Ladies and gentlemen, thank you for standing by. Welcome to Best Buy's conference call for the second quarter of fiscal 2013. [Operator Instructions] As a reminder, this call is being recorded for playback and will be available by 12:00 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, sir.

[indiscernible] conference call. We have 2 speakers today, Mike Mikan, our Interim CEO; and Jim Muehlbauer, our CFO. And after our prepared remarks, we'll be happy to take Q&A. 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. Please note that our reported results this morning include non-GAAP financial measures. These results should not be confused with the GAAP numbers we reported this morning in our earnings release or with the GAAP numbers we will report in our 10-Q. For GAAP to non-GAAP reconciliations of the reported to adjusted results and guidance, please refer to the supplemental schedules in this morning's news release. And now I'd like to turn the call over to Mike.

Thanks, Bill, and thanks to all for joining the call. Last spring, Best Buy's Board of Directors established an independent search process to name a successor to former CEO Brian Dunn, who resigned in April. That process has been conducted thoroughly and with great care and has resulted in the board's decision announced yesterday to name Hubert Joly as Best Buy's new Chief Executive. We are all very excited about the prospect of Hubert joining this organization. Hubert brings tremendous experience to the job. He served the last 8 years at Carlson, a global company based right here in Minneapolis. He's got local roots, but he's also got a great deal of international experience. And he has specific experience in corporate turnarounds, exactly what Best Buy needs at this moment. Over the last 3 months, Best Buy's management team has worked to define opportunities, initiatives and actions to move the company forward. Hubert will inherit a good deal of advanced work on that front. The team has begun to confront the challenges Best Buy faces. We have examined ways to expand our services and digital offerings while reducing costs and cutting square footage. This work will be shared with the company's new CEO as he comes on board. I know you will understand it would not be fair to him to discuss the details today. But rest assured, the work will be shared with Hubert as he transitions into the company. I, along with the full executive team, will do everything we can do to ensure a smooth transition to provide continuity of leadership and to make sure he has the benefits of the good work done to date so that he hits the ground running. Let me briefly discuss the performance of the company. As we've been discussing for…

Thanks, Mike. As Mike said, our second quarter performance is a reflection of the current product cycle challenges in CE hardware, highlighted by industry weakness across several large categories. Q2 did see an improvement in comparable store sales trends compared to Q1, but this was overshadowed by lower gross profit rates, driven by unfavorable mix of sales within mobile phones and televisions, additional promotional activity in the computing category and weak performance in our International business. I'll cover each of these items in more detail shortly. From a revenue prospective, consumer demand in several large categories continues to be challenged, but our Domestic market share during the quarter was up a little from the prior year. In fact, according to external sources, our market share for the quarter, year-to-date and trailing 12 months are all at or above levels of the previous year. The Domestic segment comp sales decline of 1.6% in Q2 represented improvement over the 3.7% decline in Q1. Strong growth from tablets, mobile phones, appliances and eReaders was more than offset by weakness in categories like gaming, digital imaging, televisions and notebooks. The product categories having the most notable improvement from Q1 to Q2 were stronger growth in mobile phones and smaller declines from notebooks and gaming products. There's speculation by some that a portion of the current industry softness may be from customers holding off purchases until some of the highly anticipated new product launches hit later this year. It remains to be seen how much customers are truly waiting. But what we do know is that we have seen this phenomena play out before, and there are significant product launches expected in the second half that will provide some tailwind to sales. We continue to make progress on expanding our online sales. During Q2, online…

Thanks, Jim. Let me offer just one final reflection. Having spent the last 4 months operating on the inside of this great company, I've had the opportunity to learn about the business in detail. I've talked to customers, I've met with store employees, gained a deeper understanding of the distinctive assets and the power of the brand and the partnerships we have with vendors. Based on these experiences, I'm more optimistic than ever about Best Buy's future and I look forward to continuing that journey as I return to the board as Chairman of the Audit Committee. Thank you, everyone. And now we'll turn it over to the operator for Q&A.

[Operator Instructions] Our first question comes from the line of Alan Rifkin with Barclays.

I guess if I'm permitted just one question, it's kind of a philosophical one. So if your Domestic business essentially came in line with your expectations and Europe on a sequential basis actually improved, I guess I'm trying to understand why are you suspending your official earnings guidance as well as the share buyback program? Is it a function of greater uncertainty in the marketplace or the -- is the potential exists that Mr. Joly will have a different strategic plan for the second half, which may impact your earnings and your buyback activity?

Alan, it's Jim Muehlbauer. Two things. First off is we talk about the Domestic business being in line with our first half expectations. As we discussed, we were over our planned expectations in Q1 in our Domestic business. The business started to soften from an industry standpoint in Q2. When I put the 2 quarters together, we're basically in line. Looking forward, as we talked about on the call, we certainly have a lot of variability in how the year is going to play out from a consumer demand standpoint, especially with the key product launches we see in the back half of the year. Candidly, the visibility to the magnitude of the impact of those launches is very variable at this point in time, especially given the concentration of sales we have over the holiday season. That, coupled with giving Hubert some time to come in and understand the business and assess where he wants to take the organization long term, we believe that the best thing to do in light of those 2 circumstances is to give him the flexibility, which basically resulted in us deciding to take guidance away for the balance of the year, really to give him a chance to digest what's happening in the business model.

Okay. So can we expect to hear on your third quarter call, if not before, a detailed strategic plan from Mr. Joly as to where he wants to take your business going forward?

Alan, it's Mike. I don't want to get ahead of Hubert and his digestion of all the work that we've been doing and the impact that he will choose to take. But I can assure you that Hubert is a decision maker, he's action-oriented and he will come to the marketplace as appropriate, so he'll hit the ground running and take on all the great work that has been done over the last several months.

And our next question comes from the line of Greg Melich with ISI Group.

I want to focus on the margin trends, Jim, versus your plan. You said SG&A, in particular, came in a little better than expected, getting some costs out faster. Could you relay what those costs were and if we think this rate that you've done, the down 2%, can be maintained?

Yes, Greg. As you know, from the beginning of the year, we put plans in place to dramatically lower our cost structure. We made several of those moves starting at the end of last year into Q1 around some of the organizational changes we made in our operations -- our operating model, both in our corporate offices and our field locations. We've also been trimming back expenses in a variety of areas of the business so that we can make sure that we fund the important investments around the growing and profitable parts of the portfolio, especially in our Best Buy Mobile business and our Service business. So the good news is, is that we continue to invest in those businesses. And as you saw from the results in the second quarter, we continue to see strong growth in our Services business and in our phone business and we're investing SG&A behind that. We continue to expect to take costs out as we go throughout the year. Our plans for the year are actually more bullish on the amount of costs that we can take out and we’ve kind of reflected that in our forward-looking view was well. Candidly, we've got a lot of work to do over the long term in taking costs and rightsizing the business to the opportunities you see going forward. So we still certainly believe that what we're doing in FY '13 is just a good start on those fronts. There's more opportunities to take costs out for the long term.

And Greg, it's Mike. I will also suggest that as we go forward, reflecting the actions that we -- the aggressive actions we're starting to take with our cost structure in terms of our store portfolio and footprint, we also want to be looking at the store productivity and revenue per square foot and seeing that improve and you started to see that this quarter with an improvement of 1%. It's slightly up, but our intention is to demonstrate that improvement over time.

And our next question comes from the line of David Schick with Stifel, Nicolaus. David A. Schick - Stifel, Nicolaus & Co., Inc., Research Division: Want to talk about the sort of global sales slowdown that you're talking about. Do you think that there's a new -- and some of the product cycle discussion around that, is it a new pattern that's forming in terms of purchases? Is there a longer duration between television purchases? Your insights as to how consumers are looking at purchases of some of the higher-ticket stuff outside of the obvious Windows 8 cycle would be helpful.

This is Mike Vitelli. Thank you for the question. What we're seeing is we focused a tremendous amount of our attention in the first half, and in fact, globally on some of the key categories that we've seen tremendous consumer interest, in mobile and connected products. So we've grown our revenue in mobile phones and tablets. We grew our share in both of those categories and in computing. Those are areas that we're seeing strong consumer interest and we wanted to make sure that we're positioning ourselves in that place for the second half of those launches came out. Appliances, as an industry, are relatively stable. We grew our -- we grew both our comps and our share in that category as well. So the place where you're seeing -- we're seeing slowdown has been in some of the more traditional categories like television and that's right where we were in our plan. We expected this year to be -- there to be a decline there. That's playing out to be true. Units are up, ASPs are down and that's something that's playing out literally around the globe in the television category. David A. Schick - Stifel, Nicolaus & Co., Inc., Research Division: So Mike, do you think that, that's a change in how often -- historically there was an idea that there was a replacement cycle. Is that replacement cycle changing due to cord cutting or changing due to technology or is there something changing in that?

Well, I think it's actually more of -- if you think of that fact that units are actually up year-over-year, consumers are buying as many televisions -- more televisions than they were a year ago, their costs are lower. So in that sense, the interest in television and the interest in entertainment is actually continuing to grow. There are more devices to choose from. We've got tablets, we've got mobile phones that have that capability so there are more products that are there. So there's really no new data that we have that's suggesting that replacement cycles are changing.

And our next question comes from the line of Scot Ciccarelli with RBC Capital Markets.

I do understand you guys have suspended guidance. I think we all kind of understand that. But given that the look -- the comments you've made regarding the broad sales slowdown as well as the gross margin degradation, is there any reason to believe that the year-over-year trends in operating income will be much different in the second half than what we saw in the second quarter?

Yes, we certainly expect that the trends that we saw in the second quarter, based on what we see right now going forward, are not going to extend into the back half of the year in the same way. I do want to highlight, specifically in what we’ve talked about in the sales trends and margin trends in our business, are not things that we see unique to Best Buy. We certainly see them being driven by the same industry mix factors that are happening in the business and basically being driven by what consumers are currently interested in buying in key categories whether it's smartphones, whether it's the activity we see in the tablets and current notebook space. And once again, just given the vast amount of consumer activity in the back half of the year around the holidays, it's difficult to predict around where consumers are actually going to go during that period, especially with all new releases that are coming out. Quite candidly, we just don't want to get out too far in front of us given the uncertainty around demand in the environment and the impact of those releases in general.

And our next question comes from the line of Michael Baker with Deutsche Bank.

So I wonder if you guys are going to be willing to address any of the movement around the buyout offer from your former Chairman and CEO. And if so, just wondering the thought process on what occurred over the weekend in terms of the disagreement in some of the language in terms of standstill agreements. And it sounded to me that the board is open to discussing things with Dick Schulze, but couldn't come to an agreement on some of the language around that, is that a correct characterization?

Michael, I appreciate the question. We've been -- we've issued a release. The board has issued responses to that and releases. And as of now, the only thing I would add to what's been out there in the public marketplace is our proposal still stands and we feel it's up to Dick to respond from there. But that's all I really have to add at this time.

Our next question comes from the line of Michael Lasser with UBS.

Along those lines, Mike, can you just expand and shed a little light on how the board is thinking about maximizing shareholder value? We're getting snippets of a lot of different things right now and it's hard to dimension what the strategy is.

Well, thanks for the question. As we've been talking about for several months now, we're focused on building out a strategic plan that is what we believe to be a better Best Buy for the future. And as I stated earlier, Hubert will come in and take a look at the elements of the things we've been working on and bring those to further action as appropriate, so that's first. Second, getting a permanent CEO in place was a big objective of the board. And as you know, originally, when we discussed the transition to interim and ultimately to permanent, we talked about 6 to 9 months. The board has acted -- in our mind, we've acted swiftly in getting what we think is a great candidate in that role for the future in about a 4-month time period, so a lot of heavy work has been there. But with respect to a long-term value and also just have you look at where we believe we are today, you're seeing some of the improvements that we've been working on with our cost structure, which is important. But we've got a very strong financial position. We remain with a strong balance sheet with significant assets to leverage, strong free cash flow with diversified businesses. And so the board continues to focus on the strategic plan with a permanent CEO to execute against that and we'll do that swiftly as Hubert comes in at his time line.

Our next question comes from the line of David Strasser with Janney Capital Markets.

So there's a lot, obviously, going on whether it's the offer, it's the new CEO transition, it's tough business environment. What's the mood as you walk around the headquarters, and even more importantly, as you kind of visit stores? I mean, how impaired do you think the mood is around the company and how hard is that going to be to get back or do you feel relatively comfortable there?

Obviously, Best Buy has gone through -- has had -- we've had our challenges and the things that are playing out in the public marketplace is a distraction. I can't say that it isn't impacting the, I'll call it, the engagement of employees. That being said, everyone's focused on improving business performance. And there's a great passion and belief in the brand of Best Buy. And so for the most part, we believe that whether it's in the stores or within the corporate campus here, that people are looking to the future and are excited about the prospects and we're going to continue to stay focused at. And I believe that with the announcement of a permanent CEO, that brings additional stability to the organization and people feel good about that. So overall, we feel like we're in a -- in positive territory with respect to employee engagement.

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

Matt, Vitelli wanted to add something on the end of that just real quick.

Michael, I just wanted to add you talked about the mood in the field, and I wanted to emphasize because we did talk about what the sales performance has been. We had double-digit comps in cell phones, tablets and eReader and major appliances and our Services grew. We've just put in a new operating model in our stores that's starting right now in our second half where we're incentivizing team-based performance in our mobile department, in our computer and tablet department, in our homes department. We've put training in place that we're now bringing all of our people through. And our teams are excited about that. We've also started to open some of our new stores and our Richfield store is open. Our territory general managers, many of them were in yesterday and actually took a tour there. Some of them have not seen it before, though several had. Some hadn't. It's a very exciting environment. We are so pleased with the early reaction that our employees are having, our customers are having. The comp sales performance, our services growth, all things that we are expecting. It's fairly early. It's been open for a month, but the U.S. operating model that we put in place, the incentives and training we have for our sales people, our supervisors and coaches, our assistant managers focusing on our services, connectivity and home business and these new stores, we're excited as we move into the second half.

I guess it's my turn now. You made a point of having held market share this quarter, but your gross margin obviously came under some unanticipated pressure. I realize that the answer to this question will probably evolve over the next number of months, but are you running the business these days with share in mind or profit in mind, and how are you prioritizing the 2?

Matt, it's Jim. We're running the business with both in mind. We have to be cognizant of what customers are interested in buying in different windows of time and when you look at the margin in any one individual quarter, you could get mixed messages in what the long-term business plan looks like. The reality of our margins in the quarter, we expected them to be down. It was down more than we thought, primarily because we had fewer smartphones available last year. If you remember in Q2 last year, there was -- we were in between launch cycles on smartphones. We're more fully in stock this year. The reality of those higher-priced smartphones, they still come with the same margin value for the connection we get, but the price point is higher, that which drives the margin rate down. So that's just an industry phenomena. Doesn't speak any difference in how we're running the mobile phone business year-over-year. In the computing space, we've seen all first half the year that the notebook industry is just softer than was anticipated heading into the launch of Windows 8 in the back half the year. We'll see if that volume comes back as part of that launch. But in the meantime, what we're doing is we're making sure that we remain competitive and that we drive footsteps into our store and that we have relevant, strong market share in that important category as customers come in again shopping for Windows 8. And the value of the inventory we have in categories like that, we have to stay on top of those levels as well and we did some prudent things during the quarter to manage that. So we don't anticipate those activities going forward given the product cycle we'll see in the back half of the year. And then specifically, also from a market standpoint, in televisions, when consumers mix into lower ASP TVs in the midsized and small-sized TV, that's a market phenomena across-the-board. We just get lower margin rates through those and we have less attach of our services and other products on those items. So really, none of those are changes in strategies from Best Buy's standpoint. We're trying to maximize gross profit dollars based on what consumers want to buy. And we see that mix of sales improving in the back of the year. It's just difficult, once again, given the range of potential outcomes around the various new product launches to see exactly where that's going to go.

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

Jim, just a follow-on to what you had mentioned with a range of product launches. Clearly, you've been mentioning Windows 8. Could you give as an idea, though, of what some of these product launches are that are coming out and where you have some uncertainty around the timing?

This is Mike Vitelli, thanks. There -- what's exciting, there are launches in all the categories that we focused on. There are launches coming out in tablets, there are launches coming out in smartphones, launches in eReaders, there's a gaming launch that's scheduled. So there are launches in a lot of key categories that we focus our attention on, that we have grown with double-digit comps and that we've grown share in. So we're looking forward to that as they come out. And that'll -- a lot will be -- begin to happen in the third quarter when you get into that October period. So October, November are always significant, but they seem to be more significant and concentrated this year.

Our next question comes from the line of David Magee with SunTrust Robinson Humphrey.

Just a quick question on the -- on how important you think the UPP pricing structure might be in the second half of the year, and what might drive better large-screen TV demand?

This is Mike Vitelli again. So UPP, unilateral pricing policies, the attempt there is, in whatever category it is, is to stabilize the pricing of the products under those categories and what we've seen is that's succeeding. We're seeing manufacturers hold on those -- onto those plans. There's a greater focus in profitability, particularly in our TV vendors, but we're seeing in other categories as well. So manufacturers trying to bring value for their products and our sales team that's well-trained to be able to present those values to consumers, we think, is a good combination.

Do you see anything that would improve the large-screen TV demand?

Large TV demand is going to based on the prices that are put in the marketplace and what they're competing against. So UPP is not looking to create demand, but to stabilize value and -- but we think that balance between demand creation and profitability will be a better one for the industry overall in the second half.

Thank you. And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.