BEST BUY CO INC

Previous wording

Described below are certain risks we believe apply to our business and the industry in which we operate. The risks are categorized using the following headings: external, strategic, operational, regulatory and legal, and financial and market. Each of the following risk factors should be carefully considered in conjunction with other information provided in this Annual Report on Form 10-K and in our other public disclosures. The risks described below highlight potential events, trends or other circumstances that could adversely affect our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing and, consequently, the market value of our common stock and debt instruments. These risks could cause our future results to differ materially from historical results and from guidance we may provide regarding our expectations of future financial performance. The risks described below are not an exhaustive list of all the risks we face. There may be others that we have not identified or that we have deemed to be immaterial. All forward-looking statements made by us or on our behalf are qualified by the risks described below.

Current wording

Described below are certain risks we believe apply to our business and the industry in which we operate. The risks are categorized using the following headings: external, strategic, operational, regulatory, compliance and legal, and financial and market. Each of the following risk factors should be carefully considered in conjunction with other information provided in this Annual Report on Form 10-K and in our other public disclosures. The risks described below highlight potential events, trends or other circumstances that could adversely affect our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing and, consequently, the market value of our common stock and debt instruments. These risks could cause our future results to differ materially from historical results and from guidance we may provide regarding our expectations of future financial performance. The risks described below are not an exhaustive list of all the risks we face. There may be others that we have not identified or that we have deemed to be immaterial. All forward-looking statements made by us or on our behalf are qualified by the risks described below.

Previous wording

To varying degrees, our products and services are sensitive to changes in macroeconomic conditions. Consumer demand for the products and services that we offer could be affected by a number of factors, including: real GDP growth, inflation, recession, consumer confidence, employment levels, cost of living, tax rates, availability of consumer financing, interest rates, housing market conditions, foreign currency exchange rates, the price of oil, gas and other commodities, and other macroeconomic trends. Additionally, the impact of these factors could be compounded with respect to discretionary purchases of consumer electronics.

Current wording

To varying degrees, our products and services are sensitive to changes in macroeconomic conditions. Consumer demand for the products and services that we offer could be, or could continue to be, affected by a number of factors, including: real GDP growth, inflation, recession, consumer confidence, employment levels, effects of government closures, cost of living, uncertainty over the availability of government benefits, tax rates, availability of consumer financing, interest rates, housing market conditions, foreign currency exchange rates, the price of oil, gas and other commodities and other macroeconomic trends. Additionally, the impact of these factors could be compounded with respect to discretionary purchases of consumer electronics.

Previous wording

how frequently they upgrade or replace their devices;

Current wording

•how frequently consumers upgrade or replace their devices;

Previous wording

their choice of brand, model or price-point; and

Current wording

•consumers' choice of brand, model or price-point; and

Previous wording

their appetite for complementary services (for example, My Best Buy Plus™ or My Best Buy Total™ membership).

Current wording

•consumers' appetite for complementary services (for example, My Best Buy Plus™ or My Best Buy Total™ membership).

Previous wording

We are subject to specific pressures that may increase our product prices, including high consumer demand, inflation, tariffs and supply chain disruptions. Additionally, price increases in the products we purchase for resale may require us to adjust our sales prices. Our ability to increase prices to offset these pressures might be limited, requiring us to absorb these increases within our margins. Increases in the cost of living may also put pressure on our ability to offer competitive compensation and other employer-provided benefits and may adversely affect our financial results. Any economic factors or circumstances resulting in higher transportation, labor, insurance costs, healthcare costs or commodity prices can increase our cost of sales and operating, selling, general and administrative expenses and otherwise materially adversely affect our financial results.

Current wording

We are subject to specific pressures that may increase our product prices, including high consumer demand, inflation, governmental actions (e.g., tariffs) and supply chain disruptions. Additionally, price increases in the products we purchase for resale may require us to adjust our sales prices. Our ability to increase prices to offset these pressures might be limited, requiring us to absorb these increases within our margins. Increases in the cost of living may also put pressure on our ability to offer competitive compensation and other employer-provided benefits and may adversely affect our financial results. Any economic factors or circumstances resulting in higher costs for transportation, labor, insurance, healthcare or commodities can increase our operating, selling, general and administrative costs and otherwise materially adversely affect our financial results.

Previous wording

Geopolitical tensions, both domestic and international, including issues related to trade routes, political instability and divisiveness, the potential implementation of more restrictive trade policies, higher tariffs or the renegotiation of existing trade agreements could have a material adverse impact on our business.

Current wording

Geopolitical tensions, both domestic and international, including issues related to trade routes, political instability and divisiveness, the potential implementation of more restrictive trade policies, tariff increases and/or volatility, the realignment of alliances or the renegotiation of existing trade agreements could continue to have a material adverse impact on our business.

Previous wording

Ongoing or emerging conflicts, including those in Ukraine, the Middle East and the South China Sea, may continue to impact fuel prices, inflation, the global supply chain, cybersecurity and other macroeconomic conditions, which may further adversely affect global economic growth, consumer confidence and demand for our products and services. For example, attacks on cargo ships in the Red Sea, catalyzed by tensions in the Middle East, continue to disrupt global trade flows and shipping capacity. Additionally, any further deterioration of relations between Taiwan and China, the resulting actions taken, the response of the international community and other factors affecting trade with China or political or economic conditions in Taiwan could disrupt the manufacturing and distribution of products or hardware components in the region, such as semiconductors and television panels sourced from Taiwan or the broader array of products sourced from China.

Current wording

Ongoing or emerging conflicts, including those in the Middle East, Ukraine and the South China Sea, may continue to impact fuel prices, inflation, the global supply chain, cybersecurity and other macroeconomic conditions, which may further adversely affect global economic growth, consumer confidence and demand for our products and services. For example, any further deterioration of relations between Taiwan and China, the resulting actions taken, the response of the international community and other factors affecting trade with China or political or economic conditions in Taiwan could disrupt the manufacturing and distribution of products or hardware components in the region, such as semiconductors and television panels sourced from Taiwan or the broader array of products sourced from China. Additionally, conflict in the Middle East, and the resulting disruption of transit through the Persian Gulf and the Strait of Hormuz, continues to disrupt global supply chain flows and impact fuel prices. Furthermore, these conflicts or other international policies and efforts may impact, or continue to impact, our critical international trade routes, such as the Panama Canal, the Red Sea and the Suez Canal. Such disruptions may increase shipping times or costs, which could adversely affect our operations and financial results.

Previous wording

These trade restrictions and any associated political uncertainty surrounding international trade measures and international relations may affect market stability and consumer confidence. One or more of these factors could have a material adverse effect on our supply chain, the cost of our products or our revenues and financial results.

Current wording

One or more of these factors could have a material adverse effect on our supply chain, the cost of our products or our revenues and financial results.

Previous wording

natural disasters or extreme weather events (such as storms, blizzards, extreme temperatures, earthquakes, hurricanes, floods, fires and droughts), including those related to, or exacerbated by, climate change;

Current wording

Catastrophic events, including those driven or intensified by climate change, pose a growing risk to our operating results and financial performance. The frequency and severity of natural disasters or extreme weather events (such as storms, blizzards, extreme temperatures, earthquakes, hurricanes, floods, fires and droughts) are increasing in many of our key markets, particularly in our three largest states by total sales (California, Texas and Florida). We may experience other catastrophic events beyond natural disasters, including pandemics, civil unrest, power loss, telecommunications failures, software and hardware malfunctions, terrorism (including related cyber threats) and other acts of violence. Additionally, the locations where we do business could continue to be the subject of unrest and national attention, which impacts our ability to operate. The adverse effects of these events may be amplified should multiple events occur simultaneously, such as a natural disaster during a pandemic.

Previous wording

The number and severity of certain catastrophic events is increasing in many of our markets. Such events can adversely affect our workforce and prevent employees and customers from reaching our stores and properties. Catastrophic events can also disrupt portions of our supply chain, distribution network and third-party services, and may impact our ability to procure goods or services required for operating our business. Such events can also affect our information technology systems, resulting in disruption to various aspects of our operations, including our ability to transact with customers and fulfill orders. The adverse effects of any such catastrophic event would be exacerbated if experienced at the same time as another unexpected and adverse event, such as a pandemic.

Current wording

Such events may prevent our workforce and/or customers from reaching our stores and properties, disrupt segments of our supply chain and distribution network or impact critical third-party services. These disruptions may impact our ability to procure goods or services necessary for operating our business and may affect our information technology systems, limiting our ability to transact with customers and fulfill orders.

Previous wording

As a consequence of these catastrophic events, we may experience interruptions to our operations or losses of property, equipment and/or inventory, which could adversely affect our revenue and profitability.

Current wording

Catastrophic events could result in significant physical damage to, or closure of, our facilities. They may also necessitate preventative investments in our facilities and infrastructure. Moreover, insufficient infrastructure investment may increase the risk that large-scale disruptive events could impact our critical infrastructure, potentially having a material adverse impact on our operations and financial performance. As a consequence of these catastrophic events, we may experience interruptions to our operations or losses of property, equipment and/or inventory, which could adversely affect our revenue and profitability.

Previous wording

We operate in a highly and increasingly dynamic industry sector fueled by constant technological innovation and disruption, including most recently by the proliferation of artificial intelligence (“AI”) technologies. These factors manifest in a variety of ways: the emergence of new products and categories, the rapid maturation of categories, cannibalization of categories, changing price points, and product replacement and upgrade cycles.

Current wording

We operate in a highly and increasingly dynamic industry sector fueled by constant technological innovation, advancement and disruption, including the rapid integration of artificial intelligence (“AI”) into consumer products. These factors manifest in a variety of ways: the emergence of new products and categories, the rapid maturation of categories, cannibalization of categories, changing price points, and product replacement and upgrade cycles.

Previous wording

excess inventory, which may require heavy discounting or liquidation;

Current wording

•excess inventory, which may require heavy discounting, liquidation or storage;

Previous wording

While we constantly strive to offer consumers the best value, the retail sector is highly competitive. Price is of great importance to most customers, and price transparency and comparability continues to increase. Digital technology enables consumers to compare prices on a real-time basis, putting additional pressure on us to maintain competitive prices. We compete against many local, regional, national and international retailers (both online and brick and mortar), as well as against some of our vendors and mobile network carriers that market their products directly to consumers. Competition is becoming increasingly diverse, including in the advertising revenue space and with the proliferation of marketplace platforms offering products at increasingly lower prices. Diverse competition may also arise from new entrants into the markets we serve, including unexpected players who could more aggressively leverage technologies such as AI and platform integrations.

Current wording

We constantly strive to offer consumers the best value in a highly competitive retail sector. We compete against many local, regional, national and international retailers (both online and brick and mortar), as well as against some of our vendors and mobile network carriers that are leveraging their own direct-to-customer channels to market and sell products.

Previous wording

Further, as our competitors develop and expand their strategic use of AI, our operations and profitability could be adversely impacted if we fail to execute or maintain our own focused AI strategy enabling technology advancement and innovation. As these and related competitive factors evolve, we may experience material adverse pressure on our revenue and profitability.

Current wording

Further, as our competitors develop and expand their strategic use of AI, our operations and profitability could be adversely impacted if we fail to execute or maintain our own focused AI strategy that drives technological advancement and innovation. Diverse competition may also arise from new entrants into the markets we serve, including unexpected players who could more aggressively leverage technologies such as AI and platform integrations. As these and related competitive factors evolve and progress, we may experience material adverse pressure on our revenue and profitability.

Previous wording

Our performance is highly dependent on attracting, retaining and engaging appropriately qualified employees in our stores, service centers, distribution centers, field and corporate offices. Our strategy of offering high-quality services and assistance for our customers requires a highly trained and engaged workforce, which is reliant on the creation and maintenance of a positive culture that is attractive to all qualified employees and beneficial relationships between employees and the enterprise. The turnover rate in the retail sector is relatively high, and there is an ongoing need to recruit and train new employees. Factors that affect our ability to maintain sufficient numbers of qualified employees include, for example, employee engagement, our reputation, our ability to train and develop our employees, our ability to connect with and promote available talent pools, our development and maintenance of employer-desired policies and practices, unemployment rates, competition from other employers, availability of qualified personnel and our ability to offer appropriate compensation and benefit packages. Our policies and practices may be affected by, or require changes in response to, legal and regulatory restrictions on policies related to inclusion and belonging, employee engagement and climate change, which may further impact our ability to retain and engage qualified employees. Failure to recruit or retain qualified employees may impair our efficiency and effectiveness and our ability to pursue growth opportunities. In addition, significant turnover of our executive team or other employees in key positions with specific knowledge relating to our operations and industry may negatively impact our operations and financial results.

Current wording

Our performance is highly dependent on attracting, retaining and engaging appropriately qualified employees in our stores, service centers, distribution centers, field and corporate offices. Our strategy of offering high-quality services and assistance for our customers requires a highly trained and engaged workforce, which is reliant on the creation and maintenance of a positive culture that is attractive to all qualified employees and beneficial relationships between employees and the enterprise. The turnover rate in the retail sector is relatively high, creating an ongoing need to recruit and train new employees. Our ability to maintain sufficient numbers of qualified employees depends on a number of factors, such as employee engagement, our reputation, our ability to train and develop our employees, our ability to connect with and promote available talent pools, our development and maintenance of employee-desired policies and practices, unemployment rates, competition from other employers, availability of qualified personnel and our ability to offer appropriate compensation and benefit packages.

Previous wording

We operate in a competitive labor market and there is a risk that market increases in compensation and employer-provided benefits could have a material adverse effect on our profitability. We may also be subject to continued market pressure to increase employee hourly wage rates and increased cost pressure on employer-provided benefits. Our need to implement corresponding adjustments within our labor model and compensation and benefit packages could have a material adverse impact on the profitability of our business. Additionally, increasingly prevalent legal and regulatory restrictions on the terms or enforceability of non-competition, employee non-solicitation, confidentiality and similar restrictive covenant clauses could make it more difficult to retain qualified personnel.

Current wording

Additionally, increasingly prevalent legal and regulatory restrictions on the terms or enforceability of non-competition, employee non-solicitation, confidentiality and similar restrictive covenant clauses could make it more difficult to retain qualified personnel. Further, our policies and practices may be affected by, or require changes in response to, evolving legal and regulatory restrictions on policies related to employee engagement, which may further impact our ability to retain and engage qualified employees.

Previous wording

We offer a full range of services that complement our product offerings, including consultation, delivery, design, installation, memberships, protection plans, repair, set-up, technical support and health, safety and caregiving monitoring and support. The strategy and execution of our service offerings are subject to incremental risks. These risks could include, for example:

Current wording

We offer a full range of services that complement our product offerings, including consultation, delivery, health-related services, installation, memberships, repair, set-up, technical support and warranty-related services. The strategy and execution of our service offerings are subject to incremental risks, such as:

Previous wording

sustained increase in consumer desire to purchase product offerings online and through mobile applications, impacting our ability to sell ancillary services;

Current wording

•a sustained increase in consumer desire to purchase product offerings online and through mobile applications, impacting our ability to sell ancillary services;

Previous wording

increased reputational risk of bad actors posing as Geek Squad and/or customer care;

Current wording

•bad actors posing as Geek Squad and/or customer care;

Previous wording

increased risk of errors or omissions in the fulfillment of services;

Current wording

•errors or omissions in the fulfillment of services;

Previous wording

employees having access to customer devices, including the information held on those devices, which increases our risk given the responsibility for the security of those devices and the privacy of the data they hold while in our possession;

Current wording

•customer devices in our possession and the related responsibility for the security of those devices and the privacy of the data they hold;

Previous wording

the risk that in-home services could be more adversely impacted by inclement weather, health and safety concerns and catastrophic events; and

Current wording

•the potential impact on in-home services of inclement weather, health and safety concerns and catastrophic events;

Previous wording

increased risk of non-compliance with new laws and regulations applicable to these services.

Current wording

•non-compliance with new and existing laws and regulations applicable to these services.

Previous wording

We source the products we sell from a wide variety of domestic and international vendors. In fiscal 2025, our 20 largest suppliers accounted for approximately 80% of the merchandise we purchased, with five suppliers – Apple, Samsung, HP, Sony and LG - representing approximately 55% of total merchandise purchased. We generally do not have long-term written contracts with our vendors that would require them to continue supplying us with merchandise. Our profitability depends on securing acceptable terms with our vendors for, among other things, the price of merchandise we purchase from them, funding for various forms of promotional programs, payment terms, allocations of merchandise, development of compelling assortments of products, operation of vendor-focused shopping experiences within our stores and terms covering returns and factory warranties. While we believe we offer capabilities that these vendors value and depend upon to varying degrees, our vendors may be able to leverage their competitive advantages — for example, their own stores or online channels, their financial strength, the strength of their brands with customers or their relationships with other retailers — to our detriment. In addition, vendors may decide to limit or cease allowing us to offer certain categories, focus their marketing efforts on alternative channels or make unfavorable changes to our financial or other terms. Further, our flexibility to modify selling prices is limited due to digital technology that enables consumers to compare prices on a real-time basis.

Current wording

While we source products we sell from a wide variety of domestic and international vendors, a significant portion of our merchandise comes from a relatively small group of key suppliers. In fiscal 2026, our 20 largest suppliers accounted for approximately 80% of the merchandise we purchased, with five suppliers – Apple, Samsung, HP, LG and Sony – representing approximately 55% of total merchandise purchased. Our contracts with vendors generally do not require them to continue supplying us with merchandise. Our profitability depends on securing acceptable terms with our vendors for, among other things, the price of merchandise we purchase from them, funding for various forms of promotional programs, payment terms, allocations of merchandise, development of compelling assortments of products, data sharing terms, operation of vendor-focused shopping experiences within our stores and terms covering returns and factory warranties. While we believe we offer capabilities that these vendors value and depend upon to varying degrees, our vendors may be able to leverage their competitive advantages — for example, their own stores or online channels, their financial strength, the strength of their brands with customers or their relationships with other retailers — to our detriment. In addition, vendors may decide to limit or cease allowing us to offer certain categories, focus their marketing efforts on alternative channels or make unfavorable changes to our financial or other terms. Further, our flexibility to modify selling prices is limited due to digital technology that enables consumers to compare prices on a real-time basis, a challenge that is further amplified by the increasing use of AI-driven tools and shopping platforms.

Previous wording

We operate a portfolio of brands with a commitment to customer service and innovation. We believe that recognition and the reputation of our company and our brands are key to our success. Operational factors, such as failure to deliver high quality services, noncompetitive pricing, failure to meet delivery promises or business interruptions, could damage our reputation. External factors, such as negative public remarks or accusations, or our failure to meet enhanced, and sometimes conflicting, expectations on corporate response to sensitive topics, could also be damaging, including those related to inclusion and belonging, employee engagement and climate change. Third parties may commit fraud (including AI-driven fraud) while using our brand without our permission, possibly harming brand perception or reputation. The ubiquity of social media means that customer feedback and other information, which may include fictitious information, about our company are shared with a broad audience in a manner that is easily accessible and rapidly disseminated. Damage to the perception or reputation of our brands could result in, among other things, declines in revenues and customer loyalty, decreases in gift card and service plan sales, lower employee retention and productivity and vendor relationship issues, all of which could materially adversely affect our revenue and profitability.

Current wording

The ubiquity of social media means that customer feedback and other information about our company, which may include fictitious information, are shared with a broad audience in a manner that is easily accessible and rapidly disseminated. Damage to the perception or reputation of our brands could result in, among other things, declines in revenues and customer loyalty (including as a result of any boycotts), decreases in gift card and service plan sales, lower employee retention and productivity and vendor relationship issues, all of which could materially adversely affect our revenue and profitability.

Previous wording

Failure to effectively manage and execute strategic ventures or partnerships could have a negative impact on our business.

Current wording

Failure to effectively identify, manage and execute enterprise-wide strategies could have a negative impact on our business.

Previous wording

We may pursue new strategic ventures, including business relationships, acquisitions, and expanding or adding revenue streams, including our retail media network, known as Best Buy Ads, and our marketplace platforms, where third-party sellers can sell their own products on Best Buy’s platform (“Marketplace”) (collectively “Strategic Ventures”). Assessing the viability of Strategic Ventures is typically subject to uncertainty, and the success of such Strategic Ventures can be adversely affected by many factors, including, for example:

Current wording

We may pursue new strategic initiatives, including business relationships, acquisitions, and/or adding or expanding revenue streams, including Best Buy Ads and Best Buy Marketplace. Assessing the viability of new or existing strategies is typically subject to uncertainty, and the success of such strategies can be adversely affected by many factors, including, for example, our ability to:

Previous wording

failure to identify or appropriately evaluate the risks of Strategic Ventures in our diligence assessments;

Current wording

•identify or appropriately evaluate the risks in our diligence assessments;

Previous wording

failure to integrate aspects of Strategic Ventures into our existing business, such as new product or service offerings or information technology systems;

Current wording

•integrate aspects of potential strategies into our existing business, such as new product or service offerings or information technology systems;

Previous wording

failure to accurately predict customer demand, or generate forecasted revenue or profitability;

Current wording

•accurately predict customer demand, meet customer expectations or generate forecasted revenue or profitability;

Previous wording

failure to maintain appropriate internal controls over financial reporting;

Current wording

•maintain appropriate internal controls over financial reporting;

Previous wording

failure to generate expected synergies, such as cost reductions and other benefits; and

Current wording

•generate expected synergies, such as cost reductions and other benefits; and

Previous wording

adverse impacts on relationships with employees, vendors and other key partners of our existing business or Strategic Ventures.

Current wording

•manage potential adverse impacts on relationships with employees, vendors and other key partners of our existing business.

Previous wording

If our new or emerging Strategic Ventures are unsuccessful, our liquidity and profitability could be materially adversely affected, and we may be required to recognize material impairments to goodwill and other assets acquired. For example, we recorded a pre-tax, non-cash goodwill impairment charge of $475 million related to our Best Buy Health reporting unit, as described further in the Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in fiscal 2025. Strategic Ventures may also divert our financial resources and management’s attention from other important areas of our business.

Current wording

If our new or emerging strategies are unsuccessful, our reputation could be negatively impacted. Additionally, liquidity and profitability could be materially adversely affected, and we may be required to recognize material impairments to goodwill and other assets acquired or elect to discontinue certain areas of the business. For example, we recorded impairment charges related to our decision to exit a component of our Best Buy Health business in fiscal 2026. Our strategies may also divert our financial resources and management’s attention from other important areas of our business.

Previous wording

Failure to effectively manage our real estate portfolio and market segmentation strategy may negatively impact our operating results.

Current wording

Failure to effectively manage our infrastructure, real estate portfolio and market segmentation strategy may negatively impact our business.

Previous wording

Effective management of our real estate portfolio is critical to our omnichannel strategy. Failure to identify and secure suitable locations for our stores and other facilities, failure to negotiate appropriate terms related to our real estate portfolio, or failure to react appropriately should any unforeseen changes arise, could impair our ability to compete successfully and our profitability. Any of the following factors could impact our long-term real estate strategy:

Current wording

Managing our real estate portfolio effectively is critical to our omnichannel strategy. Failure to identify and secure suitable store and other facility locations, negotiate appropriate terms related to our real estate portfolio, or respond appropriately to any unforeseen changes could impair our ability to compete successfully and maintain profitability. In addition, any of the following factors could impact our long-term real estate strategy:

Previous wording

our ability to adjust store operating models to adapt to these changing patterns;

Current wording

•our ability to adjust store operating models to adapt to changing consumer patterns;

Previous wording

the local competitive positioning, trade area demographics and economic factors for each of our stores; and

Current wording

•the local competitive positioning, trade area demographics and economic factors for each of our stores;