BEST BUY CO INC 10-Q

Item 1. Financial Statements Condensed Consolidated Balance Sheets $ in millions, except per share amounts (unaudited) August 2, 2025 February 1, 2025 August 3, 2024 Assets Current assets Cash and cash equivalents $ 1,456 $ 1,578 $ 1,387 Receivables, net 917 1,044 871 Merchandise inventories 5,816 5,085 5,706 Other current assets 688 517 598 Total current assets 8,877 8,224 8,562 Property and equipment, net 2,046 2,122 2,183 Operating lease assets 2,816 2,833 2,860 Goodwill 908 908 1,383 Other assets 606 695 636 Total assets $ 15,253 $ 14,782 $ 15,624 Liabilities and equity Current liabilities Accounts payable $ 5,682 $ 4,980 $ 5,542 Unredeemed gift card liabilities 230 253 243 Deferred revenue 889 951 940 Accrued compensation and related expenses 448 464 347 Accrued liabilities 684 741 756 Current portion of operating lease liabilities 610 617 610 Current portion of long-term debt 10 10 13 Total current liabilities 8,553 8,016 8,451 Long-term operating lease liabilities 2,292 2,282 2,316 Long-term debt 1,164 1,144 1,157 Long-term liabilities 528 532 593 Contingencies (Note 10) Equity Best Buy Co., Inc. Shareholders' Equity Preferred stock, $ 1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none - - - Common stock, $ 0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 210.4 million, 211.4 million and 215.0 million shares, respectively 22 22 22 Additional paid-in capital - - - Retained earnings 2,381 2,486 2,775 Accumulated other comprehensive income 313 300 310 Total equity 2,716 2,808 3,107 Total liabilities and equity $ 15,253 $ 14,782 $ 15,624 NOTE: The Consolidated Balance Sheet as of February 1, 2025, has been condensed from the audited consolidated financial statements. See Notes to Condensed Consolidated Financial Statements. 3 Table of Contents Condensed Consolidated Statements of Earnings $ and shares in millions, except per share amounts (unaudited) 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 Cost of sales 7,244 7,102 13,962 13,885 Gross profit 2,194 2,186 4,243 4,250 Selling, general and administrative expenses 1,829 1,810 3,550 3,547 Restructuring charges 114 ( 7 ) 223 8 Operating income 251 383 470 695 Other income (expense): Loss on disposal of subsidiaries ( 4 ) - ( 4 ) - Investment income and other 18 21 33 46 Interest expense ( 12 ) ( 13 ) ( 24 ) ( 25 ) Earnings before income tax expense and equity in income of affiliates 253 391 475 716 Income tax expense 68 101 87 181 Equity in income of affiliates 1 1 - 2 Net earnings $ 186 $ 291 $ 388 $ 537 Basic earnings per share $ 0.88 $ 1.35 $ 1.83 $ 2.49 Diluted earnings per share $ 0.87 $ 1.34 $ 1.82 $ 2.47 Weighted-average common shares outstanding: Basic 211.5 216.0 211.8 216.1 Diluted 212.0 217.1 212.5 217.2 See Notes to Condensed Consolidated Financial Statements. 4 Table of Contents Condensed Consolidated Statements of Comprehensive Income $ in millions (unaudited) Three Months Ended Six Months Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Net earnings $ 186 $ 291 $ 388 $ 537 Foreign currency translation adjustments, net of tax - ( 2 ) 13 ( 7 ) Comprehensive income $ 186 $ 289 $ 401 $ 530 See Notes to Condensed Consolidated Financial Statements. 5 Table of Contents Condensed Consolidated Statements of Cash Flows $ in millions (unaudited) Six Months Ended August 2, 2025 August 3, 2024 Operating activities Net earnings $ 388 $ 537 Adjustments to reconcile net earnings to total cash provided by operating activities: Depreciation and amortization 422 437 Restructuring charges 223 8 Stock-based compensation 75 74 Deferred income taxes 45 10 Loss on disposal of subsidiaries 4 - Other, net 4 2 Changes in operating assets and liabilities: Receivables 123 66 Merchandise inventories ( 717 ) ( 761 ) Other assets ( 24 ) ( 11 ) Accounts payable 693 904 Income taxes ( 167 ) ( 183 ) Other liabilities ( 286 ) ( 266 ) Total cash provided by operating activities 783 817 Investing activities Additions to property and equipment ( 341 ) ( 335 ) Disposal of subsidiary ( 27 ) - Other, net ( 1 ) ( 17 ) Total cash used in investing activities ( 369 ) ( 352 ) Financing activities Repurchase of common stock ( 165 ) ( 148 ) Dividends paid ( 403 ) ( 405 ) Other, net ( 6 ) ( 4 ) Total cash used in financing activities ( 574 ) ( 557 ) Effect of exchange rate changes on cash and cash equivalents 5 ( 3 ) Decrease in cash, cash equivalents and restricted cash ( 155 ) ( 95 ) Cash, cash equivalents and restricted cash at beginning of period 1,868 1,793 Cash, cash equivalents and restricted cash at end of period $ 1,713 $ 1,698 See Notes to Condensed Consolidated Financial Statements. 6 Table of Contents Condensed Consolidated Statements of Changes in Shareholders' Equity $ and shares in millions, except per share amounts (unaudited) Common Shares Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Balances at May 3, 2025 211.3 $ 22 $ - $ 2,428 $ 313 $ 2,763 Net earnings, three months ended August 2, 2025 - - - 186 - 186 Stock-based compensation - - 35 - - 35 Common stock dividends, $ 0.95 per share - - 4 ( 205 ) - ( 201 ) Repurchase of common stock ( 0.9 ) - ( 39 ) ( 28 ) - ( 67 ) Balances at August 2, 2025 210.4 $ 22 $ - $ 2,381 $ 313 $ 2,716 Balances at February 1, 2025 211.4 $ 22 $ - $ 2,486 $ 300 $ 2,808 Net earnings, six months ended August 2, 2025 - - - 388 - 388 Other comprehensive income: Foreign currency translation adjustments, net of tax - - - - 13 13 Stock-based compensation - - 75 - - 75 Issuance of common stock 1.5 - 2 - - 2 Common stock dividends, $ 1.90 per share - - 10 ( 413 ) - ( 403 ) Repurchase of common stock ( 2.5 ) - ( 87 ) ( 80 ) - ( 167 ) Balances at August 2, 2025 210.4 $ 22 $ - $ 2,381 $ 313 $ 2,716 Balances at May 4, 2024 216.1 $ 22 $ 26 $ 2,722 $ 312 $ 3,082 Net earnings, three months ended August 3, 2024 - - - 291 - 291 Other comprehensive loss: Foreign currency translation adjustments, net of tax - - - - ( 2 ) ( 2 ) Stock-based compensation - - 36 - - 36 Issuance of common stock - - 1 - - 1 Common stock dividends, $ 0.94 per share - - 4 ( 207 ) - ( 203 ) Repurchase of common stock ( 1.1 ) - ( 67 ) ( 31 ) - ( 98 ) Balances at August 3, 2024 215.0 $ 22 $ - $ 2,775 $ 310 $ 3,107 Balances at February 3, 2024 215.4 $ 22 $ 31 $ 2,683 $ 317 $ 3,053 Net earnings, six months ended August 3, 2024 - - - 537 - 537 Other comprehensive loss: Foreign currency translation adjustments, net of tax - - - - ( 7 ) ( 7 ) Stock-based compensation - - 74 - - 74 Issuance of common stock 1.4 - 5 - - 5 Common stock dividends, $ 1.88 per share - - 9 ( 414 ) - ( 405 ) Repurchase of common stock ( 1.8 ) - ( 119 ) ( 31 ) - ( 150 ) Balances at August 3, 2024 215.0 $ 22 $ - $ 2,775 $ 310 $ 3,107 See Notes to Condensed Consolidated Financial Statements. 7 Table of Contents Notes to Condensed Consolidated Financial Statements (unaudited) 1. Basis of Presentation Unless the context otherwise requires, the terms “Best Buy,” “we,” “us”, “our” and the “company” in these Notes to Condensed Consolidated Financial Statements refer to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the U.S. (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements. A large proportion of our revenue and earnings is generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. 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 February 1, 2025. The first six months of fiscal 2026 and fiscal 2025 each included 26 weeks. In preparing the accompanying condensed consolidated financial statements, we evaluated the period from August 2, 2025, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified. Recently Issued Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires disclosure of specific categories meeting a quantitative threshold within the income tax rate reconciliation, as well as disaggregation of income taxes paid by jurisdiction. This ASU, which can be applied either prospectively or retrospectively, is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of the ASU and expect to include updated income tax disclosures in our fiscal 2026 Form 10-K. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires disclosure of specific expense categories in the notes to financial statements. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. We are currently evaluating the impact of the ASU and expect to include updated expense disclosures in our fiscal 2028 Form 10-K. Recently Enacted Tax Legislation On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OB3”). The OB3 extends key provisions of the 2017 Tax Cuts and Jobs Act, including, but not limited to, domestic research expensing, 100% bonus depreciation on tangible property and modifications to the international tax framework. The provisions will not have a material impact on our income tax expense. Supply Chain Financing We have a supply chain financing program with an independent financial institution, whereby some of our suppliers have the opportunity to receive accounts payable settlements early, at a discount, facilitated by the financial institution. Our liability associated with the funded participation in the program, which is primarily included in Accounts payable on our Condensed Consolidated Balance Sheets, was $ 872 million, $ 398 million and $ 729 million as of August 2, 2025, February 1, 2025, and August 3, 2024, 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 totals shown on our Condensed Consolidated Statements of Cash Flows as follows ($ in millions): August 2, 2025 February 1, 2025 August 3, 2024 Cash and cash equivalents $ 1,456 $ 1,578 $ 1,387 Restricted cash included in Other current assets 257 290 311 Total cash, cash equivalents and restricted cash $ 1,713 $ 1,868 $ 1,698 8 Table of Contents Amounts included in restricted cash are primarily restricted to cover product protection plans provided under our membership offerings and self-insurance liabilities. Reclassification Certain reclassifications of immaterial amounts previously reported have been made to the accompanying Condensed Consolidated Statements of Cash Flows to maintain consistency and comparability between periods presented. 2. Restructuring Restructuring charges were as follows ($ in millions): Three Months Ended Six Months Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Fiscal 2026 Labor and Store Optimization Initiative $ 122 $ - $ 122 $ - Best Buy Health Optimization and China Sourcing Initiative ( 6 ) - 105 - Fiscal 2024 Restructuring Initiative ( 2 ) ( 6 ) ( 4 ) 10 Fiscal 2023 Resource Optimization Initiative - ( 1 ) - ( 2 ) Total $ 114 $ ( 7 ) $ 223 $ 8 Fiscal 2026 Labor and Store Optimization Initiative In the second quarter of fiscal 2026, we commenced a restructuring initiative intended to align field resources with changing customer behaviors, close select non-traditional store locations and redirect corporate resources for better alignment with our strategy. We currently do not expect to incur material future restructuring charges related to this initiative. All charges incurred related to this initiative were from continuing operations and presented within Restructuring charges on our Condensed Consolidated Statements of Earnings. The composition of restructuring charges incurred related to this initiative were as follows ($ in millions): Three Months Ended Domestic International Total Termination benefits $ 78 $ 3 $ 81 Asset impairments (1) 41 - 41 Total $ 119 $ 3 $ 122 (1) Represents asset impairments primarily related to planned store closures, including an impairment related to an indefinite-lived tradename. See Note 3, Goodwill and Intangible Assets , for additional information. The remaining carrying value of net assets approximates fair value and was immaterial as of August 2, 2025 . There were no cash payments related to this initiative during the second quarter of fiscal 2026. Our restructuring accrual liabilities related to termination benefits of $ 81 million as of August 2, 2025, reflect expected future cash payments primarily during fiscal 2026. Best Buy Health Optimization and China Sourcing Initiative In the first quarter of fiscal 2026, we commenced a restructuring initiative primarily focused on optimizing our Best Buy Health business by taking actions to maximize value and improve profitability in light of its performance against our original forecasting. These actions included the exit of a component of our Best Buy Health business that was finalized during the second quarter of fiscal 2026. In addition, we also made significant changes to reduce our exposure to tariffs, particularly in China. We currently do not expect to incur material future restructuring charges related to this initiative. 9 Table of Contents All charges incurred related to this initiative were from continuing operations in our Domestic segment and presented within Restructuring charges on our Condensed Consolidated Statements of Earnings. The composition of restructuring charges incurred related to this initiative were as follows ($ in millions): Three Months Ended Six Months Ended August 2, 2025 August 2, 2025 Asset impairments and other costs (1) $ ( 3 ) $ 70 Termination benefits ( 3 ) 35 Total $ ( 6 ) $ 105 (1) Primarily represents the full impairment of net assets related to a component of our Best Buy Health business and other exit costs. The remaining carrying value of net assets approximates fair value and was immaterial as of August 2, 2025 . Restructuring accrual activity related to this initiative was as follows ($ in millions): Termination Benefits Asset Impairments and Other Costs Total Balances at February 1, 2025 $ - $ - $ - Charges 38 28 66 Cash payments ( 9 ) ( 27 ) ( 36 ) Adjustments (1) ( 3 ) ( 1 ) ( 4 ) Balances at August 2, 2025 $ 26 $ - $ 26 (1) Primarily represents adjustments for termination benefits primarily related to higher-than-expected employee retention from previously planned organizational changes. Our restructuring accrual liabilities related to termination benefits of $ 26 million as of August 2, 2025, reflect expected future cash payments primarily during fiscal 2026. Fiscal 2024 Restructuring Initiative During the fourth quarter of fiscal 2024, we commenced an enterprise-wide restructuring initiative intended to align field labor resources with where customers want to shop and to optimize the customer experience, redirect corporate resources for better alignment with our strategy and right-size resources to better align with our revenue outlook for fiscal 2025. We do not expect to incur material future restructuring charges related to this initiative. 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): Three Months Ended Six Months Ended Cumulative Amount as of August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 August 2, 2025 Domestic $ ( 2 ) 7 $ ( 4 ) $ 10 $ 162 International - ( 1 ) - - 8 Total $ ( 2 ) $ 6 $ ( 4 ) $ 10 $ 170 Restructuring accrual activity related to this initiative was as follows ($ in millions): Termination Benefits Domestic International Total Balances at February 1, 2025 $ 80 $ 5 $ 85 Cash payments ( 15 ) ( 1 ) ( 16 ) Adjustments (1) ( 4 ) - ( 4 ) Balances at August 2, 2025 $ 61 $ 4 $ 65 (1) Represents adjustments primarily related to higher-than-expected employee retention from previously planned organizational changes. Our restructuring accrual liabilities related to termination benefits of $ 65 million as of August 2, 2025, reflect expected future cash payments primarily during fiscal 2026. 10 Table of Contents 3. Goodwill and Intangible Assets Goodwill Goodwill balances by segment were as follows ($ in millions): August 2, 2025 February 1, 2025 August 3, 2024 Gross Carrying Amount Cumulative Impairment Gross Carrying Amount Cumulative Impairment Gross Carrying Amount Cumulative Impairment Domestic $ 1,450 $ ( 542 ) $ 1,450 $ ( 542 ) $ 1,450 $ ( 67 ) International 608 ( 608 ) 608 ( 608 ) 608 ( 608 ) Total $ 2,058 $ ( 1,150 ) $ 2,058 $ ( 1,150 ) $ 2,058 $ ( 675 ) In fiscal 2025, we recorded a goodwill impairment of $ 475 million within the Domestic segment for the Best Buy Health reporting unit. The restructuring activity that commenced in the first quarter of fiscal 2026 was a triggering event to evaluate the Best Buy Health reporting unit for impairment. No further goodwill impairment was identified. Refer to Note 2, Restructuring , for additional information. Indefinite-Lived Intangible Assets In the second quarter of fiscal 2026, we recorded a full impairment of $ 16 million related to our only remaining indefinite-lived intangible asset as a result of restructuring activity that commenced in the second quarter of fiscal 2026. Refer to Note 2, Restructuring , for additional information. Definite-Lived Intangible Assets We have definite-lived intangible assets recorded within Other assets on our Condensed Consolidated Balance Sheets as follows ($ in millions): August 2, 2025 February 1, 2025 August 3, 2024 Weighted-Average Useful Life Remaining as of August 2, 2025 (in years) Gross Carrying Amount (1) Accumulated Amortization (1) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Customer relationships $ 339 $ 284 $ 360 $ 285 $ 360 $ 280 8.0 Tradenames 87 78 92 79 92 75 1.2 Developed technology 56 56 64 61 64 60 - Total $ 482 $ 418 $ 516 $ 425 $ 516 $ 415 7.0 (1) Gross carrying amount and accumulated amortization as of August 2, 2025, excludes $ 34 million and $ 16 million, respectively, of definite-lived intangible assets related to the exit of a component of our Best Buy Health business. See Note 2, Restructuring , for additional information. Amortization expense included in Selling, general and administrative expenses ("SG&A") on our Condensed Consolidated Statements of Earnings was as follows ($ in millions): Three Months Ended Six Months Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Amortization expense $ 4 $ 5 $ 9 $ 11 Amortization expense expected to be recognized in future periods is as follows ($ in millions): Amortization Expense Remainder of fiscal 2026 $ 7 Fiscal 2027 13 Fiscal 2028 8 Fiscal 2029 7 Fiscal 2030 6 Fiscal 2031 5 Thereafter 18 11 Table of Contents 4. Fair Value Measurements Fair value measurements are reported in one of three levels based on the lowest level of significant input used: Level 1 (unadjusted quoted prices in active markets); Level 2 (observable market inputs, other than quoted prices included in Level 1); and Level 3 (unobservable inputs that cannot be corroborated by observable market data). Recurring Fair Value Measurements Financial assets and liabilities accounted for at fair value were as follows ($ in millions): Fair Value as of Balance Sheet Location (1) Fair Value Hierarchy August 2, 2025 February 1, 2025 August 3, 2024 Assets Money market funds (2) Cash and cash equivalents Level 1 $ 78 $ 439 $ 212 Time deposits (3) Cash and cash equivalents Level 2 258 150 136 Money market funds (2) Other current assets Level 1 123 140 147 Time deposits (3) Other current assets Level 2 40 50 51 Marketable securities that fund deferred compensation (4) Other assets Level 1 40 39 38 Liabilities Interest rate swap derivative instruments (5) Long-term liabilities Level 2 - 14 2 (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) Valued at quoted market prices in active markets at period end. (3) Valued at face value plus accrued interest at period end, which approximates fair value. (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. Nonrecurring Fair Value Measurements In the second quarter and first six months of fiscal 2026, we recorded asset impairments and other costs as a result of restructuring initiatives that commenced in the first and second quarters of fiscal 2026. These fair value remeasurements were based on significant unobservable inputs (Level 3). Refer to Note 2, Restructuring , for additional information. Fair Value of Financial 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. Fair values for other investments held at cost are not readily available, but we estimate that the carrying values for these investments approximate their fair values. Long-term debt is presented at carrying value on our Condensed Consolidated Balance Sheets. If our long-term debt were recorded at fair value, it would be classified as Level 2 in the fair value hierarchy. Long-term debt balances were as follows ($ in millions): August 2, 2025 February 1, 2025 August 3, 2024 Fair Value Carrying Value Fair Value Carrying Value Fair Value Carrying Value Long-term debt (1) $ 1,077 $ 1,150 $ 1,031 $ 1,136 $ 1,058 $ 1,148 (1) Excludes debt discounts, issuance costs and finance lease obligations. 5. Derivative Instruments We manage our economic and transaction exposure to certain risks by using foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations and by using interest rate swaps to mitigate interest rate risk on our $ 500 million of principal amount of notes due October 1, 2028. In addition, we use foreign currency forward contracts not designated as hedging instruments to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies. 12 Table of Contents Our derivative instruments designated as net investment hedges and fair value hedges are recorded on our Condensed Consolidated Balance Sheets at fair value. See Note 4, Fair Value Measurements , for gross fair values of our outstanding derivative instruments and corresponding fair value classifications. Notional amounts of our derivative instruments were as follows ($ in millions): Contract Type August 2, 2025 February 1, 2025 August 3, 2024 Derivatives designated as net investment hedges $ 119 $ 119 $ 103 Derivatives designated as fair value hedges (interest rate swaps) 500 500 500 No hedge designation (foreign exchange contracts) 62 42 59 Total $ 681 $ 661 $ 662 Effects of our fair value hedges included in Interest expense on our Condensed Consolidated Statements of Earnings were as follows ($ in millions): Gain (Loss) Recognized Three Months Ended Six Months Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Interest rate swaps $ 9 $ 24 $ 15 $ 9 Adjustments to carrying value of long-term debt ( 9 ) ( 24 ) ( 15 ) ( 9 ) Total $ - $ - $ - $ - 6. Debt Short-Term Debt U.S. Revolving Credit Facility 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 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. 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. Long-Term Debt Long-term debt consisted of the following ($ in millions): August 2, 2025 February 1, 2025 August 3, 2024 Notes, 4.45 %, due October 1, 2028 ("2028 Notes") $ 500 $ 500 $ 500 Notes, 1.95 %, due October 1, 2030 ("2030 Notes") 650 650 650 Interest rate swap valuation adjustments - ( 14 ) ( 2 ) Subtotal 1,150 1,136 1,148 Debt discounts and issuance costs ( 6 ) ( 7 ) ( 7 ) Finance lease obligations 30 25 29 Total long-term debt 1,174 1,154 1,170 Less current portion 10 10 13 Total long-term debt, less current portion $ 1,164 $ 1,144 $ 1,157 Fair Value and Future Maturities See Note 4, Fair Value Measurements , for the fair value of long-term debt. Both the 2028 Notes and the 2030 Notes mature within the next five fiscal years. 13 Table of Contents 7. Revenue We generate substantially all of our revenue from contracts with customers from the sale of products and services. Contract balances primarily relate to unfulfilled membership benefits and services not yet completed, product merchandise not yet delivered to customers, deferred revenue from our private label and co-branded credit card arrangement and unredeemed gift cards. Contract balances were as follows ($ in millions): August 2, 2025 February 1, 2025 August 3, 2024 Receivables, net (1) $ 486 $ 504 $ 474 Short-term contract liabilities included in: Unredeemed gift card liabilities 230 253 243 Deferred revenue 889 951 940 Accrued liabilities 60 50 64 Long-term contract liabilities included in: Long-term liabilities 213 229 233 (1) Receivables are recorded net of allowances for expected credit losses of $ 14 million, $ 20 million and $ 16 million as of August 2, 2025, February 1, 2025, and August 3, 2024, respectively. During the first six months of fiscal 2026 and fiscal 2025, $ 853 million and $ 893 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): Fiscal Year Amount Remainder of fiscal 2026 $ 17 Fiscal 2027 33 Fiscal 2028 29 Fiscal 2029 26 Fiscal 2030 26 Fiscal 2031 26 Thereafter 89 See Note 11, Segments , for information on our revenue by reportable segment and product category. 14 Table of Contents 8. Earnings per Share We compute our basic earnings per share based on the weighted-average number of common shares outstanding and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued as calculated using the treasury stock method. Reconciliations of the numerators and denominators of basic and diluted earnings per share were as follows ($ and shares in millions, except per share amounts): Three Months Ended Six Months Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Numerator Net earnings $ 186 $ 291 $ 388 $ 537 Denominator Weighted-average common shares outstanding 211.5 216.0 211.8 216.1 Dilutive effect of stock compensation plan awards 0.5 1.1 0.7 1.1 Weighted-average common shares outstanding, assuming dilution 212.0 217.1 212.5 217.2 Potential shares which were anti-dilutive and excluded from weighted-average share computations 0.2 - 0.1 - Basic earnings per share $ 0.88 $ 1.35 $ 1.83 $ 2.49 Diluted earnings per share $ 0.87 $ 1.34 $ 1.82 $ 2.47 9. Repurchase of Common Stock On February 28, 2022, our Board of Directors approved a $ 5.0 billion share repurchase program. The program had $ 3.1 billion remaining available for repurchases as of August 2, 2025. There is no expiration date governing the period over which we can repurchase shares under this authorization. Information regarding the shares we repurchased and retired was as follows ($ and shares in millions, except per share amounts): Three Months Ended Six Months Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Total cost of shares repurchased $ 67 $ 98 $ 167 $ 150 Average price per share $ 68.65 $ 82.57 $ 66.03 $ 80.86 Number of shares repurchased and retired 0.9 1.1 2.5 1.8 10. Contingencies We are involved in a number of legal proceedings. Where appropriate, we have made accruals with respect to these matters, which are reflected on our Condensed Consolidated Financial Statements. However, there are cases where liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. We provide disclosure of matters where we believe it is reasonably possible the impact may be material to our Condensed Consolidated Financial Statements. 15 Table of Contents 11. Segments Segment and category revenue information was as follows ($ in millions): Three Months Ended Six Months Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Domestic: Computing and Mobile Phones $ 3,930 $ 3,792 $ 7,722 $ 7,380 Consumer Electronics 2,351 2,478 4,588 4,842 Appliances 1,074 1,177 2,075 2,267 Entertainment 681 498 1,130 1,018 Services 581 590 1,160 1,168 Other 81 88 150 151 Total Domestic revenue $ 8,698 $ 8,623 $ 16,825 $ 16,826 International: Computing and Mobile Phones $ 346 $ 308 $ 670 $ 626 Consumer Electronics 198 186 371 359 Appliances 80 86 137 146 Entertainment 68 39 110 85 Services 39 38 76 77 Other 9 8 16 16 Total International revenue 740 665 1,380 1,309 Total revenue $ 9,438 $ 9,288 $ 18,205 $ 18,135 Adjusted operating income by segment and the reconciliation to consolidated earnings before income tax expense and equity in income of affiliates were as follows ($ in millions): Three Months Ended August 2, 2025 August 3, 2024 Domestic (1) International Total Domestic (1) International Total Revenue $ 8,698 $ 740 $ 9,438 $ 8,623 $ 665 $ 9,288 Cost of sales 6,665 579 7,244 6,596 506 7,102 Adjusted SG&A (2) 1,682 143 1,825 1,663 142 1,805 Adjusted operating income $ 351 $ 18 369 $ 364 $ 17 381 Restructuring charges 114 ( 7 ) Intangible asset amortization 4 5 Operating income 251 383 Other income (expense): Loss on disposal of subsidiaries ( 4 ) - Investment income and other 18 21 Interest expense ( 12 ) ( 13 ) Earnings before income tax expense and equity in income of affiliates $ 253 $ 391 (1) Domestic segment adjusted operating income includes certain operations that are based in foreign tax jurisdictions and primarily relate to sourcing products into the U.S. (2) Adjusted SG&A excludes amortization of definite-lived intangible assets associated with acquisitions. 16 Table of Contents Six Months Ended August 2, 2025 August 3, 2024 Domestic (1) International Total Domestic (1) International Total Revenue $ 16,825 $ 1,380 $ 18,205 $ 16,826 $ 1,309 $ 18,135 Cost of sales 12,884 1,078 13,962 12,882 1,003 13,885 Adjusted SG&A (2) 3,261 280 3,541 3,255 281 3,536 Adjusted operating income $ 680 $ 22 702 $ 689 $ 25 714 Restructuring charges 223 8 Intangible asset amortization 9 11 Operating income 470 695 Other income (expense): Loss on disposal of subsidiaries ( 4 ) - Investment income and other 33 46 Interest expense ( 24 ) ( 25 ) Earnings before income tax expense and equity in income of affiliates $ 475 $ 716 (1) Domestic segment adjusted operating income includes certain operations that are based in foreign tax jurisdictions and primarily relate to sourcing products into the U.S. (2) Adjusted SG&A excludes amortization of definite-lived intangible assets associated with acquisitions. Other expense and cash flow information by segment was as follows ($ in millions): Three Months Ended Six Months Ended August 2, 2025 August 3, 2024 August 2, 2025 August 3, 2024 Capital expenditures Domestic $ 161 $ 160 $ 311 $ 298 International 14 23 30 37 Total capital expenditures $ 175 $ 183 $ 341 $ 335 Depreciation and amortization Domestic $ 201 $ 208 $ 402 $ 417 International 10 10 20 20 Total depreciation and amortization $ 211 $ 218 $ 422 $ 437 Asset information by segment was as follows ($ in millions): August 2, 2025 February 1, 2025 August 3, 2024 Domestic $ 13,926 $ 13,567 $ 14,471 International 1,327 1,215 1,153 Total assets $ 15,253 $ 14,782 $ 15,624 17 Table of Contents