BEST BUY CO INC

Previous wording

In the first quarter of fiscal 2025, we continued to manage our profitability through strong execution, while at the same time preparing for future growth. We made progress on our fiscal 2025 priorities, grew our paid membership base, implemented previously announced restructuring actions and drove improvements in our prioritized customer experiences. While macroeconomic factors continued to create a challenging sales environment during the quarter, we will continue to navigate this fluctuating environment and its impact on customer demand while remaining focused and energized about our purpose to enrich lives through technology.

Current wording

In the second quarter of fiscal 2025, we continued to manage our profitability through strong execution, while at the same time preparing for future growth. We made progress on our fiscal 2025 priorities, grew our paid membership base, continued to implement previously announced restructuring actions and drove improvements in our prioritized customer experiences. We delivered sales growth in our Domestic tablet and computing categories as our market position, expert sales associates and compelling merchandising allowed us to capitalize on demand driven by our customers’ desire to replace or upgrade their products combined with new innovation.

Previous wording

We expect fiscal 2025 to be a year of increasing industry stabilization as the pace of innovation increases and consumers begin to upgrade and replace technology products bought early in the pandemic. To ensure we are in the best position possible to benefit, we are focused on the following four priorities: 1) invigorate and progress targeted customer experiences; 2) drive operational effectiveness and efficiency; 3) continue our disciplined approach to capital allocation; and 4) explore, pilot and drive incremental revenue streams.

Current wording

Our enterprise comparable sales declined 2.3% in the second quarter of fiscal 2025, compared to a comparable sales decline of 6.1% in the first quarter of fiscal 2025. We believe the second quarter sequential improvement in comparable sales supports our belief that this will be a year of further stabilization in the consumer electronics industry. To ensure we are in the best position possible to benefit from these industry developments, we are focused on the following four priorities: (1) invigorate and progress targeted customer experiences; (2) drive operational effectiveness and efficiency; (3) continue our disciplined approach to capital allocation; and (4) explore, pilot and drive incremental revenue streams.

Previous wording

In the first quarter of fiscal 2025, we focused on providing increasingly personalized, highly relevant and motivational content to our App users to drive higher engagement. Each of our App users’ home screens will eventually look different based on their personal preferences and a number of factors like current location, shopping history, membership status and what we know they care about the most based on their activity. We are also driving speed improvements on the product pages and in checkout in the mobile experience to drive customer experience and sales performance.

Current wording

In the second quarter of fiscal 2025, we completed the roll-out of personalized, relevant and motivational content to our App users to drive higher engagement. Each of our App users’ home screens now look different based on their personal preferences and a number of factors like current location, shopping history, membership status and what we know they care about the most based on their activity.

Previous wording

In our stores, we plan to make enhancements to every store in the chain in some fashion throughout the second and third quarters, improving both our merchandising and ease of shopping for customers. This includes working with many of our vendors to implement new and enhanced in-store experiences across the store. To continue to elevate the expert service we provide customers, we are adding fully dedicated labor expertise to our in-store computing, home theater and major appliances departments in hundreds of stores. These changes are in addition to the actions taken throughout the past year to streamline our leadership model, allowing us to invest in more customer-facing sales associate hours in our stores.

Current wording

In our stores, we are making enhancements to every store in the chain in some fashion throughout the second and third quarters, improving both our merchandising and ease of shopping for customers. This includes working with many of our vendors to implement new and enhanced in-store experiences across the store. To continue to elevate the expert service we provide customers, we have added fully dedicated labor expertise to our in-store computing and have begun the process of doing so in our home theater and major appliances departments in hundreds of stores. These changes are in addition to the actions taken throughout the past year to streamline our leadership model, allowing us to invest in more customer-facing sales associate hours in our stores.

Previous wording

While we elevate our customer experiences, we are simultaneously executing on our longstanding commitment to drive operational effectiveness and efficiencies and identify cost reductions, as this is paramount to help offset inflationary pressures in our business and fund investment capacity. For example, in fiscal 2025 we are focused on driving further efficiencies across forward and reverse supply chain, our Geek Squad repair operations, and our customer care experience. We will continue to lean heavily on analytics and technology to achieve these efficiencies.

Current wording

While we elevate our customer experiences, we are simultaneously executing on our longstanding commitment to drive operational effectiveness and efficiencies and identify cost reductions, as this is paramount to help offset inflationary pressures in our business and fund investment capacity. For example, in fiscal 2025 we are focused on driving further efficiencies across our forward and reverse supply chain, our Geek Squad repair operations and our customer care experience. We will continue to lean heavily on analytics and technology to achieve these efficiencies.

Previous wording

Our third key priority for the year is to continue our disciplined approach to capital allocation. This will include striking the appropriate balance of prioritizing areas that best position us for the future while prudently dealing with the near-term uncertainty in the consumer electronics industry.

Current wording

Our third key priority for the year is to continue our disciplined approach to capital allocation. This includes striking the appropriate balance of prioritizing areas that best position us for the future, while prudently dealing with the near-term uncertainty in the consumer electronics industry.

Previous wording

We believe we are starting to see the pace of technology innovation increase as computing devices powered by artificial intelligence are expected to launch this summer. We are the largest consumer electronics specialty retailer with what we believe to be a unique range of product assortment and expert services to help humanize tech, especially new innovation, for every stage of our customers’ lives. We intend to strengthen our position in key categories like computing, home theater and major appliances through our differentiated experiences, pointed marketing spend and competitive pricing. We believe we are putting ourselves in the best position for fiscal 2025 and beyond.

Current wording

We are the largest consumer electronics specialty retailer with what we believe to be a unique range of product assortment and expert services to help humanize tech, especially new innovation, for every stage of our customers’ lives. We intend to strengthen our position in key categories like computing, home theater and major appliances through our differentiated experiences, pointed marketing spend and competitive pricing.

Previous wording

Revenue, gross profit rate, SG&A and operating income rate changes in the first quarter 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 second quarter and first six 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.

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. We currently expect to close approximately 10 to 15 Domestic Best Buy stores in fiscal 2025.

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. We currently expect to close a total of approximately 10 to 15 Domestic Best Buy stores in fiscal 2025.

Previous wording

Income tax expense increased in the first quarter of fiscal 2025, primarily dueto reduced benefits from the resolution of tax matters and stock-based compensation. Our effective tax rate (“ETR”) increased to 24.7% in the first quarter of fiscal 2025 compared to 23.3% in the first quarter of fiscal 2024, primarily due to reduced tax benefits from the resolution of tax matters and stock-based compensation, partially offset by benefits from green energy incentives.

Current wording

Income tax expense increased in the first six months of fiscal 2025, primarily due to an increase in pre-tax earnings. Our ETR increased to 25.3% in the first six months of fiscal 2025 compared to 24.8% in the first six months of fiscal 2024, primarily due to reduced tax benefits from the resolution of tax matters and stock-based compensation, partially offset by increased tax benefits from green energy incentives.

Previous wording

Computing and Mobile Phones: The 2.2% comparable sales decline was driven primarily by declines in mobile phones and wearables, partially offset by comparable sales growth in laptops.

Current wording

Computing and Mobile Phones: The 3.9% comparable sales growth was driven primarily by tablets and computing, partially offset by a comparable sales decline in mobile phones.

Previous wording

Consumer Electronics: The 8.3% comparable sales decline was driven primarily by home theater.

Current wording

Consumer Electronics: The 6.2% comparable sales decline was driven primarily by home theater.

Previous wording

Appliances: The 18.5% comparable sales decline was driven primarily by large appliances.

Current wording

Appliances: The 14.9% comparable sales decline was driven primarily by large appliances.

Previous wording

Services: The 9.0% comparable sales growth wasdriven primarily by delivery and installation services.

Current wording

Services: The 8.5% comparable sales growth wasdriven primarily by delivery and installation services.

Previous wording

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

Current wording

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

Previous wording

Domestic SG&A decreased in the first quarter of fiscal 2025, primarily due to: (1) lower employee compensation expense, which was primarily store payroll; (2) reduced vehicle rental costs; and (3) lower expenses across multiple other areas, such as advertising and credit card fees. These decreases were partially offset by higher technology expense.

Current wording

Domestic SG&A decreased in the first six months of fiscal 2025, primarily due to lower employee compensation expense, which was primarily store payroll, andlower expenses across multiple other areas, including reduced vehicle rental costs. These decreases were partially offset by higher advertising and technology expense.

Previous wording

Domestic restructuring charges in the first quarter of fiscal 2025 were primarily related to employee termination benefits 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

Domestic restructuring charges in the second quarter and first six 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.

Previous wording

Computing and Mobile Phones: The 0.7% comparable sales growth was driven primarily by mobile phones, partially offset by a comparable sales decline in computing.

Current wording

Computing and Mobile Phones: The 1.7% comparable sales growth was driven primarily by mobile phones, partially offset by a comparable sales decline in computing.

Previous wording

International gross profit rate decreased in the first quarter of fiscal 2025, primarily driven by lower product margin rates.

Current wording

International gross profit rate decreased in the second quarter and first six 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.

Previous wording

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

Current wording

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

Previous 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.

Current 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.

Previous 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%.

Current wording

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

Previous wording

Non-GAAP operating income rate increased in the first quarter of fiscal 2025, primarily due to a favorable gross profit rate in our Domestic segment.

Current wording

Non-GAAP operating income rate increased in the second quarter and first six months of fiscal 2025, primarily due to a favorable gross profit rate in our Domestic segment.

Previous wording

Non-GAAP effective tax rate increased in the first quarter of fiscal 2025, primarily due to reduced tax benefits from the resolution of tax matters and stock-based compensation, partially offset by benefits from green energy incentives.

Current wording

Non-GAAP effective tax rate decreased in the second quarter of fiscal 2025, primarily due to increased tax benefits from green energy incentives. Non-GAAP effective tax rate increased in the first six months of fiscal 2025, primarily due to reduced tax benefits from the resolution of tax matters and stock-based compensation, partially offset by increased tax benefits from green energy incentives.

Previous wording

Non-GAAP diluted EPS increased in the first quarter of fiscal 2025, primarily due to the increase in non-GAAP operating income.

Current wording

Non-GAAP diluted EPS increased in the second quarter and first six months of fiscal 2025, primarily due to the increase in non-GAAP operating income.

Previous wording

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

Current wording

The decrease in cash and cash equivalents from February 3, 2024, was primarily due to dividend payments and capital expenditures, 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 quarter 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 and higher incentive compensation payments in the current year.

Current wording

The increase in cash provided by operating activities in the first six 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.

Previous wording

Cash used in investing activities in the first quarter of fiscal 2025 decreased, primarily driven by lower capital spending. We currently expect capital expenditures to approximate $750 million in fiscal 2025 compared to $795 million in fiscal 2024.

Current wording

Cash used in investing activities in the first six months of fiscal 2025 decreased, primarily driven by lower capital spending. We currently expect capital expenditures to approximate $750 million in fiscal 2025 compared to $795 million in fiscal 2024.

Previous wording

The decrease in cash used in financing activities in the first quarter of fiscal 2025 was primarily driven by lower share repurchases.

Current wording

Cash used in financing activities in the first six months of fiscal 2025 remained relatively consistent with the comparable prior-year period.

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 other self-insurance liabilities. Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $313 million, $346 million and $402 million at May 4, 2024, February 3, 2024, and April 29, 2023, respectively. The decrease in restricted cash from April 29, 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 $311 million, $346 million and $398 million at August 3, 2024, February 3, 2024, and July 29, 2023, respectively. The decrease in restricted cash from February 3, 2024, and July 29, 2023, was primarily due to releases of product protection reserves based on claims and purchasing behaviors of customers participating in our membership offerings.

Previous wording

The total cost of shares repurchased decreased in the first quarter of fiscal 2025, primarily due to a decrease in the volume of repurchases. Cash dividends declared and paid remained consistent during the first quarter of fiscal 2025, due to the increase in the regular quarterly cash dividend per share offset by fewer shares outstanding.

Current wording

The total cost of shares repurchased increased in the second quarter of fiscal 2025, primarily due to an increase in the volume of repurchases. The total cost of shares repurchased remained consistent in the first six months of fiscal 2025, as the decrease in the volume of repurchases was offset by the increase in the average price per share. Cash dividends declared and paid increased during the second quarter and first six months of fiscal 2025, due to the increase in the regular quarterly cash dividend per share, partially offset by fewer shares outstanding.

Previous wording

Between the end of the first quarter of fiscal 2025 on May 4, 2024, and June 5, 2024, we repurchased an incremental 0.4 million shares of our common stock at a cost of $34 million. We currently expect total share repurchases of approximately $350 million in fiscal 2025.

Current wording

Between the end of the second quarter of fiscal 2025 on August 3, 2024, and September 4, 2024, we repurchased an incremental 0.4 million shares of our common stock at a cost of $39 million. We currently expect total share repurchases of approximately $500 million in fiscal 2025.