What changed in this filing

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Item 1A. Risk Factors

2023-03-17 compared with 2022-03-18 · 67 added, 92 removed, 299 unchanged (35% of the section changed)

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External Risks

The ongoing COVID-19 pandemic has subjected our business, operations and financial condition to a number of risks, and those risks may intensify or last for an extended period of time.

Future pandemics may also introduce similar risks.

Risks Related to Sales and Customer Demand :

At various times throughout the ongoing COVID-19 pandemic , the pandemic and the operational changes we have made have resulted in significant reductions in customer visits to, and spending at, our stores.

The extent to which the pandemic continues to impact our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the pandemic and its resurgences ;

the extent of the impact on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates, consumer discretionary spending and consumer confidence;

actions governments take, including governments’ positions towards monetary and/or fiscal policy, including potential stimulus or the timing and nature of loosening of restrictions imposed in response to the pandemic and its resurgence;

interruptions and other supply chain issues;

actions businesses and individuals take in their ongoing responses to the pandemic;

and our ability to successfully navigate those impacts.

During the pandemic, consumer spending on consumer electronics has generally been higher than pre-pandemic levels.

After the pandemic, consumers might shift their spending back towards categories or industries that were affected by the pandemic and away from consumer electronic categories.

In addition, the pandemic has caused some products and services to be in high demand, and we may not be able to meet this demand in all of our categories due to product shortages or decisions by our vendors to allocate products to certain customers due to the circumstances resulting from the pandemic, and our vendors may increase prices, each of which may adversely impact our revenue and profitability.

The pandemic has negatively impacted, and may continue to negatively impact, our products and services that historically have been more likely to be purchased in a physical store than online.

Risks Related to Operations :

The pandemic forced us to make a number of operational changes.

Although we continue to offer a contactless, curbside model for those who prefer to shop that way, we could be required to return to a curbside-only model or close stores due to the current or future resurgence of the pandemic (including the potential emergence of new and more transmissible variants, such as the Delta and Omicron variants).

Our ability to continue to sell our products and services is highly dependent on our ability to maintain the safety of our customers and those employees who are needed to work at our stores and distribution facilities.

Failure to maintain the recommended or required safety standards as defined by the CDC , federal and state Occupational Safety and Health agencies and local governments could also result in an increased risk of regulatory action or civil litigation.

The ability of our employees to work may continue to be significantly impacted by individuals contracting or being exposed to COVID-19 and its resurgences and by the availability and efficacy of vaccinations, particularly against new variants of COVID-19 .

While we are following the requirements of governmental authorities and taking preventative and protective measures to prioritize the safety of our customers and employees, these measures may not be successful, and we may be required to temporarily close distribution centers or stores from time to time, halt certain services or take other measures.

Also, if our customers and employees do not perceive our response to be appropriate or adequate for a particular region or our company as a whole, we could suffer damage to our reputation and our brand, which could adversely affect our business in the future.

Additionally, while we have continued to prioritize the health and safety of our employees and customers as we continue to operate during the pandemic, we may face an increased risk of litigation related to our operating environments.

The pandemic may also cause increased cybersecurity risk, as cybercriminals attempt to capitalize from the disruption, including remote working arrangements.

Preparing for and responding to the continuing pandemic could divert management’s attention from our key strategic priorities;

increase costs as we prioritize health and safety matters for our employees and customers;

cause us to reduce, delay, alter or abandon initiatives that may otherwise increase our long-term value;

or otherwise disrupt our business operations.

Risks Related to Profitability :

To the extent the pandemic continues to cause fundamental shifts in the channels in which customers choose to engage us, our profitability may be adversely impacted.

Facility c osts such as rent, depreciation and property taxes are largely fixed, regardless of whether we are able to keep our stores open, and our online mix of products and services generally produces lower gross profit rates than in-store sales .

We also tend to see lower online revenue for certain service offerings that have higher profitability rates.

To the extent we are not able to maintain or increase the level of customer traffic in our stores or maintain or enable a more profitable mix of sales in our digital and online channels, our profitability may be materially negatively impacted.

We have also incurred costs due to the operational changes we have made in response to the pandemic, and these costs have adversely impacted our profitability.

As a result of disruptions to our supply chain, primarily due to mandatory shutdowns in locations where our products are manufactured and domestic labor shortages impacting the ports, our distribution centers and our product delivery services , we are experiencing, and may continue to experience, increased costs for shipping and transportation resources.

If we are unable to manage these costs and supply chain disruptions, our profitability may be adversely impacted.

Even after the pandemic subsides, we could experience a longer-term impact on our costs, for example, the need for enhanced health and hygiene and testing requirements to counteract the risk of future outbreaks.

In the event of continued decreased store traffic, certain of our stores may not generate revenue sufficient to meet operating expenses, which could adversely affect the value of our owned and leased properties, potentially requiring us to record more significant non-cash impairment charges in future periods.

Risks Related to Our Debt and Global Financing Markets :

We may find it necessary to increase our cash position and our debt in the future in response to further resurgences of COVID-19.

In the event we are required to raise capital, our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects, our credit ratings and our business and industry outlook.

There is no guarantee that debt or equity financings will be available in the future to fund our obligations or will be available on terms consistent with our expectations.

COVID-19, and the volatile regional and global economic conditions stemming from the pandemic, as well as reactions to future pandemics or resurgences of COVID-19, could also precipitate or aggravate the other risk factors that we have identified in this section, which in turn could materially adversely affect our business, financial condition, liquidity, results of operations (including revenues and profitability) and/or stock price.

Further, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations .

Macroeconomic pressures in the markets in which we operate, including, but not limited to, the effects of COVID-19, may adversely affect consumer spending and our financial results.

Macroeconomic pressures, including, but not limited to, the current geopolitical climate, may adversely affect consumer spending and our financial results.

To varying degrees, our products and services are sensitive to changes in macroeconomic conditions that impact consumer spending.

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• how frequently they upgrade or replace their devices;

• their appetite for complementary services (for example, protection plans).

Real GDP growth, consumer confidence, the COVID-19 pandemic, inflation (including wage inflation), employment levels (including as a result of an increasingly tight job market), oil prices, interest rates, tax rates, availability of consumer financing, housing market conditions, foreign currency exchange rate fluctuations, costs for items such as fuel and food and other macroeconomic trends can adversely affect consumer demand for the products and services that we offer.

• their appetite for complementary services (for example, Best Buy Totaltech).

Real GDP growth, inflation (including wage inflation), consumer confidence, the COVID-19 pandemic, employment levels, oil prices, interest, tax and foreign currency exchange rates, availability of consumer financing, housing market conditions, limitations on a government’s ability to borrow and/or spend capital, costs for items such as fuel and food, any recession (and resulting corresponding declines in consumer sentiment) in response at least in part to central banks’ actions to reduce inflation, bank failures or limited liquidity in accessing bank deposits, and other macroeconomic trends can adversely affect consumer demand for the products and services that we offer.

In addition to general levels of inflation, we are also subject to risks of specific inflationary pressures on product prices due to, for example, high consumer demand, component shortages and supply chain disruption.

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Geopolitical issues around the world and how our markets are positioned can also impact macroeconomic conditions and could have a material adverse impact on our financial results.

For example, the ultimate impact of the conflict in Ukraine on fuel prices, inflation, the global supply chain and other macroeconomic conditions is unknown and could materially adversely affect global economic growth, consumer confidence and demand for our products and services.

For example, the conflict in Ukraine may continue to significantly impact fuel prices, inflation, the global supply chain and other macroeconomic conditions, which may further adversely affect global economic growth, consumer confidence and demand for our products and services.

Russia is a significant global producer of both fuel and raw materials used in certain of the products we sell, including nickel, aluminum and copper.

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We cannot predict the extent or duration of sanctions in response to the conflict in Ukraine, nor can we predict the effects of legislative or other governmental actions or regulatory scrutiny of Russia, its allies or other countries with which Russia has significant trade or financial ties, including China.

The conflict in Ukraine may also exacerbate geopolitical tensions globally.

Similarly, further deterioration of relations between Taiwan and China, the resulting actions taken, the response of the international community and other factors affecting trade with China or political or economic conditions in Taiwan could disrupt the manufacturing of products or hardware components in the region, such as semiconductors and television panels sourced from Taiwan or the broader array of products sourced from China.

The conflict in Ukraine has exacerbated geopolitical tensions globally.

Further deterioration of relations between Taiwan and China, the resulting actions taken, the response of the international community and other factors affecting trade with China or political or economic conditions in Taiwan could disrupt the manufacturing of products or hardware components in the region, such as semiconductors and television panels sourced from Taiwan or the broader array of products sourced from China.

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

Catastrophic events could adversely affect our operating results.

Catastrophic events, including global pandemics such as the COVID-19 pandemic, could adversely affect our operating results.

The risk or actual occurrence of various catastrophic events could have a material adverse effect on our financial performance.

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• diseases or pandemics (including COVID-19) that have affected and may continue to affect our employees, customers or partners;

• floods, fires or other catastrophes affecting our properties, employees or customers;

• earthquakes, floods, fires or other catastrophes affecting our properties, employees or customers;

• power loss, telecommunications failures, or software or hardware malfunctions;

• terrorism, civil unrest, mass violence or violent acts, or other conflicts.

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Finally, such events can also affect our information technology systems, resulting in disruption to various aspects of our operations, including our ability to transact with customers and fulfill orders.

The adverse effects of any such catastrophic event would be exacerbated if experienced at the same time as another unexpected and adverse event, such as the COVID-19 pandemic.

The COVID-19 pandemic in particular has had and may continue to subject our business, operations and financial condition to a number of risks.

These risks have included or may in the future continue to include:

(i) significant reductions in customer visits to, and spending at, our stores;

(ii) significant disruptions to our supply chain;

(iii) fluctuating consumer spending, particularly in light of the provision of government stimulus funds;

(iv) novel changes to our operations, such as the roll-out of contactless, curbside pick-up for our goods, (v) the implementation of safety standards by various state and federal agencies;

(vi) risks related to the shift in channels in which customers choose to engage us, such as by switching to online shopping, which may affect our profitability;

and (vii) our ability to finance our operations.

The emergence of new and more transmissible, more virulent, and/or immune-evading SARS-COV-2 variants could exacerbate these risks.

Three of our largest states by total sales are California, Texas and Florida, areas where natural disasters and extreme weather conditions have been, and could continue to be, more prevalent.

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Many of the products we sell are highly susceptible to technological advancement, product life cycle fluctuations and changes in consumer preferences.

We operate in a highly and increasingly dynamic industry sector fueled by constant technology innovation and disruption.

We operate in a highly and increasingly dynamic industry sector fueled by constant technological innovation and disruption.

This manifests itself in a variety of ways:

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and damage to our brand and reputation.

In addition, consumer preferences may be influenced even further as the social and economic environment navigates through the COVID-19 pandemic.

These and other similar factors could have a material adverse impact on our revenue and profitability.

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Competition may also result from new entrants into the markets we serve, offering products and/or services that compete with us.

The retail sector has experienced an immense increase in sales initiated online and using mobile applications, as well as online sales for both in-store or curbside pick-up.

The retail sector continues to experience increased sales initiated online and using mobile applications, as well as online sales for both in-store or curbside pick-up.

Online and multi-channel retailers continue to focus on delivery services, with customers increasingly seeking faster, guaranteed delivery times and low-cost or free shipping.

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Our strategy of offering high-quality services and assistance for our customers requires a highly trained and engaged workforce.

The turnover rate in the retail sector is relatively high and has increased during the pandemic, and there is an ongoing need to recruit and train new employees.

The turnover rate in the retail sector is relatively high and increased during the COVID-19 pandemic, and there is an ongoing need to recruit and train new employees.

Factors that affect our ability to maintain sufficient numbers of qualified employees include, for example, employee engagement, our reputation, unemployment rates, competition from other employers, availability of qualified personnel and our ability to offer appropriate compensation and benefit packages.

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Our need to implement corresponding adjustments within our labor model and compensation and benefit packages could have a material adverse impact to the profitability of our business.

Our strategy to expand into new products, services , health and technologies brings new business, financial and regulatory risks.

As we introduce new products and services, using new technologies and applications, we may have limited experience in these newer markets and regulatory environments and our customers may not like our new value propositions.

Our strategy to expand into health and new products, services and technologies brings new business, financial and regulatory risks.

As we introduce new products and services, we may have limited experience in these newer markets and regulatory environments and our customers may not like our new value propositions.

These offerings may present new and difficult technology and regulatory challenges, and we may be subject to claims if customers of these offerings experience service disruptions, failures or other issues.

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They may also involve significant laws or regulations that are beyond our current expertise.

The healthcare space in which we operate is highly regulated from a product safety and quality perspective, and its services and products, including parts or materials from suppliers, are subject to regulation by various government and regulatory agencies, including the U.S.

Food and Drug Administration (“FDA”).

In the European Union, a Medical Device Regulation was published in 2017 that will impose significant additional pre-market and post-market requirements on some of our offerings.

With our focus on healthcare, new products and services may frequently require regulatory approvals for market introduction.

The number and diversity of regulatory bodies add complexity and may negatively impact time to market and implementation costs.

Non-compliance with conditions imposed by regulatory authorities could result in product recalls, a temporary ban on products, stoppages at production facilities, remediation costs, fines or claims for damages.

For example, the healthcare space in which we operate is highly regulated from a product safety and quality perspective, and its services and products, including parts or materials from suppliers, are subject to regulation by various government and regulatory agencies including, but not limited to, the U.S.

Food and Drug Administration (“FDA”).

Product safety incidents or user concerns could trigger business reviews by the FDA or other regulatory agencies, which, if failed, could trigger these impacts.

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The services and systems used in certain instances subject us to privacy and information security requirements, such as the Health Insurance Portability and Accountability Act, and could expose us to customer data privacy and information security risks, as well as business or system interruption risks.

Given our acquisition of Current Health Ltd., a care-at-home technology platform, we also are subject to the UK General Data Protection Regulation (“GDPR”) and other newly applicable regulatory frameworks.

Given our acquisition of Current Health, a care-at-home technology platform, we also are subject to the UK’s General Data Protection Regulation (“GDPR”) and other regulatory frameworks.

These and other related issues could have a material adverse impact on our financial results and reputation .

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• increased labor expense to fulfill our customer promises;

• increased pressure on margins as we roll out our Totaltech membership offering, which includes incremental customer benefits, and associated costs, compared to our previous Total Tech Support offer, and the risk that increased volumes will not fully compensate for lower margins, or for loss of revenue and profit from revenue streams that are now included as benefits ;

• increased pressure on margins from our Best Buy Totaltech membership offering, which includes incremental customer benefits, and associated costs, compared to our previous Total Tech Support offer, and the risk that increased volumes will not fully compensate for lower margins, or for loss of revenue and profit from revenue streams that are now included as benefits ;

• pressure on traditional labor models to meet the evolving landscape of offerings and customer needs;

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We generally do not have long-term written contracts with our vendors that would require them to continue supplying us with merchandise.

Our profitability depends on our securing acceptable terms with our vendors for, among other things, the price of merchandise we purchase from them, funding for various forms of promotional programs, payment terms, allocations of merchandise, development of compelling assortments of products, operation of vendor-focused shopping experiences within our stores and terms covering returns and factory warranties.

Our profitability depends on securing acceptable terms with our vendors for, among other things, the price of merchandise we purchase from them, funding for various forms of promotional programs, payment terms, allocations of merchandise, development of compelling assortments of products, operation of vendor-focused shopping experiences within our stores and terms covering returns and factory warranties.

While we believe we offer capabilities that these vendors value and depend upon to varying degrees, our vendors may be able to leverage their competitive advantages  for example, their financial strength, the strength of their brands with customers, their own stores or online channels or their relationships with other retailers  to our commercial disadvantage.

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External factors, such as negative public remarks or accusations, could also be damaging.

Third parties may commit fraud while using our brand without our permission, possibly harming brand perception or reputation.

The ubiquity of social media means that customer feedback and other information about our company are shared with a broad audience in a manner that is easily accessible and rapidly disseminated.

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Assessing the viability of new ventures is typically subject to significant uncertainty, and the success of such new ventures can be adversely affected by many factors, including, for example:

• different and incremental business risks of the new venture not identified in our diligence assessments;

• different and incremental business and other risks of the new venture not identified in our diligence assessments;

• failure to attract, motivate and retain key employees of the new venture;

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• changing patterns of customer consumption and behavior, particularly in light of an evolving omnichannel environment;

• our ability to adjust store operating models to adapt to these changing patterns, as we have done with our curbside pick-up and ship-from-store models;

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

• the location and appropriate number of stores, supply chain and other facilities in our portfolio;

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• increasing transportation costs.

• the COVID-19 pandemic and disruptions as a result of efforts to control or mitigate the pandemic (such as facility closures, governmental orders, outbreaks and/or transportation capacity).

It is important that we maintain optimal levels of inventory in each store and distribution center and respond rapidly to shifting demands.

Any disruption to, or inefficiency in, our supply chain network, whether due to geopolitical conflicts, COVID-19 or other factors, could damage our revenue and profitability.

Any disruption to, or inefficiency in, our supply chain network, whether due to geopolitical conflicts, the COVID-19 pandemic or other factors, could damage our revenue and profitability.

The risks associated with our dependence on third parties are greater for small parcel home deliveries because of the relatively small number of carriers with the scope and capacity required by our business.

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If we fail to manage these risks effectively, we could experience a material adverse impact on our reputation, revenue and profitability.

We utilize third-party vendors for certain aspects of our operations, and any material disruption in our relationship or their services may have an adverse impact on our business.

We utilize third-party vendors for certain aspects of our operations, and any material disruption in our relationships or their services may have an adverse impact on our business.

We engage key third-party business partners to support various functions of our business, including, but not limited to, delivery and installation, customer warranty, information technology, web hosting and cloud-based services, customer loyalty programs, promotional financing and customer loyalty credit cards, gift cards, technical support, transportation, insurance programs and human resource operations.

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Sales of our exclusive brands products, which include Best Buy Essentials, Dynex, Insignia, Modal, Platinum and Rocketfish branded products, as well as products such as Jitterbug and Lively branded products, represent an important component of our product offerings and our revenue and profitability.

Most of these products are manufactured by contract manufacturers based in southeast Asia.

Most of these products are manufactured by contract manufacturers in China and Southeast Asia .

This arrangement exposes us to the following additional potential risks, which could have a material adverse effect on our operating results:

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• we may be subject to regulatory compliance and/or product liability claims relating to personal injury, death or property damage caused by exclusive brands products, some of which may require us to take significant actions, such as product recalls;

• we have experienced and are likely to continue to experience disruptions in manufacturing and logistics due to COVID-19, and we may experience disruptions in manufacturing or logistics in the future due to inconsistent and unanticipated order patterns, our inability to develop long-term relationships with key manufacturers, other diseases or pandemics, unforeseen natural disasters or geopolitical crises, such as the conflict in Ukraine and this conflict’s potential impact on global geopolitical tensions, including with China or between China and Taiwan;

• we have experienced and may continue to experience disruptions in manufacturing and logistics due to the COVID-19 pandemic, and we may experience disruptions in manufacturing or logistics in the future due to inconsistent and unanticipated order patterns, our inability to develop long-term relationships with key manufacturers, other diseases or pandemics, unforeseen natural disasters or geopolitical crises, such as the conflict in Ukraine and this conflict’s potential impact on global geopolitical tensions, including with China or between China and Taiwan;

• we may not be able to locate manufacturers that meet our internal standards, whether for new exclusive brands products or for migration of the manufacturing of products from an existing manufacturer;

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• we may be unable to obtain or adequately protect patents and other intellectual property rights on our exclusive brands products or manufacturing processes.

• regulations regarding disclosure of efforts to identify the country of origin of “conflict minerals” in certain portions of our supply chain could increase the cost of doing business and, depending on the findings of our country-of-origin inquiry, could have an adverse effect on our reputation.

Maintaining consistent quality, availability and competitive pricing of our exclusive brands products helps us build and maintain customer loyalty, generate revenue and achieve acceptable margins.

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The effective and efficient operation of our business is dependent on our information technology systems and those of our information technology vendors.

We rely heavily on these information technology systems to manage all key aspects of our business, including demand forecasting, purchasing, supply chain management, point-of-sale processing, services fulfillment, staff planning and deployment, financial management, reporting and forecasting and safeguarding critical and sensitive information.

Our information technology systems and those of our partners are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, worms, other malicious computer programs, denial-of-service attacks, security breaches (through cyber-attacks and other malicious actions, including the recent increasing use of “ransomware” and phishing attacks), catastrophic events (such as fires, tornadoes, earthquakes and hurricanes) and usage errors by our employees.

We rely heavily on these information technology systems to manage all key aspects of our business, including demand forecasting, purchasing, supply chain management, point-of-sale processing, services fulfillment (including, for example, our Urgent Response service provided by Best Buy Health), staff planning and deployment, financial management, reporting and forecasting and safeguarding critical and sensitive information.

Our information technology systems and those of our partners are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, worms, other malicious computer programs, denial-of-service attacks, security breaches (through cyber-attacks and other malicious actions, including ransomware and phishing attacks), catastrophic events (such as fires, tornadoes, earthquakes and hurricanes) and usage errors by our employees.

While we have adopted, and continue to enhance, business continuity and disaster recovery plans and strategies, there is no guarantee that such plans and strategies will be effective, which could interrupt the functionality of our information technology systems or those of third parties.

The failure or interruption of these information systems, data centers or their backup systems could significantly disrupt our business and cause higher costs and lost revenues and could threaten our ability to remain in operation.

The failure or interruption of these information systems, data centers, cloud platforms or their backup systems could significantly disrupt our business and cause higher costs and lost revenues and could threaten our ability to remain in operation.

As we continue to migrate more systems to the cloud, we may face additional risks that may compromise our security or disrupt our business capabilities, including ensuring the proper configuration, the unknowns of operating more workloads in the cloud, securing systems in the cloud and the types of cloud-based services we leverage.

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Disruptions to these services, such as those caused by unforeseen traffic levels, malicious attacks by governments, criminals or other non-state actors, other technical difficulties or events outside of our control, such as natural disasters, power or telecommunications failures or loss of critical data, could prevent us from accepting and fulfilling customer orders for products or services, which could cause us to forgo material revenues and incur material costs, and could adversely affect our reputation.

Further, as our online sales have increased and have become critical to our growth, and as we have shifted to remote working arrangements for many employees, the risk of any interruption of our information technology system capabilities is heightened, as well as the risk that customer demand exceeds the capacity of our online operations.

Further, as our online interactions and sales have increased and have become critical to our growth, and as many employees now use hybrid or full-time remote-working arrangements, the risk of any interruption of our information technology system capabilities is heightened, as well as the risk that customer demand exceeds the capacity of our online operations.

Any such interruption or capacity constraint could result in a deterioration of our ability to process online sales, provide customer service or perform other necessary business functions.

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While we engage in significant data-protection efforts, criminal activity, such as cyber-attacks, lapses in our controls or the intentional or negligent actions of employees, business associates or third parties, may undermine our privacy and security measures, and, as a result, unauthorized parties may obtain access to our data systems and misappropriate employee, customer and other confidential data, or authorized parties may use or share personal information in an inappropriate manner or otherwise seek to extract financial gain based on access to or possession of company, employee or customer information.

Furthermore, because the methods used to obtain unauthorized access change frequently and may not be immediately detected, we may be unable to anticipate such attacks or promptly and effectively respond to them.

Furthermore, because the methods used to obtain unauthorized access change frequently and may not be immediately detected, and given the potentially disruptive nature of emerging technologies, we may be unable to anticipate such attacks or promptly and effectively respond to them.

Any compromise of our customer information or other confidential information could have a material adverse effect on our reputation or our relationships with our customers and partners, which may in turn have a negative impact on our revenue and may expose us to material costs, penalties and claims.

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Increasing costs associated with information security and privacy, such as increased investment in technology and qualified staff, costs of compliance, costs resulting from fraud or criminal activity and costs of cyber and privacy insurance, could cause our business and results of operations to suffer materially.

Additionally, new laws, such as the California Privacy Rights Act , Virginia Consumer Data Protection Act, and the Colorado Privacy Act, and laws newly applicable to us, such as the UK GDPR, are expanding our obligations to protect and honor the privacy and security of customer data, requiring additional resources and creating incremental risk arising from a potential breach.

Additionally, recently applicable and potential new or significantly revised state, provincial and federal laws and regulations in the jurisdictions in which we do business are expanding our obligations to protect and honor the privacy and security of customer data, requiring additional resources and creating incremental risk arising from a potential breach or compliance failure.

In addition, any compromise of our data security may materially increase the costs we incur to protect against such breaches and could subject us to additional legal risk.

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Changes to labor or employment laws or regulations could have an adverse impact on our costs and impair the viability of our operating model.

As an employer of approximately 105,000 people in a large number of different jurisdictions, we are subject to risks related to employment laws and regulations including, for example:

As an employer of more than 90,000 people in a large number of different jurisdictions, we are subject to risks related to employment laws and regulations including, for example:

• the organization of unions and related rules that affect the nature of labor relations, changes to which the National Labor Relations Board frequently considers;

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• the challenges of ensuring compliance with applicable product compliance laws and regulations with respect to both the products we sell and contract to manufacture, including laws and regulations related to product safety and product transport;

• the financial, operational and business impact of new regulations governing data privacy and security;

• the financial, operational and business impact of evolving regulations governing data privacy and security, including limitations on the collection, use or sharing of information;

consumer rights to access, delete or limit/opt-out of the use of information;

or litigation arising from new private rights of action;

• the impact of other new or changing statutes and regulations including, but not limited to, financial reform;

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contracted worker labor laws;

corporate governance matters (including increased focus on environmental, social and governance matters by certain investors and regulators);

corporate governance matters;

escheatment rules;

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• the impact of changes in the federal executive and legislative branches on the development, or changes in, laws, regulations and policies, such as economic, fiscal, tax, retail, labor and social policies.

The impact of geo-political tensions, including the potential implementation of more restrictive trade policies, higher tariffs or the renegotiation of existing trade agreements in the U.S.

The impact of geopolitical tensions, including the potential implementation of more restrictive trade policies, higher tariffs or the renegotiation of existing trade agreements in the U.S.

or countries where we sell our products and services or procure products, could have a material adverse effect on our business.

In particular, future trade disputes or future phases of trade negotiations with China could lead to the imposition of tariffs or other trade actions that could adversely affect our supply chain and our business and could require us to take action to mitigate those effects.

In particular, political or trade disputes or future phases of trade negotiations with China could lead to the imposition of tariffs or other trade actions that could adversely affect our supply chain and our business and could require us to take action to mitigate those effects.

Further, the impact of potential changes in U.S., state or other countries’ tax laws and regulations or evolving interpretations of existing laws, could adversely affect our financial condition and results of operations.

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In addition, changes to the environment, both long-term and short-term, may affect consumer shopping behavior in a way that negatively impacts our revenue, revenue mix and profitability.

Further, as the COVID-19 pandemic and its resurgences persist, we will continue to face risk and uncertainty as it relates to federal, state and local government public health orders or mandates, which may restrict how we do business and potentially impact our performance and profitability.

Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to cybersecurity and environmental, social and governance matters, that could expose us to numerous risks.

We are subject to changing rules and regulations promulgated by a number of governmental and self-regulatory organizations, including the SEC, the New York Stock Exchange and the Financial Accounting Standards Board.

These rules and regulations continue to evolve in scope and complexity, and many new requirements have been created in response to laws enacted by Congress, making compliance more difficult and uncertain.

In addition, increasingly regulators, customers, investors, employees and other stakeholders are focusing on cybersecurity and environmental, social and governance (“ESG”) matters and related disclosures.

These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in, increased general and administrative expenses and increased management time and attention spent complying with or meeting such regulations and expectations.

For example, developing and acting on initiatives within the scope of ESG, and collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time consuming and is subject to evolving reporting standards, including the SEC’s recently proposed climate-related reporting requirements, and similar proposals by other international regulatory bodies.

We may also communicate certain initiatives and goals, regarding environmental matters, diversity, responsible sourcing and social investments and other ESG-related matters, in our SEC filings or in other public disclosures.

These initiatives and goals within the scope of ESG could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the accuracy, adequacy or completeness of the disclosure.

Further, statements about our ESG-related initiatives and goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions that are subject to change in the future.

In addition, we could be criticized for the scope or nature of such initiatives or goals, or for any revisions to these goals.

If our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to our goals within the scope of ESG on a timely basis, or at all, our reputation, business, financial performance and growth could be adversely affected.

Our international activities are subject to many of the same risks as described above, as well as to risks associated with the legislative, judicial, regulatory, political, economic and cultural factors specific to the countries or regions in which we operate.

We operate retail locations in Canada.

All of our former stores in Mexico were closed as of the end of the first quarter of fiscal 2022.

In addition, most of our exclusive brands products are manufactured by contract manufacturers based in southeast Asia.

We also have wholly owned legal entities registered in various other foreign countries, including Bermuda, China, Hong Kong, Luxembourg, the Republic of Mauritius and the U.K.

We operate retail locations in Canada, Current Health operates in the UK, and most of our exclusive brands products are manufactured by contract manufacturers based in southeast Asia.

We also have wholly-owned legal entities registered in various other foreign countries, including Bermuda, China, Hong Kong, Luxembourg, the Republic of Mauritius and the UK.

During fiscal 2023, our International segment’s operations generated approximately 8 % of our revenue.

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In addition, the holiday shopping season also incorporates many other unpredictable factors, such as the level of competitive promotional activity, new product release activity and customer buying patterns, which makes it difficult to forecast and react to these factors quickly.

Unexpected events or developments, such as resurgences of the COVID-19 pandemic, natural or man-made disasters, changes in consumer demand, economic factors, product sourcing issues, cyber-attacks, failure or interruption of management information systems or disruptions in services or systems provided or managed by third-party vendors could significantly disrupt our operations.

As a result of these factors, there is risk that our fiscal fourth quarter and annual results could be adversely affected.

Unexpected events or developments, such as pandemics, natural or man-made disasters, changes in consumer demand, economic factors, product sourcing issues, cyber-attacks, failure or interruption of management information systems, or disruptions in services or systems provided or managed by third-party vendors could significantly disrupt our operations.

As a result of these factors, our fiscal fourth quarter and annual results could be adversely affected.

Economic, regulatory and other developments could adversely affect our ability to offer attractive promotional financing to our customers and adversely affect the profits we generate from these programs.

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If our sources of liquidity do not satisfy our requirements, we may need to seek additional financing.

The future availability of financing will depend on a variety of factors, such as economic and market conditions, the regulatory environment for banks and other financial institutions, the availability of credit, our credit ratings and our reputation with potential lenders.

We typically hold material balances of cash, cash equivalents and/or short-term investments and are therefore reliant on banks and other financial institutions to safeguard and allow ready access to these assets.

Our future liquidity will depend on a variety of factors, such as economic and market conditions, the regulatory environment for and financial stability of banks and other financial institutions, the availability of credit, our credit ratings and our reputation with potential lenders.

These factors could have a material adverse effect on our costs of borrowing and our ability to pursue business opportunities and threaten our ability to meet our obligations as they become due.

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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-K

Item 1A. Risk Factors