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June 29, 2002

Best buy: estimating how much they make per store

I was out at Best Buy today (the infamous one that had had a customer arrested back in April) and noticed an interesting sheet of paper next to the checkout area: it appeared to be a sales projection for today. If I read it correctly, their "sales budget" for today was $119,000.

That's interesting. I'm always curious about what things cost, or how much different businesses make. Let's see what that would imply. Note: aside from the $119k number I saw at the store, all the rest of these numbers are swags (scientific wild-ass guesss, for the unintiated.)

  • $119k/day * 365 = $43.4 million/year. That might be high; I'm guessing Saturday is one of their highest sales day. $100k/day would still be around $36 million/year.
  • What would the sales force cost? I don't know how many people you need to work a store like that .. let's assume 40 people at $10/hr for 12 hours. That's around $5,000; it may be a little higher because of higher paid people, so assume $6,000.
  • I've browsed around trying to find some real number about Best Buy, and they suggest their profit on their goods is about 25%. Assuming $119k, cost of the goods would be around $89k.
  • Assume another $2,000 per day for other expenses: electricity, lease on the store, whatever.
  • Assuming 119k/day, that still leaves around $22k profit per store/day. (If you assume 100k, you get around 17k/day).

The bottom line: that store could be making between 6.2 and 7.9 million dollars per year for Best Buy. That's about 18% profit margin.

There must be more to the picture, however: Hoover's reports that for the fiscal year ending in Feb '02, Best Buy's net profit margin was 2.9%. Some of that obvious comes from the central operation, but my estimates of the costs per store are probably low in some ways.

(BTW, I did find some page that said that the average sales per store were around $36 million annually. So I'm in the ballpark.)