Best Buy Co., Inc. (BBY) Q4 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Best Buy's Conference Call for the Fourth Quarter of Fiscal 2012. [Operator Instructions] As a reminder, this call is being recorded for playback and will be available by 12 p.m. Eastern Time today. [Operator Instructions] I would now like to turn the conference call over to Bill Seymour, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us on our fiscal fourth quarter 2012 conference call. We have 2 speakers today: Brian Dunn, our CEO; and Jim Muehlbauer, our CFO. And after our prepared remarks, we should have plenty of time for your questions. A few items before we get started. As usual, the media are participating in this call on a listen-only mode. Let me remind you that comments made by me or by others representing Best Buy may contain forward-looking statements which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations. Today's call is scheduled to be 1.5 hours to accommodate the material we are presenting today. We will be showing slides today on the webcast that run concurrently with our presentation, starting after Jim's initial comments. You can also download these slides on our IR site. As previously announced on November 7, 2011, we began reporting net operating results of certain discontinued operations in our fiscal fourth quarter, primarily related to the Best Buy store closures in the U.K., China and Turkey. You'll find, on our IR site, a file that reconciles the fourth quarter and fiscal 2012 financials from continuing ops to financials that include discontinued ops. You will also note that our reported results this morning include non-GAAP financial measures, excluding approximately $2.6 billion in charges associated with the purchase of CPW's share of the Best Buy Mobile profit share agreement and related costs; the Best Buy Europe goodwill impairment and restructuring charges, which are largely related to the activities announced on November 7. These results should not be confused with the GAAP numbers we reported this morning in our earnings release or the GAAP numbers we will report in our 10-K. In addition, the 2012 fiscal year adjusted earnings and adjusted earnings per share we'll be discussing today exclude the aforementioned items, as well as the gain on sale of investments previously discussed in Q3. For a GAAP to non-GAAP reconciliation of our reported to adjusted results and guidance, please refer to the supplemental schedules in this morning's news release. We also refer to free cash flow in today's results in our discussion today. Our definition of free cash flow is operating cash flow minus CapEx. Finally, as you recall, we are changing our fiscal year, beginning in the first quarter of fiscal 2013. To assist you in your modeling, we have provided a file on our IR site today that provides fiscal 2011 and fiscal 2012 financial statements recast for the new fiscal year with the relevant reconciliations. With those items out of the way, I'd like to turn the call over to Brian.

Good morning. I'd like to begin by providing an overview of several of the key items we announced today. First, our Q4 and full year results show that we finished relatively strong and delivered adjusted earnings in the top half of our most recent guidance range. Also, as you recall, we took a number of important actions last year that we expect to pay off in the near and long term. Despite these actions and results, I'm not satisfied with the pace or degree of improvement in our performance and transformation, especially given the opportunities we have in the marketplace. So today, we're announcing a series of significant steps to drive our transformation in 2013 and beyond, all focused on improving the customer experience and our financial performance. This includes taking $800 million out of our annual cost through fiscal 2015, closing 50 U.S. big box stores this year, opening 100 Best Buy Mobile stores, driving growth in e-commerce in China and improving our customers' experience, among other actions. We believe that this set of actions will help drive benefits this year and improve earnings and returns over time. I'll come back in a few minutes to tell you more about our planned actions in the year ahead, but first, I'll ask Jim to provide a quick overview of our fourth quarter and the full year results. Here's Jim.

Thanks. As Brian mentioned, our fourth quarter and annual earnings results finished in the upper half of our updated guidance expectations. The quarter's highlights included continued strength in our online channel, overall market share gains, strong growth in connectable products, continued focus on expense control and strong cash management. As noted in our release, there are a large number of additional reporting items in FY '12, which resulted from the proactive measures we took during the year to improve the business. These items include the closure of unprofitable businesses, restructuring costs, the purchase of CPW's interest in the Best Buy Mobile profit-sharing agreement and taking certain noncash impairments. As Bill mentioned, our release details our GAAP results and our adjusted results of continuing operations for the quarter and the year. You should refer to these numbers for complete information regarding our financial results. In order to be consistent with how we've discussed results all year long and how we have provided guidance and, consequently, to what you have -- likely have in your models, I'll focus my discussion today on our adjusted results of total operations. Specifically, this includes operations that were discontinued in FY '12 and excludes restructuring and other charges. I believe this will be the most straightforward and transparent way to evaluate our FY '12 performance against expectations. For the year, total company revenue finished at $51.1 billion and comparable store sales declined 1.7%, each falling within the guidance ranges we provided all year long. Revenue dollars were at the low end of our range, while comparable store sales were right in the middle of our expectation of flat to down 3%. Our Domestic comparable store sales results in the fourth quarter were led by the online channel, which continued to deliver strong revenue growth of approximately 20%, after being up a similar amount in Q3. Online growth was fueled by strong traffic growth and year-over-year improvement in conversion rate, driven by continued competitive pricing, an expanded assortment and free shipping promotions. Looking at our overall product categories, the biggest positive sales drivers came from our connected product focus areas, including tablets and eReaders with low-triple-digit comps and mobile phones with a comp of 20%. The robust growth achieved in these product categories reflects our continued success where connectivity, innovation and customer demand was strong this year. Appliances also delivered strong growth during the quarter, with comparable store sales growth of more than 10%, driven by increased store labor investments and promotional enhancements to grow our share of this business. These growth areas in the Domestic segment were more than offset by areas of comparable store sales declines from gaming, notebook computers, digital imaging and televisions. These declines were primarily driven by continued industry declines in these product categories. Despite the decline in Domestic comparable store sales in the fourth quarter, we believe our performance relative to the industry actually improved. As we estimate, our overall market share gain was stronger in Q4 than Q3. International comparable store sales were bolstered by our Five Star business in China, which had comparable store sales growth of 8%, driven by strong consumer demand from the expected expiration of government-sponsored trade-in programs. This will be a headwind to our China sales early in FY '13 as some of this business is most likely a pull-forward of customer demand. Total revenue growth for Five Star was 22% in Q4, reflecting the net addition of 38 new stores. Offsetting the Five Star comp growth were our businesses in Canada and Europe, which each had mid-single-digit comp declines. In Canada, the decline was a function of industry softness, as we believe we continued to maintain market share. Europe continued to experience slowed connection growth, given the difficult macro and highly competitive environment. Turning now to gross profit performance in the fourth quarter. The Domestic segment delivered gross profit dollar growth of 2%. As anticipated and discussed on our last call, the rate decline improved sequentially to down 40 basis points from the third quarter decline of 130 basis points. This improvement was primarily due to more favorable product mix from strong mobile phone and lower notebook and gaming sales and more profitable sales within the computing, tablets and movie areas. Within the International segment, gross profit dollars increased 6% in the fourth quarter. This growth was driven by a rate increase of 140 basis points. We were pleased to see rate improvements across each international business, an indication of our growing scale and presence across our key markets. In Canada, the team did a great job of optimizing our dual-brand strategy with Best Buy and Future Shop. During the year, we made improvements to inventory management, solution selling and driving growth in the margin-accretive mobile business. In Europe, the increased gross profit rate was largely a result of improving our partnerships with carriers and a higher mix of postpaid connections. In China, our continued rapid growth of Five Star has given us greater size and influence in the market. Margins increased through reducing product costs and improving relationships with vendors, including more exclusive arrangements. In total, the fourth quarter gross profit rate increased 10 basis points for the company. This increase was better than our expectation of a modest decline in Q4 and led to a full year rate decline of 40 basis points. For context, the 40-basis-point decline for the company followed a gross profit rate expansion of 70 basis points last year. Given the focus on Best Buy's ability to maintain gross profit rates within the current macro environment and competitive CE industry, it's worth highlighting that the full year company gross profit rate of 24.8% is 30 basis points above our previous 5-year trend. We have been actively managing our SG&A spend all year long, and the fourth quarter was no exception. These efforts have helped to fund pricing and promotional investments. Total company SG&A increased 1% during the quarter, driven by a 3% increase in the International segment, while Domestic spending was approximately flat. Excluding our 53rd week and FX, fourth quarter company SG&A was down 4%. For the full fiscal year, total SG&A expense increased 1% and was down 1% when excluding the 53rd week and FX. The 1% increase in SG&A was better than our updated guidance of 2% growth. Total company operating income dollars were up 8% in Q4, and the rate increased 40 basis points versus the prior year. For the year, our operating income declined 5%, which was at the low end of our updated guidance range of a 5% decline to 2% growth. Moving on to EPS. Fourth quarter EPS finished at $2.47, representing an increase of 25%. Full year EPS was $3.64, representing 6% growth and finished at the top end of our most recent guidance of $3.35 to $3.65. As I compare our full year EPS results to annual consensus of $3.38, I would characterize the $0.26 beat to annual consensus in 2 high-level areas. First, operating income accounted for approximately $0.10 of the favorability, a function of stronger gross profit rates and lower SG&A spending. The remainder of the favorability is related to taxes, which I'd separate into 2 different parts. First is what I would call normal and ongoing items, including the achievement of the low end of our tax guidance range, coupled with the resolution of tax matters. Together, this accounted for approximately $0.11. Second, and less significant, were benefits arising from our buy of CPW's interest in the Best Buy Mobile profit-sharing agreement, accounting for approximately $0.05. Before handing the discussion back to Brian, let's quickly follow-up on a few key FY '12 initiatives we announced at last April's Analyst Day. E-commerce is one of the fastest-growing sales channels for our business. In FY '12, we achieved our online sales plan, gained market share and grew online Domestic revenue 18% over last year, an approximate 50% increase in the growth rate from last year. Sales momentum in this channel improved as the year progressed, and our strongest performance came during the holidays, where we estimate that we outpaced industry growth by almost 2x during this period. As we said in April, one of our focus areas was improving market share. According to external sources, for the full year, we believe Best Buy gained market share in total. The focus of our market share discussion was on growing share in low-share product categories. Mobile phones continued their strong annual share gains in FY '12, driven by additional response to our customer promise and more stand-alone store locations. We gained significant share in tablets through a successful build out of Tablet Central that utilized dedicated expert labor to assist customers through a broad assortment of product, connectivity and service options. In appliances, a strong share gain was the result of improvements to the operating model and enhanced promotional effectiveness. In gaming, while we rolled our pre-owned gaming capability across our stores and improved our sales from important pre-orders for new titles, we did not achieve our market share goals in this business. The resulting sales miss in this area was amplified by the disappointing performance of the entire gaming industry, where sales declined double digits. We also had a goal of selling 10 million Domestic connections during fiscal '12, this from a business that sold less than 5 million just 3 years ago. Total connections for the year finished at 9 million, falling short of our goal, but still growing 11%. The majority of the current connections business is driven by Best Buy Mobile, and that business had another very strong year, growing total sales by nearly 30% when we include stand-alone stores and services. We stated goals to grow long-term earnings and expand return on invested capital. We took significant actions against those goals by closing our unprofitable big box stores in the U.K. and purchasing CPW's interest in the Best Buy Mobile profit-sharing agreement, which now gives us full ownership of this capability and 100% of the future profits as we expand the connection opportunities across additional categories. Finally, we discussed capital allocation and our free cash flow generation expectation for the year of $2 billion to $2.5 billion, which we achieved at the top end, with full year free cash flow of $2.5 billion. With this cash flow, we continued to return cash to shareholders with $1.5 billion in share repurchases during the year. So looking back on the year just completed, while consumer demand in the CE industry continued to provide headwinds in many traditional product categories, we took actions to leverage opportunities provided by our model, highlighted by improved market share, strong online growth, solid expense control, continued actions to improve international returns and capital allocation. In the end, our overall gross profit rate assumption for the year provided our largest financial challenge and materially impacted our ability to grow operating income dollars in FY '12 as we had originally planned. The current macro and consumer environment fueled heavier promotional activity, especially heading into the holidays, which is a similar story that played out across most of the retail industry. It also provides another reason why we are accelerating the pace of our transformation. With that, I'd like to turn the call back over to Brian.

Thanks, Jim. I'd like to address the elements of the transformation work we announced this morning, but I'd like to begin by providing a bit of context on the actions we've been taking over the last few years and how those fit into our larger strategy. In the last 3 years, the industry experienced little innovation in many of the large traditional CE categories such as television, PCs and gaming. At the same time, consumers have enjoyed greater price transparency and ease of cross shopping. As a result, we knew we had to accelerate our cost reduction efforts, adjust our sales mix and significantly improve on the experience we were delivering for our customers, all of this in the most uncertain consumer and economic environment we've ever experienced. Last year, to better navigate the "new normal" consumer environment, we took some important steps to begin transforming the company and focusing on strategies we felt offered the best opportunities to deliver improved returns. We significantly restructured our International business, closing our big box stores in Shanghai, Turkey and the U.K. when it became clear these investments would not deliver meaningful returns consistent with timely expectations. As Jim mentioned, in November, we acquired CPW's interest in the Best Buy Mobile profit-sharing agreement. These 2 sets of transactions alone are expected to deliver over $250 million in benefits to Best Buy in fiscal 2013. But as I said at the top of the call, despite these actions and despite closing out the year at the upper half of our most recent earnings forecast, I'm not satisfied with the pace or degree of change we've made up to this point. This is why today we announced a series of actions intended to improve our operating performance and further develop the multichannel "shop anywhere, anytime, any way" experience we offer customers. To drive the transformation in fiscal year 2013 and beyond, we are focused on 4 strategic imperatives: one, multiyear cost reductions; two, U.S. store format improvements in the context of our multichannel strategy; three, growth initiatives; four, improved customer experience. Before I dive into these, I want to emphasize the fact that each of them lives in the service of a dramatically improved customer experience. I'll begin with multiyear cost reductions. We are taking several actions designed to significantly lower our cost base. These moves are intended to help us be more efficient and nimble and, of course, to drive our initiatives to grow earnings over the long term. Our plan is to free up financial capacity to invest in areas that will provide the greatest returns and invest in significant enhancements to the customer experience. In total, we expect to take out $800 million in cost and expense through fiscal 2015, with $250 million of the savings expected to be realized in fiscal 2013. These planned reductions primarily fall into 3 areas: retail stores, corporate and support structure, and cost of goods sold. More specifically, we expect to achieve these cost savings as follows. Under retail stores, the largest component is the closure of 50 U.S. Best Buy big box stores this fiscal year that didn't meet our investment criteria. Also included in this category is savings associated with the new store operating model. The cost savings in corporate and support structure will come from IT services, non-merchandise purchases, reduction of positions in our corporate and support areas, and a reduction in outside consultant services. Savings in cost of goods sold will be driven by reduction of product transition costs, lower product return and exchange expenses, and other various supply chain efficiencies. Savings from these cost reductions will be primarily targeted to fund enhancements to our customer experience and drive improved returns, and I'll provide more on the improved customer experience in a few minutes. The second strategic imperative is U.S. store format improvements in the context of our multichannel strategy. As we continue to focus on making it easier for customers to shop with us anywhere, anytime and any way they want, we are evolving our retail store strategy. We're increasing our points of presence while decreasing overall square footage and increasing profit per square foot. The changes we're making to our store portfolio are not only intended to decrease costs, but they also increase our flexibility. This strategy complements our fast-growing online channel by making Best Buy more accessible across multiple channels. I'm very excited about the first stage of this work. We intend to totally transform and completely reset 2 full markets to demonstrate how our combined big box and small box presence enables us to provide a better customer experience, accelerate profitable areas like connections and services, increase customer touch points and improve profitability and returns. On the big box side of the equation, we are rolling out at-scale market tests of our new Connected Stores in the most compelling value propositions in the Twin Cities and San Antonio. The Twin Cities will be fully deployed by this fall, with San Antonio completed before the holiday season. We haven't talked much about the new Connected Store model, so allow me to provide you with a brief overview. Connected Stores are remodeled big box stores that focus on connections, services and an enhanced multichannel experience. This is a total transformation of a big box store, including physical changes and a new store operating model, all designed to provide the customer a dramatically improved experience as he or she shops for technology and the connections, content and services that make it work for them. Some unique parts of the store. The stores are focused on driving key growth enablers of connections, services and our multichannel capabilities, like introducing great service products like Buy Back and Tech Support, or sending new tablet owners walking out with a wireless plan. We'll now have one larger combined team in computing and mobile phones and tablets that's on a singular mission to grow market share in hardware; accessories; services; and in particular, profitable connections. A new central knowledge desk in the center of the store, which will provide a central place to assist customers with services and connections and offer training and classes. The stores will also have expanded Geek Squad services anchored at the front of the store for improved customer service and employee experience. The stores will transform the traditional front-of-store checkout to a dedicated multichannel experience, including enhanced in-store pickup. And we're going to accelerate the opening of more Pacific Kitchen and Bath and Magnolia Design Centers inside our bigger Best Buy stores. These premium value propositions have proven results, with Pacific Sales' store-within-a-store delivering more than double the comp growth of a Best Buy appliance department. And current stores with the Magnolia Design Center store-within-a-store are achieving double the comp growth over previous Magnolia Home Theater areas. As part of the tests in the Twin Cities and San Antonio, we plan to decrease the big box square footage in aggregate across the 2 markets by almost 20% from store closures and downsizing of stores; and increase our customer touch points or doors by over 20%, driven by the continued build out of more Best Buy Mobile stand-alone stores in these markets. We'll also be introducing a new labor model, which I'll talk about later. And in these markets, we'll build out, as previously mentioned, 11 Pacific Sales Kitchen and Bath and 4 Magnolia Design Centers in select big box stores. This test in the Twin Cities and San Antonio is based on several early versions of the Connected Store pilots we did in the Las Vegas markets and several others over the last year. The Las Vegas test stores generated a significant sales and gross margin lift compared to other stores located in a similar geography, and these results were achieved with less square footage in the Vegas stores. These at-scale market tests in the Twin Cities and San Antonio will provide important data to inform the further evolution of our retail strategy and footprint, providing us an opportunity to reintroduce a new Best Buy experience to new and returning customers, and helping us determine the pace and magnitude of future actions and other store-based adjustments in the coming years. Of course, as a critical component to our evolving retail model, we will continue to open the profitable Best Buy Mobile small-format stores throughout the U.S., with plans to open 100 new locations this fiscal year. Our stand-alone mobile stores perform very well with customers and are on the path to generate strong financial returns. These locations have the highest customer satisfaction scores among Best Buy store formats, and we are happy with the financial results and see long-term value to the enterprise from our small box strategy. At full scale, we expect these stores will deliver an IRR of over 20%. Our third strategic imperative is growth initiatives. We will continue to invest to prioritize the opportunities in existing businesses through 4 key growth initiatives: e-commerce, connections, services and China. These initiatives are expected to be both revenue and margin accretive to our model. We've made good improvement in our e-commerce offering for customers, combining an improved online shopping experience with the multichannel benefits of in-store pickup. We expect our U.S. e-commerce revenue to grow 15% in fiscal 2013, almost twice the estimated growth of the overall market. Our growth in this channel is being driven largely by improvements we have put in place, including competitive online pricing; broader use of free shipping, which has proven to be a powerful value proposition; the doubling of our online SKU count; and the addition of the Best Buy Marketplace, which significantly expanded our range of assortment, price points and brands. Going forward, Stephen Gillett, our new EVP and President of Best Buy Digital, will play an important role in taking our e-commerce strategies to the next level. Stephen is tasked with accelerating our global digital strategy, entertainment offerings, multichannel capabilities and business development. He most recently helped lead Starbucks to a place at the forefront of digital retailing, and I'm very excited by what he'll do, not only to revitalize our digital relevance, but to use innovative digital thinking to create a genuinely seamless experience for our customers across channels, virtual and physical. There continues to be a tremendous opportunity for Best Buy to solve connectivity issues for our customers, a real pain point for many people. Our sales of connections in the U.S. are targeted to grow 15% in fiscal 2013. The continued growth from Best Buy Mobile will be an important driver of this performance, of course, and the other critical piece of the equation is our ability to bring the mobile connections expertise to other parts of our business, including tablets and computing, to drive increased attachments of connections, accessories and services. It's early in the expansion of the mobile model to tablets, but we already see a few encouraging data points of the mobile model at work. One quick example, based on the successful launch of the new iPad: compared to our launch of the iPad 2, the recent launch of the new iPad saw a 60% higher attach rate on Geek Squad Black Tie service and a significant improvement in the activation rates of broadband connections, which come with bounties, therefore generating a potentially more profitable transaction. Our services offering continues to be one of our biggest differentiators and one which provides us a lot of incremental opportunity. Our Domestic services revenue is expected to grow 10% in fiscal 2013, driven primarily through 3 initiatives: the continued performance of our leading Black Tie warranty program across fast-growing categories such as mobile phones and tablets; the expansion of in-store service offerings like our popular Geek Squad Tech Support program launched early last year, which offers customers both in-store and remote support; and the new and very promising small and medium business opportunity via the combination of our existing business and the new capability and product offerings available from our expanded business products and the mindSHIFT acquisition last year. Moving on to China. One important tenet of our China strategy is the expansion of our profitable Five Star stores. At full scale, we expect the Five Star stores will deliver an IRR of approximately 25%. We previously stated that we expected to do $4 billion in sales and reach 400 to 500 stores by fiscal 2016, and we are on track to accomplish that objective. Another tenet of our strategy is mobile. I'm pleased to announce that we are implementing a mobile store-within-a-store concept inside Five Star stores this summer. We expect to have 6 up and running by July and another 8 to launch in August. These stores will be our first in China under our new Global Connect strategic alliance with Carphone Warehouse. You will recall that we announced a Global Connect venture late last fall. Its purpose is to bring the combined expertise and success CPW and Best Buy have had in mobile phones and connectivity to additional retail partners around the world. Based on what we've learned together in the United States and the global experience of our team in China, I'm confident we can bring a higher-value experience to consumers in China. Beyond China, we have also been very pleased with the response from a broader set of potential partners around the globe. Our fourth strategic imperative is improved customer experience. While we have always taken pride in providing a great customer experience, we know we need to strengthen these experiences through our employees across any and all of our channels, regardless of how and where customers interact with us. We can't just claim to offer great service. We need to earn that right every day with every customer to ensure it is our #1 competitive advantage. It's my intention that today's announcement represents just the first installment of several planned enhancements to our customer experience, and we will have more to talk about in the months and quarters ahead. But I want to highlight a few things we're doing right now: We recently introduced the Perfect Match Promise for all items purchased at Best Buy. Perfect Match Promise is designed to help customers find the technology match that meets their unique needs, backed by a simple yet powerful value proposition we call "30-30-30." 30 days of free phone support to get products up and running, 30 days of easy returns with no restocking fees and 30 days of competitor price matching. Our popular Reward Zone loyalty program is about to get even better for more than 40 million members. Beginning in April, we'll be making improvements that make it easier for our members to redeem their points, both online and in-store. And in addition, over the next several months, we'll be enhancing the top-tier of our already industry-leading Reward Zone program, Premier Silver. These important customers account for a significant percentage of our profits. And to further recognize their loyalty, we'll be improving their free shipping benefit to include free expedited shipping for any order from BestBuy.com, a benefit comparable to Amazon Prime. In addition to free shipping, we are offering free delivery where we will deliver, unpack and connect basic appliances to existing utility service; launching our Premier access perk where our top customers get premier access to new technology, popular products and iconic sales events, like on Black Friday, giving them a free house call from our Geek Squad where our expert agents will solve their most common technology headaches; improving their no-hassle return and price match policy to 60 days; all the while continuing their 25% point bonus and extra point flexibility. At Best Buy, a positive customer experience and a positive employee experience are inextricably linked. We know we cannot deliver one without the other. And as part of our actions to significantly improve our customer experience, we will be making important changes later this year to our store operating model that are designed to drive a differentiated employee experience. Our intent is to ensure Best Buy stores are a great place for our employees to work, a place where they are inspired and rewarded, which in turn creates a positive impact on the customer experience and business performance. As part of this change, we will be implementing enhanced training, recognition and reward programs that reinforce the behaviors that deliver great customer experiences. Key elements of the new model include increased training. We are planning a 40% increase in employee training to ensure employees have the skills and knowledge to deliver a differentiated experience, matching customers with the right technology for their needs from our industry-leading assortment of brands, platforms, plans and services. As part of this increased training investment, we will be implementing a program this summer in which all new hires receive a significant increase in training within their first 30 days of employment. The second key element is an enhanced compensation model. This model, rolling out this summer, will provide financial incentives for delivering on customer service and business goals. The model and the incentives will vary based on the teams and individual roles within the store, but the intent is very simple: all store employees are eligible to participate in a plan. The whole store works together to create great customer experiences and meet business goals, and all employees share in a successful outcome. We know changes like this work because we've deployed similar programs in parts of our stores already. For example, in Best Buy Mobile, the increased training, recognition and performance-based rewards have had a material positive impact on the customer experience, comps and profits, with all 3 of those critical metrics routinely performing well above our aggregate store performance. One additional element of the model I want to highlight today is a streamlined communication process between corporate business teams, field leadership and the stores. The changes we are making over the next few months will increase the speed and clarity of information sent from corporate to the stores, as well as the store team's ability to offer feedback on what's working and what's not. The result will be a more nimble organization that can respond faster to challenges and opportunities within the business. I'm going to turn it back to Jim in a moment to provide you with a look at our fiscal year 2013 guidance, but I've just given you a lot of information about our transformation strategy and actions, so let me sum it up briefly. We are revising our portfolio of store formats and footprints to improve the customer experience across all channels and to improve store performance and productivity, closing some big box stores, modifying others to our Connected Store format and adding more Best Buy Mobile locations. We intend to reinvest some of the expected $800 million in cost savings back into the marketplace by offering improved customer experiences and even more competitive prices. Over time, we expect a portion of the savings will fall to the bottom line in the form of increased operating profit. And at the same time, we are accelerating our key growth initiatives: connections, services, e-commerce and our business in China. Looking specifically at the year ahead in our guidance, while I'm excited about the strategy we have for the future and the specific actions we have put in place to improve the business, I feel it's important to be pragmatic in the near-term outlook and take into account the realities we face today: first and importantly, as you have seen, sales in the traditional CE industry, from which we still currently derive the largest portion of our sales, are expected to be down again in fiscal 2013; second, we continue to face an uncertain consumer environment; and third, the significant changes we've introduced will take time for the benefits to flow through and reach their full scale of contribution. This is how I see the environment today, but we will benefit when market and macroeconomic conditions improve. And we are well positioned to grow earnings and improve ROIC more meaningfully over time, during our continued transformation in fiscal 2013 and more fully in the years ahead. Now back to Jim.

Thanks, Brian. With that context on the key transformational actions we announced today, let's discuss how these items impact our fiscal 2013 expectations. Our guidance for this year reflects the significant actions we have taken and the realistic view of the current environment that Brian just shared. Before I begin, a quick reminder that, for ease of comparison, FY '13 guidance is for the full 12-month period of January 29, 2012, through February 2, 2013, under our new fiscal year. Also, year-over-year growth figures in the FY '13 guidance, except where noted, are in comparison to our adjusted and recast continuing operations results of FY '12, which is what will serve as the prior year baseline for comparison throughout fiscal 2013. Since I know you'll be building new models given our fiscal year change and the introduction of discontinued operations, we have provided 2 years of quarterly results that are recast for our new fiscal calendar on our Investor Relations website. We expect full year company revenue in the range of $50 billion to $51 billion, which will again include a 53rd week. Given the expected decline in total CE industry sales, comparable store sales are expected to decline between 2% and 4%, which assumes we maintain our overall share and grow share in focus areas. As Brian discussed, we expect strong Domestic segment comparable store sales growth from our online channel and from tablets, mobile phones, eReaders, appliances and services. Our view also includes expected industry declines to continue in televisions, digital imaging, notebook computing products and entertainment. We are also planning for positive International comparable store sales in Five Star and modest declines in Europe and Canada. Full year operating income dollars, once again on a continuing operations basis, are expected to be down 4% to 11%. When you look at our year-over-year performance inclusive of the businesses we've exited, our operating income expectation improves to a decline of 4% to growth of 4%. Within our operating income expectation, overall gross profit rate is assumed to be approximately flat. Positive drivers include growth in connections and services and cost reduction initiatives, while the primary offsetting variables include investments to support price competitiveness and customer loyalty, as well as increased mix of online channel sales. As outlined in our multiyear cost reductions of $800 million, $250 million is expected in FY '13, and the majority of this resides within SG&A. The primary cost reductions in FY '13 are driven by store closures; less overhead in corporate and support areas; and other cost reductions related to procurement, store operating model and advertising costs. Primary areas of SG&A increase in FY '13 include the addition of 100 Best Buy Mobile stand-alone, 50 Five Star and approximately 50 Connected Store locations; investments in driving services, including last year's acquisition of mindSHIFT; connections and e-commerce. When combining the cost reductions with these areas of SG&A investment, our SG&A spending is actually down about 1% and down 5% when looking at the year-over-year spending, inclusive of the businesses we've exited. However, we also have 2 other items which increase our total SG&A spending for the year: more normalized incentive compensation levels and a 53rd week against a recast FY '12 of 52 weeks. Including these items, our total SG&A is expected to grow approximately 3%. The tax rate is expected to be approximately 36%. Moving on to earnings per share, we expect fully diluted earnings per share of $3.50 to $3.80, excluding FY '13 restructuring costs related to the actions we announced today. This represents fully diluted adjusted EPS growth of 3% to 12%, compared to a recast FY '12 adjusted total EPS under our new fiscal calendar of $3.39. Free cash flow is expected to be in excess of $1.5 billion. Our capital allocation mindset hasn't changed, and we currently expect approximately $750 million to $1 billion of share buybacks during fiscal 2013. Our EPS range assumes the low end of this estimate. From a capital spending standpoint, we expect approximately $800 million in capital expenditures this year, focused on the initiatives outlined today, including online, Best Buy Mobile SASes, Five Star, Connected Stores and services, as well as core IT projects and maintenance. While we do not provide quarterly guidance, I realize the shift in our fiscal year requires many of you to update your models to reflect our recast quarterly results and to develop your FY '13 estimates. Given this, let me provide you some quick context on the expected progression of adjusted results: From an EPS perspective, we currently expect the weighting of the quarterly adjusted EPS, as a percent of the full year, will not be materially dissimilar to the recast and adjusted FY '12 quarterly EPS results available on our Investor Relations website, within Tab B of the file titled Recast Financials for Fiscal 2011 and 2012. When looking at operating income from continuing operations, where our range for the year is down 4% to 11%, we expect the decline to be larger earlier in the year, especially in Q1, driven by lower sales comps and softer year-over-year gross profit rate performance than is expected for the year as a whole. Finally, we expect to incur pretax restructuring charges related to store closures, severance, asset impairments and other costs in fiscal 2013, resulting from the transformation actions outlined this morning in the preliminary range of $300 million to $350 million. While a large majority of these charges will be in cash, many payments associated with exiting leases will likely be made over multiple years. Including these charges, we expect fully diluted earnings per share of $2.85 to $3.25 on a GAAP basis. Our guidance of $3.50 to $3.80 is for adjusted results that exclude these restructuring charges. With that, I'll turn the call back to Brian.

In summary, I'm pleased with many of the actions we've taken over the last few years that will bring improved financial benefits and an improved customer experience. But I believe we need to move even faster to adapt to the realities of the market, and the actions we're announcing today move us boldly in that direction. I'm confident that the transformation we are making will take our customer experience to new heights, grow earnings and ROIC, and deliver excellent value for shareholders. Thank you. And now, I'll turn it over to the operator for the questions.

[Operator Instructions] Our first question comes from the line of Greg Melich with ISI.

The 50 store closures, could you help us out as to where they are or what made the decision, how you picked the 50? And then I have a follow-up on that front.

It's Brian. I'll tell you what; we're not going to specifically tell you where the 50 are. We're going to talk to our employees first about that. I can tell you that, as I mentioned in the call, they are stores that did not meet the hurdle rate we saw for continuing operations. And further, there will be stores, as I mentioned in the call, in those test markets, Minneapolis and San Antonio, that will be reconfigured, and there will be store closings in those 2 markets.

Okay, great. And secondly, on this -- the EBIT dollar growth down 4% to 11%, Jim, there are a lot of moving parts. Could you just help -- take us to the number that, that's actually off of? And just to be clear, the savings you're talking about, the $250 million this year is embedded in that down 4% to 11% guidance number.

Yes. Sure, Greg, I'd be happy to talk about both of those. So what you were quoting is the operating income guidance from continuing operations of down 4% to 11%. With the number of activities that we did this year and certainly the fiscal year change, one of the things that shareholders and the sell side will see next year is that when we report actual results, our results are going to be broken into 2 pieces: continuing operations and then discontinued operations. Clearly, we're going to receive a large benefit in discontinued operations from the store closures and model changes we made this year that aren't going to show up in that continuing operations line. So one of the things that we purposely tried to do in the call today is when you compare on an apples-to-apples basis the total results of the business, we're actually looking at op income dollars, if we weren't reporting discontinued operations, to be more like a range of down 4% to up 4%. But specifically, what you're going to see next year in the continuing ops line is just the results of our continuing operations. That's the down 11% to down 4%. So specifically, within that, you can look on our website; you'll see reported information for what we are using that as -- what we used as the anchor for the FY '12 recast, number one. And number two, to your point, Greg, the savings that we have, of the $250 million, are included in the guidance ranges that we've provided. They're actually what's helping us fund a large portion of the investments that we can make in the customer experience activities and actually improving those new store footprints that we're doing in our connected digital stores.

Okay. And then lastly, on the business through the quarter, it seems like it got a lot worse or slower in January or February from your December results. Could you highlight some of the category shifts there, what got weaker and promotions through the quarter?

Yes. Greg, really, just a mixed bag. Certainly, I'm not going to dive into the detailed results within individual months, but I think it'd be unfair to characterize all the pieces moving in the same direction over those 2 months. Broadly, versus our expectations and what we saw in the closeout of the year, is the Mobile Phone business got stronger, which was great. We were also very happy to see our mix of sales in the home theater area also improve. So we mixed into more profitable categories. The softening that we saw was predominantly focused on the gaming business, which has been a drag in the industry and certainly within our portfolio all year long.

Our next question comes from the line of Dan Binder with Jefferies & Company. Daniel T. Binder - Jefferies & Company, Inc., Research Division: It's Dan Binder. Just wondering if you could give us a little bit of color above the EBIT line for next year, in terms of directionally, the type of price investments you think you need to make and what the resulting gross margin outlook is.

It's Jim Muehlbauer. So we've made a number of investments in improving our overall price impression during the current year. And we were very happy that -- current year, just to be clear, FY -- I'm referring to FY '12. We were very happy to see the progression in our overall market share gains, especially in the back half of the year, and very pleased to report that total market share for the company went up in the quarter and for the year in total. So those pricing impressions that we have deployed this year in FY '12 really were focused on a number of different areas. They most meaningfully show up obviously in our largest product categories like televisions and computing. As we look at next year, certainly, the growth that we're planning in the online space is an area that we continue to make appropriate investments in to grow that business, to emphasize the benefits of our digital and physical presence. And we're also mindful of where the competitive environment will continue to be for a period of time. So part of it's in our plans and part of it is we've got firepower set aside to read the market as the year goes on, because we're certainly focused on providing value to our best customers and making sure that we get every chance to give them the full experience of what our model can provide. And the first entry point, as it always has been, is you got to have a great price in the marketplace to drive that hardware so we can actually do what we do best: selling connections and services while offering those great products that our vendors provide us.

Dan, this is Brian. We appreciate the question. I would just add that this notion of us gaining share this last year in fiscal '12, we're very pleased with that. That was our intent. You should expect us -- during this time, when the industry is experiencing a temporal contraction, you should expect us to work diligently to maintain our share in categories where there is less innovation and to grow our shares -- our share in those key core connected categories. We view that as utterly mission-critical to what we're doing. Thanks for the question.

Our next question comes from the line of Kate McShane with Citi Research.

I wondered if you could help us understand a little bit better the timing of when we are going to see some of these changes. I know there's a clear definition of some of the Connected Stores and when that will change, but for all the other changes that you're making, is it more like FY 2014 where we'll see these changes to the store, where you'll really start to see it impact both comps and margin? And also, could you identify what the CapEx requirement is for the new rollout of the Connected Stores?

I'll let Jim comment on the CapEx required. You should start -- you will start to see movement this year in fiscal 2013. We're very -- as I mentioned, very enthusiastic about the Connected Store markets -- test markets we're running in Minneapolis and San Antonio. The big question there for us is, what is our customer transfer rate? We're going to be very focused and work very diligently and play offense in helping make it easy for our customers that are used to shopping in location A and moving them to one of these connected digital stores, location B or location C. So we're going to proactively and then actively work to transfer these customers, and that will largely dictate how rapidly we move in these markets and expanding this test. But the customer transfer rate is the big question for us, and we're very, very focused on delivering against that. Jim, you want to comment on CapEx?

Yes, I would be happy to. As I mentioned in our overall CapEx guidance for the year, we've set aside money to roll out those new Connected Store tests in certainly Minneapolis or -- sorry, the Twin Cities and San Antonio, as well as a few other select markets. The capital that's going to be required to do that is not an enormous portion of our total $800 million of spending. And really, it's intended to lay out, from a test standpoint, what is it going to take in those stores to deliver the type of experience that we have? So we're not, at this point in time, going to lay out the economics of the investment or the returns, other than to say that we're modeling it off of the work we've done so far in Las Vegas and some other markets, which candidly was nowhere near as comprehensive as what we're planning to do going forward. And to Brian's point, I think the overall excitement that we have in the business is this is the first time we're really able to take entire markets and transform the entire experience and then put marketing support and muscle behind it all at the same time to see how the digital, physical big box and small boxes work together. So the capital investment is going to be modest in that space so far, and we'll be happy to provide more results as we get into that journey and see some of the details of these tests.

Just as an example, one of the things that we saw in Vegas in a number of the stores, but there's one in particular, a store that's 19 years old in Las Vegas that is essentially performing on a comp basis like it's new again. It went from an old and tired footprint to a place that is vibrant and really demonstrates the sort of best of what we can do in this connected world. And it is comp-ing materially better than the balance of chain, as is the Vegas market, as I mentioned in my remarks. And that really is the core here, bringing to light all the things this technology can do for customers and having it in a place -- in a space where we can showcase that so people can make great decisions about all the choices they have. Thanks for the question, Kate.

Our next question comes from the line of Gary Balter with Credit Suisse. Gary Balter - Crédit Suisse AG, Research Division: A couple of follow-up questions -- or one question, I guess, the way everybody says it and then I ask too, the -- we had a call yesterday talking about some of the changes that the vendors are doing with pricing of televisions. I'd love to get your thoughts on what's happening. And do you think it's going to have any impact and help your margins, first of all?

Gary, I'm going to ask Mike Vitelli to comment on that, please.

As a matter of practice, we're not going to comment on our vendors' policies or distribution practices. But with that said, we think that our combination of stores, employees, the ability to demonstrate products in the store, on our websites, we believe that there's no better retailer positioned than Best Buy to help explain and show customers the benefits of the technology and features that our vendors invest in and are seeking to get a return on. So we believe we're best positioned to do that and to sell advanced products and advanced features to consumers. Gary Balter - Crédit Suisse AG, Research Division: Okay, I'll take that as a yes. Just a follow-up, I think one of the -- the stock obviously is not performing as well as some people may have hoped for today. And one of the things that we're seeing with companies that are generating a lot of cash flow is beyond the buyback, which you're doing pretty nicely, raising dividends and paying out and kind of accepting a certain percent return to investors for dividend policy. What have been your thoughts about the dividend?

It's Jim. I'm happy to take that. Certainly, as Brian and I have both talked about over the last few years, the position that our business is in, given its size and scale and its cash-generative capabilities, has allowed us the capacity to not only invest in the business, but also to enhance shareholder returns. And what we have purposely been doing in the marketplace over the last few years is getting more aggressive in repurchasing shares based on what we know we can do with the business and based to how our company is currently valued. We certainly understand the perspective that shareholders have -- certain shareholders have around the role that dividends play. It's an important part of our story as well. Quite candidly, at this point in time, as we make the choices around how to deploy our cash, what we're always most interested in is investing money to grow our core businesses and to make them more profitable for the long term. And that's where you're always going to see our capital allocation strategy take hold first. So as we look at this year and beyond, what we're most conscious of is looking at our cash balances and making sure that we have the money available to invest in the transformation that Brian outlined, and that we're really looking to the success that we're planning for the markets in Minneapolis and San Antonio to be indicative of how our investment profile should move moving forward and what pace we should make that investment. So first and foremost, we're here to drive the core business in profitable areas that we know will enhance shareholder value. That's our first function. And we want to make sure that we have enough capacity to let that play out, because that is the transformation story within Best Buy. We also continue to review options around share repurchases and dividends, and we have proactive conversations with all of our internal and external constituents on that point. And we're not in a specific position today to talk about any further details other than what we laid out in the release and script this morning.

Our next question comes from the line of David Schick with Stifel, Nicolaus. David A. Schick - Stifel, Nicolaus & Co., Inc., Research Division: Back to -- you've got some discussion of that Vegas test, and you mentioned sales and gross margin lift. I just wanted to get a little more specific, I guess, as a road map here. Is there an operating margin lift as well? And anything you could give about magnitude of said lift.

So the question is about the magnitude of the lift and what we're seeing in operating margins, and we're just not going to break that down further. What we can -- what I can tell you is what we have seen is giving us a great deal of confidence and great enthusiasm for what these connected digital stores can do. And this is not just a brick strategy. This is about all the channels coming together around the customer and having a real physical manifestation of that in our connected digital stores. And in the upcoming quarters, as we open the markets and roll the markets out, we'll be reporting with some regularity about what we're learning and what we're seeing. But again, the key thing for us there is going to be not only those metrics you just identified, but that very important customer transfer rate where we're going to spend a great deal of time and energy focusing. Thanks for the question.

Our next question comes from the line of Alan Rifkin with Barclays Capital.

Of the $800 million in cost reductions that you've targeted for the next few years, it certainly looks like, more so in 2012, the benefit is coming from the store closures. If the Twin Cities and San Antonio tests perform as you hope and expect, would that not imply more store closures further down the road?

Yes. Thanks for the question, Alan. Let me say this: I am -- we are very enthusiastic about the future and the notion of what Best Buy can do to make technology work for each and every one of our customers and transforming this business as the CE industry continues to evolve. And I think it's really important that the listeners on the call understand we believe these flat innovation cycles are temporal and not permanent. The television business is going to be an important environment -- business in the years ahead, for example. But as part of this strategy, when we learn more about this transfer rate and where -- what we're able to do in terms of migrating customers from store A to store B, to online, on the phone, any one of our channels, that will inform our future trajectory on square footage. I mentioned on the call this morning that we anticipate a 20% reduction in Minneapolis and San Antonio. We think that's a really excellent testing point for us. And we are very confident that as we put our energy behind a customer-transfer strategy, that we'll be in a position to be really well informed about what the future square footage looks like for Best Buy.

Okay. So, Brian, so if the tests work, would it be reasonable for us to assume that a potential 20% square-footage reduction in other markets may be possible? And then as a follow-up, how do you think about the group of stores that are cash flow positive today, yet are not yielding their cost of capital? Could you maybe just elaborate a little bit on how you're thinking about the future of those group of stores, however many they may be?

Alan, I appreciate the question. I just want to be clear here. In terms of -- I know it's of great interest, the number of locations. It's just too early to say what the exact right number is, and we're going to learn a lot more this year from the markets. I do want you to understand I'm not wed to a specific number of stores or square footage. What I am wed to is further developing our multichannel strategy, which is shop anywhere -- anytime, anywhere and providing the best experience with the most choices for our customers. That's how we're thinking about this.

Yes. And I think, specifically, Alan, to your question around what might we expect in other markets, certainly, from a hypothesis standpoint, our density is different in different markets. So depending upon how this test plays out, we may have markets that are well below the 20%. We may have markets that are above the 20%. To Brian's point, that's what's going to play out in this test. Certainly, our density of stores is much higher in the Twin Cities than it is in San Antonio. That's part of the reason. Purposely, we picked 2 different types of markets to focus on. The other element that you talked about was stores in the portfolio that do not meet our investment returns. We have many, many, many stores that provide well above our investment returns in the portfolio today. As a matter of fact, of the -- even of the stores that we're announcing from a closure standpoint, there are just a handful of them that don't make money on an NOP basis, and even fewer that don't make money from a cash flow basis. So this is all about transforming the experience in those stores. And the connected digital store formats that we're putting out there are all about leveraging the brand, the traffic and the customers that we have in those markets today and giving them a better experience, which we know will build on the great returns those stores have already.

Alan, just one last thought here. I know there's a great deal of interest in the number of the 50 big box stores we're closing today. I don't want lost in this, that we have announced that we're opening 100 more Best Buy Mobile stores, which is a very important growth vehicle for us. All along, we've been very, very clear about this. Our intention is to leverage our square footage and to have more distribution points for our customers. So while we are reducing square footage some number, this is really about, how do we position the company so we're where our customers need us to be? I don't want that lost on anybody following the story. We're clearly going to have more doors and less square footage. Thanks for the questions, Alan.

Our next question comes from the line of Peter Keith with Piper Jaffray.

I had a 2-part question on the cost reductions. I guess I'm just curious on how much control and visibility you have on the $800 million. Certainly, it seems like there's good control on the SG&A items, but the $200 million of cost of goods items, it seems like that might be a little bit difficult to predict over a 3-year time period.

I'm going to ask Jim to comment on it, Peter, but I want you to know that $800 million that we've talked about this morning in the release and in our prepared remarks, we have a high degree of confidence that we will be able to deliver that number. Very, very high degree of confidence. There may be shifting between buckets, and I'll let Jim comment a little bit on that, but that $800 million, this management team views as a very firm number.

And it's really building off of the success that we've had over the last couple of years. Clearly, once again, as you saw in our results for the quarter -- our Q4 and for the year, we continue to bring the SG&A rate down. Specifically to your question on the cost-of-goods-sold bucket, I'd ask you to think about that in a couple of different pieces. There is a substantial portion of that, that's really related to how we continue to make improvements to our management of return and exchanges and end-of-life transitions, working in partnership with our vendors and our stores, and things that we can do in our overall model, that we can actually control a lot of our own destiny in that space. So when you see cost of goods sold, don't queue into that different negotiation strategies with vendors on core product costs. These are waste we and our vendors see in the system, around product that is being purchased by customers for good reasons and being brought back, that we think we can do a good job working in concert with our vendor partners and really solve a bigger problem in the industry and being more efficient while serving our overall mission, which is giving customers a better experience, which really means making sure what they buy from us works and they continue to be happy with it. So a large port of that -- a large part of that is controllable in our system. It's not subject to negotiation.

Okay, that's very helpful. Just a follow-up question I had then. On the store closures, one thing that was not mentioned today was your effort to reduce square footage in existing stores by 10% over 3 to 5 years. Is that still an initiative? If it is, could you give us an update on how that's proceeding? And is that at all factored into the $300 million of savings in retail stores?

Yes. To the point Brian had made earlier, we have been talking about expanding our points of presence and reducing overall square footage for some point of time. When we last met with many of you in the April analyst meeting, we laid out the strategy of looking for a minimum of a 10% reduction in our square footage. It was always intended to be accomplished through a combination of downsizings and a smaller portion of store closures while, at the same time, building more points of presence with the small boxes. So not only have we not given up on that strategy, we've been very successful in executing what we said we were going to execute this year. And what you should look at today's comments on is really building on that success and our continued commitment to drive the outcomes and reducing our overall square footage. Back in Q2, I mentioned, I believe, on the call, that we had anticipated that we were going to touch probably -- I think it was like 25 or 30 stores for the year. What we ended up touching, just specifically, was about 43 big box stores during the current year. And on average, across those 43 stores, we reduced square footage by approximately 15%. Now to be clear, those were individual stores. We'll see how that amount moves going forward. But for that tranche, it was 15%. The other thing that exceeded my own expectations this year was for that square footage we took out. We have already been successful in either subletting or giving back over 70% of that to landlords. So we've got that expense for those stores out of our operation. So once again, just small data points on a small subset. But I know there's many questions by shareholders at a time, talking to retailers about the real ability. And will they actually close stores when they say it? Will they actually shrink? We exceeded our expectations that we set out for this year. And certainly, with the plans we've laid out going forward, we're very interested to see where the expansion of our small box footprint and the shrinkage opportunities we have on our overall square footage really will take the business model.

Our next question comes from the line of Matthew Fassler with Goldman Sachs.

I have a couple of questions today. On the market share front, as I look at the government retail sales data for consumer electronics stores over the 3 months ended February, the number was down about 1%. And if you look at PCE data in nominal terms, in December and January, the 2 months of the quarter that are out, the numbers were up low-single digits. So I guess when you think about market share gains, if you could share with us some of the sourcing and the magnitude perhaps and who you're including in that bucket, because it seems like the revenue did soften up perhaps a bit more than the market, at least from some of the easily available data.

This is Mike Vitelli. The data we use is very specific in working with the categories that we track that are not -- everything that we sell. So when we're talking about share, we're talking about the share in categories that we track. We're very specific at the product-category level. Government data oftentimes include stores that sell other things. So we actually believe the triangulation of the data we're looking at. We saw, over that same 3-month period, that everything we've seen is the industry down about 4% in the categories that we track, while we were down less than 2%. And that's where we see our share gains across almost every category that we've looked at.

Got it. And, Mike, if you can just amplify on that a bit. As you look out to 2012, any outliers in your revenue forecast in terms of major categories, be it TV or some of the PC categories? Anything that you think might be particularly hopeful or tough for you in 2012?

I think, as Jim mentioned, some of our more -- the traditional CE categories like television will be a lot like it was in fiscal year '12, that is, a relatively flat unit scenario with some modest ASP declines. So the revenue of television will be down slightly. Computing is different. It'll kind of be a bifurcated year. The period leading up to Windows 8, the notebook industry will probably be soft. But we have some confidence that Windows 8 is going to change that, particularly on the revenue side more than the unit side, more towards the second half.

And then my second question, you're now -- it's almost exactly 2 months past the closing of the repurchase of your stake in Best Buy Mobile, and I know it's probably early to look for results from the work you've been able to do. Any insight you have as you implement some of the mobile strategies across broader pieces of the store, on what that's doing to your ability to upsell, generate service revenue, et cetera?

Yes, we're actually very pleased, Matt, with what we've seen there to date. I mentioned on the call what we saw with the sale of the new iPad. We were very pleased with the very material improvement and execution around that. And I just want to -- just flip one word on you here. For us, it's not about upselling as much as it is about selling customers the technology they need and all the services that light them up and make them work. But that iPad launch was a very strong indicator of the work this new solutions business group is doing, and we're very pleased with it.

Our next question comes from the line of Brad Thomas with KeyBanc Capital Markets.

Wanted to follow-up on the connections overall. The total additions fell a little bit short of your goal for the year. I was hoping you could just talk a little bit more about some of the industry drivers there and why you expect that to accelerate this upcoming year, and then some of the underlying margin drivers as this industry continues to mature.

I'll let Mike talk about some of the specifics as he sees them, but I think it's companion to the answer I just gave Matt, and it is that capability, and that's why the deal we made with CPW was so important, so we're able to expand that connections business group, that capability to a broader set of our categories. And they're the categories that are growing in our industry right now: phones, tablets, Macs and PCs. So we're actually very pleased with the directionality and what we're going to be able to do with that group.

This is Mike again. And when we look back at fiscal year '12, and most of our connections in fiscal year '12 came from the actual connections of smartphones and other phones, those were a little bit less than our expectations in the way some of the iconic phones launched and when they launched within the year. When we look into fiscal year '13, as Brian mentioned earlier, we've combined the team, both here in our headquarters offices and in the field. That is driving the computing business, the tablet business and the cellphone business together. What we're seeing is, in addition to phone -- continued growth in market share and units in the smartphone business, our ability to connect tablets. And we saw that significantly change versus the iPad 2 launch to the new iPad launch. We believe we're going to be able to continue that and press that, both in the tablet business and the computer business throughout fiscal year '13.

I know we're going long, but if I could ask one last question on CapEx, the $800 million plan for the year, still relatively low as you look at it as a percentage of sales. But at the higher end of the range, from a historical perspective, is this a level that we should look for, for the next several years? Or is there going to be an opportunity to reduce that level of spend going forward?

Yes, I would characterize it, honestly, more in the range of what we did in the last several years. Certainly, it's nowhere near the high-water mark we had a number of years ago, and I'd put it into the camp of fairly consistent with what we did last year. A couple of, I think, important callouts. One is the mix of what we're spending on is dramatically different now versus what it was 3 or 4 years ago. Much less emphasis on new stores, much more emphasis on core existing businesses like services, mobile, things of that nature. And where we really see the opportunities to continue to invest behind our strategy is, clearly, we can spend more and will spend more in the online digital space to continue to improve that experience. The other thing that I would call out is, depending upon how these Connected Store tests work, that will absolutely inform our capital spend profile over the next 3 years. Because when that test is successful, like we do with all things that are successful, we'll want to roll that out into the marketplace. But we're going to do that with proven results and proven returns. So that is a variable that I would see in the CapEx plan. I don't -- I'm not suggesting that our CapEx is going to move up enormously as a result of that, but it will influence our thinking specifically around where we spend CapEx over the next 3 years.

And our final question comes from the line of Chris Horvers with JPMorgan. Christopher Horvers - JP Morgan Chase & Co, Research Division: Big picture math on the guidance. So last year, it looks like the adjusted is $3.39. You add $0.30 for exiting Europe, call it $0.15 to $0.20 for buyback and you get $250 million in cost savings. That seems like it's about $0.45. You add that all up, it's about $4.30. Is that the right way to think about it? Or does the $250 million double count some prior restructuring? And if it is, are we basically assuming that the price investments is the primary offset to get back down to the $3.50 to $3.80?

Yes. In the road map you walked through, I think if -- I'll take the amounts out of it for a minute. But in general, that's the right way to think about it. Specifically to your question, you're double counting a little bit at the price at the -- I'm sorry, the actions we took last year and the $250 million. If I helicopter up, the way I'd look at it is as follows, is that if you look at the benefits that we're receiving from the businesses that we exited, which is providing tailwind to the EPS growth, certainly, the continued buyback activity that we have planned will provide some tailwind to growth. The cost savings that we've laid out for roughly $250 million are providing some tailwind. We're reinvesting those costs in our biggest-growth businesses: connections, mobile, services and online. And we're using that money also to help fund several of the very important price impressions and customer experience levers that Brian talked about. All at the same time, looking at our Domestic business specifically, is that given the sales comp expectations in some of the traditional categories that Mike Vitelli talked about, we're expecting profitability declines in those spaces. So we're using those cost savings to offset some of the gross margin dollars on the lines we see in that space also. So this is all about positioning the business for profitable, long-term growth. And in the current environment, looking at next year, certainly, with the weight of those big businesses declining, that puts pressure on our overall cost structure. And what we don't want to do -- it would be very simple not to invest in the future and show better returns for next year. That would be a very short story over the next 2 or 3 years. What we're committed to doing is driving where we see value for the long term and investing prudently in proven actions, which is why we're redeploying that SG&A the way we are today. It's purposely why, in the $800 million of cost savings we've laid out, we've said that over time we expect more of that to fall directly to the bottom line. It's all moving to the bottom line right now. We're just reinvesting higher portions of that to get our business in a position to grow even faster when some of those headwind pressures alleviate.

Into growing businesses like connections, like services, in places where we know we make a difference. We appreciate everybody hanging with us through a long call today. Thank you.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.