BEST BUY CO INC

Previous wording

We are driven by our purpose to enrich lives through technology and our vision to personalize and humanize technology solutions for every stage of life. We accomplish this by leveraging our combination of technology and a human touch to meet our customers’ everyday needs, whether they come to us online, visit our stores or invite us into their homes.

Current wording

We are driven by our purpose to enrich lives through technology and our vision to personalize and humanize technology solutions for every stage of life. We accomplish this by leveraging our combination of tech expertise and a human touch to meet our customers’ everyday needs, whether they come to us online, visit our stores or invite us into their homes.

Previous wording

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”), as well as certain adjusted or non-GAAP financial measures, such as non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted earnings per share (“EPS”). We believe that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, provide additional useful information for evaluating current period performance and assessing future performance. For these reasons, internal management reporting, including budgets, forecasts and financial targets used for short-term incentives are based on non-GAAP financial measures. Generally, our non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and intangible asset impairments, price-fixing settlements, gains and losses on sales of subsidiaries and certain investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when we believe doing so provides greater clarity to management and our investors. We provide reconciliations of the most comparable financial measures presented in accordance with GAAP to presented non-GAAP financial measures that enable investors to understand the adjustments made in arriving at the non-GAAP financial measures and to evaluate performance using the same metrics as management. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. Non-GAAP financial measures may be calculated differently from similarly titled measures used by other companies, thereby limiting their usefulness for comparative purposes.

Current wording

This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”), as well as certain non-GAAP financial measures, such as consolidated adjusted operating income, consolidated adjusted operating income rate, consolidated adjusted effective tax rate and consolidated adjusted diluted earnings per share (“EPS”). We believe that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, provide additional useful information for evaluating current period performance and assessing future performance. For these reasons, internal management reporting, including budgets, forecasts and financial targets used for short-term incentives are based on non-GAAP financial measures. Generally, our non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and acquired intangible asset impairments, price-fixing settlements, gains and losses on sales of subsidiaries and certain investments, amortization of definite-lived intangible assets associated with acquisitions, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when we believe doing so provides greater clarity to management and our investors. We provide reconciliations of the most comparable financial measures presented in accordance with GAAP to presented non-GAAP financial measures that enable investors to understand the adjustments made in arriving at the non-GAAP financial measures and to evaluate performance using the same metrics as management. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. Non-GAAP financial measures may be calculated differently from similarly titled measures used by other companies, thereby limiting their usefulness for comparative purposes.

Previous wording

Refer to the Non-GAAP Financial Measures section below for detailed reconciliations of items impacting non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted EPS in the presented periods.

Current wording

Refer to the Non-GAAP Financial Measures section below for detailed reconciliations of items impacting consolidated adjusted operating income, consolidated adjusted effective tax rate and consolidated adjusted diluted EPS in the presented periods.

Previous wording

In the third quarter and first nine months of fiscal 2025, we generated $9.4 billion and $27.6 billion in revenue, respectively, and our comparable sales declined 2.9% and 3.7%, respectively, as we continued to operate in a challenged consumer electronics industry and experienced softer customer demand. While our comparable sales declined in the third quarter of fiscal 2025 in categories such as appliances, home theater and gaming, we grew comparable sales in our computing, tablet and services categories.

Current wording

In the first quarter of fiscal 2026, we continued to navigate the environment and plan our business within dynamic macroeconomic conditions, including higher prices across many areas of consumers' lives and uncertainty surrounding tariffs. We generated $8.8 billion in revenue and our comparable sales declined 0.7% in the first quarter of fiscal 2026. While our comparable sales declined during the quarter in categories such as home theater, appliances and drones, we grew comparable sales in our computing, mobile phone and tablet categories.

Previous wording

Domestic restructuring charges in the third quarter and first nine months of fiscal 2025 were primarily related to employee termination benefits and subsequent adjustments from higher-than-expected employee retention associated with an enterprise-wide restructuring initiative that commenced in the fourth quarter of fiscal 2024. Refer to Note 2, Restructuring, of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

Current wording

Restructuring charges in the first quarter of fiscal 2026 were associated with arestructuring initiative primarily focused on optimizing our Best Buy Health business that commenced in the first quarter of fiscal 2026. Refer to Note 2, Restructuring, of the Notes to Consolidated Financial Statements, for additional information.

Previous wording

Revenue, gross profit rate, SG&A and operating income rate changes in the third quarter and first nine months of fiscal 2025 were primarily driven by our Domestic segment. For further discussion of our Domestic and International segments, see Segment Performance Summary, below.

Current wording

Revenue, gross profit rate, SG&A and operating income rate changes in the first quarter of fiscal 2026 were primarily driven by our Domestic segment. For further discussion of our Domestic and International segments, see Segment Performance Summary, below.

Previous wording

We continuously monitor store performance as part of a market-driven, omnichannel strategy. As we approach the expiration of leases, we evaluate various options for each location, including whether a store should remain open. In fiscal 2025, we currently expect to reduce our Domestic Best Buy store count by approximately 10 to 12 stores.

Current wording

We continuously monitor store performance as part of a market-driven, omnichannel strategy. As we approach the expiration of leases, we evaluate various options for each location, including whether a store should remain open. In fiscal 2026, we currently expect to reduce our Domestic Best Buy store count by approximately 5 to 10 stores.

Previous wording

Our tax provision for interim periods is determined using an estimate of our annual ETR, adjusted for discrete items, if any, that are taken into account in the relevant period. We update our estimate of the annual ETR each quarter and we make a cumulative adjustment if our estimated tax rate changes. Our quarterly tax provision and our quarterly estimate of our annual ETR are subject to variation due to several factors, including our ability to accurately forecast our pre-tax and taxable income and loss by jurisdiction, tax audit developments, recognition of excess tax benefits or deficiencies related to stock-based compensation, foreign currency gains (losses), changes in laws or regulations, and expenses or losses for which tax benefits are not recognized. Our ETR can be more or less volatile based on the amount of pre-tax earnings. For example, the impact of discrete items and non-deductible losses on our ETR is greater when our pre-tax earnings are lower.

Current wording

Our tax provision for interim periods is determined using an estimate of our annual ETR, adjusted for discrete and unusual and infrequent items, if any, that are taken into account in the relevant period. We update our estimate of the annual ETR each quarter, and we make a cumulative adjustment if our estimated tax rate changes. Our quarterly tax provision and our quarterly estimate of our annual ETR are subject to variation due to several factors, including our ability to accurately forecast our pre-tax and taxable income and loss by jurisdiction, tax audit developments, recognition of excess tax benefits or deficiencies related to stock-based compensation, foreign currency gains (losses), changes in laws or regulations, and expenses or losses for which tax benefits are not recognized. Our ETR can be more or less volatile based on the amount of pre-tax earnings. For example, the impact of discrete items and non-deductible losses on our ETR is greater when our pre-tax earnings are lower.

Previous wording

Domestic revenue decreased in the third quarter and first nine months of fiscal 2025, primarily driven by comparable sales declines in the appliances, home theater and gaming categories, partially offset by comparable sales growth in the computing, tablets and services categories. Online revenue of $2.7 billion and $8.0 billion in the third quarter and first nine months of fiscal 2025 decreased 1.0% and 2.9%, respectively, on a comparable basis.

Current wording

Domestic segment revenue decreased in the first quarter of fiscal 2026, primarily driven by comparable sales declines in the home theater, appliances and drone categories, partially offset by comparable sales growth in the computing, mobile phone and tablet categories. Online revenue of $2.6 billion in the first quarter of fiscal 2026 increased 2.1% on a comparable basis.

Previous wording

Computing and Mobile Phones: The 3.8% comparable sales growth was driven primarily by computing and tablets.

Current wording

Computing and Mobile Phones: The 5.8% comparable sales growth was driven primarily by computing, mobile phones and tablets.

Previous wording

Consumer Electronics: The 5.8% comparable sales decline was driven primarily by home theater.

Current wording

Consumer Electronics: The 5.2% comparable sales decline was driven primarily by home theater.

Previous wording

Appliances: The 14.7% comparable sales decline was driven primarily by large appliances.

Current wording

Appliances: The 8.1% comparable sales decline was driven primarily by large appliances.

Previous wording

Services: The 6.0% comparable sales growth wasdriven primarily by growth in our membership programs, as well as delivery and installation services.

Current wording

Services: The 0.9% comparable sales growth wasdriven primarily by growth in delivery and installation services.

Previous wording

Domestic gross profit rate increased in the third quarter of fiscal 2025, primarily due to improved financial performance from our services category, including our membership offerings, which was partially offset by lower profit-sharing revenue from our private label and co-branded credit card arrangement and lower product margin rates.

Current wording

Domestic segment gross profit rate increased in the first quarter of fiscal 2026, primarily due to improved financial performance from our services category, including our membership offerings, partially offset by rate pressure within our Best Buy Health business and lower profit-sharing revenue from our private label and co-branded credit card arrangement.

Previous wording

International revenue decreased in the third quarter of fiscal 2025, primarily driven by comparable sales declines in gaming, home theater and appliances, as well as the negative impact of foreign exchange rates. These decreases were partially offset by increased revenue from Best Buy Express locations.

Current wording

International segment revenue decreased in the first quarter of fiscal 2026, primarily driven by the negative impact of foreign exchange rates and a comparable sales decline, primarily in the gaming category. These decreases were partially offset by revenue from Best Buy Express locations that opened in Canada after the first quarter of fiscal 2025.

Previous wording

Computing and Mobile Phones: The 0.1% comparable sales decline was driven primarily by computing and tablets, partially offset by comparable sales growth in mobile phones.

Current wording

Computing and Mobile Phones: The 2.3% comparable sales growth was driven primarily by computing.

Previous wording

Consumer Electronics: The 6.1% comparable sales decline was driven primarily by home theater and home automation.

Current wording

Consumer Electronics: The 1.5% comparable sales decline was driven primarily by home automation.

Previous wording

Appliances: The 8.1% comparable sales decline was driven by both large and small appliances.

Current wording

Appliances: The 2.1% comparable sales decline was driven by both large and small appliances.

Previous wording

Services: The 4.0% comparable sales growth was driven primarily by growth in our membership programs.

Current wording

Services: The 2.2% comparable sales growth was driven primarily by growth in our membership programs.

Previous wording

International gross profit rate decreased in the first nine months of fiscal 2025, primarily driven by lower product margin rates and higher supply chain costs, which were partially offset by growth in the higher margin services category.

Current wording

International segment gross profit rate decreased in the first quarter of fiscal 2026, primarily due to lower product margin rates and unfavorable supply chain costs.

Previous wording

International operating income rate decreased in the first nine months of fiscal 2025, primarily due to decreased leverage from lower sales volume, which resulted in an unfavorable SG&A rate, and an unfavorable gross profit rate.

Current wording

International segment adjusted operating income rate decreased in the first quarter of fiscal 2026, primarily due to an unfavorable gross profit rate.

Previous wording

Reconciliations of operating income, effective tax rate and diluted EPS (GAAP financial measures) to non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted EPS (non-GAAP financial measures) were as follows ($ in millions, except per share amounts):

Current wording

Reconciliations of consolidated operating income, effective tax rate and diluted EPS (GAAP financial measures) to consolidated adjusted operating income, adjusted effective tax rate and adjusted diluted EPS (non-GAAP financial measures), respectively, were as follows ($ in millions, except per share amounts):

Previous wording

For additional information regarding the nature of charges discussed below, refer to Note 1, Basis of Presentation, Note 2, Restructuring, and Note 3, Goodwill and Intangible Assets, of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

Current wording

For additional information regarding the nature of charges discussed below, refer to Note 2, Restructuring, and Note 3, Goodwill and Intangible Assets, of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

Previous wording

(4)The non-GAAP adjustments primarily relate to the U.S. and Mexico. As such, the forecasted annual income tax charge on a portion of the U.S. non-GAAP adjustments is calculated using the statutory tax rate of 24.5%. There is no forecasted annual income tax for Mexico non-GAAP items and a portion of U.S. non-GAAP items, as there is no forecasted annual tax benefit/expense on the income/expenses in the calculation of GAAP income tax expense.

Current wording

(3)The non-GAAP adjustments primarily relate to the U.S. As such, the income tax charge on the U.S. non-GAAP adjustments is calculated using the statutory tax rate of 24.5%, adjusted for tax benefits discrete to the period.

Previous wording

The decrease in cash and cash equivalents from February 3, 2024, was primarily due to dividend payments, capital expenditures and the timing and volume of inventory purchases and payments, partially offset by positive cash flows from operations, primarily driven by earnings.

Current wording

The decrease in cash and cash equivalents from February 1, 2025, was primarily due to the timing and volume of inventory purchases and payments, dividend payments, capital expenditures and share repurchases, partially offset by positive cash flows from operations, primarily driven by earnings.

Previous wording

The increase in cash and cash equivalents from October 28, 2023, was primarily due to positive cash flows from operations, primarily driven by earnings, partially offset by dividend payments, capital expenditures and share repurchases.

Current wording

The decrease in cash and cash equivalents from May 4, 2024, was primarily due to dividend payments, capital expenditures and share repurchases, partially offset by positive cash flows from operations, primarily driven by earnings.

Previous wording

The increase in cash provided by operating activities in the first nine months of fiscal 2025 was primarily driven by the timing and volume of inventory purchases and payments, partially offset by the timing of vendor funding receivables.

Current wording

The decrease in cash provided by operating activities in the first quarter of fiscal 2026 was primarily driven by the timing and volume of inventory purchases and payments, partially offset by the timing of vendor funding receivables.

Previous wording

The increase in cash used in financing activities in the first nine months of fiscal 2025 was primarily driven by higher share repurchases.

Current wording

The increase in cash used in financing activities in the first quarter of fiscal 2026 was primarily driven by higher share repurchases.

Previous wording

We have a $1.25 billion five-year senior unsecured revolving credit facility agreement (the “Five-Year Facility Agreement”) with a syndicate of banks that expires in April 2028. There were no borrowings outstanding under the Five-Year Facility Agreement as of November 2, 2024, February 3, 2024, or October 28, 2023.

Current wording

On April 18, 2025, we entered into a $1.25 billion five-year senior unsecured revolving credit facility agreement (the “Five-Year Facility Agreement”) with a syndicate of banks. The Five-Year Facility Agreement replaced the previous $1.25 billion senior unsecured revolving credit facility (the “Previous Facility”) with a syndicate of banks, which was entered into April 2023 and scheduled to expire in April 2028, but was terminated on April 18, 2025. The Five-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in April 2030. Refer to Note 6, Debt, of the Notes to the Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information. There were no borrowings outstanding under the Five-Year Facility Agreement as of May 3, 2025, or the Previous Facility as of February 1, 2025, or May 4, 2024.

Previous wording

Our liquidity is also affected by restricted cash balances that are primarily restricted to cover product protection plans provided under our membership offerings and self-insurance liabilities. Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $295 million, $346 million and $423 million at November 2, 2024, February 3, 2024, and October 28, 2023, respectively. The decrease in restricted cash from February 3, 2024, and October 28, 2023, was primarily due to releases of product protection reserves based on claims and purchasing behaviors of customers participating in our membership offerings.

Current wording

Our liquidity is also affected by restricted cash balances that are primarily restricted to cover product protection plans provided under our membership offerings and self-insurance liabilities. Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $288 million, $290 million and $313 million as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively. While restricted cash has remained relatively flat from February 1, 2025, the decrease in restricted cash from May 4, 2024, was primarily due to releases of product protection reserves based on claims and purchasing behaviors of customers participating in our membership offerings.

Previous wording

We repurchase our common stock and pay dividends pursuant to programs approved by our Board of Directors (“Board”). The payment of cash dividends is also subject to customary legal and contractual restrictions. Our long-term capital allocation strategy is to first fund operations and investments in growth and then return excess cash over time to shareholders through dividends and share repurchases while maintaining investment-grade credit metrics. Our share repurchase plans are evaluated on an ongoing basis, considering factors such as our financial condition and cash flows, our economic outlook, the impact of tax laws, our liquidity needs, and the health and stability of global credit markets. The timing and amount of future repurchases may vary depending on such factors.

Current wording

We repurchase our common stock and pay dividends pursuant to programs approved by our Board of Directors (“Board”). The payment of cash dividends is also subject to customary legal and contractual restrictions. Our long-term capital allocation strategy is to first fund operations and investments in growth and then return excess cash over time to shareholders through dividends and share repurchases while maintaining investment-grade credit metrics. Our share repurchase plans are evaluated on an ongoing basis, considering factors such as our financial condition and cash flows, our economic outlook, the impact of tax laws, our liquidity needs, our stock price and the health and stability of global markets. The timing and amount of future repurchases may vary depending on such factors.

Previous wording

The total cost of shares repurchased increased in the third quarter and first nine months of fiscal 2025, primarily due to an increase in the average price per share, partially offset by a decrease in the volume of repurchases. We currently expect total share repurchases of up to $500 million in fiscal 2025.

Current wording

The total cost of shares repurchased increased in the first quarter of fiscal 2026, primarily due to an increase in the volume of repurchases, partially offset by a decrease in the average price per share.

Previous wording

Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements and may be identified by the use of words such as “anticipate,” “appear,” “approximate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “guidance,” “intend,” “may,” “might,” “outlook,” “plan,” “possible,” “project,” “seek,” “should,” “would,” and other words and terms of similar meaning or the negatives thereof. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, our operating model, new strategies and growth initiatives, the competitive environment, consumer behavior and other events. These statements involve a number of judgments and are subject to certain risks and uncertainties, many of which are outside the control of the Company, that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our most recent Annual Report on Form 10-K, and any updated information in subsequent Quarterly Reports on Form 10-Q, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this Quarterly Report on Form 10-Q. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: macroeconomic pressures in the markets in which we operate (including but not limited to recession, inflation rates, fluctuations in foreign currency exchange rates, limitations on a government’s ability to borrow and/or spend capital, fluctuations in housing prices, energy markets, jobless rates, the imposition of tariffs, trade wars and effects related to the conflicts in Eastern Europe and the Middle East or other geopolitical events); catastrophic events, health crises and pandemics; susceptibility of the products we sell to technological advancements, product life cycle fluctuations and changes in consumer preferences; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers and in the provision of delivery speed and options); our ability to attract and retain qualified employees; changes in market compensation rates; our expansion into health and new products, services and technologies; our focus on services as a strategic priority; our reliance on key vendors and mobile net…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements and may be identified by the use of words such as “anticipate,” “appear,” “approximate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “foresee,” “guidance,” “intend,” “may,” “might,” “outlook,” “plan,” “possible,” “project,” “seek,” “should,” “would,” and other words and terms of similar meaning or the negatives thereof. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, our operating model, new strategies and growth initiatives, the competitive environment, consumer behavior and other events. These statements involve a number of judgments and are subject to certain risks and uncertainties, many of which are outside the control of the Company, that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our most recent Annual Report on Form 10-K, and any updated information in subsequent Quarterly Reports on Form 10-Q, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this Quarterly Report on Form 10-Q. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: macroeconomic pressures in the markets in which we operate (including but not limited to recession, inflation rates, fluctuations in foreign currency exchange rates, limitations on a government’s ability to borrow and/or spend capital, fluctuations in housing prices, energy markets, jobless rates, the imposition of tariffs, trade wars and effects related to the conflicts in Eastern Europe and the Middle East, supply chain disruptions or other geopolitical events); catastrophic events, health crises and pandemics; susceptibility of the products we sell to technological advancements, product life cycle fluctuations and changes in consumer preferences; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers and in the provision of delivery speed and options); our ability to attract and retain qualified employees; changes in market compensation rates; our expansion into health and new products, services and technologies; our focus on services as a strategic priority; our reliance on …

Excerpt shortened here; the source contains the full paragraph.