What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-09-05 compared with 2025-06-06 · 142 added, 63 removed, 245 unchanged (46% of the section changed)

37 unchanged sentences

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 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.

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 disposals 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 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.

While we directly import approximately 2% to 3% of our overall assortment, the complex global supply chain for consumer electronics is heavily reliant on vendor imports from China, which we 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 estimate approximately 25% of the products we purchase are from the U.S.

and Mexico, with the remaining amount from other countries, including Vietnam, Thailand, South Korea and Malaysia.

Results of Operations

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Selected consolidated financial data was as follows ($ in millions, except per share amounts):

Three Months Ended

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Revenue $ 9,438 $ 9,288 $ 18,205 $ 18,135

Revenue % change 1.6 % (3.1) % 0.4 % (4.8) %

Comparable sales % change 1.6 % (2.3) % 0.4 % (4.2) %

Gross profit $ 2,194 $ 2,186 $ 4,243 $ 4,250

Gross profit as a % of revenue (1)

23.2 % 23.5 % 23.3 % 23.4 %

Selling, general and administrative expense ("SG&A") $ 1,829 $ 1,810 $ 3,550 $ 3,547

SG&A as a % of revenue (1)

19.4 % 19.5 % 19.5 % 19.6 %

Restructuring charges $ 114 $ (7) $ 223 $ 8

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Operating income as a % of revenue 2.7 % 4.1 % 2.6 % 3.8 %

Net earnings $ 186 $ 291 $ 388 $ 537

Diluted EPS $ 0.87 $ 1.34 $ 1.82 $ 2.47

(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 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.

In the second quarter and first six months of fiscal 2026, we generated $9.4 billion and $18.2 billion in revenue, respectively, and our comparable sales grew 1.6% and 0.4%, respectively, driven by a mix of new technology innovation, our continued focus on omni-channel customer experience and strong vendor partnerships.

Comparable sales increased in the second quarter of fiscal 2026, primarily from comparable sales growth in gaming, computing and mobile phones, partially offset by comparable sales declines in home theater, appliances, tablets and drones.

Comparable sales increased in the first six months of fiscal 2026, primarily from comparable sales growth in computing, gaming and mobile phones, partially offset by comparable sales declines in home theater and appliances.

Restructuring charges in the second quarter of fiscal 2026 were primarily associated with a labor and store optimization restructuring initiative that commenced in the second quarter of fiscal 2026.

Restructuring charges in the first six months of fiscal 2026 also included charges primarily associated with a restructuring initiative 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.

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

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

Revenue and gross profit rate changes in the second quarter of fiscal 2026 were driven by both our Domestic and International segments.

Changes in our SG&A rate and operating income rate in the second quarter of fiscal 2026 were primarily driven by our International segment and Domestic segment, respectively.

Revenue, gross profit rate and SG&A rate changes in the first six months of fiscal 2026 were primarily driven by our International segment.

The change in operating income rate in the first six months of fiscal 2026 was primarily driven by our Domestic segment.

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

Store Summary

Stores open by reportable segment were as follows:

August 2, 2025 August 3, 2024

Best Buy 885 890

Outlet Centers 23 26

Pacific Sales 20 20

Yardbird 21 23

Total Domestic stores 949 959

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Total International stores (1)

Total stores 1,105 1,120

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

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As we approach the expiration of leases, we evaluate various options for each location, including whether a store should remain open.

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

In fiscal 2026, we currently expect to reduce our traditional Domestic Best Buy store count by approximately 5 to 10 stores in the normal course of operations.

We also plan to close select non-traditional Domestic store locations in conjunction with our restructuring initiative that commenced in the second quarter of fiscal 2026.

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

Income Tax Expense

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.

Income tax expense decreased to $68 million in the second quarter of fiscal 2026 compared to $101 million in the second quarter of fiscal 2025, primarily due to lower pre-tax income.

Effective tax rate (“ETR”) increased to 26.8% in the second quarter of fiscal 2026 compared to 25.8% in the second quarter of fiscal 2025, primarily due to decreased tax benefits from resolutions of tax matters and stock-based compensation, as well as increased U.S.

taxes from sourcing operations, partially offset by discrete tax impacts of the restructuring charges and associated exit of a component of our Best Buy Health business.

Income tax expense decreased to $87 million in the first six months of fiscal 2026 compared to $181 million in the first six months 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, as well as lower pre-tax income.

ETR decreased to 18.3% in the first six months of fiscal 2026 compared to 25.3% in the first six months 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.

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Selected financial data for the Domestic segment was as follows ($ in millions):

Three Months Ended

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Revenue $ 8,698 $ 8,623 $ 16,825 $ 16,826

Revenue % change 0.9 % (3.0) % — % (4.9) %

Comparable sales % change (1)

1.1 % (2.3) % 0.2 % (4.3) %

Gross profit $ 2,033 $ 2,027 $ 3,941 $ 3,944

Gross profit as a % of revenue 23.4 % 23.5 % 23.4 % 23.4 %

Adjusted SG&A (2)

$ 1,682 $ 1,663 $ 3,261 $ 3,255

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

19.3 % 19.3 % 19.4 % 19.3 %

Adjusted operating income (2)

$ 351 $ 364 $ 680 $ 689

Adjusted operating income as a % of revenue (4)

4.0 % 4.2 % 4.0 % 4.1 %

Selected Online Revenue Data

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Comparable online sales % change (1)

5.1 % (1.6) % 3.7 % (3.8) %

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

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(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 increased in the second quarter of fiscal 2026, primarily driven by comparable sales growth in gaming, computing and mobile phones, partially offset by comparable sales declines in home theater, appliances, tablets and drones.

Online revenue of $2.9 billion in the second quarter of fiscal 2026 increased 5.1% on a comparable basis.

Domestic segment revenue in the first six months of fiscal 2026 remained effectively unchanged from the first six months of fiscal 2025.

Comparable sales growth of 0.2% in the first six months of fiscal 2026 was primarily driven by computing, gaming and mobile phones, mostly offset by comparable sales declines in home theater and appliances.

Online revenue of $5.4 billion in the first six months of fiscal 2026 increased 3.7% on a comparable basis.

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

Comparable Sales

Three Months Ended

Revenue Mix Comparable Sales

Three Months Ended Three Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Computing and Mobile Phones 45% 44% 3.8 % 3.9 %

Consumer Electronics 27% 29% (4.9) % (6.2) %

Appliances 12% 13% (8.5) % (14.9) %

Entertainment 8% 6% 37.5 % (7.4) %

Services 7% 7% (1.0) % 8.5 %

Other 1% 1% (6.3) % 14.4 %

Total 100% 100% 1.1 % (2.3) %

Notable comparable sales changes by revenue category were as follows:

• Computing and Mobile Phones:

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

The 3.8% comparable sales growth was driven primarily by computing and mobile phones, partially offset by a comparable sales decline in tablets.

• Consumer Electronics:

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• Entertainment:

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 .

The 37.5% comparable sales growth was driven primarily by gaming, partially offset by a comparable sales decline in drones.

The 1.0% comparable sales decline was driven primarily by Best Buy Health service offerings and delivery and installation services.

Domestic segment gross profit rate decreased in the second quarter of fiscal 2026, primarily due to lower product margin rates, which were partially offset by rate improvement within the services category.

The lower product margin rates were primarily driven by a higher sales mix of lower-margin categories.

Domestic segment gross profit rate remained effectively unchanged in the first six months of fiscal 2026 compared to the first six months of fiscal 2025, primarily driven by lower product margin rates and rate pressure within our Best Buy Health business, mostly offset by rate improvement within the services category, including membership offerings.

Domestic segment adjusted SG&A increased in the second quarter of fiscal 2026, primarily due to higher compensation expense, which included higher medical claims, the lapping of a favorable legal settlement of approximately $10 million in the second quarter of fiscal 2025 and higher technology expense.

These increases were partially offset by lower Best Buy Health expenses.

Domestic segment adjusted SG&A increased in the first six months of fiscal 2026, primarily due to higher compensation expense, the lapping of a favorable legal settlement of approximately $10 million in the second quarter of fiscal 2025 and higher technology expense.

These increases were partially offset by a favorable indirect tax settlement in the first quarter of fiscal 2026 and lower Best Buy Health expenses.

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

Domestic segment adjusted operating income rate decreased in the first six months of fiscal 2026, primarily due to an unfavorable adjusted SG&A rate and an unfavorable gross profit rate.

International Segment

Selected financial data for the International segment was as follows ($ in millions):

Three Months Ended

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Revenue $ 740 $ 665 $ 1,380 $ 1,309

Revenue % change 11.3 % (4.0) % 5.4 % (3.7) %

Comparable sales % change 7.6 % (1.8) % 3.5 % (2.6) %

Gross profit $ 161 $ 159 $ 302 $ 306

Gross profit as a % of revenue 21.8 % 23.9 % 21.9 % 23.4 %

Adjusted SG&A (1)

$ 143 $ 142 $ 280 $ 281

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

19.3 % 21.4 % 20.3 % 21.5 %

Adjusted operating income (1)

$ 18 $ 17 $ 22 $ 25

Adjusted operating income as a % of revenue (3)

2.4 % 2.6 % 1.6 % 1.9 %

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

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(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 increased in the second quarter of fiscal 2026, primarily driven by comparable sales growth in gaming, computing and mobile phones, and revenue from Best Buy Express locations that opened in Canada after the second quarter of fiscal 2025.

International segment revenue increased in the first six months of fiscal 2026, primarily driven by revenue from Best Buy Express locations that opened in Canada after the second quarter of fiscal 2025 and comparable sales growth in gaming and computing.

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

Comparable Sales

Three Months Ended

Revenue Mix Comparable Sales

Three Months Ended Three Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Computing and Mobile Phones 47% 46% 9.5 % 1.7 %

Consumer Electronics 27% 28% 1.3 % (2.1) %

Appliances 11% 13% (5.7) % (3.9) %

Entertainment 9% 6% 57.3 % (20.8) %

Services 5% 6% 2.2 % 5.9 %

Other 1% 1% 6.5 % (20.1) %

Total 100% 100% 7.6 % (1.8) %

Notable comparable sales changes by revenue category were as follows:

• Computing and Mobile Phones:

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

The 9.5% comparable sales growth was driven primarily by computing and mobile phones.

• Consumer Electronics:

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

The 1.3% comparable sales growth was driven primarily by health and fitness and digital imaging, partially offset by a comparable sales decline in home theater.

• Appliances:

The 2.1% comparable sales decline was driven by both large and small appliances.

The 5.7% comparable sales decline was driven primarily by small appliances.

• Entertainment:

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

The 57.3% comparable sales growth was driven primarily by gaming.

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

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.

International segment gross profit rate decreased in the second quarter and first six months of fiscal 2026, primarily due to lower product margin rates.

International segment adjusted SG&A in the second quarter of fiscal 2026 remained relatively unchanged from the second quarter of fiscal 2025.

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

International segment adjusted operating income rate decreased in the second quarter and first six months of fiscal 2026, primarily due to unfavorable gross profit rates, partially offset by increased leverage from higher sales volumes, which resulted in favorable adjusted SG&A rates.

Consolidated Non-GAAP Financial Measures

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

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Operating income $ 251 $ 383 $ 470 $ 695

% of revenue 2.7 % 4.1 % 2.6 % 3.8 %

Intangible asset amortization (1)

Restructuring charges (2)

114 (7) 223 8

Adjusted operating income $ 369 $ 381 $ 702 $ 714

% of revenue 3.9 % 4.1 % 3.9 % 3.9 %

Effective tax rate 26.8 % 25.8 % 18.3 % 25.3 %

Intangible asset amortization (1)

— % — % 0.2 % — %

Restructuring charges (2)

0.9 % — % 8.7 % — %

Loss on disposal of subsidiaries (3)

0.1 % — % 0.2 % — %

Adjusted effective tax rate 27.8 % 25.8 % 27.4 % 25.3 %

Diluted EPS $ 0.87 $ 1.34 $ 1.82 $ 2.47

Intangible asset amortization (1)

0.02 0.03 0.04 0.05

Restructuring charges (2)

0.54 (0.03) 1.05 0.04

Loss on disposal of subsidiaries (3)

0.02 - 0.02 -

Income tax impact of non-GAAP adjustments (4)

(0.17) - (0.50) (0.02)

Adjusted diluted EPS $ 1.28 $ 1.34 $ 2.43 $ 2.54

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

(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 .

(2) Represents charges for the three and six months ended August 2, 2025, primarily related to a labor and store optimization initiative that commenced in the second quarter of fiscal 2026, and charges and subsequent adjustments related to a restructuring initiative within our Best Buy Health business that commenced in the first quarter of fiscal 2026.

Charges and subsequent adjustments for the three and six months ended August 3, 2024, primarily related to an enterprise-wide restructuring initiative that commenced in the fourth quarter of fiscal 2024.

(3) Primarily represents the loss on disposal of a component of our Best Buy Health business.

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

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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.

Adjusted operating income rate decreased in the second quarter of fiscal 2026, primarily due to an unfavorable gross profit rate.

Adjusted operating income rate in the first six months of fiscal 2026 remained effectively unchanged from the first six months of fiscal 2025.

Adjusted effective tax rate increased in the second quarter of fiscal 2026, primarily due to decreased tax benefits from resolutions of tax matters and increased U.S.

taxes from sourcing operations.

Adjusted effective tax rate increased in the first six months of fiscal 2026, primarily due to decreased tax benefits from resolutions of tax matters and green energy incentives, as well as increased U.S.

taxes from sourcing operations.

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

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

The decreases in adjusted diluted EPS in the second quarter and first six months of fiscal 2026 were partially offset by lower diluted weighted-average common shares outstanding.

Liquidity and Capital Resources

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

February 1, 2025

August 2, 2025 February 1, 2025 August 3, 2024

Cash and cash equivalents $ 1,456 $ 1,578 $ 1,387

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 .

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

The increase in cash and cash equivalents from August 3, 2024, was primarily due to positive cash flows from operations, primarily driven by earnings, partially offset by dividend payments, capital expenditures and share repurchases.

Cash flows were as follows ($ in millions):

Three Months Ended

Six Months Ended

August 2, 2025 August 3, 2024

Total cash provided by (used in):

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Operating Activities

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.

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

Investing Activities

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

The increase in cash used in investing activities in the first six months of fiscal 2026 was primarily due to the disposal of a component of our Best Buy Health business.

Financing Activities

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

The increase in cash used in financing activities in the first six months of fiscal 2026 was primarily driven by higher 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 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.

There were no borrowings outstanding under the Five-Year Facility Agreement as of August 2, 2025, or the Previous Facility as of February 1, 2025, or August 3, 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 $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.

Restricted cash, which is included in Other current assets on our Condensed Consolidated Balance Sheets, was $257 million, $290 million and $311 million as of August 2, 2025, February 1, 2025, and August 3, 2024, respectively.

The decrease in restricted cash from February 1, 2025, was primarily due to releases of product protection reserves based on claims and purchasing behaviors of customers participating in our membership offerings.

The decrease in restricted cash from August 3, 2024, was primarily due to a decrease in cash for self-insurance liabilities and releases of product protection reserves.

Debt and Capital

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.

As of August 2, 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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Share repurchase and dividend activity were as follows ($ and shares in millions, except per share amounts):

Three Months Ended

Three Months Ended Six Months Ended

August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024

Total cost of shares repurchased $ 67 $ 98 $ 167 $ 150

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Cash dividends declared and paid $ 201 $ 203 $ 403 $ 405

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.

The total cost of shares repurchased decreased in the second quarter of fiscal 2026, due to a decrease in the average price per share and a decrease in the volume of repurchases.

The total cost of shares repurchased increased in the first six months of fiscal 2026, 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 decreased during the second quarter and first six months of fiscal 2026, due to fewer shares outstanding, partially offset by increases in the regular quarterly cash dividend per share.

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 May 3, 2025, 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 August 2, 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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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