Subject says it all—doesn’t have to be Best Buy, though they are the only game in town around here.
I went to Best Buy yesterday to pick up something and had a brief moment of pause where I considered just how much $$$ they needed to stock a single store.
A related question: How much does the average Best Buy sell on a Sunday?
I don’t know how much is in the store versus in warehouses, but Best Buy’s most recently-published balance sheet shows inventory of $8.2bn. They have 1,300 stores, including all formats, so they own inventory of $6.3m per store.
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Also worth pointing out that the inventory valuation on the balance sheet is surely at lower of cost or market. The retail value is probably twice that.
Not necessarily its not uncommon for a retailer to inventory its assets at full retail value.
That would be strange accounting practice, because you would show a profit when you purchased from the wholesaler/manufacturer, rather than when you sold the item. In addition, if you had a sale, and sold the item below full retail, your accounts would have you making a loss at that point.
Many companies use retail value for internal reports and inventory activities, but the numbers on a balance sheet of a US publicly traded corporation should conform with GAAP. Only certain types of inventories (like precious metals) can be valued at retail value under GAAP.
Thanks for the thoughts on this. Actually, I was interested in the more basic layman’s question of “If they sold everything here for what’s on the price tag, how many dollars would they have in the register”
I understand that the merchandise doesn’t cost them that, and that there are tons of other variables.
Well if you ever have a lazy Sunday, feel free to go around the store with a calculator and you could figure that out easily enough. Obviously this would only be what’s on the floor, but it would be an interesting experiment.
But in Best Buy that would add too much to the numbers because they keep nothing in the back room.
If the back room is empty, where are all the big screen TVs? There are several dozen models hanging on the wall, but I don’t see all of the inventory on the floor.
Electronics tends to be a fairly low margin business especially in the big box stores.
To answer the Q about inventory valuation, IME its both.
To clarify, the retail value is tracked and is an indicator of retail value on hand. For example if a 50" plasma TV that retails for $999 and BB purchased it for $700 it would be said that they have $999 worth of theat item. The $700 would be on the liabilities side as an expense, and would not even be applied until sold. You want the sales reports to look right so the $999 TV shows up as $999 in sales. Day to day ops people are rarely concerned with the wholesale price because the markup math has already been done for them by the supply chain team. They just want to see 10 TV’s = $9990 not $2990.
I’m not sure how Best Buy operates but undoubtedly they have warehouses and distribution centers. Their balance sheet should state all inventory so just dividing it among the number of stores doesn’t give an accurate figure of what is in stock at the average store.
Another thing. Does Best Buy own all of the inventory in the store, or do the manufacturers loan the stuff on consignment?
Some of that total may include infrastructure–buildings, power equipment, corporate offices, etc., along with product inventory. When my store (not a Best Buy) did our last inventory we had to count things like pallet jacks and power equipment. The building itself was on the list and had to be counted (“Let’s see…one building–check”).
Total assets for my store at last inventory was close to $20 million.
I was an inventory manager for BBY from 95’-02’ and have friends still working there.
We took inventory of each store 1-2 times a years based on how well your previous inventory went. Typical inventory level (cost of goods) was $1.5-$3 million pre store based on the size of your store. A store like Daytona Beach (the largest style BBY store) held about $3 million. Smaller format stores (newer ones) hold less.
Margins (markups) on a days worth of sales run about 15-20%.
Margins also included warranties and services so closer to 15% is probably more accurate.
A good Sunday would bring in about $150K-$180K gross.
Best Buy is an industry leader in turn times. That is they sell their inventory level “x” times a year faster than most.
They do “own” their inventory (no consignment) but are so efficient at turning it that they often have it sold before they have to pay (the vendors) for it. By doing this they rarely have to find capital to buy inventory and they avoid paying taxes on sitting assets since they sit for such a short period of time.