BEST BUY CO INC 10-Q

Item 1. Financial Statements Condensed Consolidated Balance Sheets $ in millions, except per share amounts (unaudited) May 2, 2026 January 31, 2026 May 3, 2025 Assets Current assets Cash and cash equivalents $ 1,749 $ 1,738 $ 1,147 Receivables, net 906 1,043 744 Merchandise inventories 5,598 5,230 5,194 Other current assets 487 493 500 Total current assets 8,740 8,504 7,585 Property and equipment, net 1,987 1,986 2,089 Operating lease assets 2,870 2,869 2,821 Goodwill 790 790 908 Other assets 503 521 725 Total assets $ 14,890 $ 14,670 $ 14,128 Liabilities and equity Current liabilities Accounts payable $ 5,118 $ 4,745 $ 4,670 Unredeemed gift card liabilities 229 235 246 Deferred revenue 843 900 891 Accrued compensation and related expenses 317 423 367 Accrued liabilities 665 742 617 Current portion of operating lease liabilities 614 623 611 Current portion of long-term debt 11 11 10 Total current liabilities 7,797 7,679 7,412 Long-term operating lease liabilities 2,343 2,334 2,277 Long-term debt 1,158 1,165 1,153 Long-term liabilities 509 528 523 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 - 210.7 million, 209.1 million and 211.3 million shares, respectively 22 22 22 Additional paid-in capital 65 14 - Retained earnings 2,677 2,610 2,428 Accumulated other comprehensive income 319 318 313 Total equity 3,083 2,964 2,763 Total liabilities and equity $ 14,890 $ 14,670 $ 14,128 NOTE: The Consolidated Balance Sheet as of January 31, 2026, 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 May 2, 2026 May 3, 2025 Revenue $ 8,936 $ 8,767 Cost of sales 6,834 6,718 Gross profit 2,102 2,049 Selling, general and administrative expenses 1,741 1,721 Restructuring charges ( 9 ) 109 Operating income 370 219 Other income (expense): Investment income and other 19 15 Interest expense ( 11 ) ( 12 ) Earnings before income tax expense and equity in loss of affiliates 378 222 Income tax expense 102 19 Equity in loss of affiliates - ( 1 ) Net earnings $ 276 $ 202 Basic earnings per share $ 1.31 $ 0.95 Diluted earnings per share $ 1.31 $ 0.95 Weighted-average common shares outstanding: Basic 210.4 212.0 Diluted 211.3 213.0 See Notes to Condensed Consolidated Financial Statements. 4 Table of Contents Condensed Consolidated Statements of Comprehensive Income $ in millions (unaudited) Three Months Ended May 2, 2026 May 3, 2025 Net earnings $ 276 $ 202 Foreign currency translation adjustments, net of tax 1 13 Comprehensive income $ 277 $ 215 See Notes to Condensed Consolidated Financial Statements. 5 Table of Contents Condensed Consolidated Statements of Cash Flows $ in millions (unaudited) Three Months Ended May 2, 2026 May 3, 2025 Operating activities Net earnings $ 276 $ 202 Adjustments to reconcile net earnings to total cash provided by operating activities: Depreciation and amortization 194 211 Restructuring charges ( 9 ) 109 Stock-based compensation 40 40 Deferred income taxes 10 ( 51 ) Other, net 1 ( 2 ) Changes in operating assets and liabilities: Receivables 138 298 Merchandise inventories ( 367 ) ( 95 ) Other assets 12 7 Accounts payable 349 ( 330 ) Income taxes 42 7 Other liabilities ( 311 ) ( 362 ) Total cash provided by operating activities 375 34 Investing activities Additions to property and equipment ( 160 ) ( 166 ) Total cash used in investing activities ( 160 ) ( 166 ) Financing activities Repurchase of common stock - ( 100 ) Dividends paid ( 202 ) ( 202 ) Other, net - ( 3 ) Total cash used in financing activities ( 202 ) ( 305 ) Effect of exchange rate changes on cash and cash equivalents - 4 Increase (decrease) in cash, cash equivalents and restricted cash 13 ( 433 ) Cash, cash equivalents and restricted cash at beginning of period 2,023 1,868 Cash, cash equivalents and restricted cash at end of period $ 2,036 $ 1,435 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 Total Balances at January 31, 2026 209.1 $ 22 $ 14 $ 2,610 $ 318 $ 2,964 Net earnings, three months ended May 2, 2026 - - - 276 - 276 Other comprehensive income: Foreign currency translation adjustments, net of tax - - - - 1 1 Stock-based compensation - - 40 - - 40 Issuance of common stock 1.6 - 4 - - 4 Common stock dividends, $ 0.96 per share - - 7 ( 209 ) - ( 202 ) Balances at May 2, 2026 210.7 $ 22 $ 65 $ 2,677 $ 319 $ 3,083 Balances at February 1, 2025 211.4 $ 22 $ - $ 2,486 $ 300 $ 2,808 Net earnings, three months ended May 3, 2025 - - - 202 - 202 Other comprehensive income: Foreign currency translation adjustments, net of tax - - - - 13 13 Stock-based compensation - - 40 - - 40 Issuance of common stock 1.5 - 2 - - 2 Common stock dividends, $ 0.95 per share - - 6 ( 208 ) - ( 202 ) Repurchase of common stock ( 1.6 ) - ( 48 ) ( 52 ) - ( 100 ) Balances at May 3, 2025 211.3 $ 22 $ - $ 2,428 $ 313 $ 2,763 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 January 31, 2026. The first three months of fiscal 2027 and fiscal 2026 each included 13 weeks. Unless otherwise noted, references to years in these notes to condensed consolidated financial statements relate to fiscal years, not calendar years. In preparing the accompanying condensed consolidated financial statements, we evaluated the period from May 2, 2026, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified. Unadopted Accounting Pronouncements In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. 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 $ 861 million, $ 600 million and $ 569 million as of May 2, 2026, January 31, 2026, and May 3, 2025, 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): May 2, 2026 January 31, 2026 May 3, 2025 Cash and cash equivalents $ 1,749 $ 1,738 $ 1,147 Restricted cash included in Other current assets 287 285 288 Total cash, cash equivalents and restricted cash $ 2,036 $ 2,023 $ 1,435 Amounts included in restricted cash are primarily restricted to cover product protection plans provided under our membership offerings and self-insurance liabilities. 8 Table of Contents 2. Restructuring Restructuring charges were as follows ($ in millions): Three Months Ended May 2, 2026 May 3, 2025 Fiscal 2026 Labor and Store Optimization Initiative $ ( 8 ) $ - Best Buy Health Optimization and China Sourcing Initiative ( 1 ) 111 Fiscal 2024 Restructuring Initiative - ( 2 ) Total $ ( 9 ) $ 109 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 May 2, 2026 Cumulative Amount as of May 2, 2026 Domestic Domestic International Total Termination benefits $ ( 7 ) $ 61 $ 3 $ 64 Asset impairments and other costs (1) ( 1 ) 45 - 45 Total $ ( 8 ) $ 106 $ 3 $ 109 (1) Cumulative amount as of May 2, 2026 primarily represents asset impairments related to planned store closures, an impairment related to an indefinite-lived tradename and other exit costs. The remaining carrying value of net assets approximates fair value and was immaterial as of May 2, 2026. Restructuring accrual activity related to this initiative was as follows ($ in millions): Termination Benefits Domestic International Total Balances at January 31, 2026 $ 42 $ 3 $ 45 Cash payments ( 8 ) ( 1 ) ( 9 ) Adjustments (1) ( 7 ) - ( 7 ) Balances at May 2, 2026 $ 27 $ 2 $ 29 (1) Represents adjustments primarily related to higher-than-expected employee retention from previously planned organizational changes. Our restructuring accrual liabilities primarily related to termination benefits of $ 29 million as of May 2, 2026, reflect expected future cash payments primarily during fiscal 2027 and fiscal 2028. 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 and no material liability remains as of May 2, 2026. 9 Table of Contents 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. There were no expenses incurred related to this initiative in the first quarter of fiscal 2027, and we do not expect to incur material future restructuring charges related to this initiative. The only remaining restructuring accrual related to this initiative relates to our Domestic segment and was as follows ($ in millions): Termination Benefits Balance at January 31, 2026 $ 31 Cash payments ( 1 ) Balance at May 2, 2026 $ 30 Our restructuring accrual liability related to termination benefits of $ 30 million as of May 2, 2026, reflects expected future cash payments primarily during fiscal 2028. 3. Goodwill Goodwill balances by segment were as follows ($ in millions): May 2, 2026 January 31, 2026 May 3, 2025 Gross Carrying Amount Cumulative Impairment Gross Carrying Amount Cumulative Impairment (1) Gross Carrying Amount Cumulative Impairment Domestic $ 1,450 $ ( 660 ) $ 1,450 $ ( 660 ) $ 1,450 $ ( 542 ) International 608 ( 608 ) 608 ( 608 ) 608 ( 608 ) Total $ 2,058 $ ( 1,268 ) $ 2,058 $ ( 1,268 ) $ 2,058 $ ( 1,150 ) (1) 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. 4. Fair Value Measurements 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 May 2, 2026 January 31, 2026 May 3, 2025 Assets Money market funds (2) Cash and cash equivalents Level 1 $ 77 $ 143 $ 79 Time deposits (3) Cash and cash equivalents Level 2 200 252 232 Commercial paper (2) Cash and cash equivalents Level 2 - 37 - Money market funds (2) Other current assets Level 1 124 123 142 Time deposits (3) Other current assets Level 2 30 30 50 Marketable securities that fund deferred compensation (4) Other assets Level 1 41 41 38 Liabilities Interest rate swap derivative instruments (5) Long-term liabilities Level 2 8 1 8 (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. 10 Table of Contents Nonrecurring Fair Value Measurements In the first quarter of fiscal 2026, we recorded asset impairments and other costs related to our Best Buy Health Optimization and China Sourcing Initiative. These nonrecurring fair value remeasurements were based on significant unobservable inputs (Level 3). Refer to Note 2, Restructuring , for additional information. Fair Value of Financial Instruments 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): May 2, 2026 January 31, 2026 May 3, 2025 Fair Value Carrying Value Fair Value Carrying Value Fair Value Carrying Value Long-term debt (1) $ 1,075 $ 1,142 $ 1,089 $ 1,149 $ 1,043 $ 1,142 (1) Excludes debt discounts, issuance costs and finance lease obligations. 5. Derivative Instruments The net notional amounts of our derivative instruments were as follows ($ in millions): May 2, 2026 January 31, 2026 May 3, 2025 Derivatives designated as net investment hedges $ 119 $ 119 $ 119 Derivatives designated as fair value hedges (interest rate swaps) 500 500 500 No hedge designation (foreign exchange contracts) 31 34 54 Total $ 650 $ 653 $ 673 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 May 2, 2026 May 3, 2025 Interest rate swaps $ ( 7 ) $ 6 Adjustments to carrying value of long-term debt 7 ( 6 ) Total $ - $ - 6. Debt Short-Term Debt U.S. Revolving Credit Facility 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 2030. There were no borrowings outstanding under the Five-Year Facility Agreement as of May 2, 2026, January 31, 2026, or May 3, 2025. 11 Table of Contents Long-Term Debt Long-term debt consisted of the following ($ in millions): May 2, 2026 January 31, 2026 May 3, 2025 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 ( 8 ) ( 1 ) ( 8 ) Subtotal 1,142 1,149 1,142 Debt discounts and issuance costs ( 5 ) ( 5 ) ( 6 ) Finance lease obligations 32 32 27 Total long-term debt 1,169 1,176 1,163 Less current portion 11 11 10 Total long-term debt, less current portion $ 1,158 $ 1,165 $ 1,153 Fair Value and Future Maturities See Note 4, Fair Value Measurements , for the fair value of long-term debt. The 2028 Notes mature in fiscal 2029 and the 2030 Notes mature in fiscal 2031. 7. Revenue We generate most 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, unredeemed gift cards and deferred revenue from our private label and co-branded credit card arrangement. Contract balances were as follows ($ in millions): May 2, 2026 January 31, 2026 May 3, 2025 Receivables, net (1) $ 528 $ 538 $ 461 Short-term contract liabilities included in: Unredeemed gift card liabilities 229 235 246 Deferred revenue 843 900 891 Accrued liabilities 64 57 59 Long-term contract liabilities included in: Long-term liabilities 197 205 221 (1) Receivables are recorded net of allowances for expected credit losses of $ 13 million, $ 17 million and $ 15 million as of May 2, 2026, January 31, 2026, and May 3, 2025, respectively. During the first three months of fiscal 2027 and fiscal 2026, $ 569 million and $ 614 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 2027 $ 27 Fiscal 2028 33 Fiscal 2029 29 Fiscal 2030 28 Fiscal 2031 27 Fiscal 2032 26 Thereafter 63 See Note 11, Segments , for information on our revenue by segment and category. 12 Table of Contents 8. Earnings per Share 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 May 2, 2026 May 3, 2025 Numerator Net earnings $ 276 $ 202 Denominator Weighted-average common shares outstanding 210.4 212.0 Dilutive effect of stock compensation plan awards 0.9 1.0 Weighted-average common shares outstanding, assuming dilution 211.3 213.0 Potential shares which were anti-dilutive and excluded from weighted-average share computations 1.7 0.3 Basic earnings per share $ 1.31 $ 0.95 Diluted earnings per share $ 1.31 $ 0.95 9. Repurchase of Common Stock On February 28, 2022, our Board of Directors approved a $ 5.0 billion share repurchase program. The program had $ 3.0 billion remaining available for repurchases as of May 2, 2026. There is no expiration date governing the period over which we can repurchase shares under this authorization. There were no share repurchases during the three months ended May 2, 2026. Information regarding the shares we repurchased and retired in the prior year was as follows ($ and shares in millions, except per share amounts): Three Months Ended May 3, 2025 Total cost of shares repurchased $ 100 Average price per share $ 64.39 Number of shares repurchased and retired 1.6 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. 11. Segments Revenue Category Reclassification Beginning in the first quarter of fiscal 2027, we reclassified certain amounts within our revenue categories to better align with management's current view of the business. The reclassification primarily relates to credit card revenue and digital content revenue (including digital gaming, software and subscriptions) that were previously included in various product revenue categories and, following the reclassification, are now included within services revenue. The reclassification impacts only the presentation of revenue by category and does not affect previously reported total revenue, net earnings or cash flows. 13 Table of Contents The key components of each revenue category are now as follows: • Computing and Mobile Phones - computing (including desktops, notebooks and peripherals), mobile phones (including related mobile network carrier commissions), networking, tablets (including e-readers) and wearables (including smartwatches); • Consumer Electronics - digital imaging, health and fitness products, home theater (including accessories, soundbars and televisions), portable audio (including headphones and portable speakers) and smart home; • Appliances - large appliances (including dishwashers, laundry, ovens and refrigerators) and small appliances (including blenders, coffee makers, vacuums and personal care); • Entertainment - drones, gaming (including hardware, peripherals and certain software, as well as augmented reality glasses), toys and virtual reality; • Services - advertising, credit card revenue, digital content (including digital gaming, software and subscriptions), fulfillment, health-related services, installation, marketplace commissions, memberships, repair, technical support and warranty-related services; and • Other - other product offerings (including baby, food and beverage and outdoor living). Revenue information by segment and category was as follows ($ in millions): Three Months Ended May 2, 2026 May 3, 2025 (1) Domestic: Computing and Mobile Phones $ 3,887 $ 3,737 Consumer Electronics 2,151 2,215 Appliances 841 979 Services 786 749 Entertainment 548 398 Other 36 49 Total Domestic revenue 8,249 8,127 International: Computing and Mobile Phones 343 317 Consumer Electronics 180 171 Appliances 53 56 Services 49 47 Entertainment 51 41 Other 11 8 Total International revenue 687 640 Total revenue $ 8,936 $ 8,767 (1) Amounts for the three months ended May 3, 2025, have been recast to conform to the current presentation. See Revenue Category Reclassificatio n, above, for additional information. 14 Table of Contents Adjusted operating income by segment and the reconciliation to consolidated earnings before income tax expense and equity in loss of affiliates were as follows ($ in millions): Three Months Ended May 2, 2026 May 3, 2025 Domestic (1) International Total Domestic (1) International Total Revenue $ 8,249 $ 687 $ 8,936 $ 8,127 $ 640 $ 8,767 Cost of sales 6,295 539 6,834 6,219 499 6,718 Adjusted SG&A (2) 1,596 143 1,739 1,579 137 1,716 Adjusted operating income $ 358 $ 5 363 $ 329 $ 4 333 Restructuring charges ( 9 ) 109 Intangible asset amortization 2 5 Operating income 370 219 Other income (expense): Investment income and other 19 15 Interest expense ( 11 ) ( 12 ) Earnings before income tax expense and equity in loss of affiliates $ 378 $ 222 (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. Cash flow and other expense information by segment was as follows ($ in millions): Three Months Ended May 2, 2026 May 3, 2025 Capital expenditures Domestic $ 145 $ 150 International 15 16 Total capital expenditures $ 160 $ 166 Depreciation and amortization Domestic $ 182 $ 201 International 12 10 Total depreciation and amortization $ 194 $ 211 Asset information by segment was as follows ($ in millions): May 2, 2026 January 31, 2026 May 3, 2025 Domestic $ 13,586 $ 13,407 $ 12,835 International 1,304 1,263 1,293 Total assets $ 14,890 $ 14,670 $ 14,128 15 Table of Contents