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"Musicland’s management team and store employees remain committed to serving Musicland customers during this transition period."
——Best Buy CEO Brad Anderson

MUSICLAND ON THE BLOCK

Best Buy to Sell Off Retail Subsidiary
 

Best Buy has announced that it has hired an investment company to assist in "marketing its interest in its Musicland subsidiary in order to concentrate on the company’s core business and assets."

Best Buy CEO Brad Anderson points to "further declines in CD sales and a continued slowdown in traffic in traditional shopping centers nationwide," as the reason for the decision to divest the company.

Best Buy acquired the mall-based chain in late 2000, which at the time boasted some 1,200 locations, including Sam Goody, Suncoast, Media Play and On Cue stores.

Recently however, Best Buy had announced some 150 store closing, and rumors had it that more were on the way.

Some industry insiders even wondered whether Best Buy would consider Chapter 11 bankruptcy protection for the troubled subsidiary in order to get out from under more leases and pave the way for even more sorely needed store closures.

Anderson states that in the meantime however, Musicland Exec VP Connie Fuhrman has been promoted to President, and that "Musicland’s management team and store employees remain committed to serving Musicland customers during this transition period."

Best Buy will also now report Musicland’s operating results separately as discontinued operations, in accordance with Statement of Financial Accounting Standards # 144 "Accounting for the Impairment of Disposal of Long-Lived Assets."

Best Buy Tuesday reported results from the company’s fourth quarter, ended March 1, 2003. Revenue for the quarter climbed 11% to $7 billion, compared to $6.3 billion in Q4 ’02, yielding record earnings per share of $1.16, up from $1.04 a year earlier. Backing out $67 million in losses from discontinued operations, net earnings for the quarter were $311 million, or $0.96 per share.

For the fiscal year, Best Buy saw revenue growth of 18% to $20.9 billion, compared to 18.5 billion for fiscal ’02, yielding EPS for continuing operations of $1.91, compared to $1.75 for the previous year. However, Musicland’s deteriorating performance over the year, as well as a $441 million loss from discontinued operations took a huge toll, lowering net earnings per share to just $0.30, down from $1.75 for the prior year. Ouch.

Going forward, the company says it expects to see 15% earnings growth in fiscal ’04.

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