BEST BUY CO INC

Previous 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.

Current wording

In the third quarter of fiscal 2025, we continued to manage our profitability through strong execution despite revenue declines. We made progress on our fiscal 2025 priorities, grew our paid membership base and drove improvements in our prioritized customer experiences. We continued to deliver sales growth in our Domestic computing and tablet 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

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.

Current wording

We also continue to focus 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 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.

Current wording

In our stores, we are making enhancements to every store in the chain in some fashion this year, 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

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.

Current wording

As we look to the rest of the year, we are excited for the holiday season in this still uncertain consumer electronics industry. We are well positioned with compelling deals, inspirational in-store and digital merchandising and competitive fulfillment options. 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

In the second quarter and first six months of fiscal 2025, we generated $9.3 billion and $18.1 billion in revenue, respectively, and our comparable sales sequentially improved from the first quarter of fiscal 2025 to a decline of 2.3% and a decline of 4.2%, respectively, as we continued to operate in a challenged consumer electronics industry. Despite comparable sales declines in the second quarter of fiscal 2025 in categories such as appliances, home theater and gaming, we delivered comparable sales growth in our tablet and computing categories, driven by customers’ desire to replace or upgrade their products combined with new product innovation.

Current 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.

Previous 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.

Current 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.

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 a total of 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. In fiscal 2025, we currently expect to reduce our Domestic Best Buy store count by approximately 10 to 12 stores.

Previous wording

Income tax expense increased in the second quarter of fiscal 2025, primarily due to an increase in pre-tax earnings. Our effective tax rate (“ETR”) decreased to 25.8% in the second quarter of fiscal 2025 compared to 26.1% in the second quarter of fiscal 2024, primarily due to increased tax benefits from green energy incentives.

Current wording

Income tax expense was relatively unchanged in the third quarter of fiscal 2025. Our effective tax rate (“ETR”) decreased to 23.9% in the third quarter of fiscal 2025 compared to 24.7% in the third quarter of fiscal 2024, primarily due to increased tax benefits from green energy incentives.

Previous 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.

Current wording

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

Previous wording

Domestic revenue decreased in the second quarter 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 tablets, computing and services categories. In the first six months of fiscal 2025, Domestic revenue decreased, primarily driven by comparable sales declines in the appliances, home theater and gaming categories, partially offset by comparable sales growth in the services, tablets and computing categories. Online revenue of $2.7 billion and $5.2 billion in the second quarter and first six months of fiscal 2025 decreased 1.6% and 3.8%, respectively, on a comparable basis.

Current 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.

Previous 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.

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous 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.

Current wording

Domestic gross profit rate increased in the first nine 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 second quarter of fiscal 2025, primarily due to lower employee compensation expense andlower expenses across multiple other areas, including reduced vehicle rental costs and credit card processing fees. These decreases were partially offset by higher advertising expense.

Current wording

Domestic SG&A decreased in the third quarter of fiscal 2025, primarily due to lower employee compensation expense and lower intangible asset amortization expense, partially offset by higher advertising expense.

Previous 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.

Current wording

Domestic SG&A decreased in the first nine months of fiscal 2025, primarily due to lower employee compensation expense, which was primarily store payroll, lower intangible amortization expense andreduced vehicle rental costs. These decreases were partially offset by higher advertising and technology expense.

Previous 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.

Current 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.

Previous wording

Domestic operating income rate increased in the second quarter and first six months of fiscal 2025, primarily due to favorability in the gross profit rate.

Current wording

Domestic operating income rate increased in the third quarter and first nine months of fiscal 2025, primarily due to favorability in the gross profit rate, partially offset bydecreased leverage from lower sales volume, which resulted in an unfavorable SG&A rate.

Previous wording

International revenue decreased in the second quarter of fiscal 2025, primarily driven by the negative impact of foreign exchange rates and comparable sales declines in gaming and computing, partially offset by comparable sales growth in mobile phones.

Current 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.

Previous wording

International revenue decreased in the first six months of fiscal 2025, primarily driven by comparable sales declines in gaming and computing, as well as the negative impact of foreign exchange rates. These drivers were partially offset by comparable sales growth in mobile phones.

Current wording

International revenue decreased in the first nine months of fiscal 2025, primarily driven by comparable sales declines in gaming, computing and home theater, as well as the negative impact of foreign exchange rates. These decreases were partially offset by increased revenue from Best Buy Express locations and comparable sales growth in mobile phones.

Previous 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.

Current 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.

Previous wording

Consumer Electronics: The 2.1% comparable sales decline was driven primarily by home automation.

Current wording

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

Previous wording

Services: The 5.9% comparable sales growth was driven primarily by growth in our membership programs.

Current wording

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

Previous 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.

Current 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.

Previous wording

International SG&A decreased in the second quarter of fiscal 2025, primarily driven by the favorable impact of foreign exchange rates and lower advertising expense, which was partially offset by expenses associated with new Best Buy Express locations as a result of our previously announced collaboration with Bell Canada.

Current wording

International SG&A increased in the third quarter of fiscal 2025, primarily driven by expenses associated with new Best Buy Express locations.

Previous wording

International SG&A decreased in the first six months of fiscal 2025, primarily driven by the favorable impact of foreign exchange rates, lower advertising expense and lower employee compensation expense, which was primarily incentive compensation. These drivers were partially offset by expenses associated with new Best Buy Express locations and higher technology expense.

Current wording

International SG&A decreased in the first nine months of fiscal 2025, primarily driven bylower advertising expense and lower employee compensation expense, which was primarily incentive compensation. These decreases were partially offset by expenses associated with new Best Buy Express locations.

Previous wording

International operating income rate decreased in the second quarter of fiscal 2025, primarily due to an unfavorable gross profit rate.

Current wording

International operating income rate decreased in the third quarter of fiscal 2025, primarily due to an unfavorable SG&A rate, partially offset by a favorable gross profit rate.

Previous 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.

Current 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.

Previous 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.

Current 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.

Previous 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.

Current wording

Non-GAAP operating income rate decreased in the third quarter of fiscal 2025, primarily due to an unfavorable SG&A rate, partially offset by a favorable gross profit rate. Non-GAAP operating income rate increased in the first nine months of fiscal 2025, primarily due to a favorable gross profit rate in our Domestic segment, partially offset by an unfavorable SG&A rate.

Previous 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.

Current wording

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

Previous 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.

Current wording

Non-GAAP diluted EPS decreased in the third quarter of fiscal 2025, primarily due to the decrease in non-GAAP earnings. Non-GAAP diluted EPS increased in the first nine months of fiscal 2025, primarily due to the increase in non-GAAP earnings.

Previous 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.

Current 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.

Previous 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.

Current 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.

Previous 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.

Current wording

Cash used in investing activities in the first nine 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

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.

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 $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.

Previous 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.

Current 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.

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 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 network carriers (including product availa…

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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 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.