Best Buy(BBY) - 2026 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents Best Buy's condensed consolidated financial statements and detailed notes, highlighting decreased net earnings and diluted EPS due to restructuring charges, and a slight year-over-year decrease in total assets and equity Item 1. Financial Statements This section provides Best Buy's condensed consolidated financial statements, including balance sheets, income, comprehensive income, cash flows, and equity changes, with detailed notes Condensed Consolidated Balance Sheets This section presents the company's condensed consolidated balance sheets, detailing assets, liabilities, and equity at specific fiscal dates Condensed Consolidated Balance Sheet Highlights ($ in millions): | Metric | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :-------------------------- | :------------- | :--------------- | :------------- | | Total Assets | $15,253 | $14,782 | $15,624 | | Total Liabilities | $12,537 | $11,972 | $12,517 | | Total Equity | $2,716 | $2,808 | $3,107 | | Merchandise Inventories | $5,816 | $5,085 | $5,706 | | Goodwill | $908 | $908 | $1,383 | Condensed Consolidated Statements of Earnings This section outlines the company's condensed consolidated statements of earnings, showing revenue, gross profit, operating income, and net earnings for specified periods Condensed Consolidated Statements of Earnings Highlights ($ in millions, except per share amounts): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Revenue | $9,438 | $9,288 | $18,205 | $18,135 | | Gross profit | $2,194 | $2,186 | $4,243 | $4,250 | | Operating income | $251 | $383 | $470 | $695 | | 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 | | Restructuring charges | $114 | $(7) | $223 | $8 | Condensed Consolidated Statements of Comprehensive Income This section presents the condensed consolidated statements of comprehensive income, detailing net earnings and other comprehensive income components Condensed Consolidated Statements of Comprehensive Income Highlights ($ in millions): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net earnings | $186 | $291 | $388 | $537 | | Foreign currency translation adjustments, net of tax | $- | $(2) | $13 | $(7) | | Comprehensive income | $186 | $289 | $401 | $530 | Condensed Consolidated Statements of Cash Flows This section provides the condensed consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights ($ in millions): | Metric | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Total cash provided by operating activities | $783 | $817 | | Total cash used in investing activities | $(369) | $(352) | | Total cash used in financing activities | $(574) | $(557) | | Decrease in cash, cash equivalents and restricted cash | $(155) | $(95) | Condensed Consolidated Statements of Changes in Shareholders' Equity This section details the condensed consolidated statements of changes in shareholders' equity, including net earnings, dividends, and stock repurchases Condensed Consolidated Statements of Changes in Shareholders' Equity Highlights ($ in millions): | Metric | Balances at Feb 1, 2025 | Balances at Aug 2, 2025 | | :-------------------------- | :---------------------- | :---------------------- | | Total Equity | $2,808 | $2,716 | | Net earnings (six months) | - | $388 | | Common stock dividends (six months) | - | $(413) | | Repurchase of common stock (six months) | - | $(167) | Notes to Condensed Consolidated Financial Statements This section provides detailed notes supporting the condensed consolidated financial statements, offering additional context and disclosures Note 1. Basis of Presentation This note describes the basis of financial statement presentation, including seasonality, recent accounting pronouncements, and the impact of new legislation - The company's business is seasonal, with a large proportion of revenue and earnings generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season[21] - Recently issued accounting pronouncements include ASU 2023-09 (Income Taxes) effective after December 15, 2024, and ASU 2024-03 (Expense Disaggregation) effective after December 15, 2026, with the company evaluating their impacts[23][24] - The One Big Beautiful Bill Act (OB3), signed July 4, 2025, extends key provisions of the 2017 Tax Cuts and Jobs Act but is not expected to have a material impact on income tax expense[25] Supply Chain Financing Liabilities ($ in millions): | Date | Amount | | :------------- | :----- | | August 2, 2025 | $872 | | February 1, 2025 | $398 | | August 3, 2024 | $729 | Total Cash, Cash Equivalents and Restricted Cash ($ in millions): | Date | Amount | | :------------- | :----- | | August 2, 2025 | $1,713 | | February 1, 2025 | $1,868 | | August 3, 2024 | $1,698 | - Restricted cash is primarily used to cover product protection plans under membership offerings and self-insurance liabilities[28] Note 2. Restructuring This note details the company's restructuring initiatives, including associated charges, objectives, and expected financial impacts Restructuring Charges ($ in millions): | Initiative | Three Months Ended Aug 2, 2025 | Six Months Ended Aug 2, 2025 | | :------------------------------------------ | :----------------------------- | :--------------------------- | | Fiscal 2026 Labor and Store Optimization Initiative | $122 | $122 | | Best Buy Health Optimization and China Sourcing Initiative | $(6) | $105 | | Fiscal 2024 Restructuring Initiative | $(2) | $(4) | | Fiscal 2023 Resource Optimization Initiative | $- | $- | | Total | $114 | $223 | - The Fiscal 2026 Labor and Store Optimization Initiative, commenced in Q2 FY26, aims to align field resources with changing customer behaviors, close select non-traditional store locations, and redirect corporate resources, incurring $122 million in charges, primarily termination benefits ($81 million) and asset impairments ($41 million)[31][32] - The Best Buy Health Optimization and China Sourcing Initiative, commenced in Q1 FY26, focuses on optimizing the Best Buy Health business and reducing tariff exposure, incurring $105 million in charges for the six months ended August 2, 2025, including asset impairments and other costs ($70 million) and termination benefits ($35 million)[34][35] - Restructuring accrual liabilities for termination benefits totaled $81 million for the Labor and Store Optimization Initiative and $26 million for the Best Buy Health Optimization Initiative as of August 2, 2025, with expected future cash payments primarily during fiscal 2026[33][37] Note 3. Goodwill and Intangible Assets This note provides information on goodwill and intangible assets, including impairment charges and amortization expense - A goodwill impairment of $475 million was recorded in fiscal 2025 within the Domestic segment for the Best Buy Health reporting unit[41] - A full impairment of $16 million related to the only remaining indefinite-lived intangible asset was recorded in the second quarter of fiscal 2026 due to restructuring activity[42] Definite-Lived Intangible Assets (Gross Carrying Amount, $ in millions, as of August 2, 2025): | Asset Category | Gross Carrying Amount | | :------------------ | :-------------------- | | Customer relationships | $339 | | Tradenames | $87 | | Developed technology | $56 | | Total | $482 | Amortization Expense ($ in millions): | Period | August 2, 2025 | August 3, 2024 | | :----------------- | :------------- | :------------- | | Three Months Ended | $4 | $5 | | Six Months Ended | $9 | $11 | Note 4. Fair Value Measurements This note describes the company's fair value measurements for financial and non-financial assets and liabilities Recurring Fair Value Measurements ($ in millions, as of August 2, 2025): | Asset Category | Fair Value Hierarchy | Fair Value | | :--------------------------------- | :------------------- | :--------- | | Money market funds (Cash) | Level 1 | $78 | | Time deposits (Cash) | Level 2 | $258 | | Money market funds (Other current assets) | Level 1 | $123 | | Time deposits (Other current assets) | Level 2 | $40 | | Marketable securities (Other assets) | Level 1 | $40 | | Interest rate swap derivative (Long-term liabilities) | Level 2 | $- | - Nonrecurring fair value remeasurements, primarily asset impairments and other costs from restructuring initiatives, were based on significant unobservable inputs (Level 3)[49] Long-Term Debt Fair Value vs. Carrying Value ($ in millions, as of August 2, 2025): | Metric | Fair Value | Carrying Value | | :----------- | :--------- | :------------- | | Long-term debt | $1,077 | $1,150 | Note 5. Derivative Instruments This note details the company's use of derivative instruments for hedging foreign exchange and interest rate risks - The company uses foreign exchange forward contracts to hedge against Canadian dollar exchange rate fluctuations and interest rate swaps to mitigate interest rate risk on its $500 million notes due October 1, 2028[52] Notional Amounts of Derivative Instruments ($ in millions, as of August 2, 2025): | Contract Type | Amount | | :---------------------------------------- | :----- | | Derivatives designated as net investment hedges | $119 | | Derivatives designated as fair value hedges (interest rate swaps) | $500 | | No hedge designation (foreign exchange contracts) | $62 | | Total | $681 | Note 6. Debt This note provides information on the company's debt instruments, including credit facilities and long-term notes - On April 18, 2025, the company entered into a new $1.25 billion five-year senior unsecured revolving credit facility, expiring in April 2030, with no borrowings outstanding as of August 2, 2025[55] Long-Term Debt ($ in millions, as of August 2, 2025): | Debt Type | Amount | | :---------------------------------- | :----- | | Notes, 4.45%, due October 1, 2028 | $500 | | Notes, 1.95%, due October 1, 2030 | $650 | | Interest rate swap valuation adjustments | $- | | Debt discounts and issuance costs | $(6) | | Finance lease obligations | $30 | | Total long-term debt | $1,174 | | Less current portion | $(10) | | Total long-term debt, less current portion | $1,164 | Note 7. Revenue This note details the company's revenue recognition policies, including contract liabilities and estimated future revenue Contract Liabilities ($ in millions, as of August 2, 2025): | Liability Type | Amount | | :-------------------------- | :----- | | Unredeemed gift card liabilities | $230 | | Deferred revenue | $889 | | Accrued liabilities (short-term) | $60 | | Long-term liabilities (contract) | $213 | - During the first six months of fiscal 2026, $853 million of revenue was recognized from contract liabilities that existed at the beginning of the period, compared to $893 million in the prior year[59] Estimated Future Revenue from Long-Term Contract Liabilities ($ 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 | $89 | Note 8. Earnings per Share This note presents the calculation of basic and diluted earnings per share Basic and Diluted Earnings Per Share ($ and shares in millions, except per share amounts): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net earnings | $186 | $291 | $388 | $537 | | Weighted-average common shares outstanding (Basic) | 211.5 | 216.0 | 211.8 | 216.1 | | Weighted-average common shares outstanding (Diluted) | 212.0 | 217.1 | 212.5 | 217.2 | | Basic earnings per share | $0.88 | $1.35 | $1.83 | $2.49 | | Diluted earnings per share | $0.87 | $1.34 | $1.82 | $2.47 | Note 9. Repurchase of Common Stock This note provides details on the company's common stock repurchase program and activity - The Board of Directors approved a $5.0 billion share repurchase program on February 28, 2022, with $3.1 billion remaining available for repurchases as of August 2, 2025[62] Common Stock Repurchase Activity ($ and shares in millions, except per share amounts): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Total cost of shares repurchased | $67 | $98 | $167 | $150 | | Average price per share | $68.65 | $82.57 | $66.03 | $80.86 | | Number of shares repurchased and retired | 0.9 | 1.1 | 2.5 | 1.8 | Note 10. Contingencies This note discusses the company's legal proceedings and contingent liabilities - The company is involved in legal proceedings and makes accruals for matters where liability is probable and estimable, disclosing matters with a reasonably possible material impact[64] Note 11. Segments This note provides financial information by reportable segment, including revenue, operating income, and assets Segment Revenue Information ($ in millions): | Segment | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Domestic | $8,698 | $8,623 | $16,825 | $16,826 | | International | $740 | $665 | $1,380 | $1,309 | | Total Revenue | $9,438 | $9,288 | $18,205 | $18,135 | Adjusted Operating Income by Segment ($ in millions): | Segment | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Domestic | $351 | $364 | $680 | $689 | | International | $18 | $17 | $22 | $25 | | Total Adjusted Operating Income | $369 | $381 | $702 | $714 | Capital Expenditures by Segment ($ in millions): | Segment | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------- | :--------------------------- | :--------------------------- | | Domestic | $311 | $298 | | International | $30 | $37 | | Total Capital Expenditures | $341 | $335 | Total Assets by Segment ($ in millions, as of August 2, 2025): | Segment | Amount | | :-------------- | :----- | | Domestic | $13,926 | | International | $1,327 | | Total Assets | $15,253 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Best Buy's financial condition, operations, and liquidity, noting revenue growth from comparable sales, but decreased operating income and EPS due to restructuring and tariff impacts Overview This overview outlines Best Buy's purpose, operational segments, and the seasonal nature of its business - Best Buy's purpose is to enrich lives through technology and personalize technology solutions for every stage of life, leveraging tech expertise and human touch across online, in-store, and in-home channels[72] - The company operates with two reportable segments: Domestic (U.S. operations and Best Buy Health) and International (Canada operations)[73] - The business is seasonal, with a large proportion of revenue and earnings generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season[74] Comparable Sales This section defines comparable sales, a key metric for evaluating performance, detailing its inclusions and exclusions - Comparable sales is a key metric used to evaluate the performance of existing stores, websites, and call centers, measuring the change in net sales for a particular period over the comparable prior period[75] - The calculation includes revenue from stores, websites, and call centers operating for at least 14 full months, online sales, credit card revenue, gift card breakage, commercial sales, and sales to wholesalers and dealers[75] - Exclusions from comparable sales include revenue from stores closed more than 14 days, certain periodic warranty-related profit-share revenue, and the effect of foreign currency exchange rate fluctuations[75] Non-GAAP Financial Measures This section explains the use of non-GAAP financial measures to provide additional insights into performance, excluding specific adjustments - Non-GAAP financial measures, such as adjusted operating income and adjusted diluted EPS, are used to provide additional useful information for evaluating current and future performance, and for internal management reporting[77] - These measures typically exclude adjustments for items like restructuring charges, goodwill and acquired intangible asset impairments, price-fixing settlements, gains/losses on disposals of subsidiaries, amortization of definite-lived intangible assets associated with acquisitions, and related tax effects[77] - The term 'constant currency' is used to represent results adjusted to exclude foreign currency impacts, providing supplementary information in light of currency rate fluctuations[78] Tariffs This section discusses the ongoing uncertainty and impact of tariffs on the company's supply chain and product sourcing - The company continues to face significant uncertainty regarding the scope, timing, and magnitude of tariffs and is working with vendors to mitigate their impact[80] - While direct imports are 2% to 3% of the overall assortment, an estimated 30% to 35% of products purchased are from China (down from 55% previously), with approximately 25% from the U.S. and Mexico[81] Results of Operations This section presents a detailed analysis of the company's consolidated and segment-specific financial performance Consolidated Results This section summarizes the company's consolidated revenue, operating income, net earnings, and diluted EPS performance Consolidated Financial Data Highlights ($ in millions, except per share amounts): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Revenue | $9,438 | $9,288 | $18,205 | $18,135 | | Revenue % change | 1.6 % | (3.1)% | 0.4 % | (4.8)% | | Comparable sales % change | 1.6 % | (2.3)% | 0.4 % | (4.2)% | | Operating income | $251 | $383 | $470 | $695 | | Operating income as a % of revenue | 2.7 % | 4.1 % | 2.6 % | 3.8 % | | Net earnings | $186 | $291 | $388 | $537 | | Diluted EPS | $0.87 | $1.34 | $1.82 | $2.47 | - Comparable sales increased in Q2 FY26, primarily driven by growth in gaming, computing, and mobile phones, partially offset by declines in home theater, appliances, tablets, and drones[84] - Operating income rate and diluted EPS decreased in both the second quarter and first six months of fiscal 2026, primarily due to higher restructuring charges[86] Store Summary This section provides a summary of the company's store count by segment and expected changes Stores Open by Reportable Segment: | Store Type | August 2, 2025 | August 3, 2024 | | :-------------------------------- | :------------- | :------------- | | Best Buy (Domestic) | 885 | 890 | | Outlet Centers (Domestic) | 23 | 26 | | Pacific Sales (Domestic) | 20 | 20 | | Yardbird (Domestic) | 21 | 23 | | Total Domestic stores | 949 | 959 | | Canada Best Buy stores (International) | 128 | 129 | | Canada Best Buy Mobile stand-alone stores (International) | 28 | 32 | | Total International stores | 156 | 161 | | Total stores | 1,105 | 1,120 | - In fiscal 2026, the company expects to reduce its traditional Domestic Best Buy store count by approximately 5 to 10 stores and close select non-traditional Domestic store locations as part of a restructuring initiative[91] Income Tax Expense This section details the company's income tax expense and effective tax rate, explaining key drivers of changes Income Tax Expense and Effective Tax Rate (ETR): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :---------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Income tax expense | $68 | $101 | $87 | $181 | | ETR | 26.8 % | 25.8 % | 18.3 % | 25.3 % | - The decrease in income tax expense for both periods was primarily due to lower pre-tax income and the discrete tax impacts of restructuring charges and the exit of a Best Buy Health component[92][93] - ETR increased in Q2 FY26 due to decreased tax benefits and increased U.S. taxes from sourcing operations, but decreased for the six-month period primarily due to discrete tax impacts of restructuring and the Best Buy Health exit[92][93] Segment Performance Summary This section provides a summary of financial performance for both the Domestic and International segments Domestic Segment This section details the Domestic segment's revenue, comparable sales, gross profit, and adjusted SG&A performance Domestic Segment Financial Data Highlights ($ in millions): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Revenue | $8,698 | $8,623 | $16,825 | $16,826 | | Revenue % change | 0.9 % | (3.0)% | — % | (4.9)% | | Comparable sales % change | 1.1 % | (2.3)% | 0.2 % | (4.3)% | | Total online revenue | $2,856 | $2,718 | $5,435 | $5,243 | | Comparable online sales % change | 5.1 % | (1.6)% | 3.7 % | (3.8)% | | Gross profit as a % of revenue | 23.4 % | 23.5 % | 23.4 % | 23.4 % | | Adjusted operating income as a % of revenue | 4.0 % | 4.2 % | 4.0 % | 4.1 % | - Domestic segment revenue increased in Q2 FY26, driven by comparable sales growth in gaming, computing, and mobile phones, partially offset by declines in home theater, appliances, tablets, and drones[97] - Domestic segment gross profit rate decreased in Q2 FY26 primarily due to lower product margin rates and a higher sales mix of lower-margin categories[100] - Domestic segment adjusted SG&A increased in Q2 FY26 due to higher compensation expense (including medical claims), the lapping of a favorable legal settlement, and higher technology expense, partially offset by lower Best Buy Health expenses[102] Domestic Segment Comparable Sales % Change by Revenue Category (Three Months Ended Aug 2, 2025): | Category | Comparable Sales % Change | | :------------------------ | :------------------------ | | Computing and Mobile Phones | 3.8 % | | Consumer Electronics | (4.9)% | | Appliances | (8.5)% | | Entertainment | 37.5 % | | Services | (1.0)% | | Other | (6.3)% | International Segment This section details the International segment's revenue, comparable sales, gross profit, and adjusted SG&A performance International Segment Financial Data Highlights ($ in millions): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Revenue | $740 | $665 | $1,380 | $1,309 | | Revenue % change | 11.3 % | (4.0)% | 5.4 % | (3.7)% | | Comparable sales % change | 7.6 % | (1.8)% | 3.5 % | (2.6)% | | Gross profit as a % of revenue | 21.8 % | 23.9 % | 21.9 % | 23.4 % | | Adjusted operating income as a % of revenue | 2.4 % | 2.6 % | 1.6 % | 1.9 % | - International segment revenue increased in Q2 FY26, driven by comparable sales growth in gaming, computing, and mobile phones, and revenue from Best Buy Express locations opened after Q2 FY25[107] - International segment gross profit rate decreased in both the second quarter and first six months of fiscal 2026, primarily due to lower product margin rates[110] - International segment adjusted SG&A remained relatively unchanged in Q2 FY26 but decreased for the six-month period due to favorable foreign exchange rates, partially offset by higher employee compensation and Best Buy Express expenses[111] International Segment Comparable Sales % Change by Revenue Category (Three Months Ended Aug 2, 2025): | Category | Comparable Sales % Change | | :------------------------ | :------------------------ | | Computing and Mobile Phones | 9.5 % | | Consumer Electronics | 1.3 % | | Appliances | (5.7)% | | Entertainment | 57.3 % | | Services | 2.2 % | | Other | 6.5 % | Consolidated Non-GAAP Financial Measures This section presents consolidated non-GAAP financial measures, including adjusted operating income and adjusted diluted EPS Consolidated Non-GAAP Financial Measures ($ in millions, except per share amounts): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Adjusted operating income | $369 | $381 | $702 | $714 | | Adjusted operating income % of revenue | 3.9 % | 4.1 % | 3.9 % | 3.9 % | | Adjusted effective tax rate | 27.8 % | 25.8 % | 27.4 % | 25.3 % | | Adjusted diluted EPS | $1.28 | $1.34 | $2.43 | $2.54 | - Adjusted operating income rate decreased in Q2 FY26 primarily due to an unfavorable gross profit rate, but remained effectively unchanged for the first six months of fiscal 2026[118] - Adjusted diluted EPS decreased in both the second quarter and first six months of fiscal 2026 due to lower adjusted earnings, partially offset by lower diluted weighted-average common shares outstanding[120] Liquidity and Capital Resources This section discusses the company's cash position, cash flow activities, sources of liquidity, debt, and capital allocation strategies Cash and Cash Equivalents This section details the company's cash and cash equivalents, explaining changes over time Cash and Cash Equivalents ($ in millions): | Date | Amount | | :------------- | :----- | | August 2, 2025 | $1,456 | | February 1, 2025 | $1,578 | | August 3, 2024 | $1,387 | - The decrease in cash and cash equivalents from February 1, 2025, was primarily due to dividend payments, capital expenditures, and share repurchases, partially offset by positive cash flows from operations[122] Cash Flows This section analyzes cash flows from operating, investing, and financing activities Cash Flows by Activity ($ in millions, Six Months Ended): | Activity | August 2, 2025 | August 3, 2024 | | :-------------------------- | :------------- | :------------- | | Operating activities | $783 | $817 | | Investing activities | $(369) | $(352) | | Financing activities | $(574) | $(557) | | Decrease in cash, cash equivalents and restricted cash | $(155) | $(95) | - The decrease in cash provided by operating activities was primarily driven by the timing and volume of inventory purchases and payments and lower net earnings[125] - The increase in cash used in investing activities was primarily due to the disposal of a component of the Best Buy Health business[126] - The increase in cash used in financing activities was primarily driven by higher share repurchases[127] Sources of Liquidity This section identifies the primary sources of the company's liquidity, including operating cash and credit facilities - The company's most significant sources of liquidity are funds generated by operating activities, available cash and cash equivalents, credit facilities, other debt arrangements, and trade payables[128] - A new $1.25 billion five-year senior unsecured revolving credit facility was entered into on April 18, 2025, expiring in April 2030, with no borrowings outstanding as of August 2, 2025[129] Restricted Cash This section provides information on restricted cash balances and the reasons for their restriction Restricted Cash ($ in millions): | Date | Amount | | :------------- | :----- | | August 2, 2025 | $257 | | February 1, 2025 | $290 | | August 3, 2024 | $311 | - The decrease in restricted cash from February 1, 2025, was primarily due to releases of product protection reserves based on claims and purchasing behaviors, and a decrease in cash for self-insurance liabilities[130] Debt and Capital This section outlines the company's debt structure and capital obligations - As of August 2, 2025, the company had $500 million of principal amount of notes due October 1, 2028, and $650 million of principal amount of notes due October 1, 2030[131] Share Repurchases and Dividends This section details the company's share repurchase program and dividend payments - The company's long-term capital allocation strategy prioritizes funding operations and growth investments, then returning excess cash to shareholders through dividends and share repurchases while maintaining investment-grade credit metrics[132] - A $5.0 billion share repurchase program was approved on February 28, 2022, with no expiration date[133] Share Repurchase and Dividend Activity ($ and shares in millions, except per share amounts): | Metric | Three Months Ended Aug 2, 2025 | Three Months Ended Aug 3, 2024 | Six Months Ended Aug 2, 2025 | Six Months Ended Aug 3, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Total cost of shares repurchased | $67 | $98 | $167 | $150 | | Average price per share | $68.65 | $82.57 | $66.03 | $80.86 | | Total number of shares repurchased | 0.9 | 1.1 | 2.5 | 1.8 | | Regular quarterly cash dividend per share | $0.95 | $0.94 | $1.90 | $1.88 | | Cash dividends declared and paid | $201 | $203 | $403 | $405 | - Cash dividends declared and paid decreased in both periods due to fewer shares outstanding, partially offset by increases in the regular quarterly cash dividend per share[135] Off-Balance-Sheet Arrangements and Contractual Obligations This section discusses off-balance-sheet arrangements and contractual obligations, noting any material changes - The company's liquidity is not dependent on off-balance-sheet financing arrangements, other than its $1.25 billion in undrawn capacity on its Five-Year Facility Agreement as of August 2, 2025[136] - There has been no material change in contractual obligations other than in the ordinary course of business since the end of fiscal 2025[137] Significant Accounting Policies and Estimates This section confirms no significant changes to the company's accounting policies or critical estimates since the last fiscal year-end - There have been no significant changes in the company's significant accounting policies or critical accounting estimates since the end of fiscal 2025[138] New or Recently Issued Accounting Pronouncements This section refers to Note 1 for details on new or recently issued accounting pronouncements and their assessed impact - For a description of applicable new or recently issued accounting pronouncements and their assessed impact, refer to Note 1, Basis of Presentation, in the Notes to Condensed Consolidated Financial Statements[139] Safe Harbor Statement Under the Private Securities Litigation Reform Act This statement advises readers on the forward-looking nature of the report and the inherent risks and uncertainties that could affect actual results - The report includes forward-looking statements that are subject to various risks and uncertainties, including macroeconomic pressures, competition, technological advancements, supply chain disruptions, and regulatory changes, which could cause actual results to differ materially[140] - Readers are advised to review Item 1A, Risk Factors, of the most recent Annual Report on Form 10-K for a description of important factors that could affect actual results[140] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to interest rate and foreign currency exchange rate risks, outlining management strategies and quantitative sensitivity analyses Interest Rate Risk This section discusses the company's exposure to short-term market interest rate changes and their potential impact on net interest expense - The company is exposed to changes in short-term market interest rates, which impact its net interest expense from cash, cash equivalents, restricted cash, and floating-rate debt[142] - As of August 2, 2025, the net asset balance exposed to interest rate changes was $1.2 billion, where a 50-basis point increase or decrease in short-term interest rates would lead to an estimated $6 million increase or decrease in interest income, respectively[143] Foreign Currency Exchange Rate Risk This section addresses the company's market risk from foreign currency exchange rate fluctuations and its hedging strategies - The company has market risk from changes in foreign currency exchange rates related to its International segment operations[144] - Foreign currency forward contracts are utilized to manage foreign currency exposure, aiming to reduce volatility in net earnings, cash flows, and net asset value[144] - Foreign currency exchange rate fluctuations had an unfavorable impact of $31 million on revenue in the first six months of fiscal 2026, but the impact on net earnings was not significant for both the second quarter and first six months[145] Item 4. Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures as of August 2, 2025, with no material changes to internal control over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated and deemed effective as of August 2, 2025, by management, including the CEO and CFO[147] - There were no changes in internal control over financial reporting during the fiscal quarter ended August 2, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[148] PART II — OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, equity sales, other disclosures, and exhibits Item 1. Legal Proceedings This section refers to Note 10, Contingencies, for detailed information on the company's legal proceedings - For information about the company's legal proceedings, refer to Note 10, Contingencies, of the Notes to Condensed Consolidated Financial Statements[149] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activities, including shares purchased and remaining authorization under its program Stock Repurchases This section provides specific details on the company's common stock repurchase program and recent activity - The Board approved a $5.0 billion share repurchase program on February 28, 2022, with no expiration date, and approximately $3.118 billion remained available under this program as of August 2, 2025[150][151] Stock Repurchases (Fiscal 2026 Second Quarter): | Fiscal Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | | :-------------------------------- | :----------------------------- | :--------------------------- | :--------------------------------------------------------------------------- | | May 4, 2025 through May 31, 2025 | - | $- | $3,184,000,000 | | June 1, 2025 through July 5, 2025 | 406,173 | $69.38 | $3,156,000,000 | | July 6, 2025 through August 2, 2025 | 563,745 | $68.13 | $3,118,000,000 | | Total fiscal 2026 second quarter | 969,918 | $68.65 | $3,118,000,000 | Item 5. Other Information This section includes information on Rule 10b5-1 trading arrangements and refers to financial notes for details on restructuring initiatives Rule 10b5-1 Plan Elections This section confirms no changes to Rule 10b5-1 trading arrangements by directors or officers during the quarter - None of the company's directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended August 2, 2025[152] Restructuring Initiatives This section refers to Note 2 for details on restructuring initiatives commenced in fiscal 2026 - Information regarding restructuring initiatives commenced in Q1 and Q2 fiscal 2026, including a labor and store optimization initiative and actions related to the Best Buy Health business, is incorporated by reference from Note 2, Restructuring[153] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance, compensation, certifications, and iXBRL financial data - Exhibits include Amended and Restated Articles of Incorporation, By-Laws, Long-Term Incentive Program Award Agreement, Executive Officer Separation and General Release Agreement, CEO and CFO Certifications (Sections 302 and 906), and iXBRL formatted financial information[156] Signatures This section contains the official signatures of the company's key executives, certifying the report - The report is signed by Corie Barry (Chief Executive Officer), Matthew Bilunas (Senior Executive Vice President, Chief Financial Officer & Enterprise Strategy), and Mathew R. Watson (Senior Vice President, Finance – Controller and Chief Accounting Officer) on September 5, 2025[158]