Best Buy(US:BBY)2025-12-05 21:57Revenue and Sales Performance - Revenue for the third quarter of fiscal 2026 was $9.7 billion, a 2.4% increase compared to $9.4 billion in the same period last year[88]. - Comparable sales grew by 2.7% in the third quarter and 1.2% in the first nine months of fiscal 2026, driven by growth in computing, gaming, and mobile phones[89]. - Domestic segment revenue for the three months ended November 1, 2025, was $8,878 million, a 2.1% increase from $8,697 million in the same period last year[101]. - Online revenue in the Domestic segment reached $2,823 million for the third quarter, reflecting a 3.5% increase on a comparable basis[104]. - International segment revenue increased to $794 million for the three months ended November 1, 2025, representing a 6.1% growth compared to $748 million in the prior year[110]. Profitability and Earnings - Gross profit for the third quarter was $2.25 billion, representing 23.2% of revenue, slightly down from 23.5% in the prior year[88]. - Operating income for the third quarter decreased to $198 million, with an operating income rate of 2.0%, down from 3.7% in the same quarter last year[88]. - Net earnings for the third quarter were $140 million, resulting in diluted EPS of $0.66, a decrease from $1.26 in the prior year[88]. - Adjusted operating income for the Domestic segment was $360 million for the third quarter, with an adjusted operating income margin of 4.1%[101]. - The International segment's adjusted operating income increased to $28 million for the third quarter, with an adjusted operating income margin of 3.5%[110]. - Consolidated adjusted operating income for the three months ended November 1, 2025, was $388 million, representing 4.0% of revenue[120]. - Adjusted diluted EPS for the three months ended November 1, 2025, was $1.40, compared to $1.26 in the same period last year[120]. - Adjusted operating income rate increased in Q3 of fiscal 2026, primarily due to a favorable SG&A rate, partially offset by an unfavorable gross profit rate[125]. - Adjusted diluted EPS increased in Q3 of fiscal 2026, primarily due to higher adjusted operating income[127]. Costs and Expenses - Restructuring charges in the first nine months of fiscal 2026 totaled $218 million, primarily related to labor and store optimization initiatives[90]. - Goodwill and intangible asset impairments in the third quarter amounted to $171 million, reflecting downward revisions in revenue growth rates for Best Buy Health[91]. - Income tax expense for the third quarter decreased to $64 million, with an effective tax rate of 31.5%, up from 23.9% in the prior year[98]. - The adjusted effective tax rate increased in Q3 of fiscal 2026, primarily due to decreased tax benefits from green energy incentives[126]. - Cash dividends declared and paid decreased to $199 million in Q3 of fiscal 2026, compared to $202 million in Q3 of fiscal 2025, due to fewer shares outstanding[143]. Cash Flow and Capital Management - Cash and cash equivalents decreased to $923 million as of November 1, 2025, from $1,578 million as of February 1, 2025, primarily due to dividend payments and capital expenditures[130]. - Total cash provided by operating activities increased to $684 million for the nine months ended November 1, 2025, compared to $561 million for the same period in the prior year[132]. - Total cost of shares repurchased decreased to $34 million in Q3 of fiscal 2026, down from $135 million in Q3 of fiscal 2025[142]. - The company entered into a $1.25 billion five-year senior unsecured revolving credit facility agreement on April 18, 2025, which permits borrowings of up to $1.25 billion[137]. - Restricted cash decreased to $271 million as of November 1, 2025, from $290 million as of February 1, 2025, primarily due to releases of product protection reserves[138]. Foreign Currency and Interest Rate Management - Foreign currency exchange rate fluctuations had an unfavorable impact of $13 million on revenue during the third quarter of fiscal 2026[155]. - The estimated impact of foreign exchange rate fluctuations on revenue for the first nine months of fiscal 2026 was $44 million[155]. - The company utilizes foreign currency forward contracts to manage exposure related to certain forecasted inventory purchases and recognized receivable and payable balances[154]. - The primary objective of holding derivatives is to reduce the volatility of net earnings and cash flows associated with foreign currency exchange rates[154]. - The strength of the U.S. dollar against the Canadian dollar primarily drove foreign currency exchange rate fluctuations compared to the prior-year period[155]. - The estimated impacts of foreign exchange rate fluctuations on net earnings in the third quarter and first nine months of fiscal 2026 were not significant[155]. - The company has swapped a portion of its fixed-rate debt to floating rate, which will vary with short-term interest rates[152]. - A 50-basis point increase in short-term interest rates would have led to an estimated $3 million increase in interest income during the third quarter ended November 1, 2025[153]. - Further information regarding interest rate swaps can be found in the Annual Report on Form 10-K for the fiscal year ended February 1, 2025[152]. Store Operations - Total domestic stores decreased to 926 from 957 year-over-year, with plans to reduce the store count by 5 in fiscal 2026[96][97]. - The revenue mix for the Domestic segment showed that computing and mobile phones accounted for 49% of revenue, with a comparable sales growth of 7.6%[105]. - Domestic segment gross profit for the three months ended November 1, 2025, was $2,067 million, with a gross profit margin of 23.3%[101]. - The International segment's gross profit margin increased to 22.8% for the three months ended November 1, 2025, driven by favorable supply chain costs[116].