Second-Quarter Performance Summary                                                   
 (U.S. dollars in millions, except per share amounts)                                 
                                   Three Months Ended                                 
                                   Aug. 29, 2009  Aug. 30, 2008                       
 Revenue                           $11,022        $9,801                              
 Comparable store sales % change1  (3.9%)         4.2%                                
 Gross profit as % of revenue      24.4%          24.3%                               
 SG&A as % of revenue              21.8%          20.8%                               
 Operating income                  $280           $339                                
 Operating income as % of revenue  2.5%           3.5%                                
 Net earnings                      $158           $202                                
 Diluted EPS                       $0.37          $0.48                               


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1 Our comparable store sales is comprised of revenue at stores, call centers, and Web sites operating for at least 14 full months as well as revenue related to other comparable sales channels. Relocated, remodeled and expanded stores are excluded from the comparable store sales calculation until at least 14 full months after reopening. Acquired stores are included in the comparable store sales calculation beginning with the first full quarter following the first anniversary of the date of the acquisition. The portion of our calculation of the comparable store sales percentage change attributable to our International segment excludes the effect of fluctuations in foreign currency exchange rates. The method of calculating comparable store sales varies across the retail industry. As a result, our method of calculating comparable store sales may not be the same as other retailers' methods.

Best Buy Co., Inc. (NYSE:BBY), a leading retailer of consumer electronics, today reported net earnings of $158 million, or $0.37 per diluted share, for its fiscal second quarter ended on Aug. 29, 2009. Net earnings declined by 22 percent compared with $202 million, or $0.48 per diluted share, for the prior-year period.

"I am pleased, but not surprised, with the market share gains we posted during the quarter," said Brian Dunn, CEO of Best Buy. "Our ability to capture a significant amount of market share in the period is directly correlated to the dedication and expertise of our employees around the world. We have great prices, great people, and great solutions -- a combination that gives us confidence in our ability todeliver a better financial outcome for the year than we originally expected."

Comparable Store Sales Trends Improve Sequentially; Domestic Market Share Gains Accelerate

During the second quarter of fiscal 2010, Best Buy's revenue increased 12 percent to $11.0 billion, compared with revenue of $9.8 billion for the second quarter of fiscal 2009. The revenue increase reflected the inclusion of Best Buy Europe's revenue and gains from the addition of 170 net new stores in the past 12 months. Revenue gains were partially offset by a comparable store sales decline of 3.9 percent and the unfavorable impact of foreign currency fluctuations. The company noted that enterprise comparable store sales trends improved sequentially each month during the quarter.

The domestic segment's fiscal second quarter revenue totaled $8.3 billion, an increase of nearly 2 percent versus the prior year period. Revenue growth from the net addition of 104 stores in the past 12 months was partially offset by a comparable store sales decline of 3.1 percent. Traffic in the fiscal second quarter increased slightly over the prior-year period but was offset by a slight reduction in the average ticket. Comparable store sales gains in notebook computers, mobile phones and flat-panel TVs were more than offset by decreases in gaming, digital cameras, music and movies. The company noted that domestic comparable store sales in flat-panel TVs increased by the mid-single digits as unit increases more than offset declines in the average selling price.

The company said it believes its domestic segment gained strong market share and that these gains accelerated in the quarter, growing approximately 270 basis points for the three months ending July 31, 2009 as compared to the prior year period. As previously reported, the company estimated that it gained nearly 200 basis points of market share in the first quarter of fiscal 2010 versus the prior year period. Strong store execution and popular bundled solutions in the back-to-school shopping season allowed the domestic segment to capitalize on changes in the competitive environment. These better-than-expected market share gains were led by flat-panel televisions, digital imaging and notebook computers. The company also noted that it believes it continued to gain market share in mobile phones, as customers responded to Best Buy Mobile's industry leading product assortment and customer service.

The international segment's fiscal second quarter revenue increased 65 percent from the prior year's period to $2.7 billion. The revenue increase was driven by the inclusion of revenue from Best Buy Europe as well as the net addition of 66 stores (of which 36 were small-format locations in Europe) over the past 12 months. Partially offsetting these gains was a comparable store sales decline of 8.3 percent and the negative impact of foreign currency fluctuations. Excluding the addition of Best Buy Europe and the negative impact of fluctuations in foreign currency exchange rates, the international segment's revenue declined approximately 3 percent versus the prior-year period. Canada reported a low double-digit decline in comparable store sales while China experienced low single-digit growth in comparable store sales. Beginning in the fiscal third quarter, Best Buy Europe will be included in the comparable store sales calculation.

Bob Willett, CEO of Best Buy International, commented, "Although top-line results continued to be challenged, overall international performance was consistent with our expectations. We are pleased with the market share gains in Europe and Canada and the improving performance in China. Our European business continued to add connections in the fiscal second quarter and showed market share gains in the U.K. market." Willett continued, "We drove synergies around the globe, best represented by our private label product distribution. We will continue to focus on leveraging our assets in Europe and investing carefully in international infrastructure to support our long-term growth strategy."

The enterprise gross profit rate for the fiscal second quarter was 24.4 percent of revenue, compared with 24.3 percent of revenue for the prior-year period. The 10-basis-point increase was driven by the inclusion of Best Buy Europe, which predominantly features sales of higher-margin mobile phones. Partially offsetting this increase was a 60 basis point decline in the domestic segment gross profit rate. This decline was driven by 40 basis points of mix pressure as continued double-digit comparable store sales growth in lower gross profit rate notebook computers category mitigated gains from Best Buy Mobile. Also contributing to the decline was 20 basis points of rate impact due to the launch of the new iPhone combined with the launch of several focused initiatives in the fiscal second quarter intended to capitalize on competitive opportunities and drive incremental traffic to the stores.

Disciplined Cost Controls Drives Lower Domestic SG&A Rate

Best Buy's selling, general and administrative expense (SG&A) rate increased to 21.8 percent of revenue for the fiscal second quarter, compared with 20.8 percent of revenue for the prior year's fiscal second quarter. The inclusion of Best Buy Europe's higher-cost operating model and de-leverage on comparable store sales declines in the U.S. and Canada drove the increase. Partially offsetting these increases were reductions in spending on domestic discretionary projects and corporate payroll, and leverage on the comparable store sales gain in China. The company reported that its second quarter domestic SG&A rate of 20.5 percent of revenue improved by 50 basis points. Excluding Best Buy Europe and other fiscal 2009 acquisitions, the company reported that SG&A dollar spending in the quarter declined versus the prior year period, and was consistent with the company's expectations.

Domestic Operating Income Flat; International Operating Income Impacted by Phasing of Results

For the fiscal second quarter, Best Buy reported operating income of $280 million, or 2.5 percent of revenue. The domestic segment reported fiscal second-quarter operating income of $315 million, flat when compared with the prior-year period despite a comparable store sales decline. The company's international segment generated a $35 million operating loss for the fiscal second quarter, a decrease of $59 million versus the prior-year period. In total, the international segment's results were in line with the company's expectations with both Canada and China demonstrating improvements in operating profit from the first quarter of fiscal 2010. The international segment's results were significantly impacted by the phasing of quarterly earnings in Best Buy Europe. Best Buy Europe derives most of its operating profits during Best Buy's fiscal first and fourth quarters while the fiscal second quarter has historically represented the year's low point for operating results. Also included in these results is approximately $20 million related to non-cash amortization expenses of intangible assets related to acquired tradenames and customer relationships in Best Buy Europe. The company stated that it continues to expect Best Buy Europe to deliver annual results consistent with its original guidance.

For the second fiscal quarter, the company recorded an effective tax rate of 42.8 percent. The rate was consistent with what the company reported in its first quarter of fiscal 2010, and reflected the timing impact of losses on certain international operations that placed upward pressure on the company's effective tax rate and noted that this is expected to only impact the first half of fiscal 2010. The company estimates that this timing negatively impacted the second fiscal quarter's diluted EPS by approximately 3 cents. The company still anticipates that its annual tax rate will fall at the upper end of the original guidance range of 38.0 to 38.5 percent for the full-year.

Company Raises Annual EPS Guidance

"Our revenue growth modestly exceeded our expectations for the first half and customer traffic patterns have started to indicate signs of stability," said Jim Muehlbauer, Best Buy's executive vice president of finance and CFO. "Given these improving trends and our expectations for the remainder of the year, we are both raising the bottom-end of our annual EPS guidance and improving our top-end expectations.