What changed in this filing

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Item 1. Financial Statements

2023-12-01 compared with 2023-09-01 · 228 added, 224 removed, 596 unchanged (43% of the section changed)

2 unchanged sentences

$ in millions, except per share amounts (unaudited)

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Current assets

37 unchanged sentences

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Cost of sales

4 unchanged sentences

Gain on sale of subsidiary, net

Investment income (expense) and other

Investment income and other

Interest expense

9 unchanged sentences

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Foreign currency translation adjustments, net of tax

3 unchanged sentences

$ in millions (unaudited)

Six Months Ended

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

Operating activities

29 unchanged sentences

Accumulated Other Comprehensive Income (Loss)

Balances at April 29, 2023

Net earnings, three months ended July 29, 2023

Other comprehensive income:

Balances at July 29, 2023

Net earnings, three months ended October 28, 2023

Other comprehensive loss:

Foreign currency translation adjustments, net of tax

3 unchanged sentences

Repurchase of common stock

Balances at July 29, 2023

Balances at October 28, 2023

Balances at January 28, 2023

Net earnings, six months ended July 29, 2023

Net earnings, nine months ended October 28, 2023

Other comprehensive loss:

Foreign currency translation adjustments, net of tax

Stock-based compensation

2 unchanged sentences

Repurchase of common stock

Balances at October 28, 2023

Balances at July 30, 2022

Balances at April 30, 2022

Net earnings, three months ended 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 July 30, 2022

Balances at October 29, 2022

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 28, 2023.

The first six months of fiscal 2024 and fiscal 2023 included 26 weeks.

In preparing the accompanying condensed consolidated financial statements, we evaluated the period from July 29, 2023, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure.

The first nine months of fiscal 2024 and fiscal 2023 included 39 weeks.

In preparing the accompanying condensed consolidated financial statements, we evaluated the period from October 28, 2023, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure.

No such events were identified.

Sale of Subsidiary

In the second quarter of fiscal 2024, we completed the sale of a Mexico subsidiary subsequent to our exit from operations in Mexico and recognized a $ 21 million gain within Gain on sale of subsidiary, net on our Condensed Consolidated Statements of Earnings for the three and six months ended July 29, 2023.

Adopted Accounting Pronouncements

10 unchanged sentences

Our rights and obligations to our suppliers – which are typically formalized in standardized agreements – are not affected by the existence of the program.

Our liability associated with the funded participation in the program, which is included in Accounts payable on our Condensed Consolidated Balance Sheets, was $ 609 million, $ 386 million and $ 731 million as of July 29, 2023, January 28, 2023, and July 30, 2022, respectively.

Our liability associated with the funded participation in the program, which is included in Accounts payable on our Condensed Consolidated Balance Sheets, was $ 680 million, $ 386 million and $ 713 million as of October 28, 2023, January 28, 2023, and October 29, 2022, respectively.

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 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Cash and cash equivalents

9 unchanged sentences

All charges incurred related to this initiative were comprised of employee termination benefits from continuing operations and were presented within Restructuring charges on our Condensed Consolidated Statements of Earnings as follows ($ in millions):

July 29, 2023

July 30, 2022

Cumulative Amount

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

As of July 29, 2023

Nine Months Ended

Cumulative Amount

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

As of October 28, 2023

International

4 unchanged sentences

Cash payments

Balances at July 30, 2022

Adjustments (1)

Balances at October 29, 2022

Balances at January 28, 2023

1 unchanged sentence

Adjustments (1)

Balances at July 29, 2023

Balances at October 28, 2023

(1) Represents adjustments primarily related to higher-than-expected employee retention from previously planned organizational changes.

1 unchanged sentence

Goodwill balances were as follows ($ in millions):

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Gross Carrying Amount

8 unchanged sentences

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

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Weighted-Average

5 unchanged sentences

‎ Amortization

Useful Life Remaining as of July 29, 2023 (in years)

Useful Life Remaining as of October 28, 2023 (in years)

Customer relationships

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Statement of Earnings Location

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Amortization expense

12 unchanged sentences

Fair Value Hierarchy

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Money market funds (2)

7 unchanged sentences

Marketable securities that fund deferred compensation (4)

Interest rate swap derivative instruments (5)

Long-term liabilities

(1) Balance sheet location is determined by the length to maturity at date of purchase and whether the assets are restricted for particular use.

2 unchanged sentences

(4) Valued using the performance of mutual funds that trade with sufficient frequency and volume to obtain pricing information on an ongoing basis.

(5) Valued using readily observable market inputs.

These instruments are custom, over-the-counter contracts with various bank counterparties that are not traded on an active market.

See Note 5, Derivative Instruments , for additional information.

Fair Value of Financial Instruments

The fair values of cash, restricted cash, receivables, accounts payable and other payables approximated their carrying values because of the short-term nature of these instruments.

The fair values of cash, certain restricted cash, receivables, accounts payable and other payables approximated their carrying values because of the short-term nature of these instruments.

If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy.

3 unchanged sentences

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

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Carrying Value

7 unchanged sentences

Our derivative instruments designated as net investment hedges and interest rate swaps are recorded on our Condensed Consolidated Balance Sheets at fair value.

When material, the gross fair values of our outstanding derivative instruments and corresponding fair value classifications are included in Note 4, Fair Value Measurements .

When significant, the gross fair values of our outstanding derivative instruments and corresponding fair value classifications are included in Note 4, Fair Value Measurements .

Notional amounts of our derivative instruments were as follows ($ in millions):

Contract Type

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Derivatives designated as net investment hedges

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Statement of Earnings Location

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Interest rate swap contracts

7 unchanged sentences

The Five-Year Facility Agreement permits borrowings of up to $ 1.25 billion and expires in April 2028.

There were no borrowings outstanding under the Five-Year Facility Agreement as of July 29, 2023, or the Previous Facility as of January 28, 2023, or July 30, 2022.

There were no borrowings outstanding under the Five-Year Facility Agreement as of October 28, 2023, or the Previous Facility as of January 28, 2023, or October 29, 2022.

Long-Term Debt

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

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Notes, 4.45 %, due October 1, 2028

12 unchanged sentences

Contract balances were as follows ($ in millions):

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Receivables, net (1)

5 unchanged sentences

Long-term liabilities

(1) Receivables are recorded net of allowances for doubtful accounts of $ 18 million, $ 22 million and $ 21 million as of July 29, 2023, January 28, 2023, and July 30, 2022, respectively.

During the first six months of fiscal 2024 and fiscal 2023, $ 1,026 million and $ 1,089 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 $ 19 million, $ 22 million and $ 20 million as of October 28, 2023, January 28, 2023, and October 29, 2022, respectively.

During the first nine months of fiscal 2024 and fiscal 2023, $ 1,192 million and $ 1,251 million of revenue was recognized, respectively, that was included in the contract liabilities at the beginning of the respective periods.

Estimated revenue from our contract liability balances expected to be recognized in future periods if the performance of the contract is expected to have an initial duration of more than one year is as follows ($ in millions):

5 unchanged sentences

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Weighted-average common shares outstanding

9 unchanged sentences

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Total cost of shares repurchased

1 unchanged sentence

Total number of shares repurchased

As of July 29, 2023, $ 4.0 billion of the $ 5.0 billion share repurchase authorization was available.

Between the end of the second quarter of fiscal 2024 on July 29, 2023, and August 30, 2023, we repurchased an incremental 0.3 million shares of our common stock at a cost of $ 25 million.

We currently expect to continue share repurchases throughout fiscal 2024, with the level of repurchases being slightly higher in the second half of the year than the first half of the year.

As of October 28, 2023, $ 3.8 billion of the $ 5.0 billion share repurchase authorization was available.

Between the end of the third quarter of fiscal 2024 on October 28, 2023, and November 29, 2023, we repurchased an incremental 1.0 million shares of our common stock at a cost of $ 63 million.

We currently expect total share repurchases of approximately $ 350 million in fiscal 2024.

Contingencies

5 unchanged sentences

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Revenue by reportable segment

13 unchanged sentences

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

International

2 unchanged sentences

Gain on sale of subsidiary, net

Investment income (expense) and other

Investment income and other

Interest expense

1 unchanged sentence

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

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

International

48 unchanged sentences

Business Strategy Update

In the second quarter of fiscal 2024, our teams once again delivered strong execution and showcased their ability to navigate through what continues to be a challenging environment for our industry, while keeping our customers and their experiences as our top priority.

We continue to appropriately balance the need to adjust in response to current industry sales trends with the need to invest so we can capitalize on opportunities as our industry moves through this downturn and returns to expected growth.

Our digital sales in the second quarter of fiscal 2024 comprised 31% of our Domestic revenue, consistent with the second quarter of fiscal 2023 and nearly twice as high as the percentage of Domestic revenue in the pre-pandemic second quarter of fiscal 2020.

In the third quarter of fiscal 2024, our teams once again delivered strong execution and showcased their ability to navigate through what continues to be a challenging environment for our industry, while keeping our customers and their experiences as our top priority.

We continue to balance the need to adjust in response to current industry sales trends with the need to invest in our business so that we can capitalize on opportunities as our industry moves through this downturn and returns to expected growth.

Our digital sales in the third quarter of fiscal 2024 comprised 31% of our Domestic revenue, consistent with the third quarter of fiscal 2023 and nearly twice as high as the pre-pandemic third quarter of fiscal 2020.

During these same time periods, the percentage of online sales picked up in our stores by our customers was also consistent at just over 40%.

Therefore, we are continuing to adapt our omni-channel capabilities to ensure we maintain a leading position in an increasingly digital age and evolving retail landscape.

Therefore, we are continuing to adapt our omnichannel capabilities to ensure we maintain a leading position in an increasingly digital age and evolving retail landscape.

We believe our portfolio of stores needs to provide customers with differentiated experiences and multichannel fulfillment.

At the same time, we need them to become more cost and capital efficient to operate while remaining a great place to work.

We are on track to deliver our fiscal 2024 store plans, which include closing 20 to 30 large format stores, implementing 8 large format Experience store remodels and expanding the number of Outlet stores to approximately 25 by the end of fiscal 2024.

At the same time, our stores need to be cost and capital efficient to operate while remaining a great place to work.

We are on track to deliver our fiscal 2024 store plans, which include closing 20 to 30 large format stores and implementing 8 large format Experience store remodels.

We also plan to expand the number of Outlet stores to 23 by the end of fiscal 2024.

We continue to advance our operating model to align with the ongoing evolution of our industry and marketplace trends with two overarching goals in mind – efficiently allocating our labor cost, considering the channel shift from our physical stores to online, and providing our employees flexibility, predictability and opportunities to gain more skills.

We are focused on balancing the amount of labor hours necessary to deliver the best experience possible for our customers and other stakeholders.

At the same time, we have been investing in tools, training and employee development programs that increase their flexibility within and across stores.

As not all roles, and the associated hourly pay, are the same, we are making the strategic tradeoff decisions necessary to give us the ability to flexibly adjust our labor spending appropriately, particularly customer-facing labor.

During the second quarter of fiscal 2024, we continued to build customer relationships through our membership programs.

We successfully launched significant changes to our membership program that we expect will give customers more freedom to choose a membership that fits their technology needs, budget and shopping preferences.

During the third quarter of fiscal 2024, we continued to grow our membership base and ended the quarter with a total of 6.6 million paid members.

Earlier this year, we successfully launched significant changes to our membership program that we expect will give customers more freedom to choose a membership that fits their technology needs, budget and shopping preferences.

In addition, we expect the changes to provide more flexibility to evolve our programs in the future, while resulting in a lower cost to serve than our previous paid membership program, which we have already seen in margin favorability.

For the remainder of fiscal 2024, macroeconomic headwinds will likely result in continued pressure, and we are preparing for sales in the consumer electronics industry to decline again this year.

In particular, our customers are facing economic challenges from the dual pressures of high inflation and the resulting interest rate increases, and it is difficult to predict how such factors will impact us in the near term.

For the remainder of fiscal 2024, we expect macroeconomic headwinds to result in continued pressure, causing sales in the consumer electronics industry to decline again this year.

In particular, our customers are facing economic challenges from the dual pressures of high inflation and heightened interest rates, and it is difficult to predict how such factors will impact us in the near term.

However, we expect several factors to drive the eventual return of industry growth over time, including the natural upgrade and replacement cycles for the technology bought earlier in the pandemic and continued vendor innovation.

In addition, macro technology trends like cloud, augmented reality, generative AI and expanded broadband access have the potential to drive new products and demand.

While our product categories tend to experience slightly different timing nuances, in general, we believe they are poised for growth in the coming years.

While our product categories may experience different demand trends, in general, we believe they are poised for growth in the coming years.

In addition, we are continuing our expansion into newer categories like wellness technology, personal electric transportation, outdoor living and electric car charging.

5 unchanged sentences

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

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 28, 2023.

In the second quarter and first six months of fiscal 2024, we generated $9.6 billion and $19.1 billion in revenue, respectively, and our comparable sales declined 6.2% and 8.2%, respectively, as we continued to operate in a consumer electronics industry that is challenged from the pull-forward of demand in prior years, increased spending outside the home in areas such as travel and entertainment, and various macroeconomic pressures, including high inflation and rising interest rates.

Revenue, gross profit rate, SG&A and operating income rate changes in the second quarter and first six months of fiscal 2024 were primarily driven by our Domestic segment.

In the third quarter and first nine months of fiscal 2024, we generated $9.8 billion and $28.8 billion in revenue, respectively, and our comparable sales declined 6.9% and 7.8%, respectively, as we continued to operate in a consumer electronics industry that is challenged from the economic pressures of high inflation and interest rates, the pull-forward of demand in prior years and increased spending outside the home in areas such as travel and entertainment.

Revenue, gross profit rate, SG&A and operating income rate changes in the third quarter and first nine months of fiscal 2024 were primarily driven by our Domestic segment.

For further discussion of our Domestic and International segments, see Segment Performance Summary , below.

Income Tax Expense

Income tax expense increased in the second quarter of fiscal 2024 primarily due to the prior year resolution of certain discrete tax matters.

Our effective tax rate (“ETR”) increased to 26.1% in the second quarter of fiscal 2024 compared to 15.6% in the second quarter of fiscal 2023, primarily due to the prior year resolution of certain discrete tax matters .

Income tax expense was relatively unchanged in the first six months of fiscal 2024, primarily due to the prior year resolution of certain discrete tax matters offset by a decrease in pre-tax earnings.

Our ETR increased to 24.8% in the first six months of fiscal 2024 compared to 20.5% in the first six months of fiscal 2023, primarily due to the prior year resolution of certain discrete tax matters and decreased tax benefits from stock-based compensation, partially offset by the impact of lower pre-tax earnings.

Income tax expense was relatively unchanged in the third quarter of fiscal 2024.

Our effective tax rate (“ETR”) increased to 24.7% in the third quarter of fiscal 2024 compared to 23.6% in the third quarter of fiscal 2023, primarily due to the prior year recognition of losses and certain deferred tax assets for which tax benefits were previously not recognized.

Income tax expense was relatively unchanged in the first nine months of fiscal 2024, primarily due to the prior year resolution of certain discrete tax matters offset by a decrease in pre-tax earnings.

Our ETR increased to 24.8% in the first nine months of fiscal 2024 compared to 21.4% in the first nine months of fiscal 2023, primarily due to the prior year resolution of certain discrete tax matters and decreased tax benefits from stock-based compensation, partially offset by the impact of lower pre-tax earnings.

Our tax provision for interim periods is determined using an estimate of our annual ETR, adjusted for discrete items, if any, that are taken into account in the relevant period.

7 unchanged sentences

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Revenue % change

10 unchanged sentences

(1) Comparable online sales are included in the comparable sales calculation.

The decrease in revenue in the second quarter and first six months of fiscal 2024 was primarily driven by comparable sales declines in appliances, home theater, computing and mobile phones, partially offset by comparable sales growth in gaming.

Online revenue of $2.8 billion and $5.5 billion in the second quarter and first six months of fiscal 2024 decreased 7.1% and 9.7% on a comparable basis, respectively.

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

Domestic segment stores open at the beginning and end of the second quarters of fiscal 2024 and fiscal 2023 were as follows:

Total Stores at Beginning of Second Quarter

Domestic revenue decreased in the third quarter and first nine months of fiscal 2024, primarily driven by comparable sales declines in appliances, computing, home theater and mobile phones, partially offset by comparable sales growth in gaming.

Online revenue of $2.8 billion and $8.2 billion in the third quarter and first nine months of fiscal 2024 decreased 9.3% and 9.5% on a comparable basis, respectively.

These decreases in comparable sales 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 2024 and fiscal 2023 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 a total of 20 to 30 Best Buy stores and open approximately 5 Outlet Centers in fiscal 2024.

We currently expect to close approximately 25 Best Buy stores in fiscal 2024 and end the fiscal year with 23 Outlet Centers.

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

2 unchanged sentences

Three Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Computing and Mobile Phones

3 unchanged sentences

 Computing and Mobile Phones:

The 6.4% comparable sales decline was driven primarily by computing, mobile phones and tablets.

The 8.3% comparable sales decline was driven primarily by broad declines in computing and mobile phone categories.

 Consumer Electronics:

The 5.7% comparable sales decline was driven primarily by home theater, partially offset by comparable sales growth in headphones and portable speakers.

The 9.5% comparable sales decline was driven primarily by home theater.

 Appliances:

1 unchanged sentence

 Entertainment:

The 9.0% comparable sales growth was driven primarily by gaming, partially offset by comparable sales declines in virtual reality and drones .

The 7.6% comparable sales growth was driven primarily by the cumulative growth in our paid membership base.

Our gross profit rate increased in the second quarter of fiscal 2024, primarily due to favorable product margin rates, improved financial performance from our membership offerings, which included higher services margin rates and reduced costs associated with program changes made to our free membership offering, and an improved gross profit rate from our Health initiatives.

Our gross profit rate increased in the first six months of fiscal 2024, primarily due to improved financial performance from our membership offerings, which included higher services margin rates and reduced costs associated with program changes made to our free membership offering, favorable product margin rates, the profit-sharing revenue from our private label and co-branded credit card arrangement and an improved gross profit rate from our Health initiatives.

Our profit-sharing revenue from our credit card arrangement has been a consistent benefit to our gross profit and operating income rates for the past nine quarters and approximated 1.4% of Domestic revenue in fiscal 2023, an increase of approximately 50 basis points compared to fiscal 2020.

This growth has been driven by the increased usage of our credit card, both at and outside of Best Buy, and the favorable credit environment.

For fiscal 2024, we expect this profit-sharing revenue to have a relatively neutral impact to our annual gross profit rate compared to last year, as the benefit from the first half of the year is expected to turn to a slight pressure in the second half of the year.

Our SG&A in the second quarter of fiscal 2024 was approximately flat to last year, as higher incentive compensation was primarily offset by lower store payroll expense.

Our SG&A in the first six months of fiscal 2024 decreased primarily due to lower store payroll expense, partially offset by higher incentive compensation expense.

The reduction in restructuring charges in the second quarter and first six months of fiscal 2024 was primarily related to higher-than-expected employee retention from our fiscal 2023 resource optimization initiative.

The 20.6% comparable sales growth was driven primarily by gaming.

The 6.9% comparable sales growth was driven primarily by delivery and installation services.

Domestic gross profit rate increased in the third quarter of fiscal 2024, primarily due to improved financial performance from our membership offerings, which included higher services margin rates, favorable product margin rates and lower supply chain costs.

Domestic gross profit rate increased in the first nine months of fiscal 2024, primarily due to improved financial performance from our membership offerings, which included higher services margin rates, and favorable product margin rates.

Domestic SG&A decreased in the third quarter and first nine months of fiscal 2024, primarily due to lower store payroll and advertising expense, partially offset by higher incentive compensation expense.

Domestic restructuring charges decreased in the third quarter and first nine months of fiscal 2024, primarily due to higher charges in fiscal 2023 from our resource optimization initiative and higher-than-expected employee retention in fiscal 2024.

Refer to Note 2, Restructuring , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

Our operating income rate increased in the second quarter of fiscal 2024, due to an increase in gross profit rate and lower restructuring charges, partially offset by an unfavorable SG&A rate.

Our operating income rate decreased in the six months of fiscal 2024, primarily due to decreased leverage from lower sales volume on our fixed expenses and higher incentive compensation expense, which resulted in an unfavorable SG&A rate, partially offset by favorability in gross profit rate.

Domestic operating income rate increased in the third quarter of fiscal 2024, due to favorability in gross profit rate and lower restructuring charges, partially offset by decreased leverage from lower sales volume on our fixed expenses and higher incentive compensation expense, which resulted in an unfavorable SG&A rate.

Domestic operating income rate decreased in the first nine months of fiscal 2024, primarily due to decreased leverage from lower sales volume on our fixed expenses and higher incentive compensation expense, which resulted in an unfavorable SG&A rate, partially offset by favorability in gross profit rate and lower restructuring charges.

International Segment

1 unchanged sentence

Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

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 2024 were primarily driven by comparable sales declines of 5.4% and 5.5%, respectively, and the negative impact from unfavorable foreign currency exchange rates.

International segment stores open at the beginning and end of the second quarters of fiscal 2024 and fiscal 2023 were as follows:

Total Stores at Beginning of Second Quarter

International revenue decreased in the third quarter and first nine months of fiscal 2024, primarily driven by comparable sales declines of 1.9% and 4.2%, 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 2024 and fiscal 2023 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 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Computing and Mobile Phones

3 unchanged sentences

 Computing and Mobile Phones:

The 2.4% comparable sales decline was driven primarily by computing and tablets, partially offset by comparable sales growth in mobile phones.

The 1.0% comparable sales decline was driven primarily by computing, partially offset by comparable sales growth in tablets.

 Consumer Electronics:

The 10.4% comparable sales decline was driven primarily by home theater.

The 8.4% comparable sales decline was driven primarily by home theater and headphones and portable speakers.

 Appliances:

The 6.1% comparable sales decline was driven primarily by large appliances.

The 4.0% comparable sales growth was driven primarily by small appliances.

 Entertainment:

The 2.5% comparable sales growth was driven primarily by gaming and drones, partially offset by a comparable sales decline in virtual reality.

The 4.6% comparable sales growth was driven primarily by the cumulative growth in our paid membership base and warranty services.

The increase in our gross profit rate in the second quarter of fiscal 2024 was primarily driven by a higher mix of revenue from the higher margin rate services category.

The increase in our gross profit rate in the first six months of fiscal 2024 was primarily driven by improved product margin rates.

Our SG&A decreased in the second quarter and first six months of fiscal 2024, primarily due to the favorable impact of foreign currency exchange rates and lower store payroll expense, partially offset by higher incentive compensation expense.

Our operating income rates decreased in the second quarter and first six months of fiscal 2024, primarily due to decreased leverage from lower sales volume on our fixed expenses, which resulted in unfavorable SG&A rates, partially offset by favorability in gross profit rates.

The 18.6% comparable sales growth was driven primarily by gaming.

The 2.4% comparable sales growth was driven primarily by growth in our membership programs.

International gross profit rates decreased in the third quarter and first nine months of fiscal 2024, primarily driven by lower product margin rates.

The decrease in the first nine months of fiscal 2024 was partially offset by a higher mix of revenue from the higher-margin services category.

International SG&A in the third quarter of fiscal 2024 was relatively flat to last year, as the favorable impact of foreign currency exchange rates was primarily offset by higher incentive compensation expense.

International SG&A decreased in the first nine months of fiscal 2024, primarily due to the favorable impact of foreign currency exchange rates and lower store payroll expense, partially offset by higher incentive compensation expense.

International operating income rate decreased in the third quarter of fiscal 2024, primarily due to an unfavorable gross profit rate and decreased leverage from lower sales volume on our fixed expenses, which resulted in an unfavorable SG&A rate.

International operating income rate decreased in the first nine months of fiscal 2024, primarily due to decreased leverage from lower sales volume on our fixed expenses, which resulted in an unfavorable SG&A rate, and an unfavorable gross profit rate.

Consolidated Non-GAAP Financial Measures

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Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Operating income

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Restructuring charges (2)

Loss on investments

Non-GAAP effective tax rate

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

As such, the forecasted annual income tax charge on the U.S.

As such, the forecasted annual income tax charge on a portion of the U.S.

non-GAAP adjustments is calculated using the statutory tax rate of 24.5%.

There is no forecasted annual income tax benefit for Mexico non-GAAP items, as there is no forecasted annual tax expense on the income in the calculation of GAAP income tax expense.

Our non-GAAP operating income rates decreased in the second quarter and first six months of fiscal 2024, primarily due to unfavorable SG&A rates, partially offset by favorable gross profit rates.

Our non-GAAP effective tax rate increased in the second quarter of fiscal 2024, primarily due to the prior year resolution of certain discrete tax matters.

Our non-GAAP effective tax rate increased in the first six months of fiscal 2024, primarily due to the prior year resolution of certain discrete tax matters and decreased tax benefits from stock-based compensation, partially offset by the impact of lower pre-tax earnings.

Our non-GAAP diluted EPS decreased in the second quarter and first six months of fiscal 2024, primarily due to the decreases in non-GAAP operating income.

There is no forecasted annual income tax for Mexico non-GAAP items and a portion of U.S.

non-GAAP items, as there is no forecasted annual tax benefit/expense on the income/expenses in the calculation of GAAP income tax expense.

Non-GAAP operating income rates decreased in the third quarter and first nine months of fiscal 2024, primarily due to unfavorable SG&A rates, partially offset by favorable gross profit rates.

Non-GAAP effective tax rate increased in the third quarter of fiscal 2024, primarily due to the prior year recognition of losses and certain deferred tax assets for which tax benefits were previously not recognized.

Our non-GAAP effective tax rate increased in the first nine months of fiscal 2024, primarily due to the prior year resolution of certain discrete tax matters and decreased tax benefits from stock-based compensation, partially offset by the impact of lower pre-tax earnings.

Non-GAAP diluted EPS decreased in the third quarter and first nine months of fiscal 2024, primarily due to the decreases in non-GAAP operating income.

Liquidity and Capital Resources

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For example, capital expenditures and share repurchases are a component of our cash flow and capital management strategy, which, to a large extent, we can adjust in response to economic and other changes in our business environment.

We have a disciplined approach to capital allocation, which focuses on investing in key priorities that support our strategy.

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

July 29, 2023

October 28, 2023

January 28, 2023

July 30, 2022

October 29, 2022

Cash and cash equivalents

The decrease in cash and cash equivalents from January 28, 2023, was primarily due to the timing and volume of inventory purchases and payments, dividend payments and capital expenditures, partially offset by earnings.

The increase in cash and cash equivalents from July 30, 2022, was primarily due to positive cash flows from operations, primarily driven by earnings and the timing and volume of inventory purchases and payments, partially offset by capital expenditures, dividend payments and share repurchases.

The decrease in cash and cash equivalents from January 28, 2023, was primarily due to the timing and volume of inventory purchases and payments, capital expenditures and dividend payments, partially offset by earnings.

The decrease in cash and cash equivalents from October 29, 2022, was primarily due to capital expenditures, share repurchases and dividend payments, partially offset by positive cash flows from operations, primarily driven by earnings.

Cash flows were as follows ($ in millions):

Six Months Ended

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

Total cash provided by (used in):

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Operating Activities

The increase in cash provided by operating activities in the first six months of fiscal 2024 was primarily driven by the timing and volume of inventory purchases and payments, and lower incentive compensation payments in the current year as a result of less favorable fiscal 2023 results.

These impacts were partially offset by higher tax payments in the current year, a decrease in deferred revenue and lower earnings in the current-year period.

The increase in cash provided by operating activities in the first nine months of fiscal 2024 was primarily driven by lower incentive compensation payments in the current year as a result of less favorable fiscal 2023 results, and the timing and volume of inventory purchases and payments .

These impacts were partially offset by a decrease in deferred revenue, lower earnings and higher tax payments in the current year.

Investing Activities

Cash used in investing activities in the first six months of fiscal 2024 decreased, primarily driven by lower capital spending for initiatives to support our business and a decrease in purchases of investments.

We currently expect capital expenditures to approximate $850 million in fiscal 2024.

Cash used in investing activities in the first nine months of fiscal 2024 decreased, primarily driven by lower capital spending and a decrease in purchases of investments.

We currently expect capital expenditures to approximate $825 million in fiscal 2024 compared to $930 million in fiscal 2023.

Financing Activities

The decrease in cash used in financing activities in the first six months of fiscal 2024 was primarily driven by lower share repurchases.

The decrease in cash used in financing activities in the first nine months of fiscal 2024 was primarily driven by lower share repurchases.

Sources of Liquidity

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The Five-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in April 2028.

There were no borrowings outstanding under the Five-Year Facility Agreement as of July 29, 2023, or the Previous Facility as of January 28, 2023, or July 30, 2022.

Our credit ratings and outlook as of August 30, 2023, remained unchanged from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023, and are summarized below .

There were no borrowings outstanding under the Five-Year Facility Agreement as of October 28, 2023, or the Previous Facility as of January 28, 2023, or October 29, 2022.

Our credit ratings and outlook as of November 29, 2023, remained unchanged from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2023, and are summarized below.

Rating Agency

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

Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $398 million, $379 million and $312 million at July 29, 2023, January 28, 2023, and July 30, 2022, respectively.

The increases in restricted cash from January 28, 2023, and July 30, 2022, were primarily due to growth in our paid membership base.

Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $423 million, $379 million and $361 million at October 28, 2023, January 28, 2023, and October 29, 2022, respectively.

The increases in restricted cash from January 28, 2023, and October 29, 2022, were primarily due to growth in our paid membership base.

Debt and Capital

As of July 29, 2023, we had $500 million of principal amount of notes due October 1, 2028, and $650 million of principal amount of notes due October 1, 2030.

As of October 28, 2023, we had $500 million of principal amount of notes due October 1, 2028, and $650 million of 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 28, 2023, for additional information about our outstanding debt.

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Three Months Ended

Six Months Ended

July 29, 2023

July 30, 2022

July 29, 2023

July 30, 2022

Nine Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Total cost of shares repurchased

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Cash dividends declared and paid

The total cost of shares repurchased increased in the second quarter of fiscal 2024, primarily due to an increase in the volume of repurchases.

The total cost of shares repurchased decreased in the first six months of fiscal 2024 due to decreases in the volume of repurchases and the average price per share.

Cash dividends declared and paid increased in the second quarter and first six months of fiscal 2024, primarily due to an increase in the regular quarterly cash dividend per share, partially offset by fewer shares outstanding.

Between the end of the second quarter of fiscal 2024 on July 29, 2023, and August 30, 2023, we repurchased an incremental 0.3 million shares of our common stock at a cost of $25 million.

We currently expect to continue share repurchases throughout fiscal 2024, with the level of repurchases being slightly higher in the second half of the year compared to the first half of the year.

The total cost of shares repurchased increased in the third quarter of fiscal 2024 as repurchases were paused during the third quarter of fiscal 2023.

The total cost of shares repurchased decreased in the first nine months of fiscal 2024 due to decreases in the average price per share and the volume of repurchases.

Cash dividends declared and paid increased in the third quarter and first nine months of fiscal 2024, primarily due to an increase in the regular quarterly cash dividend per share, partially offset by fewer shares outstanding.

Between the end of the third quarter of fiscal 2024 on October 28, 2023, and November 29, 2023, we repurchased an incremental 1.0 million shares of our common stock at a cost of $63 million.

We currently expect total share repurchases of approximately $350 million in fiscal 2024.

Other Financial Measures

Our current ratio, calculated as current assets divided by current liabilities, remained unchanged at 1.0 as of July 29, 2023, January 28, 2023, and July 30, 2022.

Our debt to earnings ratio, calculated as total debt (including current portion) divided by net earnings over the trailing twelve months increased to 0.9 as of July 29, 2023, compared to 0.8 as of January 28, 2023, and 0.7 as of July 30, 2022, primarily due to lower net earnings.

Our current ratio, calculated as current assets divided by current liabilities, remained unchanged at 1.0 as of October 28, 2023, January 28, 2023, and October 29, 2022.

Our debt to earnings ratio, calculated as total debt (including current portion) divided by net earnings over the trailing twelve months remained unchanged at 0.8 as of October 28, 2023, and January 28, 2023, but increased compared to 0.7 as of October 29, 2022, 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 29, 2023, 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 28, 2023, 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 2023.

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Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following:

macroeconomic pressures in the markets in which we operate (including but not limited to recession, inflation rates, fluctuations in foreign currency exchange rates, limitations on a government’s ability to borrow and/or spend capital, fluctuations in housing prices, energy markets, and jobless rates and effects related to the conflict in Ukraine or other geopolitical events);

catastrophic events, health crises and pandemics;

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risks arising from statutory, regulatory and legal developments (including statutes and/or regulations related to tax or privacy);

evolving corporate governance and public disclosure regulations and expectations (including, but not limited to, cybersecurity and environmental, social and governance matters) risks arising from our international activities (including those related to the conflict in Ukraine or fluctuations in foreign currency exchange rates) and those of our vendors;

evolving corporate governance and public disclosure regulations and expectations (including, but not limited to, cybersecurity and environmental, social and governance matters) risks arising from our international activities (including those related to the conflicts in Eastern Europe and the Middle East or fluctuations in foreign currency exchange rates) and those of our vendors;

failure to effectively manage our costs;

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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-Q

Item 1. Financial Statements