What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-12-06 compared with 2022-09-08 · 244 added, 231 removed, 607 unchanged (44% of the section changed)

2 unchanged sentences

$ in millions, except per share amounts (unaudited)

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Current assets

13 unchanged sentences

Accrued liabilities

Short-term debt

Current portion of operating lease liabilities

20 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Cost of sales

3 unchanged sentences

Other income (expense):

Investment income (loss) and other

Investment income and other

Interest expense

9 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Foreign currency translation adjustments, net of tax

3 unchanged sentences

$ in millions (unaudited)

Six Months Ended

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

Operating activities

3 unchanged sentences

Stock-based compensation

Deferred income taxes

Changes in operating assets and liabilities, net of acquired assets and liabilities:

10 unchanged sentences

Repurchase of common stock

Issuance of common stock

Dividends paid

Repayments of debt

Total cash used in financing activities

10 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

Balances at April 30, 2022

Net earnings, three months ended July 30, 2022

Balances at July 30, 2022

Net earnings, three months ended October 29, 2022

Other comprehensive loss:

Foreign currency translation adjustments, net of tax

Stock-based compensation

1 unchanged sentence

Common stock dividends, $ 0.88 per share

Repurchase of common stock

Balances at July 30, 2022

Balances at October 29, 2022

Balances at January 29, 2022

Net earnings, six months ended July 30, 2022

Net earnings, nine months ended October 29, 2022

Other comprehensive loss:

4 unchanged sentences

Repurchase of common stock

Balances at October 29, 2022

Balances at July 31, 2021

Balances at May 1, 2021

Net earnings, three months ended July 31, 2021

Other comprehensive loss:

Net earnings, three months ended October 30, 2021

Other comprehensive income:

Foreign currency translation adjustments, net of tax

3 unchanged sentences

Repurchase of common stock

Balances at July 31, 2021

Balances at October 30, 2021

Balances at January 30, 2021

Net earnings, six months ended July 31, 2021

Net earnings, nine months ended October 30, 2021

Other comprehensive income:

4 unchanged sentences

Repurchase of common stock

Balances at July 31, 2021

Balances at October 30, 2021

See Notes to Condensed Consolidated Financial Statements.

8 unchanged sentences

The interim financial statements and the related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

The first six months of fiscal 2023 and fiscal 2022 included 26 weeks.

In preparing the accompanying condensed consolidated financial statements, we evaluated the period from July 30, 2022, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure.

Other than the Inflation Reduction Act of 2022 that was enacted on August 16, 2022, n o such events were identified for the reported periods.

See Note 10, Income Taxes , for additional information.

The first nine months of fiscal 2023 and fiscal 2022 included 39 weeks.

In preparing the accompanying condensed consolidated financial statements, we evaluated the period from October 29, 2022, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure.

No such events were identified for the reported periods.

Total Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash reported on our Condensed Consolidated Balance Sheets are reconciled to the total shown on our Condensed Consolidated Statements of Cash Flows as follows ($ in millions):

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Cash and cash equivalents

1 unchanged sentence

Total cash, cash equivalents and restricted cash

Amounts included in restricted cash are primarily restricted to cover product protection plans provided under our Best Buy Totaltech membership offering and self-insurance liabilities.

Amounts included in restricted cash are primarily restricted to use for product protection plans provided under our Best Buy Totaltech membership offering and self-insurance liabilities.

Restructuring

1 unchanged sentence

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Fiscal 2023 Resource Optimization Initiative

Mexico Exit and Strategic Realignment (1)

(1) Includes ($ 6 ) million related to inventory markdowns recorded in Cost of Sales on our Condensed Consolidated Statements of Earnings for the six months ended July 31, 2021.

(1) Includes ($ 6 ) million related to inventory markdowns recorded in Cost of Sales on our Condensed Consolidated Statements of Earnings for the nine months ended October 30, 2021.

Fiscal 2023 Resource Optimization Initiative

In light of ongoing changes in business trends, during the second quarter of fiscal 2023, we commenced an enterprise-wide initiative to better align our spending with critical strategies and operations, as well as to optimize our cost structure.

We incurred $ 34 million of charges in our Domestic segment related to termination benefits.

Charges incurred for the periods presented are primarily comprised of employee termination benefits within our Domestic segment.

We currently expect to incur additional charges through the remainder of fiscal 2023, primarily within our Domestic segment, of approximately $ 15 million to $ 30 million related to this initiative.

All charges incurred related to this plan were from continuing operations and were presented within Restructuring charges on our Condensed Consolidated Statements of Earnings.

There were $ 1 million of cash payments related to this initiative during the second quarter of fiscal 2023, and our remaining termination benefits liability as of July 30, 2022, was $ 33 million.

Restructuring accrual activity within our Domestic segment related to the fiscal 2023 resource optimization initiative described above was as follows ($ in millions):

Termination Benefits

Balance at January 29, 2022

Cash payments

Adjustments (1)

Balance at October 29, 2022

(1) Represents higher-than-expected employee retention.

Mexico Exit and Strategic Realignment

3 unchanged sentences

Charges incurred in our Domestic segment primarily related to actions taken to align our organizational structure in support of our strategy.

During the six months ended July 31, 2021, we recorded a $ 44 million credit primarily due to a reduction in expected termination benefits resulting from adjustments to previously planned organizational changes and higher-than-expected employee retention.

During the nine months ended October 30, 2021, we recorded a $ 44 million credit primarily due to a reduction in expected termination benefits resulting from adjustments to previously planned organizational changes and higher-than-expected employee retention.

All charges incurred related to this plan were from continuing operations and were presented as follows ($ in millions):

Three Months Ended July 31, 2021

Six Months Ended July 31, 2021

Three Months Ended October 30, 2021

Nine Months Ended October 30, 2021

Earnings Location

7 unchanged sentences

Restructuring charges

Cumulative Amount as of July 30, 2022

Cumulative Amount as of October 29, 2022

Earnings Location

9 unchanged sentences

Restructuring charges

(1) Remaining net carrying value approximates fair value and was immaterial as of July 30, 2022.

(1) Remaining net carrying value approximates fair value and was immaterial as of October 29, 2022.

(2) Other charges are primarily comprised of contract termination costs.

We do not expect to incur material future restructuring charges related to the exit from Mexico or strategic realignment initiatives described above, and no material liability remains as of July 30, 2022.

Goodwill and Intangible Assets

Goodwill balances by reportable segment were as follows ($ in millions):

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Gross Carrying Amount

8 unchanged sentences

We have definite-lived intangible assets that are recorded within Other assets on our Condensed Consolidated Balance Sheets as follows ($ in millions):

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Weighted-Average

5 unchanged sentences

‎ Amortization

Useful Life Remaining as of July 30, 2022

Useful Life Remaining as of October 29, 2022 (in years)

Customer relationships

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Earnings Location

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Amortization expense

8 unchanged sentences

Recurring Fair Value Measurements

Financial assets accounted for at fair value were as follows ($ in millions):

Financial assets and liabilities accounted for at fair value were as follows ($ in millions):

Fair Value at

1 unchanged sentence

Fair Value Hierarchy

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Money market funds (2)

4 unchanged sentences

Other current assets

Time deposits (3)

Other current assets

Marketable securities that fund deferred compensation (4)

Interest rate swap derivative instruments (5)

Long-term liabilities

(1) Balance sheet location is determined by length to maturity at date of purchase.

12 unchanged sentences

Long-term debt balances were as follows ($ in millions):

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Carrying Value

10 unchanged sentences

Contract Type

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Derivatives designated as net investment hedges

4 unchanged sentences

Three Months Ended

Six Months Ended

Earnings Location

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

Statement of Earnings Location

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Interest rate swap contracts

6 unchanged sentences

The Five-Year Facility Agreement permits borrowings of up to $ 1.25 billion and expires in May 2026.

There were no borrowings outstanding under the Five-Year Facility Agreement as of July 30, 2022, January 29, 2022, or July 31, 2021.

In conjunction with a solar energy investment, we were advanced $ 110 million due October 31, 2021.

The advance was recorded within Short-term debt on our Condensed Consolidated Balance Sheets as of July 31, 2021, and bore interest at 0.14 %.

This advance was repaid on October 29, 2021.

There were no borrowings outstanding under the Five-Year Facility Agreement as of October 29, 2022, January 29, 2022, or October 30, 2021.

Long-Term Debt

Long-term debt consisted of the following ($ in millions):

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Notes, 4.45 %, due October 1, 2028

10 unchanged sentences

Contract balances were as follows ($ in millions):

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Receivables, net (1)

3 unchanged sentences

Accrued liabilities

(1) Receivables are recorded net of allowances for doubtful accounts of $ 21 million, $ 31 million and $ 24 million as of July 30, 2022, January 29, 2022, and July 31, 2021, respectively.

During the first six months of fiscal 2023 and fiscal 2022, $ 1,089 million and $ 866 million of revenue was recognized, respectively, that was included in the contract liabilities at the beginning of the respective periods.

(1) Receivables are recorded net of allowances for doubtful accounts of $ 20 million, $ 31 million and $ 24 million as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively.

During the first nine months of fiscal 2023 and fiscal 2022, $ 1,251 million and $ 1,001 million of revenue was recognized, respectively, that was included in the contract liabilities at the beginning of the respective periods.

See Note 12, Segments , for information on our revenue by reportable segment and product category.

3 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Weighted-average common shares outstanding

7 unchanged sentences

There is no expiration date governing the period over which we can repurchase shares under this authorization.

Share repurchases were paused during the second quarter of fiscal 2023.

Share repurchases resumed in fiscal November 2023 after pausing during the second quarter of fiscal 2023.

We expect to spend approximately $ 1 billion in share repurchases in fiscal 2023.

Information regarding the shares we repurchased and retired was as follows ($ and shares in millions, except per share amounts):

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Total cost of shares repurchased

1 unchanged sentence

Number of shares repurchased

As of July 30, 2022, $ 4.7 billion of the $ 5.0 billion share repurchase authorization was available.

As of October 29, 2022, $ 4.7 billion of the $ 5.0 billion share repurchase authorization was available.

Between the end of the third quarter of fiscal 2023 on October 29, 2022, and December 2, 2022, we repurchased an incremental 4.4 million shares of our common stock at a cost of $ 322 million.

Unrecognized Tax Benefits

12 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Revenue by reportable segment

13 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

International

1 unchanged sentence

Other income (expense):

Investment income (loss) and other

Investment income and other

Interest expense

1 unchanged sentence

Assets by reportable segment were as follows ($ in millions):

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

International

52 unchanged sentences

Business Strategy Update

One of our greatest strengths is our ability to adapt to rapidly changing and challenging environments, whether due to changes in technology, macroeconomic trends or a pandemic.

We are currently operating in an unpredictable consumer electronics industry.

As previously stated, we assumed the consumer electronics industry would be lower following two years of elevated growth driven by unusually strong demand for technology products and services and fueled partly by stimulus dollars.

We believe one of our greatest strengths is our ability to adapt to rapidly changing and challenging environments, whether due to changes in technology, macroeconomic trends or a pandemic.

We are currently operating in a challenging consumer electronics industry.

As previously stated, we assumed that sales in the consumer electronics industry would be lower this year following two years of elevated growth driven by unusually strong demand for technology products and services and fueled partly by stimulus dollars during the pandemic.

In addition, we expected to see some impact on our business as customers broadly shifted their spending back into experience areas, such as travel and entertainment.

We did not expect these impacts to be compounded by a changing macro environment where consumers are dealing with sustained and record high levels of inflation in some of the most fundamental parts of their daily lives, like food.

While these factors have led to an uneven sales environment, they have not deterred us from continuing to make progress on our initiatives.

During the quarter we drove broad customer satisfaction improvements even compared to pre-pandemic levels, particularly in installation and repair.

We signed up new Best Buy Totaltech members and increased our delivery speed, delivering almost one-third of customer online orders in one day.

We also completed store remodels, opened new outlet stores and began implementing newly signed deals with healthcare companies.

In this environment, we are managing thoughtfully and carefully while still investing in our future.

These impacts are being compounded by a changing macro environment where consumers are dealing with sustained and record high levels of inflation in some of the most fundamental parts of their daily lives, like food, fuel and lodging.

Throughout the third quarter of fiscal 2023, we were committed to balancing our near-term response to current conditions and managing well what is in our control, while also advancing our strategic initiatives and investing in areas important for our long-term growth.

This includes managing our inventory levels and actively assessing further actions to evolve our operating model, manage profitability and iterate on our growth initiatives.

1 unchanged sentence

We are planning for lower store payroll expenses and reducing spending in discretionary areas by increasing our rigor around backfilling corporate roles, capital expenditures and travel.

During the quarter, we also commenced an enterprise-wide restructuring initiative to better align our spending with critical strategies and operations, as well as to optimize our cost structure.

While we remain confident in our strategy, the current macroeconomic backdrop has changed in ways that we and many others were not expecting.

In the second quarter of fiscal 2023, we commenced an enterprise-wide restructuring initiative to better align our spending with critical strategies and operations, as well as to optimize our cost structure.

At the same time, strategically, we are positioning ourselves to be a leader in the future of retailing.

We continue to see a customer that is increasingly in control and expects seamless experiences across all touchpoints.

As such, we believe it is paramount that we continue to invest in the areas that will be important for our future growth, including our in-store experience, digital experiences and tools, our Best Buy Totaltech membership and Best Buy Health.

We remain confident in our strategy and excited about our future.

We fundamentally believe that technology is more important than ever in our everyday lives, and as a result of the past few years, consumers have even more technology devices in their homes that will need to be updated, upgraded and supported over time.

As our vendor partners continue to innovate and the world becomes increasingly more digital in all aspects, we will be there to uniquely help customers in our stores, online, virtually and directly in their homes.

As our vendor partners continue to innovate and the world becomes increasingly more digital in all aspects, we will be there to help customers in our stores, online, virtually and directly in their homes.

Results of Operations

2 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Revenue % change

8 unchanged sentences

For additional information regarding costs classified in cost of sales and SG&A, refer to Note 1, Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

In the second quarter and first six months of fiscal 2023, we generated $10.3 billion and $21.0 billion in revenue and our comparable sales decreased 12.1% and 10.1%, respectively, as we lapped strong comparable sales last year, which were driven by the timing of government stimulus payments, temporary store closures due to the COVID-19 pandemic and heightened demand for stay-at-home focused purchases.

In addition, we faced macroeconomic pressures, including high inflation, that have resulted in overall softness in customer demand within the consumer electronics industry.

Revenue, gross profit rate, SG&A and operating income rate changes in the second quarter and first six months of fiscal 2023 were primarily driven by our Domestic segment.

In the third quarter and first nine months of fiscal 2023, we generated $10.6 billion and $31.6 billion in revenue and our comparable sales decreased 10.4% and 10.2%, respectively, as we lapped strong comparable sales over the past two years, which were driven by the timing of government stimulus payments, temporary store closures due to the COVID-19 pandemic and heightened demand for stay-at-home focused purchases.

In addition, we faced macroeconomic pressures in the current year, including high inflation, that have resulted in overall softness in customer demand within the consumer electronics industry.

Revenue, gross profit rate, SG&A and operating income rate changes in the third quarter and first nine months of fiscal 2023 were primarily driven by our Domestic segment.

For further discussion of each segment’s rate changes, see Segment Performance Summary , below.

Income Tax Expense

Income tax expense decreased in the second quarter of fiscal 2023 primarily due to a decrease in pre-tax earnings, partially offset by the prior year resolution of certain discrete tax matters.

Our effective tax rate (“ETR”) increased to 15.6% in the second quarter of fiscal 2023 compared to 8.0% in the second quarter of fiscal 2022, primarily due to the prior year resolution of certain discrete tax matters, partially offset by the impact of lower pre-tax earnings in the current year.

Income tax expense decreased in the first six months of fiscal 2023 primarily due to a decrease in pre-tax earnings, partially offset by the prior year resolution of certain discrete tax matters.

Our ETR increased to 20.5% in the first six months of fiscal 2023 compared to 15.1% in the first six months of fiscal 2022, primarily due to the prior year resolution of certain discrete tax matters, partially offset by the impact of lower pre-tax earnings in the current year.

Income tax expense decreased in the third quarter of fiscal 2023, primarily due to a decrease in pre-tax earnings.

Our effective tax rate (“ETR”) decreased to 23.6% in the third quarter of fiscal 2023 compared to 25.1% in the third quarter of fiscal 2022, primarily due to the recognition of losses and certain deferred tax assets for which tax benefits were previously not recognized, as well as an increase in the tax benefit from federal tax credits.

Income tax expense decreased in the first nine months of fiscal 2023, primarily due to a decrease in pre-tax earnings, partially offset by the prior-year resolution of certain discrete tax matters.

Our ETR increased to 21.4% in the first nine months of fiscal 2023 compared to 18.1% in the first nine months of fiscal 2022, primarily due to the prior-year resolution of certain discrete tax matters and a decrease in the tax benefit from stock-based compensation, partially offset by the impact of lower pre-tax earnings in the current year.

Refer to Note 10, Income Taxes , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

11 unchanged sentences

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Revenue % change

10 unchanged sentences

(1) Online sales are included in the comparable sales calculation.

The decrease in revenue in the second quarter and first six months of fiscal 2023 was primarily driven by comparable sales declines across most of our product categories, particularly computing and home theater.

Online revenue of $3.0 billion and $6.0 billion in the second quarter and first six months of fiscal 2023 decreased 14.7% and 14.8% on a comparable basis, respectively.

These decreases in revenue were primarily due to the reasons described above.

Domestic segment stores open at the beginning and end of the second quarters of fiscal 2023 and fiscal 2022 were as follows:

Total Stores at Beginning of Second Quarter

The decrease in revenue in the third quarter and first nine months of fiscal 2023 was primarily driven by comparable sales declines across most of our product categories, particularly computing and home theater.

Online revenue of $3.0 billion and $9.1 billion in the third quarter and first nine months of fiscal 2023 decreased 11.6% and 13.8% on a comparable basis, respectively.

These decreases in revenue were primarily due to the reasons described within the Consolidated Results section, above.

Domestic segment stores open at the beginning and end of the third quarters of fiscal 2023 and fiscal 2022 were as follows:

Total Stores at Beginning of Third Quarter

Stores Opened

Stores Closed

Total Stores at End of Second Quarter

Total Stores at Beginning of Second Quarter

Total Stores at End of Third Quarter

Total Stores at Beginning of Third Quarter

Stores Opened

Stores Closed

Total Stores at End of Second Quarter

Total Stores at End of Third Quarter

Outlet Centers

2 unchanged sentences

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 15 to 20 Best Buy stores in fiscal 2023 and to increase the number of Outlet Centers to approximately 30 by the end of fiscal 2024.

We currently expect to increase the number of Outlet Centers to approximately 30 by the end of fiscal 2024.

Domestic segment revenue mix percentages and comparable sales percentage changes by revenue category were as follows:

2 unchanged sentences

Three Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Computing and Mobile Phones

3 unchanged sentences

 Computing and Mobile Phones:

The 16.6% comparable sales decline was driven primarily by computing, tablets and wearables.

The 11.4% comparable sales decline was driven primarily by computing, tablets and mobile phones.

 Consumer Electronics:

The 14.7% comparable sales decline was driven primarily by home theater, headphones and portable speakers.

The 12.8% comparable sales decline was driven primarily by home theater.

 Appliances:

1 unchanged sentence

 Entertainment:

The 9.2% comparable sales decline was driven primarily by gaming.

The 8.5% comparable sales decline was driven primarily by the launch of our Totaltech membership offering that includes benefits that were previously stand-alone revenue-generating services, such as warranty .

Our gross profit rates decreased in the second quarter and first six months of fiscal 2023, primarily due to lower services margin rates, which resulted in approximately 100 basis points of margin pressure on a weighted basis in both the second quarter and first six months of fiscal 2023.

Our Totaltech membership offering was the primary driver of the lower services margin rates, which is primarily due to incremental customer benefits, and associated costs, compared to our previous Total Tech Support offer.

Lower product margin rates, including increased promotions, and higher supply chain costs also contributed to the decreases in our gross profit rates.

These decreases were partially offset by higher profit-sharing revenue from our private label and co-branded credit card arrangement in the second quarter and first six months of fiscal 2023.

Our SG&A decreased in the second quarter and first six months of fiscal 2023, primarily due to lower incentive compensation expense of approximately $135 million and $265 million, respectively, compared to prior-year periods.

The 4.6% comparable sales decline was driven primarily by gaming software.

The 0.9% comparable sales decline was driven primarily by the launch of our Best Buy Totaltech membership offering that includes benefits that were previously stand-alone revenue-generating services, such as warranty .

Our gross profit rate decreased in the third quarter of fiscal 2023, primarily due to lower product margin rates, including increased promotions, lower services margin rates, driven by the incremental customer benefits and associated costs from our Best Buy Totaltech membership offering compared to our previous Total Tech Support offer, and higher supply chain costs.

These decreases were partially offset by higher profit-sharing revenue from our private label and co-branded credit card arrangement.

Our gross profit rate decreased in the first nine months of fiscal 2023, primarily due to lower services margin rates, driven by the incremental customer benefits and associated costs from our Best Buy Totaltech membership offering compared to our previous Total Tech Support offer, lower product margin rates, including increased promotions, and higher supply chain costs.

These decreases were partially offset by higher profit-sharing revenue from our private label and co-branded credit card arrangement.

Our SG&A decreased in the third quarter and first nine months of fiscal 2023, primarily due to lower incentive compensation expense of approximately $100 million and $365 million, respectively, compared to prior-year periods and decreased store payroll expenses.

We currently expect to be below required financial thresholds for short-term incentive compensation performance metrics in the current year while lapping short-term incentive payments near maximum levels in the prior year.

The restructuring charges incurred in the second quarter and first six months of fiscal 2023 primarily related to termination benefits related to an enterprise-wide restructuring initiative that commenced in the second quarter of fiscal 2023 to better align our spending with critical strategies and operations, as well as to optimize our cost structure.

The restructuring charges incurred in the third quarter and first nine months of fiscal 2023 primarily related to employee termination benefits related to an enterprise-wide restructuring initiative that commenced in the second quarter of fiscal 2023 to better align our spending with critical strategies and operations, as well as to optimize our cost structure.

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.

Our operating income rates decreased in the second quarter and first six months of fiscal 2023, primarily due to the unfavorable gross profit rates and decreased leverage from lower sales volume on our fixed expenses, which resulted in unfavorable SG&A rates.

Our operating income rates decreased in the third quarter and first nine months of fiscal 2023, primarily due to the unfavorable gross profit rates and decreased leverage from lower sales volume on our fixed expenses, which resulted in unfavorable SG&A rates.

International Segment

1 unchanged sentence

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Revenue % change

5 unchanged sentences

Operating income as a % of revenue

The decreases in revenue in the second quarter and first six months of fiscal 2023 were primarily driven by comparable sales declines of 4.2% and 2.8%, respectively, in Canada and the negative impact from unfavorable foreign currency exchange rates.

The decrease in revenue in the first six months of fiscal 2023 was also driven by lower revenue in Mexico as a result of our decision in fiscal 2021 to exit operations.

International segment stores open at the beginning and end of the second quarters of fiscal 2023 and fiscal 2022 were as follows:

Total Stores at Beginning of Second Quarter

The decreases in revenue in the third quarter and first nine months of fiscal 2023 were primarily driven by Canada due to comparable sales declines of 9.3% and 5.2%, respectively, and the negative impact from unfavorable foreign currency exchange rates.

International segment stores open at the beginning and end of the third quarters of fiscal 2023 and fiscal 2022 were as follows:

Total Stores at Beginning of Third Quarter

Stores Opened

Stores Closed

Total Stores at End of Second Quarter

Total Stores at Beginning of Second Quarter

Total Stores at End of Third Quarter

Total Stores at Beginning of Third Quarter

Stores Opened

Stores Closed

Total Stores at End of Second Quarter

Total Stores at End of Third Quarter

Best Buy Mobile

3 unchanged sentences

Three Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Computing and Mobile Phones

3 unchanged sentences

 Computing and Mobile Phones:

The 7.6% comparable sales decline was driven primarily by computing, partially offset by comparable sales growth in mobile phones.

The 9.9% comparable sales decline was driven primarily by computing and tablets.

 Consumer Electronics:

1 unchanged sentence

 Appliances:

The 6.8% comparable sales growth was driven primarily by small appliances.

The 10.2% comparable sales decline was driven by large and small appliances.

 Entertainment:

The 5.8% comparable sales decline was driven primarily by gaming.

The 8.4% comparable sales decline was driven primarily by gaming and virtual reality.

The 15.2% comparable sales decline was driven primarily by warranty services.

The 3.6% comparable sales growth was driven primarily by sporting goods.

The decrease in our gross profit rate in the second quarter of fiscal 2023 was primarily driven by lower product margin rates.

In the first six months of fiscal 2023, the decrease in our gross profit rate was primarily driven by lower product margin rates and a $6 million benefit in the first six months of fiscal 2022 associated with more-favorable-than-expected inventory markdowns related to our decision to exit operations in Mexico.

The decrease in the first six months of fiscal 2023 was partially offset by a larger percentage of revenue from the higher margin services category in Canada.

Our SG&A decreased in the second quarter and first six months of fiscal 2023, primarily due to lower incentive compensation expense and the favorable impact of foreign currency exchange rates, partially offset by higher store payroll expense.

The decrease in our gross profit rate in the third quarter of fiscal 2023 was primarily driven by lower product margin rates and higher supply chain costs.

In the first nine months of fiscal 2023, the decrease in our gross profit rate was primarily driven by lower product margin rates, higher supply chain costs and a $6 million benefit in the first nine months of fiscal 2022 associated with more-favorable-than-expected inventory markdowns related to our decision to exit operations in Mexico.

Our SG&A decreased in the third quarter and first nine months of fiscal 2023, primarily due to lower incentive compensation expense and the favorable impact of foreign currency exchange rates.

Consolidated Non-GAAP Financial Measures

1 unchanged sentence

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Operating income

Intangible asset amortization (1)

Acquisition-related transaction costs (1)

Restructuring charges (2)

6 unchanged sentences

Intangible asset amortization (1)

Acquisition-related transaction costs (1)

Restructuring charges (2)

2 unchanged sentences

Non-GAAP diluted EPS

(1) Represents the non-cash amortization of definite-lived intangible assets associated with acquisitions, including customer relationships, tradenames and developed technology assets.

(2) Represents charges primarily related to termination benefits in the Domestic segment for the periods ended July 30, 2022, associated with an enterprise-wide initiative that commenced in the second quarter of fiscal 2023 to better align our spending with critical strategies and operations, as well as to optimize our cost structure.

Represents adjustments to previously planned organizational changes and higher-than-expected retention rates in the Domestic segment and charges associated with the exit from operations in Mexico in the International segment for the periods ended July 31, 2021.

(1) Represents charges associated with acquisitions, including:

(1) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and developed technology;

and (2) acquisition-related transaction and due diligence costs, primarily comprised of professional fees.

(2) Represents charges primarily related to employee termination benefits in the Domestic segment for the periods ended October 29, 2022, associated with an enterprise-wide initiative that commenced in the second quarter of fiscal 2023 to better align our spending with critical strategies and operations, as well as to optimize our cost structure.

Represents adjustments to previously planned organizational changes and higher-than-expected retention rates in the Domestic segment, and charges and subsequent adjustments associated with the exit from operations in Mexico in the International segment for the periods ended October 30, 2021.

(3) Represents inventory markdown adjustments recorded within cost of sales associated with the exit from operations in Mexico.

(4) The non-GAAP adjustments primarily relate to the U.S., the UK and Mexico.

(4) The non-GAAP adjustments primarily relate to the U.S.

As such, the income tax charge is calculated using the statutory tax rate of 24.5% for all U.S.

non-GAAP items for all periods presented.

There is no income tax charge for the UK and Mexico non-GAAP items, as there was no tax benefit recognized on these expenses in the calculation of GAAP income tax expense.

Our non-GAAP operating income rate decreased in the second quarter and first six months of fiscal 2023, primarily driven by our Domestic segment’s lower gross profit rates and decreased leverage from lower sales volume on our fixed expenses, which resulted in unfavorable SG&A rates.

Our non-GAAP effective tax rate increased in the second quarter and first six months of fiscal 2023, primarily due to the prior year resolution of certain discrete tax matters, partially offset by the impact of lower pre-tax earnings in the current year.

There is no income tax charge for Mexico non-GAAP items, as there was no tax benefit recognized on these expenses in the calculation of GAAP income tax expense.

Our non-GAAP operating income rate decreased in the third quarter and first nine months of fiscal 2023, primarily driven by our Domestic segment’s lower gross profit rates and decreased leverage from lower sales volume on our fixed expenses, which resulted in unfavorable SG&A rates.

Our non-GAAP effective tax rate decreased in the third quarter of fiscal 2023, primarily due to the recognition of losses and certain deferred tax assets for which tax benefits were previously not recognized, as well as an increase in the tax benefit from federal tax credits.

Our non-GAAP effective tax rate increased in the first nine months of fiscal 2023, primarily due to the prior-year resolution of certain discrete tax matters and a decrease in the tax benefit from stock-based compensation, partially offset by the impact of lower pre-tax earnings in the current year.

Refer to Note 10, Income Taxes , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

Our non-GAAP diluted EPS decreased in the second quarter and first six months of fiscal 2023, primarily driven by the decreases in non-GAAP operating income.

Our non-GAAP diluted EPS decreased in the third quarter and first nine months of fiscal 2023, primarily driven by the decreases in non-GAAP operating income.

Liquidity and Capital Resources

5 unchanged sentences

Cash and cash equivalents were as follows ($ in millions):

July 30, 2022

October 29, 2022

January 29, 2022

July 31, 2021

October 30, 2021

Cash and cash equivalents

The decrease in cash and cash equivalents from January 29, 2022, was primarily due to lower inventory turnover and the timing and volume of inventory purchases and payments, higher incentive compensation payments in fiscal 2023 as a result of strong fiscal 2022 results, share repurchases, capital expenditures and dividend payments, partially offset by earnings.

The decrease in cash and cash equivalents from July 31, 2021, was primarily due to share repurchases, lower inventory turnover and the timing and volume of inventory purchases and payments, capital expenditures, dividend payments and acquisitions, partially offset by earnings.

The decrease in cash and cash equivalents from January 29, 2022, was primarily due to lower inventory turnover and the timing and volume of inventory purchases and payments, capital expenditures, dividend payments, share repurchases and higher incentive compensation payments in fiscal 2023 as a result of strong fiscal 2022 results, partially offset by earnings.

The decrease in cash and cash equivalents from October 30, 2021, was primarily due to share repurchases, capital expenditures, dividend payments, acquisitions and higher incentive compensation payments in fiscal 2023 as a result of strong fiscal 2022 results, partially offset by earnings.

Cash flows were as follows ($ in millions):

Six Months Ended

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

Total cash provided by (used in):

5 unchanged sentences

Operating Activities

The increase in cash used in operating activities in the first six months of fiscal 2023 was primarily driven by lower earnings in the current year period, lower inventory turnover and the timing and volume of inventory purchases and payments, which resulted in a higher proportion of inventory purchases having been paid for compared to the first six months of fiscal 2022.

The increase in cash used in operating activities was also due to higher incentive compensation payments in the first six months of fiscal 2023 as a result of strong fiscal 2022 results.

The increase in cash used in operating activities in the first nine months of fiscal 2023 was primarily driven by lower earnings in the current-year period and higher incentive compensation payments as a result of strong fiscal 2022 results, partially offset by the timing and volume of inventory purchases and payments.

Investing Activities

The increase in cash used in investing activities in the first six months of fiscal 2023 was primarily driven by increased capital spending for initiatives to support our business.

The increase in cash used in investing activities in the first nine months of fiscal 2023 was primarily driven by increased capital spending for initiatives to support our business, partially offset by a decrease in purchases of investments.

Financing Activities

The decrease in cash used in financing activities in the first six months of fiscal 2023 was primarily driven by lower share repurchases.

The decrease in cash used in financing activities in the first nine months of fiscal 2023 was primarily driven by lower share repurchases.

Sources of Liquidity

5 unchanged sentences

The Five-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in May 2026.

There were no borrowings outstanding under the Five-Year Facility Agreement as of July 30, 2022, January 29, 2022, or July 31, 2021.

Our credit ratings and outlook as of September 6, 2022, remained unchanged from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, and are summarized below .

There were no borrowings outstanding under the Five-Year Facility Agreement as of October 29, 2022, January 29, 2022, or October 30, 2021.

Our credit ratings and outlook as of December 2, 2022, remained unchanged from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, and are summarized below .

Rating Agency

4 unchanged sentences

Restricted Cash

Our liquidity is also affected by restricted cash balances that are primarily restricted to cover product protection plans provided under our Totaltech membership offering and self-insurance liabilities.

Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $312 million, $269 million and $134 million at July 30, 2022, January 29, 2022, and July 31, 2021, respectively.

The increases in restricted cash from January 29, 2022, and July 31, 2021, were primarily due to the national launch of our Totaltech membership offering in October 2021 and growth in the membership base, partially offset by a decrease in restricted cash for self-insurance liabilities.

Our liquidity is also affected by restricted cash balances that are primarily restricted to cover product protection plans provided under our Best Buy Totaltech membership offering and self-insurance liabilities.

Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $361 million, $269 million and $173 million at October 29, 2022, January 29, 2022, and October 30, 2021, respectively.

The increases in restricted cash from January 29, 2022, and October 30, 2021, were primarily due to the national launch of our Best Buy Totaltech membership offering in October 2021 and growth in the membership base, partially offset by a decrease in restricted cash for self-insurance liabilities.

Debt and Capital

As of July 30, 2022, we had $500 million principal amount of notes due October 1, 2028, and $650 million principal amount of notes due October 1, 2030.

As of October 29, 2022, we had $500 million principal amount of notes due October 1, 2028, and $650 million principal amount of notes due October 1, 2030.

Refer to Note 6, Debt , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q, and Note 8, Debt , of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, for additional information about our outstanding debt.

5 unchanged sentences

There is no expiration date governing the period over which we can repurchase shares under this authorization.

Share repurchases were paused during the second quarter of fiscal 2023.

Share repurchases resumed in fiscal November 2023 after pausing during the second quarter of fiscal 2023.

We expect to spend approximately $1 billion in share repurchases in fiscal 2023.

Share repurchase and dividend activity was as follows ($ and shares in millions, except per share amounts):

Three Months Ended

Six Months Ended

July 30, 2022

July 31, 2021

July 30, 2022

July 31, 2021

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Total cost of shares repurchased

3 unchanged sentences

Cash dividends declared and paid

The total cost of shares repurchased decreased in the second quarter and first six months of fiscal 2023, primarily due to decreases in the volume of repurchases.

Cash dividends declared and paid increased in the second quarter and first six months of fiscal 2023, primarily due to increases in the regular quarterly cash dividend per share.

The total cost of shares repurchased decreased in the third quarter and first nine months of fiscal 2023, primarily due to decreases in the volume of repurchases.

Cash dividends declared and paid increased in the third quarter and first nine months of fiscal 2023, primarily due to increases in the regular quarterly cash dividend per share.

Between the end of the third quarter of fiscal 2023 on October 29, 2022, and December 2, 2022, we repurchased an incremental 4.4 million shares of our common stock at a cost of $322 million.

Other Financial Measures

Our current ratio, calculated as current assets divided by current liabilities, was 1.0 as of July 30, 2022, and January 29, 2022, and 1.2 as of July 31, 2021.

The decrease from July 31, 2021, was primarily driven by lower cash and cash equivalents.

Our debt to earnings ratio, calculated as total debt (including current portion) divided by net earnings over the trailing twelve months increased to 0.7 as of July 30, 2022, compared to 0.5 as of January 29, 2022, and July 31, 2021, primarily due to lower net earnings .

Our current ratio, calculated as current assets divided by current liabilities, was 1.0 as of October 29, 2022, and January 29, 2022, and 1.1 as of October 30, 2021.

The decrease from October 30, 2021, was primarily driven by lower cash and cash equivalents.

Our debt to earnings ratio, calculated as total debt (including current portion) divided by net earnings over the trailing twelve months increased to 0.7 as of October 29, 2022, compared to 0.5 as of January 29, 2022, and October 30, 2021, primarily due to lower net earnings .

Off-Balance-Sheet Arrangements and Contractual Obligations

Our liquidity is not dependent on the use of off-balance-sheet financing arrangements other than in connection with our $1.25 billion in undrawn capacity on our Five-Year Facility Agreement as of July 30, 2022, which, if drawn upon, would be included in either short-term or long-term debt on our Condensed Consolidated Balance Sheets.

Our liquidity is not dependent on the use of off-balance-sheet financing arrangements other than in connection with our $1.25 billion in undrawn capacity on our Five-Year Facility Agreement as of October 29, 2022, which, if drawn upon, would be included in either short-term or long-term debt on our Condensed Consolidated Balance Sheets.

There has been no material change in our contractual obligations other than in the ordinary course of business since the end of fiscal 2022.

8 unchanged sentences

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,” “assume,” “believe,” “estimate,” “expect,” “guidance,” “intend,” “outlook,” “plan,” “project” and other words and terms of similar meaning.

Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, new strategies, the competitive environment and other events.

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 are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in such forward-looking statements.

4 unchanged sentences

increased inflation rates;

increased levels of inventory loss due to organized crime, petty theft or otherwise, fluctuations in housing prices, energy markets, and jobless rates and those related to the conflict in Ukraine);

fluctuations in foreign currency exchange rates;

increased levels of inventory loss

due to organized crime, petty theft or otherwise;

fluctuations in housing prices, energy markets, and jobless rates and those related to the conflict in Ukraine);

supply chain issues;

23 unchanged sentences

risks arising from statutory, regulatory and legal developments (including tax statutes and regulations);

risks arising from our international activities (including those related to the conflict in Ukraine);

risks arising from our international activities (including those related to the conflict in Ukraine or fluctuations in foreign currency exchange rates);

failure to effectively manage our costs;

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements