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Item 7. Management’s Discussion and Analysis

2026-03-18 compared with 2025-03-19 · 221 added, 140 removed, 285 unchanged (56% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Op erations.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results.

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Our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the fiscal year ended February 3, 2024, for discussion of the results of operations for the year ended February 3, 2024, compared to the year ended January 28, 2023, which is incorporated by reference herein.

Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Form 10-K for the fiscal year ended February 1, 2025 , for discussion of the results of operations for the year ended February 1, 2025, compared to the year ended February 3, 2024, which is incorporated by reference herein.

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 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 operations in the U.S.

We have two reportable segments:

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The Domestic segment is comprised of our operations in all states, districts and territories of the U.S.

and our Best Buy Health business, and includes the brand names Best Buy, Best Buy Ads, Best Buy Business, Best Buy Essentials, Best Buy Health, Current Health, Geek Squad, Imagine That, Insignia, Lively, My Best Buy, My Best Buy Memberships, Pacific Kitchen and Home, TechLiquidators and Yardbird;

and the domain names bestbuy.com, currenthealth.com, lively.com, techliquidators.com and yardbird.com.

Our International segment is comprised of all operations in Canada under the brand names Best Buy, Best Buy Express, Best Buy Mobile, Geek Squad and TechLiquidators and the domain names bestbuy.ca and techliquidators.ca.

and our Best Buy Health business, and includes the brand names Best Buy, Best Buy Ads, Best Buy Business, Best Buy Essentials, Best Buy Health, Best Buy Marketplace, Geek Squad, Imagine That, Insignia, Lively, Jitterbug, My Best Buy, My Best Buy Memberships, Pacific Kitchen and Home, TechLiquidators and Yardbird;

and the domain names bestbuy.com, lively.com, techliquidators.com and yardbird.com.

Our International segment is comprised of all operations in Canada under the brand names Best Buy, Best Buy Ads, Best Buy Business, Best Buy Express, Best Buy Marketplace, Best Buy Mobile, Geek Squad, Insignia and TechLiquidators and the domain names bestbuy.ca and techliquidators.ca.

Our fiscal year ends on the Saturday nearest the end of January.

Fiscal 2025, fiscal 2024 and fiscal 2023 ended on February 1, 2025, February 3, 2024, and January 28, 2023, respectively.

Fiscal 2026, fiscal 2025 and fiscal 2024 ended on January 31, 2026, February 1, 2025, and February 3, 2024, respectively.

Fiscal 2026 and fiscal 2025 each included 52 weeks.

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Throughout this MD&A, we refer to comparable sales.

Comparable sales is a metric used by management to evaluate the performance of our existing stores, websites and call centers by measuring the change in net sales for a particular period over the comparable prior period of equivalent length.

Comparable sales includes revenue from stores, websites and call centers operating for at least 14 full months.

Revenue from online sales is included in comparable sales and represents sales initiated on a website or app, regardless of whether customers choose to have product delivered, or pick up product in store, curbside or at an alternative pick-up location.

Comparable sales is a metric used by management to evaluate the performance of our existing stores and digital offerings by measuring the change in net sales for a particular period over the comparable prior period of equivalent length.

Comparable sales includes revenue from stores operating for at least 14 full months;

sales initiated on a website, app or virtual store;

advertising revenue;

commercial sales;

credit card revenue;

gift card breakage;

marketplace commission revenue;

and sales of merchandise to wholesalers and dealers.

Revenue from acquisitions is included in comparable sales beginning with the first full quarter following the first anniversary of the date of the acquisition.

Comparable sales also includes credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable.

Revenue from stores closed more than 14 days, including but not limited to relocated, remodeled, expanded and downsized stores, or stores impacted by natural disasters, is excluded from comparable sales until at least 14 full months after reopening.

Comparable sales excludes the impact of certain periodic warranty-related profit-share revenue, the effect of fluctuations in foreign currency exchange rates (applicable to our International segment only) and the impact of the 53 rd week (applicable in 53-week fiscal years only).

Comparable sales excludes revenue from stores closed more than 14 days (including but not limited to relocated, remodeled, expanded and downsized stores, or stores impacted by natural disasters) until at least 14 full months after reopening;

the impact of certain periodic warranty-related profit-share revenue;

the effect of fluctuations in foreign currency exchange rates (applicable to our International segment only);

and the impact of the 53 rd week (applicable in 53-week fiscal years only).

Comparable sales is based on our fiscal calendar and is not adjusted to align calendar weeks.

All periods presented apply this methodology consistently.

Consistent with our comparable sales policy, revenue from Best Buy Express locations rebranded as a result of our previously announced collaboration with Bell Canada is excluded from our comparable sales calculation until locations have been operating for at least 14 full months.

We believe comparable sales is a meaningful supplemental metric for investors to evaluate revenue performance resulting from growth in existing stores, websites and call centers versus the portion resulting from opening new stores or closing existing stores.

Comparable online sales is a subset of comparable sales related to our digital offerings and includes sales initiated on a website, app or virtual store;

advertising revenue and marketplace commission revenue.

We believe comparable sales is a meaningful supplemental metric for investors to evaluate revenue performance resulting from growth in existing stores and digital offerings versus the portion resulting from opening new stores or closing existing stores.

The method of calculating comparable sales varies across the retail industry.

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Non-GAAP Financial Measures

Beginning in the fourth quarter of fiscal 2025, we renamed our non-GAAP financial measures to adjusted financial measures;

for example, consolidated non-GAAP operating income has been renamed to consolidated adjusted operating income.

The methodology for calculating these measures remains unchanged, and therefore any previously reported non-GAAP financial measures that are renamed to corresponding adjusted financial measures remain unchanged.

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

(“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”).

(“GAAP”), as well as certain non-GAAP financial measures, such as consolidated adjusted selling, general and administrative expenses (“SG&A”), consolidated adjusted SG&A rate, 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 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, certain long-lived 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 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 consolidated adjusted operating income, consolidated adjusted effective tax rate and consolidated adjusted diluted EPS in the presented periods.

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

Business Strategy Update

Our strategy for fiscal 2026 involves three key priorities:

Omni-channel enhancements

Starting with our digital experiences, we intend to improve our search and discover capability to make it easier for our customers to find what they want and need.

We will leverage artificial intelligence (“AI”) to launch an innovative new search experience across our websites and apps.

We will also leverage AI to enhance personalization, which we believe will drive both customer engagement and sales conversion.

In our physical stores, we expect to prioritize merchandising and store health and appearance updates over large-scale remodels, building on the insights we have gained from testing and changes implemented within our stores in recent years.

Our multi-year strategy remains consistent, which is to strengthen our position in retail as a leading omnichannel destination for technology, while at the same time scaling new profit streams.

Our fiscal 2027 priorities and resource allocation philosophy also remain consistent as we build upon the momentum from fiscal 2026.

Those priorities are:

Drive omni-channel experiences that resonate with customers

Starting with our digital experiences, we have already activated on ways to bring our products to life through artificial intelligence (“AI”) platforms, which will continue to grow during fiscal 2027.

We are also partnering with various platform providers to create a more seamless agentic shopping journey, making it easier for customers to both find and purchase directly from our product catalog.

Other fiscal 2027 digital priorities include strengthening customer recognition and personalization, increasing customer adoption and engagement with the Best Buy App and driving digital conversion for categories like major appliances and home theater.

In our physical stores, we are continuing to improve the customer experience while also using our space more effectively – often in partnership with our vendors.

From a store labor perspective, we will focus on enhancements and optimization, building on the significant operating model changes we have made in recent years that were designed to provide the experience our customers expect in the most efficient way possible.

Investment in new growth initiatives

We are targeting a mid-fiscal 2026 launch for our new Best Buy Marketplace (“Marketplace”) within our Domestic segment, which we believe will complement our existing product assortment with access to a broader range of products offered by Marketplace sellers.

We believe this will unlock potential new commission and advertising revenue, without requiring our investment in inventory.

We have recently elevated our focus on Best Buy Ads, our retail media network, and we see fiscal 2026 as a pivotal year.

In recent years, Best Buy Ads has primarily served our merchandise vendors.

In fiscal 2026, we will continue this evolution and also expect Best Buy Ads to expand into other areas of opportunity.

In order to support this growth, we plan to invest in technology capabilities, our Best Buy Ads team and other new third-party partnerships.

Operational efficiency

Our third strategic priority for fiscal 2026 is to continue our longstanding commitment to operational efficiency by identifying cost reductions and other savings to help fund investment capacity for new and existing initiatives and offset financial pressures facing our business.

We enter fiscal 2026 facing significant uncertainty regarding the scope, timing and magnitude of tariffs we may experience for the products we sell and the consequent financial impact on our business.

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

For more information regarding the potential impacts of tariffs on our business, refer to Item 1A, Risk Factors , of this Annual Report on Form 10-K.

Scaling Best Buy Ads and Best Buy Marketplace

In recent years, our retail media network, Best Buy Ads, has primarily served our merchandise vendors.

In fiscal 2027, we anticipate continuing to grow Best Buy Ads through existing advertisers as well as other areas of opportunity, including advertising agencies and demand-side platforms.

In order to support this growth, we are investing in our technology capabilities, marketing and headcount across our sales, operations and technology teams.

During fiscal 2026, we launched Best Buy Marketplace within our Domestic segment, which we believe will complement our existing product assortment with access to a broader range of products offered by marketplace sellers.

We believe this will unlock potential new commission and advertising revenue, without requiring inventory investment.

In fiscal 2027, we plan to continue to expand our third-party seller count, while investing in technology, advertising and our marketplace team to support future growth.

Drive efficiencies and identify cost reductions that are crucial to helping to fund investment capacity and offset pressure in our business

In fiscal 2027, we will continue to prioritize our longstanding commitment to operational efficiency by identifying cost reductions and other savings to help fund investment capacity for new and existing initiatives and offset financial pressures facing our business.

During fiscal 2026, U.S.

tariffs were imposed under the International Emergency Economic Powers Act (the “IEEPA”) that applied to certain imported private‑label branded and direct import products that we sold during the year or held in inventory as of the end of the fiscal year.

While we directly import approximately 1% to 3% of our overall assortment, our supply chain is highly dependent on vendor imports, including product sourced from China, Mexico and Southeast Asia.

On February 20, 2026, the U.S.

Supreme Court ruled that tariffs imposed under the IEEPA were unauthorized.

The ruling did not address potential refunds.

Following the ruling, various actions and proceedings have occurred involving U.S.

trade authorities and the U.S.

Court of International Trade relating to the administration, collection and potential refund of tariffs imposed under the IEEPA.

The outcome of these actions, including the timing, process and ultimate recoverability of any refunds, remains uncertain.

In addition, subsequent to the U.S.

Supreme Court’s ruling, the U.S.

government has initiated further actions under existing trade authorities to evaluate foreign trade practices, which could result in the imposition of additional tariffs or other trade measures.

We will continue to evaluate the potential effects of these developments on our financial position, results of operations and cash flows.

For additional information regarding tariff‑related risks, see Item 1A, Risk Factors , in this Annual Report on Form 10‑K.

Results of Operations

Consolidated Results

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

As we entered the year, we were operating in an uneven environment and expected there would be industry pressure.

Our strategy was to focus on sharpening our customer experiences and industry positioning while optimizing our operating income rate.

In fiscal 2026, our comparable sales returned to growth and we stabilized our market share position while navigating a complex and often evolving tariff situation.

We launched and began to scale Best Buy Marketplace within our Domestic segment and grew our retail media network, Best Buy Ads.

We believe we were able to both make investments in our strategic initiatives and expand our operating margin through a combination of disciplined expense management and efficiency optimization efforts.

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

2026 2025 2024

Revenue $ 41,691 $ 41,528 $ 43,452

Revenue % change 0.4 % (4.4) % (6.1) %

Comparable sales % change 0.5 % (2.3) % (6.8) %

Gross profit $ 9,373 $ 9,385 $ 9,603

Gross profit as a % of revenue (1)

22.5 % 22.6 % 22.1 %

SG&A $ 7,623 $ 7,651 $ 7,876

SG&A as a % of revenue (1)

18.3 % 18.4 % 18.1 %

Restructuring charges $ 190 $ (3) $ 153

Goodwill impairment

Goodwill and intangible asset impairments $ 171 $ 475 $ -

Operating income $ 1,389 $ 1,262 $ 1,574

Operating income as a % of revenue 3.3 % 3.0 % 3.6 %

Net earnings $ 1,069 $ 927 $ 1,241

Diluted EPS $ 5.04 $ 4.28 $ 5.68

(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 Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.

In fiscal 2025, we generated $41.5 billion in revenue, compared to $43.5 billion in fiscal 2024 that included approximately $735 million in revenue from the 53 rd week.

Our comparable sales declined 2.3% in fiscal 2025, as we continued to operate in a challenged consumer electronics industry and experienced softer consumer demand.

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

Restructuring charges in fiscal 2025 were primarily comprised of adjustments to employee termination benefits related to previously planned organizational changes and higher-than-expected employee retention associated with an enterprise-wide initiative that commenced in the fourth quarter of fiscal 2024.

In fiscal 2026, we generated $41.7 billion in revenue, compared to $41.5 billion in fiscal 2025, and our comparable sales grew 0.5%, primarily driven by comparable sales growth in computing and mobile phones, partially offset by comparable sales declines in home theater and appliances.

The comparable sales growth was due to a mix of new technology innovation, our continued focus on omni-channel customer experience and strong vendor partnerships.

Restructuring charges in fiscal 2026 were primarily related to a labor and store optimization restructuring initiative that commenced in the second quarter of fiscal 2026 and 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, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for additional information.

The goodwill impairment in fiscal 2025 was related to our Best Buy Health reporting unit.

The impairment primarily arose from downward revisions of our revenue growth rates and margin rates compared to projections used in prior years.

Goodwill and intangible asset impairments in fiscal 2026 were related to Best Buy Health.

A change in Best Buy Health’s customer base during the third quarter of fiscal 2026 resulted in an impairment review of all Best Buy Health assets.

The impairments reflect downward revisions of our revenue growth rates and margin rates compared to previous projections, in part due to pressures in the Medicaid and Medicare Advantage markets.

Refer to Note 3, Goodwill and Intangible Assets , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for additional information.

Operating income rate decreased in fiscal 2025, primarily due to the goodwill impairment and unfavorable SG&A rate, partially offset by favorability in the gross profit rate and lower restructuring charges.

Diluted EPS decreased in fiscal 2025, primarily due to lower operating income.

Revenue, gross profit rate, SG&A and operating income rate changes in fiscal 2025 were primarily driven by our Domestic segment.

Operating income rate increased in fiscal 2026, primarily due to lower goodwill and intangible asset impairments, partially offset by higher restructuring charges.

Diluted EPS increased in fiscal 2026, primarily due to higher net earnings driven by lower goodwill and intangible asset impairments, partially offset by higher restructuring charges.

In fiscal 2026, revenue changes were primarily driven by our International segment, and operating income rate changes were primarily driven by our Domestic segment.

Gross profit rate and SG&A rate changes in fiscal 2026 were driven by both of our segments.

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

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Stores open by segment were as follows:

February 1, 2025

February 3, 2024

January 28, 2023

Best Buy Outlet Centers

January 31, 2026 February 1, 2025 February 3, 2024

Best Buy 886 891 901

Outlet Centers 18 25 22

Pacific Sales 20 20 20

Yardbird 2 21 22

Total Domestic stores 926 957 965

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Total International stores (1)

Total stores 1,068 1,117 1,125

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

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

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 segment Best Buy store count by approximately 5 to 10 stores.

In fiscal 2024, 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 and therefore excluded from our store count.

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

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

By the end of fiscal 2025, all of the 167 stores have been rebranded.

We currently expect to increase our Domestic segment Best Buy store count by approximately 4 stores by the end of fiscal 2027.

In fiscal 2026, we closed select non-traditional Domestic and International store locations in conjunction with our restructuring initiative that commenced in the second quarter of fiscal 2026, with additional closures expected in fiscal 2027.

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

Income Tax Expense

Income tax expense decreased to $372 million in fiscal 2025 compared to $381 million in fiscal 2024, primarily due to the impact of decreased pre-tax earnings, partially offset by the impact of certain expenses that are not tax deductible.

Our effective tax rate increased to 28.7% in fiscal 2025 compared to 23.5% in fiscal 2024, primarily due to the impacts of certain expenses that are not tax deductible and lower pre-tax earnings, partially offset by increased tax benefits from green energy incentives.

Income tax expense decreased to $337 million in fiscal 2026 compared to $372 million in fiscal 2025.

Our effective tax rate decreased to 24.0% in fiscal 2026 compared to 28.7% in fiscal 2025.

The decreases were primarily due to the tax impacts of the restructuring charges and the associated exit of a component of our Best Buy Health business, as well as certain expenses that were not deductible in the prior year.

The decrease in income tax expense was partially offset by the impact of increased pre-tax earnings.

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

Segment Performance Summary

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

2026 2025 2024

Revenue $ 38,278 $ 38,238 $ 40,097

Revenue % change 0.1 % (4.6) % (6.3) %

Comparable sales % change (1)

0.4 % (2.5) % (7.1) %

Gross profit $ 8,636 $ 8,647 $ 8,850

Gross profit as a % of revenue 22.6 % 22.6 % 22.1 %

Adjusted SG&A (2)

$ 6,966 $ 7,000 $ 7,175

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

18.2 % 18.3 % 17.9 %

Adjusted operating income (2)

$ 1,670 $ 1,647 $ 1,675

Adjusted operating income as a % of revenue (4)

4.4 % 4.3 % 4.2 %

Selected Online Revenue Data

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Comparable online sales % change (1)

1.3 % (0.8) % (7.8) %

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

(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):

Improvements to Reportable Segment Disclosures .

See Note 1, Summary of Significant Accounting Policies , and Note13, Segment and Geographic Information , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for additional information.

(2) Represents segment Adjusted SG&A and segment Adjusted operating income as reported in accordance with Accounting Standards Codification ("ASC") 280, Segment Reporting .

(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 fiscal 2025, primarily driven by comparable sales declines in appliances and home theater and by the extra week of revenue totaling approximately $675 million in fiscal 2024.

These decreases were partially offset by comparable sales growth in computing.

Online revenue of $13.0 billion decreased 0.8% on a comparable basis in fiscal 2025.

Domestic segment revenue increased slightly in fiscal 2026, primarily driven by comparable sales growth in computing, gaming and mobile phones, mostly offset by comparable sales declines in home theater and appliances.

Online revenue of $13.2 billion increased 1.3% on a comparable basis in fiscal 2026.

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

Revenue Mix Summary

Comparable Sales Summary

Revenue Mix Comparable Sales

2026 2025 2026 2025

Computing and Mobile Phones 47 % 45 % 5.7 % 3.4 %

Consumer Electronics 28 % 29 % (5.4) % (5.2) %

Appliances 11 % 12 % (8.9) % (14.8) %

Entertainment 7 % 7 % 6.8 % (11.9) %

Services 6 % 6 % 1.0 % 8.4 %

Other 1 % 1 % (6.3) % 15.9 %

Total 100 % 100 % 0.4 % (2.5) %

Notable comparable sales changes by revenue category were as follows:

• Computing and Mobile Phones:

The 3.4% comparable sales growth was driven primarily by computing and tablets.

The 5.7% comparable sales growth was driven primarily by laptops, mobile phones and desktops.

• Consumer Electronics:

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• Entertainment:

The 11.9% comparable sales decline was driven primarily by gaming.

The 8.4% comparable sales growth was driven primarily by growth in our delivery and installation services, as well as our membership programs.

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

Domestic segment adjusted SG&A decreased in fiscal 2025, primarily due to lower employee compensation expense, which was primarily store payroll, the impact of the 53 rd week in fiscal 2024 and reduced vehicle rental costs.

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

Domestic segment adjusted operating income rate increased in fiscal 2025, primarily due to a favorable gross profit rate, partially offset by higher advertising and technology spend on lower sales, resulting in an unfavorable SG&A rate.

The 6.8% comparable sales growth was driven primarily by gaming, partially offset by a comparable sales decline in drones.

The 1.0% comparable sales growth was driven primarily by Best Buy Marketplace and Best Buy Ads, partially offset by a comparable sales decline in our Best Buy Health service offerings.

Domestic segment gross profit rate remained effectively unchanged in fiscal 2026, primarily due to lower product margin rates, mostly offset by rate improvement within the services category and growth in Best Buy Ads.

Domestic segment adjusted SG&A decreased slightly in fiscal 2026, primarily due to lower Best Buy Health expenses, lower depreciation and favorable fiscal 2026 indirect tax resolutions, mostly offset by increased expenses in support of our Best Buy Ads and Best Buy Marketplace initiatives, including higher advertising and employee compensation expenses.

Domestic segment adjusted operating income rate increased slightly in fiscal 2026, primarily due to a favorable adjusted SG&A rate.

International Segment

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

2026 2025 2024

Revenue $ 3,413 $ 3,290 $ 3,355

Revenue % change 3.7 % (1.9) % (4.3) %

Comparable sales % change 2.3 % (0.5) % (3.2) %

Gross profit $ 737 $ 738 $ 753

Gross profit as a % of revenue 21.6 % 22.4 % 22.4 %

Adjusted SG&A (1)

$ 622 $ 630 $ 640

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

18.2 % 19.1 % 19.1 %

Adjusted operating income (1)

$ 115 $ 108 $ 113

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 Note 1, Summary of Significant Accounting Policies , and Note 13, Segment and Geographic Information , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for additional information.

3.4 % 3.3 % 3.4 %

(1) Represents segment Adjusted SG&A and segment Adjusted operating income in accordance with ASC 280, Segment Reporting .

(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 fiscal 2025, primarily driven by the negative impact of foreign exchange rates and by the extra week of revenue totaling approximately $60 million in fiscal 2024.

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

International segment revenue increased in fiscal 2026, primarily driven by revenue from Best Buy Express locations excluded from comparable sales and comparable sales growth primarily driven by computing and mobile phones, partially offset by the negative impact of foreign exchange rates.

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

Revenue Mix Summary

Comparable Sales Summary

Revenue Mix Comparable Sales

2026 2025 2026 2025

Computing and Mobile Phones 49 % 48 % 5.5 % 3.4 %

Consumer Electronics 27 % 28 % (0.1) % (3.3) %

Appliances 9 % 10 % (5.1) % (0.9) %

Entertainment 8 % 8 % (0.6) % (13.3) %

Services 6 % 5 % 5.2 % 5.3 %

Other 1 % 1 % (6.3) % (11.0) %

Total 100 % 100 % 2.3 % 0.5 %

Notable comparable sales changes by revenue category were as follows:

• Computing and Mobile Phones:

The 3.4% comparable sales growth was driven primarily by mobile phones.

The 5.5% comparable sales growth was driven primarily by computing and mobile phones.

• Consumer Electronics:

The 3.3% comparable sales decline was driven primarily by home theater and smart home.

The 0.1% comparable sales decline was driven primarily by home theater and smart home, partially offset by comparable sales growth in digital imaging and health and fitness.

• Appliances:

The 0.9% comparable sales decline was driven primarily by large appliances.

The 5.1% comparable sales decline was driven by small and large appliances.

• Entertainment:

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

The 5.3% comparable sales growth was driven primarily by growth in our warranty services and membership programs.

International segment gross profit rate in fiscal 2025 remained unchanged from fiscal 2024 .

International segment adjusted SG&A decreased in fiscal 2025, primarily due to the favorable impact of foreign exchange rates and the impact of the 53 rd week in fiscal 2024, partially offset by expenses associated with new Best Buy Express locations.

International segment adjusted operating income rate in fiscal 2025 remained relatively unchanged from fiscal 2024.

The 0.6% comparable sales decline was driven primarily by virtual reality and drones, partially offset by comparable sales growth in gaming.

The 5.2% comparable sales growth was driven primarily by growth in marketplace and our membership programs.

International segment gross profit rate decreased in fiscal 2026, primarily due to lower product margin rates and unfavorable supply chain costs, partially offset by marketplace growth.

International segment adjusted SG&A decreased in fiscal 2026, primarily due to lower employee compensation expense, including incentive compensation, and the favorable impact of foreign exchange rates.

International segment adjusted operating income rate increased in fiscal 2026, primarily due to increased leverage from higher sales volumes, which resulted in a favorable adjusted SG&A rate, partially offset by an unfavorable gross profit rate.

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):

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

2026 2025 2024

SG&A $ 7,623 $ 7,651 $ 7,876

% of revenue 18.3 % 18.4 % 18.1 %

Intangible asset amortization (1)

(14) (21) (61)

Long-lived asset impairment (2)

Adjusted SG&A $ 7,588 $ 7,630 $ 7,815

% of revenue 18.2 % 18.4 % 18.0 %

Operating income $ 1,389 $ 1,262 $ 1,574

% of revenue 3.3 % 3.0 % 3.6 %

Intangible asset amortization (1)

Long-lived asset impairment (2)

Restructuring charges (3)

Goodwill impairment (3)

Goodwill and intangible asset impairments (2)

Adjusted operating income $ 1,785 $ 1,755 $ 1,788

% of revenue 4.3 % 4.2 % 4.1 %

Effective tax rate 24.0 % 28.7 % 23.5 %

Intangible asset amortization (1)

(0.1) % (0.6) % 0.1 %

Long-lived asset impairment (2)

(0.2) % - % - %

Restructuring charges (3)

Goodwill impairment (3)

1.5 % 0.1 % 0.2 %

Goodwill and intangible asset impairments (2)

(0.4) % (4.9) % - %

Adjusted effective tax rate 24.8 % 23.3 % 23.8 %

Diluted EPS $ 5.04 $ 4.28 $ 5.68

Intangible asset amortization (1)

0.07 0.10 0.28

Long-lived asset impairment (2)

Restructuring charges (3)

Goodwill impairment (3)

Gain on sale of subsidiary, net (4)

Loss on investments

0.90 (0.01) 0.70

Goodwill and intangible asset impairments (2)

(Gain) loss on disposal of subsidiaries (4)

0.03 - (0.10)

Loss on investments, net 0.03 0.03 0.05

Income tax impact of non-GAAP adjustments (5)

(0.55) (0.22) (0.24)

Adjusted diluted EPS $ 6.43 $ 6.37 $ 6.37

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Note 3, Goodwill and Intangible Assets ;

Note 4, Fair Value Measurements ;

and Note 10, Income Taxes , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.

(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 to previously planned organizational changes and higher-than-expected employee retention associated with enterprise-wide restructuring initiatives.

(3) Represents the non-cash goodwill impairment charge related to our Best Buy Health reporting unit.

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

(2) Represents charges incurred related to Best Buy Health, comprised of non-cash impairments of goodwill, intangible assets and certain long-lived assets.

(3) Charges in fiscal 2026 primarily related to a labor and store optimization restructuring initiative that commenced in the second quarter of fiscal 2026 and a restructuring initiative within the company's Best Buy Health business that commenced in the first quarter of fiscal 2026.

Charges in fiscal 2024 primarily related to an enterprise-wide restructuring initiative that commenced in the fourth quarter of fiscal 2024.

(4) Primarily represents charges incurred related to the exit of a component of our Best Buy Health business in fiscal 2026 and the disposal of a Mexico subsidiary in fiscal 2024.

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

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non-GAAP adjustments, as there is no tax benefit on the expenses in the calculation of GAAP income tax expense.

Adjusted operating income rate increased in fiscal 2025, primarily due to a favorable gross profit rate in our Domestic segment, partially offset by an unfavorable SG&A rate in our Domestic segment.

Adjusted effective tax rate decreased in fiscal 2025, primarily due to increased tax benefits from green energy incentives.

Adjusted diluted EPS in fiscal 2025 remained unchanged from fiscal 2024, as the decrease in adjusted earnings was 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

February 3, 2024

January 31, 2026 February 1, 2025

Cash and cash equivalents $ 1,738 $ 1,578

The increase in cash and cash equivalents in fiscal 2025 was primarily due to positive cash flows from operations, primarily driven by earnings .

These increases were partially offset by dividend payments, capital expenditures and share repurchases.

The increase in cash and cash equivalents in fiscal 2026 was primarily driven by positive operating cash flows from earnings.

The increase was partially offset by dividend payments, capital expenditures and share repurchases.

Our cash deposits held at financial institutions may exceed the amount of insurance provided on such deposits.

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Cash flows were as follows ($ in millions):

2026 2025 2024

Total cash provided by (used in):

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Operating Activities

Cash provided by operating activities increased in fiscal 2025, 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 fiscal 2026 was primarily driven by cash outflows from accounts payable due to the timing of inventory purchases and payments.

The decrease was partially offset by lower income tax payments and an increase in net earnings adjusted for non-cash items.

Investing Activities

Cash used in investing activities decreased in fiscal 2025, primarily driven by lower capital spending.

The increase in cash used in investing activities in fiscal 2026 was primarily driven by the disposal of a component of our Best Buy Health business.

Financing Activities

Cash used in financing activities increased in fiscal 2025, primarily driven by higher share repurchases.

The decrease in cash used in financing activities in fiscal 2026 was primarily driven by lower 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 February 1, 2025, or February 3, 2024.

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”), 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.

There were no borrowings outstanding under the Five-Year Facility Agreement as of January 31, 2026, or under the Previous Facility as of February 1, 2025.

The Five-Year Facility Agreement contains a covenant that requires the company to maintain a maximum quarterly cash flow leverage ratio.

The Five-Year Facility Agreement contains customary default provisions, including, but not limited to, failure to pay interest or principal when due and failure to comply with covenants.

As of February 1, 2025, we were in compliance with all covenants.

As of January 31, 2026, we were in compliance with all covenants.

If an event of default were to occur with respect to any of our other debt, it would likely constitute an event of default under the Five-Year Facility Agreement as well.

Our credit ratings and outlook as of March 16, 2026, remained unchanged from those disclosed in our Annual Report on Form 10-K for the fiscal year ended February 1, 2025, and are summarized below.

Rating Agency

Standard & Poor's

Rating Agency Rating Outlook

S&P Global BBB+ Stable

Moody's A3 Stable

Credit rating agencies review their ratings periodically, and, therefore, the credit rating assigned to us by each agency may be subject to revision at any time.

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

Restricted cash, which is included in Other current assets on our Consolidated Balance Sheets, was $290 million and $346 million as of February 1, 2025, and February 3, 2024, respectively.

Restricted cash, which is included in Other current assets on our Consolidated Balance Sheets, was $285 million and $290 million as of January 31, 2026, and February 1, 2025, respectively.

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

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Capital expenditures were as follows ($ in millions):

2026 2025 2024

E-commerce and information technology $ 463 $ 438 $ 496

Store-related projects (1)

Supply chain 41 38 21

Total capital expenditures $ 704 $ 706 $ 795

(1) Store-related projects are primarily comprised of store remodels and various merchandising projects.

We currently expect capital expenditures in fiscal 2026 of $700 million to $750 million.

We currently expect capital expenditures in fiscal 2027 of approximately $750 million.

Debt and Capital

As of February 1, 2025, we had $500 million of principal amount of notes due October 1, 2028 (“2028 Notes”) and $650 million of principal amount of notes due October 1, 2030 (“2030 Notes”).

Refer to Note 7, Debt , in the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for further information about our outstanding debt.

As of January 31, 2026, we had $500 million of principal amount of notes due October 1, 2028 (“2028 Notes”) and $650 million of principal amount of notes due October 1, 2030 ("2030 Notes").

Refer to Note 7, Debt , in the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K for additional information about our outstanding debt.

Share Repurchases and Dividends

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

2026 2025 2024

Total cost of shares repurchased $ 273 $ 500 $ 340

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Total number of shares repurchased 4.0 5.8 4.7

Regular quarterly cash dividends per share

Regular quarterly cash dividend per share $ 3.80 $ 3.76 $ 3.68

Cash dividends declared and paid $ 801 $ 807 $ 801

The total cost of shares repurchased increased in fiscal 2025 from increases in the volume of repurchases and the average price per share.

Cash dividends declared and paid increased in fiscal 2025, primarily due to an increase in the regular quarterly cash dividend per share, partially offset by fewer shares outstanding.

On March 4, 2025 , we announced the Board’s approval of a 1% increase in the regular quarterly cash dividend to $0.95 per share.

The total cost of shares repurchased decreased in fiscal 2026 due to decreases in the volume of repurchases and the average price per share.

Cash dividends declared and paid decreased in fiscal 2026, due to fewer shares outstanding, partially offset by an increase in the regular quarterly cash dividend per share.

Off-Balance-Sheet Arrangements and Contractual Obligations

We do not have outstanding off-balance-sheet arrangements.

Contractual obligations as of February 1, 2025, were as follows ($ in millions):

Contractual obligations as of January 31, 2026, were as follows ($ in millions):

Payments Due by Period

Contractual Obligations

Contractual Obligations Total Less Than

1 Year 1-3 Years 3-5 Years More Than

Purchase obligations (1)

$ 3,209 $ 2,393 $ 476 $ 127 $ 213

Operating lease obligations (2)

3,347 739 1,297 769 542

Long-term debt obligations (3)

1,150 - 500 650 -

Interest payments (4)

127 38 66 23 -

Finance lease obligations 36 12 16 6 2

Total $ 7,869 $ 3,182 $ 2,355 $ 1,575 $ 757

For additional information regarding the nature of contractual obligations discussed below, refer to Note 5, Derivative Instruments ;

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(2) Operating lease obligations exclude payments to landlords covering real estate taxes and common area maintenance.

These charges, if included, would increase total operating lease obligations by $0.7 billion as of February 1, 2025.

These charges, if included, would increase total operating lease obligations by $0.8 billion as of January 31, 2026.

Operating lease obligations also exclude $22 million of legally binding fixed costs for leases signed but not yet commenced.

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(4) Interest payments related to our 2028 Notes and 2030 Notes include the variable interest rate payments included in our interest rate swaps.

Additionally, we have $1.25 billion in undrawn capacity on our Five-Year Facility Agreement as of February 1, 2025, which, if drawn upon, would be included in either short-term or long-term debt on our Consolidated Balance Sheets.

Additionally, we have $1.25 billion in undrawn capacity on our Five-Year Facility Agreement as of January 31, 2026, which, if drawn upon, would be included in either short-term or long-term debt on our Consolidated Balance Sheets.

Critical Accounting Estimates

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Effect if actual results differ from assumptions

A 10% change in our vendor funding deferral as of February 1, 2025, would have affected net earnings by approximately $45 million in fiscal 2025.

A 10% change in our vendor funding deferral as of January 31, 2026, would have affected net earnings by approximately $45 million in fiscal 2026.

The level of vendor funding deferral has remained relatively stable over the last three fiscal years.

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We have goodwill in two reporting units – Best Buy Domestic (comprising our core U.S.

Best Buy business) and Best Buy Health – with carrying values of $492 million and $416 million, respectively, as of February 1, 2025.

Best Buy business) and Best Buy Health – with carrying values of $492 million and $298 million, respectively, as of January 31, 2026.

Judgments and uncertainties involved in the estimate

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Barring a fundamental, material deterioration of macroeconomic factors, we believe the risk of future goodwill impairment within our Best Buy Domestic reporting unit is remote.

In fiscal 2025, we recorded a goodwill impairment of $475 million for the Best Buy Health reporting unit.

The impairment was identified during the fourth quarter as a result of our annual impairment review.

This coincides with our annual review of performance against financial and strategic goals, and the annual update of our budget and long-range financial projections.

Fair value for the Best Buy Health reporting unit is estimated primarily based on DCF analysis.

The impairment primarily arose from downward revisions of our revenue growth rates and margin rates compared to projections used in prior years, as the market has not scaled as we originally forecasted.

In the third quarter of fiscal 2026, we recorded a goodwill impairment of $118 million within the Domestic segment for the

Best Buy Health reporting unit.

A change in Best Buy Health’s customer base during the third quarter resulted in an impairment review of all Best Buy Health assets.

The fair value of Best Buy Health was estimated primarily based on DCF analysis.

The impairment reflects downward revisions of our revenue growth rates and margin rates compared to previous projections, in part due to pressures in the Medicaid and Medicare Advantage markets.

No further impairment was identified in the fourth quarter of fiscal 2026.

Our Best Buy Health reporting unit is subject to a greater level of uncertainty compared to our Best Buy Domestic reporting unit, since it operates in a more uncertain environment.

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Effect if actual results differ from assumptions

A 10% change in our markdown adjustment as of February 1, 2025, would have affected net earnings by approximately $11 million in fiscal 2025.

A 10% change in our markdown adjustment as of January 31, 2026, would have affected net earnings by approximately $9 million in fiscal 2026.

The level of markdown adjustments has remained relatively stable over the last three fiscal years.

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Effect if actual results differ from assumptions

A 10% change in the amount of services membership deferred revenue as of February 1, 2025, would have affected net earnings by approximately $43 million in fiscal 2025.

A 10% change in the amount of services membership deferred revenue as of January 31, 2026, would have affected net earnings by approximately $42 million in fiscal 2026.

The level of services membership deferred revenue has remained relatively stable over the last three fiscal years.

New Accounting Pronouncements

For a description of applicable new accounting pronouncements, including our assessment of the impact on our financial statements, see Note 1, Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.

For a description of applicable new or recently issued accounting pronouncements, including our assessment of the impact on our financial statements, see Note 1, Summary of Significant Accounting Policies , of the Notes to Consolidated Financial Statements, included in Item 8, Financial Statements and Supplementary Data , of this Annual Report on Form 10-K.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis