What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-06-06 compared with 2024-12-06 · 85 added, 155 removed, 223 unchanged (52% of the section changed)

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We are driven by our purpose to enrich lives through technology and our vision to personalize and humanize technology solutions for every stage of life .

We accomplish this by leveraging our combination of technology and a human touch to meet our customers’ everyday needs, whether they come to us online, visit our stores or invite us into their homes.

We accomplish this by leveraging our combination of tech expertise and a human touch to meet our customers’ everyday needs, whether they come to us online, visit our stores or invite us into their homes.

We have two reportable segments:

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This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the U.S.

(“GAAP”), as well as certain adjusted or non-GAAP financial measures, such as non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted earnings per share (“EPS”).

(“GAAP”), as well as certain non-GAAP financial measures, such as consolidated adjusted operating income, consolidated adjusted operating income rate, consolidated adjusted effective tax rate and consolidated adjusted diluted earnings per share (“EPS”).

We believe that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, provide additional useful information for evaluating current period performance and assessing future performance.

For these reasons, internal management reporting, including budgets, forecasts and financial targets used for short-term incentives are based on non-GAAP financial measures.

Generally, our non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and intangible asset impairments, price-fixing settlements, gains and losses on sales of subsidiaries and certain investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items.

Generally, our non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and acquired intangible asset impairments, price-fixing settlements, gains and losses on sales of subsidiaries and certain investments, amortization of definite-lived intangible assets associated with acquisitions, certain acquisition-related costs and the tax effect of all such items.

In addition, certain other items may be excluded from non-GAAP financial measures when we believe doing so provides greater clarity to management and our investors.

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We believe the disclosure of revenue changes in constant currency provides useful supplementary information to investors in light of significant fluctuations in currency rates.

Refer to the Non-GAAP Financial Measures section below for detailed reconciliations of items impacting non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted EPS in the presented periods.

Business Strategy Update

In the third quarter of fiscal 2025, we continued to manage our profitability through strong execution despite revenue declines.

We made progress on our fiscal 2025 priorities, grew our paid membership base and drove improvements in our prioritized customer experiences.

We continued to deliver sales growth in our Domestic computing and tablet categories as our market position, expert sales associates and compelling merchandising allowed us to capitalize on demand driven by our customers’ desire to replace or upgrade their products combined with new innovation.

We also continue to focus on the following four priorities:

(1) invigorate and progress targeted customer experiences;

(2) drive operational effectiveness and efficiency;

(3) continue our disciplined approach to capital allocation;

and (4) explore, pilot and drive incremental revenue streams.

This year, we have been focused on improving and refreshing our App and small view experiences – including enhanced personalization, new features like digital wallet, deal alerts and gift finders, along with a more stream-lined checkout process and faster content loading times.

We have grown both customer ratings for our App and growth in active users.

We believe this is an important way to engage our customers on their entire shopping journey, and our data shows that customers who use our App frequent us more often and thus spend more.

In our stores, we are making enhancements to every store in the chain in some fashion this year, improving both our merchandising and ease of shopping for customers.

This includes working with many of our vendors to implement new and enhanced in-store experiences across the store.

To continue to elevate the expert service we provide customers, we have added fully dedicated labor expertise to our in-store computing and have begun the process of doing so in our home theater and major appliances departments in hundreds of stores.

These changes are in addition to the actions taken throughout the past year to streamline our leadership model, allowing us to invest in more customer-facing sales associate hours in our stores.

While we elevate our customer experiences, we are simultaneously executing on our longstanding commitment to drive operational effectiveness and efficiencies and identify cost reductions, as this is paramount to help offset inflationary pressures in our business and fund investment capacity.

For example, in fiscal 2025 we are focused on driving further efficiencies across our forward and reverse supply chain, our Geek Squad repair operations and our customer care experience.

We will continue to lean heavily on analytics and technology to achieve these efficiencies.

Our third key priority for the year is to continue our disciplined approach to capital allocation.

This includes striking the appropriate balance of prioritizing areas that best position us for the future, while prudently dealing with the near-term uncertainty in the consumer electronics industry.

Our fourth key priority for fiscal 2025 is longer-term in focus.

We will continue to explore opportunities that leverage our scale and capabilities to drive incremental profitable revenue streams over time.

As we look to the rest of the year, we are excited for the holiday season in this still uncertain consumer electronics industry.

We are well positioned with compelling deals, inspirational in-store and digital merchandising and competitive fulfillment options.

We are the largest consumer electronics specialty retailer with what we believe to be a unique range of product assortment and expert services to help humanize tech, especially new innovation, for every stage of our customers’ lives.

We intend to strengthen our position in key categories like computing, home theater and major appliances through our differentiated experiences, pointed marketing spend and competitive pricing.

Refer to the Non-GAAP Financial Measures section below for detailed reconciliations of items impacting consolidated adjusted operating income, consolidated adjusted effective tax rate and consolidated adjusted diluted EPS in the presented periods.

We continue to face significant uncertainty regarding the scope, timing and magnitude of tariffs that may affect the products we sell and the consequent financial impact on our business.

While we directly import approximately 2% to 3% of our overall assortment, our complex supply chain is heavily reliant on vendor imports from China, which we currently estimate make up approximately 30% to 35% of the products we purchase, compared to 55% disclosed within our Annual Report on Form 10-K for the fiscal year ended February 1, 2025.

This is the result of vendors using production capabilities in multiple countries and leveraging their ability to flex sourcing options as the environment evolves.

We currently estimate approximately 25% of the products we purchase are from the U.S.

In conjunction with our vendors, we continue to seek to mitigate the impact of tariffs on our business and our customers.

Results of Operations

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Three Months Ended

Nine Months Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Revenue % change

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Operating income as a % of revenue

Diluted earnings per share

(1) Because retailers vary in how they record costs of operating their supply chain between cost of sales and SG&A, our gross profit rate and SG&A rate may not be comparable to other retailers’ corresponding rates.

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 February 1, 2025.

In the third quarter and first nine months of fiscal 2025, we generated $9.4 billion and $27.6 billion in revenue, respectively, and our comparable sales declined 2.9% and 3.7%, respectively, as we continued to operate in a challenged consumer electronics industry and experienced softer customer demand.

While our comparable sales declined in the third quarter of fiscal 2025 in categories such as appliances, home theater and gaming, we grew comparable sales in our computing, tablet and services categories.

Revenue, gross profit rate, SG&A and operating income rate changes in the third quarter and first nine months of fiscal 2025 were primarily driven by our Domestic segment.

In the first quarter of fiscal 2026, we continued to navigate the environment and plan our business within dynamic macroeconomic conditions, including higher prices across many areas of consumers' lives and uncertainty surrounding tariffs.

We generated $8.8 billion in revenue and our comparable sales declined 0.7% in the first quarter of fiscal 2026.

While our comparable sales declined during the quarter in categories such as home theater, appliances and drones, we grew comparable sales in our computing, mobile phone and tablet categories.

Restructuring charges in the first quarter of fiscal 2026 were associated with a restructuring initiative primarily focused on optimizing our Best Buy Health business that commenced in the first quarter of fiscal 2026.

Refer to Note 2, Restructuring , of the Notes to Consolidated Financial Statements, for additional information.

Operating income rate decreased in the first quarter of fiscal 2026, primarily due to higher restructuring charges.

Diluted EPS decreased in the first quarter of fiscal 2026, primarily due to lower operating income driven by higher restructuring charges.

Revenue, gross profit rate, SG&A and operating income rate changes in the first quarter of fiscal 2026 were primarily driven by our Domestic segment.

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

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Stores open by reportable segment were as follows:

November 2, 2024

October 28, 2023

Outlet Centers

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Total International stores (1)

(1) Excludes Best Buy Express stores leased by Bell Canada .

We continuously monitor store performance as part of a market-driven, omnichannel strategy.

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In fiscal 2026, we currently expect to reduce our Domestic Best Buy store count by approximately 5 to 10 stores.

Earlier this year, we announced our collaboration with Bell Canada to rebrand 167 of its stores to Best Buy Express.

These stores, previously part of The Source, a wholly owned subsidiary of Bell Canada, are leased by Bell Canada.

Under the arrangement, we provide the curated consumer electronics assortment and Geek Squad services, as well as supply chain, marketing and e-commerce.

Bell Canada is the exclusive telecommunications services provider and is also responsible for the store operations .

As of November 2, 2024, nearly all of the 167 stores have been rebranded.

Income Tax Expense

Income tax expense was relatively unchanged in the third quarter of fiscal 2025.

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

Income tax expense increased in the first nine months of fiscal 2025, primarily due to an increase in pre-tax earnings.

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

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.

Income tax expense decreased to $19 million in the first quarter of fiscal 2026 compared to $80 million in the first quarter of fiscal 2025, primarily due to the discrete tax impacts of the restructuring charges and associated exit of a component of our Best Buy Health business.

Effective tax rate (“ETR”) decreased to 8.6% in the first quarter of fiscal 2026 compared to 24.7% in the first quarter of fiscal 2025, primarily due to the discrete tax impacts of the restructuring charges and associated exit of a component of our Best Buy Health business, partially offset by decreased tax benefits from resolutions of tax matters and green energy incentives.

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

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

We update our estimate of the annual ETR each quarter, and we make a cumulative adjustment if our estimated tax rate changes.

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Three Months Ended

Nine Months Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Revenue % change

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Gross profit as a % of revenue

SG&A as a % of revenue

Restructuring charges

Operating income

Operating income as a % of revenue

Adjusted SG&A (2)

Adjusted SG&A as a % of revenue (3)

Adjusted operating income (2)

Adjusted operating income as a % of revenue (4)

Selected Online Revenue Data

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

Domestic revenue decreased in the third quarter and first nine months of fiscal 2025, primarily driven by comparable sales declines in the appliances, home theater and gaming categories, partially offset by comparable sales growth in the computing, tablets and services categories.

Online revenue of $2.7 billion and $8.0 billion in the third quarter and first nine months of fiscal 2025 decreased 1.0% and 2.9%, respectively, on a comparable basis.

(2) Represents Domestic segment Adjusted SG&A and Domestic segment Adjusted operating income as reported in accordance with the adoption of Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280), in the fourth quarter of fiscal 2025.

See our Annual Report on Form 10-K for the fiscal year ended February 1, 2025, for additional information.

(3) Adjusted SG&A as a % of revenue is calculated as Domestic segment Adjusted SG&A divided by Domestic segment Revenue.

(4) Adjusted operating income as a % of revenue is calculated as Domestic segment Adjusted operating income divided by Domestic segment Revenue.

Domestic segment revenue decreased in the first quarter of fiscal 2026, primarily driven by comparable sales declines in the home theater, appliances and drone categories, partially offset by comparable sales growth in the computing, mobile phone and tablet categories.

Online revenue of $2.6 billion in the first quarter of fiscal 2026 increased 2.1% on a comparable basis.

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

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Three Months Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Computing and Mobile Phones

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 Computing and Mobile Phones:

The 3.8% comparable sales growth was driven primarily by computing and tablets.

The 5.8% comparable sales growth was driven primarily by computing, mobile phones and tablets.

 Consumer Electronics:

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 Entertainment:

The 18.8% comparable sales decline was driven primarily by gaming.

The 6.0% comparable sales growth was driven primarily by growth in our membership programs, as well as delivery and installation services.

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

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

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

Domestic SG&A decreased in the first nine months of fiscal 2025, primarily due to lower employee compensation expense, which was primarily store payroll, lower intangible amortization expense and reduced vehicle rental costs .

These decreases were partially offset by higher advertising and technology expense.

Domestic restructuring charges in the third quarter and first nine months of fiscal 2025 were primarily related to employee termination benefits and subsequent adjustments from higher-than-expected employee retention associated with an enterprise-wide restructuring initiative that commenced in the fourth quarter of fiscal 2024.

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

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

The 13.3% comparable sales decline was driven primarily by drones and gaming.

The 0.9% comparable sales growth was driven primarily by growth in delivery and installation services.

Domestic segment gross profit rate increased in the first quarter of fiscal 2026, primarily due to improved financial performance from our services category, including our membership offerings, partially offset by rate pressure within our Best Buy Health business and lower profit-sharing revenue from our private label and co-branded credit card arrangement.

Domestic segment adjusted SG&A decreased in the first quarter of fiscal 2026, primarily due to a favorable indirect tax settlement.

Domestic segment adjusted operating income rate in the first quarter of fiscal 2026 remained unchanged from the first quarter of fiscal 2025 .

International Segment

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Three Months Ended

Nine Months Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Revenue % change

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Gross profit as a % of revenue

SG&A as a % of revenue

Operating income

Operating income as a % of revenue

International revenue decreased in the third quarter of fiscal 2025, primarily driven by comparable sales declines in gaming, home theater and appliances, as well as the negative impact of foreign exchange rates.

These decreases were partially offset by increased revenue from Best Buy Express locations.

International revenue decreased in the first nine months of fiscal 2025, primarily driven by comparable sales declines in gaming, computing and home theater, as well as the negative impact of foreign exchange rates.

These decreases were partially offset by increased revenue from Best Buy Express locations and comparable sales growth in mobile phones.

Adjusted SG&A (1)

Adjusted SG&A as a % of revenue (2)

Adjusted operating income (1)

Adjusted operating income as a % of revenue (3)

(1) Represents International segment Adjusted SG&A and International segment Adjusted operating income as reported in accordance with the adoption of ASU 2023-07.

See our Annual Report on Form 10-K for the fiscal year ended February 1, 2025, for additional information.

(2) Adjusted SG&A as a % of revenue is calculated as International segment Adjusted SG&A divided by International segment Revenue.

(3) Adjusted operating income as a % of revenue is calculated as International segment Adjusted operating income divided by International segment Revenue.

International segment revenue decreased in the first quarter of fiscal 2026, primarily driven by the negative impact of foreign exchange rates and a comparable sales decline, primarily in the gaming category.

These decreases were partially offset by revenue from Best Buy Express locations that opened in Canada after the first quarter of fiscal 2025.

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

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Three Months Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Computing and Mobile Phones

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 Computing and Mobile Phones:

The 0.1% comparable sales decline was driven primarily by computing and tablets, partially offset by comparable sales growth in mobile phones.

The 2.3% comparable sales growth was driven primarily by computing.

 Consumer Electronics:

The 6.1% comparable sales decline was driven primarily by home theater and home automation.

The 1.5% comparable sales decline was driven primarily by home automation.

 Appliances:

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 Entertainment:

The 18.7% comparable sales decline was driven primarily by gaming.

The 17.7% comparable sales decline was driven primarily by gaming and drones.

The 2.2% comparable sales growth was driven primarily by growth in our membership programs.

International gross profit rate increased in the third quarter of fiscal 2025, primarily driven by growth in the higher margin services category.

International gross profit rate decreased in the first nine months of fiscal 2025, primarily driven by lower product margin rates and higher supply chain costs, which were partially offset by growth in the higher margin services category.

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

International SG&A decreased in the first nine months of fiscal 2025, primarily driven by lower advertising expense and lower employee compensation expense, which was primarily incentive compensation.

These decreases were partially offset by expenses associated with new Best Buy Express locations .

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

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

International segment gross profit rate decreased in the first quarter of fiscal 2026, primarily due to lower product margin rates and unfavorable supply chain costs.

International segment adjusted SG&A decreased in the first quarter of fiscal 2026, primarily due to the favorable impact of foreign exchange rates, partially offset by higher employee compensation expense and expenses associated with Best Buy Express locations that opened after the first quarter of fiscal 2025.

International segment adjusted operating income rate decreased in the first quarter of fiscal 2026, primarily due to an unfavorable gross profit rate.

Consolidated Non-GAAP Financial Measures

Reconciliations of operating income, effective tax rate and diluted EPS (GAAP financial measures) to non-GAAP operating income, non-GAAP effective tax rate and non-GAAP diluted EPS (non-GAAP financial measures) were as follows ($ in millions, except per share amounts):

Reconciliations of consolidated operating income, effective tax rate and diluted EPS (GAAP financial measures) to consolidated adjusted operating income, adjusted effective tax rate and adjusted diluted EPS (non-GAAP financial measures), respectively, were as follows ($ in millions, except per share amounts):

Three Months Ended

Nine Months Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Operating income

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Restructuring charges (2)

Non-GAAP operating income

Adjusted operating income

Effective tax rate

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Restructuring charges (2)

Non-GAAP effective tax rate

Adjusted effective tax rate

Intangible asset amortization (1)

Restructuring charges (2)

Loss on investments

Gain on sale of subsidiary, net (3)

Income tax impact of non-GAAP adjustments (3)

Non-GAAP diluted EPS

For additional information regarding the nature of charges discussed below, refer to Note 1, Basis of Presentation , Note 2, Restructuring, and Note 3, Goodwill and Intangible Assets , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

Adjusted diluted EPS

For additional information regarding the nature of charges discussed below, refer to Note 2, Restructuring, and Note 3, Goodwill and Intangible Assets , of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

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

(2) Represents charges related to employee termination benefits and subsequent adjustments from higher-than-expected employee retention associated with enterprise-wide restructuring initiatives.

(3) Represents the gain on sale of a Mexico subsidiary subsequent to our exit from operations in Mexico.

(2) Charges for the three months ended May 3, 2025, relate to a restructuring initiative primarily within the company’s Best Buy Health business that commenced in the first quarter of fiscal 2026.

Charges for the three months ended May 4, 2024, primarily relate to an enterprise-wide restructuring initiative that commenced in the fourth quarter of fiscal 2024 .

(3) The non-GAAP adjustments primarily relate to 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 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 rate decreased in the third quarter of fiscal 2025, primarily due to an unfavorable SG&A rate, partially offset by a favorable gross profit rate.

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

Non-GAAP effective tax rate decreased in the third quarter of fiscal 2025, primarily due to increased tax benefits from green energy incentives.

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

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

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

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

non-GAAP adjustments is calculated using the statutory tax rate of 24.5%, adjusted for tax benefits discrete to the period.

Adjusted operating income rate in the first quarter of fiscal 2026 remained unchanged from the first quarter of fiscal 2025.

Adjusted effective tax rate increased in the first quarter of fiscal 2026, primarily due to decreased tax benefits from resolutions of tax matters and green energy incentives.

Adjusted diluted EPS decreased in the first quarter of fiscal 2026, primarily due to the decrease in adjusted earnings driven by lower investment income.

Liquidity and Capital Resources

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

November 2, 2024

February 1, 2025

October 28, 2023

Cash and cash equivalents

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

The increase in cash and cash equivalents from October 28, 2023, was primarily due to positive cash flows from operations, primarily driven by earnings, partially offset by dividend payments, capital expenditures and share repurchases .

The decrease in cash and cash equivalents from February 1, 2025, was primarily due to the timing and volume of inventory purchases and payments, dividend payments, capital expenditures and share repurchases, partially offset by positive cash flows from operations, primarily driven by earnings.

The decrease in cash and cash equivalents from May 4, 2024, was primarily due to dividend payments, capital expenditures and share repurchases, partially offset by positive cash flows from operations, primarily driven by earnings .

Cash flows were as follows ($ in millions):

Nine Months Ended

November 2, 2024

October 28, 2023

Three Months Ended

Total cash provided by (used in):

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Operating Activities

The increase in cash provided by operating activities in the first nine months of fiscal 2025 was primarily driven by the timing and volume of inventory purchases and payments, partially offset by the timing of vendor funding receivables.

The decrease in cash provided by operating activities in the first quarter of fiscal 2026 was primarily driven by the timing and volume of inventory purchases and payments, partially offset by the timing of vendor funding receivables.

Investing Activities

Cash used in investing activities in the first nine months of fiscal 2025 decreased, primarily driven by lower capital spending.

We currently expect capital expenditures to approximate $750 million in fiscal 2025 compared to $795 million in fiscal 2024.

Cash used in investing activities remained relatively flat in the first quarter of fiscal 2026.

Financing Activities

The increase in cash used in financing activities in the first nine months of fiscal 2025 was primarily driven by higher share repurchases.

The increase in cash used in financing activities in the first quarter of fiscal 2026 was primarily driven by higher share repurchases.

Sources of Liquidity

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There can be no assurance that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our existing credit facilities or obtain additional financing, if necessary, on favorable terms.

We have a $1.25 billion five-year senior unsecured revolving credit facility agreement (the “Five-Year Facility Agreement”) with a syndicate of banks that expires in April 2028.

There were no borrowings outstanding under the Five-Year Facility Agreement as of November 2, 2024, February 3, 2024, or October 28, 2023 .

On April 18, 2025, we entered into a $1.25 billion five-year senior unsecured revolving credit facility agreement (the “Five-Year Facility Agreement”) with a syndicate of banks.

The Five-Year Facility Agreement replaced the previous $1.25 billion senior unsecured revolving credit facility (the “Previous Facility”) with a syndicate of banks, which was entered into April 2023 and scheduled to expire in April 2028, but was terminated on April 18, 2025.

The Five-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in April 2030.

Refer to Note 6, Debt , of the Notes to the Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

There were no borrowings outstanding under the Five-Year Facility Agreement as of May 3, 2025, or the Previous Facility as of February 1, 2025, or May 4, 2024.

Restricted Cash

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

Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $295 million, $346 million and $423 million at November 2, 2024, February 3, 2024, and October 28, 2023, respectively.

The decrease in restricted cash from February 3, 2024, and October 28, 2023, was primarily due to releases of product protection reserves based on claims and purchasing behaviors of customers participating in our membership offerings.

Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $288 million, $290 million and $313 million as of May 3, 2025, February 1, 2025, and May 4, 2024, respectively.

While restricted cash has remained relatively flat from February 1, 2025, the decrease in restricted cash from May 4, 2024, was primarily due to releases of product protection reserves based on claims and purchasing behaviors of customers participating in our membership offerings.

Debt and Capital

As of November 2, 2024, 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 May 3, 2025, 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 February 1, 2025, for additional information about our outstanding debt.

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Our long-term capital allocation strategy is to first fund operations and investments in growth and then return excess cash over time to shareholders through dividends and share repurchases while maintaining investment-grade credit metrics.

Our share repurchase plans are evaluated on an ongoing basis, considering factors such as our financial condition and cash flows, our economic outlook, the impact of tax laws, our liquidity needs, and the health and stability of global credit markets.

Our share repurchase plans are evaluated on an ongoing basis, considering factors such as our financial condition and cash flows, our economic outlook, the impact of tax laws, our liquidity needs, our stock price and the health and stability of global markets.

The timing and amount of future repurchases may vary depending on such factors.

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Three Months Ended

Nine Months Ended

November 2, 2024

October 28, 2023

November 2, 2024

October 28, 2023

Total cost of shares repurchased

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Cash dividends declared and paid

The total cost of shares repurchased increased in the third quarter and first nine months of fiscal 2025, primarily due to an increase in the average price per share, partially offset by a decrease in the volume of repurchases.

We currently expect total share repurchases of up to $500 million in fiscal 2025.

Cash dividends declared and paid increased during the third quarter and first nine months of fiscal 2025, due to the increase in the regular quarterly cash dividend per share, partially offset by fewer shares outstanding.

The total cost of shares repurchased increased in the first quarter of fiscal 2026, primarily due to an increase in the volume of repurchases, partially offset by a decrease in the average price per share.

Cash dividends declared and paid remained flat in the first quarter of fiscal 2026.

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 November 2, 2024, 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 May 3, 2025, 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 2025.

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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, jobless rates, the imposition of tariffs, trade wars and effects related to the conflicts in Eastern Europe and the Middle East or other geopolitical events);

catastrophic events, health crises and pandemics;

30 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis