overall share of the market increased by 150 basis points and that increase is more than twice the rate of the closest competitor, gaining share across the store, particularly in computing, home theater, mobile audio and imaging.
- The Best Buy brand is strong with customers as evidenced by high customer satisfaction scores and growth in the customer loyalty program which recently topped 20 million.
- U.S. retail turnover, which was 100% in fiscal 2001, has now fallen to 67% while retail management turnover is now 20%.

Fiscal 2008 Outlook

- Consumer spending will be more difficult to read, particularly down to the product level. The current environment indicates more potential variability in consumer spending, leading to a wider range of outcomes for the year.
- The firm remains confident that flat panel TVs, notebook computers and gaming will remain very appealing to customers.
- Revenue is expected to be in line with the original plan of $39 billion.
- Earnings per share are expected to be $2.95 to $3.15 for the year.

Key questions and answers from the first quarter earnings call conducted by Best Buy Corp on June 19, 2007.

Evan Rosta (The Boston Company): Geek and software sales mitigated some of the gross profit falling off. Has that not picked up how you had expected?

Bradbury H. Anderson: That gives us a strong revenue number in the quarter, even when the industry has shrunk, we have been able to grow in other areas because of the competitive strength of our overall offering which is impacted by differentiation.

Bill Sims (Citigroup): As the industry transitions from 720P technology to 1080P technology, any evidence of manufacturers trying to stuff the channel during the transition?

Mike Vitelli: We have not seen any evidence of manufacturers dumping 720P. There’s a technology difference and a price point difference. A lot of the entry level LCD products and Plasma products are 720P and then there are appropriate steps to satisfy different customer needs as you move through it.

We were able to move through our transitional inventory at the beginning of the year, as the manufacturers were changing relatively quickly. We were able to do that in less than three months so we felt we are at a great position now that we have the latest and greatest technology on our floor to offer our customers.

Bill Sims (Citigroup): Is the marketing of 1080P technology choking off demand for 720P technology in the near term?

Mike Vitelli: What most manufacturers are doing and what we tell our customers as well is if you are looking at this as a long-term investment 1080P, which is more expensive today, it is going to protect you in future. A lot of the manufacturers are trying to mix to that level and there are manufacturers that are focusing almost exclusively on the lower end of 720P. We have a very good balance in our store, in our assortment between the different kinds.

Steve Kernkraut (Berman Capital): What is going to give you leverage in the back-half of the year that you could not get in the first quarter?

Darren R. Jackson: We continue to make the refinements to our store operating model as an organization, and those buckets collectively are where we see some of the larger SG&A leverage points in the back-half of the year. In addition, there is also more timing where we have loaded in the first quarter of this year more stores historically that have landed in our third quarter. We should ride that increased opening schedule into more SG&A leverage in the back-half of the year as well.

Steve Kernkraut (Berman Capital): On expanded product assortment, what products do you see benefiting you in the back-half of the year?

David Morrish: There is a number of changes that we have coming up but the most significant one would be the expansion of our Apple stores within a store that you will see rolling out across the country over the next several months. We anticipate that we will have 300 Apple store within a store set-ups by the time we hit our holiday period.

David Strasser (Banc of America): On a U.S. basis, can you break out the comparable inventory relative to comparable store sales?

James L. Muehlbauer: Our inventory was in line with our square footage growth in the quarter. The mix of our inventory is changing, as we are skewing more into notebook computers and flat panel televisions.

David Strasser (Banc of America): Is there any part of it within the mix that might be a little high that we can see an incremental discounting going forward?

James L. Muehlbauer: We feel very good about our position, given the great work the store teams and our retail teams did in transitioning through the product inventory in the home theater space and that is the only technology that we transitioned materially in the quarter.

David Strasser (Banc of America): What made this transition significant?