Best Buy Co. Inc.
03/18/2026 | Press release | Distributed by Public on 03/18/2026 14:10
Annual Report for Fiscal Year Ending January 31, 2026 (Form 10-K)
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. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations and liquidity are discussed in order of magnitude. 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 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.
Overview
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 two reportable segments: Domestic and International. 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, 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 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. Fiscal 2024 included 53 weeks with the 53rdweek occurring in the fiscal fourth quarter. Unless otherwise noted, references to years within the MD&A section of this report relate to fiscal years, not calendar years. Our business, like that of many retailers, is seasonal. A large proportion of our revenue and earnings is generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season.
Comparable Sales
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 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 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 53rdweek (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.
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. As a result, our method of calculating comparable sales may not be the same as other retailers' methods.
Non-GAAP Financial Measures
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 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, 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. We provide reconciliations of the most comparable financial measures presented in accordance with GAAP to presented non-GAAP financial measures that enable investors to understand the adjustments made in arriving at the non-GAAP financial measures and to evaluate performance using the same metrics as management. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. Non-GAAP financial measures may be calculated differently from similarly titled measures used by other companies, thereby limiting their usefulness for comparative purposes.
In our discussions of the operating results of our consolidated business and our International segment, we sometimes refer to the impact of changes in foreign currency exchange rates or the impact of foreign currency exchange rate fluctuations, which are references to the differences between the foreign currency exchange rates we use to convert the International segment's operating results from local currencies into U.S. dollars for reporting purposes. We also may use the term "constant currency," which represents results adjusted to exclude foreign currency impacts. We calculate those impacts as the difference between the current period results translated using the current period currency exchange rates and using the comparable prior period currency exchange rates. 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 SG&A, consolidated adjusted operating income, consolidated adjusted effective tax rate and consolidated adjusted diluted EPS in the presented periods.
Business Strategy Update
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.
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.
Tariffs
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 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 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 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.
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 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.
Store Summary
Stores open by segment were as follows:
| 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 | ||||||||||||||
| Canada Best Buy stores | 130 | 129 | 128 | ||||||||||||||
| Canada Best Buy Mobile stand-alone stores | 12 | 31 | 32 | ||||||||||||||
|
Total International stores(1)
|
142 | 160 | 160 | ||||||||||||||
| 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. 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 $337 million in fiscal 2026 compared to $372 million in fiscal 2025. Our effective tax rate decreased to 24.0% in fiscal 2026 compared to 28.7% in fiscal 2025. The decreases were primarily due to the tax impacts of the restructuring charges and the associated exit of a component of our Best Buy Health business, as well as certain expenses that were not deductible in the prior year. The decrease in income tax expense was partially offset by the impact of increased pre-tax earnings. See Note 2, Restructuring, of the Notes to Consolidated Financial Statements, included in this Annual Report on Form 10-K for additional information.
Segment Performance Summary
Domestic Segment
Selected financial data for the Domestic segment was as follows ($ 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 | |||||||||||||||||
| Total online revenue | $ | 13,166 | $ | 12,994 | $ | 13,102 | |||||||||||
| Online revenue as a % of total segment revenue | 34.4 | % | 34.0 | % | 32.7 | % | |||||||||||
|
Comparable online sales % change(1)
|
1.3 | % | (0.8) | % | (7.8) | % | |||||||||||
(1)Comparable online sales are included in the comparable sales calculation.
(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 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 | 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 5.7% comparable sales growth was driven primarily by laptops, mobile phones and desktops.
•Consumer Electronics:The 5.4% comparable sales decline was driven primarily by home theater.
•Appliances:The 8.9% comparable sales decline was driven primarily by large appliances.
•Entertainment:The 6.8% comparable sales growth was driven primarily by gaming, partially offset by a comparable sales decline in drones.
•Services: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)
|
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 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 | 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 5.5% comparable sales growth was driven primarily by computing and mobile phones.
•Consumer Electronics: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 5.1% comparable sales decline was driven by small and large appliances.
•Entertainment:The 0.6% comparable sales decline was driven primarily by virtual reality and drones, partially offset by comparable sales growth in gaming.
•Services: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 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)
|
(21) | - | - | ||||||||||||||
| 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)
|
14 | 21 | 61 | ||||||||||||||
|
Long-lived asset impairment(2)
|
21 | - | - | ||||||||||||||
|
Restructuring charges(3)
|
190 | (3) | 153 | ||||||||||||||
|
Goodwill and intangible asset impairments(2)
|
171 | 475 | - | ||||||||||||||
| 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)
|
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)
|
0.10 | - | - | ||||||||||||||
|
Restructuring charges(3)
|
0.90 | (0.01) | 0.70 | ||||||||||||||
|
Goodwill and intangible asset impairments(2)
|
0.81 | 2.19 | - | ||||||||||||||
|
(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 | |||||||||||
For additional information regarding the nature of charges discussed below, refer to Note 1, Summary of Significant Accounting Policies; Note 2, Restructuring; 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 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. As such, the income tax on a portion of the U.S. non-GAAP adjustments is calculated using the statutory tax rate of 24.5%. There is no income tax for a portion of the U.S. non-GAAP adjustments, as there is no tax benefit on the expenses in the calculation of GAAP income tax expense.
Liquidity and Capital Resources
We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level of investment required to support our business strategies, the performance of our business, capital expenditures, dividends, credit facilities, short-term borrowing arrangements and working capital management. We modify our approach to managing these variables as changes in our operating environment arise. For example, capital expenditures and share repurchases are a component of our cash flow and capital management strategy, which, to a large extent, we can adjust in response to economic and other changes in our business environment.
Cash and cash equivalents were as follows ($ in millions):
| January 31, 2026 | February 1, 2025 | ||||||||||
| Cash and cash equivalents | $ | 1,738 | $ | 1,578 | |||||||
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. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit. We limit exposure relating to financial instruments by diversifying the financial instruments among various counterparties, which consist primarily of major financial institutions.
Cash Flows
Cash flows were as follows ($ in millions):
| 2026 | 2025 | 2024 | |||||||||||||||
| Total cash provided by (used in): | |||||||||||||||||
| Operating activities | $ | 1,962 | $ | 2,098 | $ | 1,470 | |||||||||||
| Investing activities | (730) | (704) | (781) | ||||||||||||||
| Financing activities | (1,083) | (1,309) | (1,144) | ||||||||||||||
| Effect of exchange rate changes on cash | 6 | (10) | (5) | ||||||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | $ | 155 | $ | 75 | $ | (460) | |||||||||||
Operating Activities
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
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
The decrease in cash used in financing activities in fiscal 2026 was primarily driven by lower share repurchases.
Sources of Liquidity
Funds generated by operating activities, available cash and cash equivalents, our credit facilities, other debt arrangements and trade payables are our most significant sources of liquidity. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures, share repurchases, dividends and strategic initiatives, including business combinations. However, in the event our liquidity is insufficient, we may be required to limit our spending. 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.
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 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 | 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. Factors that can affect our credit ratings include, but are not limited to, changes in our operating performance; the economic environment, regulatory and political environment; conditions in the retail and consumer electronics industries; our competitive standing within the industries we operate; our financial position; and changes in our business strategy. If changes in our credit ratings were to occur, they could impact, among other things, interest costs for certain of our credit facilities, our future borrowing costs, access to capital markets, vendor financing terms and future new-store leasing costs.
Restricted Cash
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 $285 million and $290 million as of January 31, 2026, and February 1, 2025, respectively. The decrease in restricted cash was primarily due to releases of product protection reserves based on claims and purchasing behaviors of customers participating in our membership offerings.
Capital Expenditures
Capital expenditures were as follows ($ in millions):
| 2026 | 2025 | 2024 | |||||||||||||||
| E-commerce and information technology | $ | 463 | $ | 438 | $ | 496 | |||||||||||
|
Store-related projects(1)
|
200 | 230 | 278 | ||||||||||||||
| 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 2027 of approximately $750 million.
Debt and Capital
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
We repurchase our common stock and pay dividends pursuant to programs approved by our Board of Directors ("Board"). The payment of cash dividends is also subject to customary legal and contractual restrictions. 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, our stock price, and the health and stability of global markets. The timing and amount of future repurchases may vary depending on such factors.
On February 28, 2022, our Board approved a $5.0 billion share repurchase program. There is no expiration date governing the period over which we can repurchase shares under this authorization.
Share repurchase and dividend activity were as follows ($ and shares in millions, except per share amounts):
| 2026 | 2025 | 2024 | |||||||||||||||
| Total cost of shares repurchased | $ | 273 | $ | 500 | $ | 340 | |||||||||||
| Average price per share | $ | 69.18 | $ | 86.42 | $ | 72.52 | |||||||||||
| Total number of shares repurchased | 4.0 | 5.8 | 4.7 | ||||||||||||||
| 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 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 January 31, 2026, were as follows ($ in millions):
| Payments Due by Period | |||||||||||||||||||||||||||||
| Contractual Obligations | Total |
Less Than 1 Year |
1-3 Years | 3-5 Years |
More Than 5 Years |
||||||||||||||||||||||||
|
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; Note 6, Leases; Note 7, Debt; and Note 12, Contingencies and Commitments, 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)Purchase obligations primarily include agreements to purchase goods or services that are enforceable, are legally binding and specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations do not include agreements that are cancelable without penalty. Additionally, although they do not contain legally binding purchase commitments, we include open purchase orders in the table above. Substantially all open purchase orders are fulfilled within 30 days.
(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 $0.8 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.
(3)Long-term debt obligations represent principal amounts only and exclude interest rate swap valuation adjustments.
(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 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
The preparation of our financial statements requires us to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors believed to be relevant at the time our consolidated financial statements are prepared. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
Our significant accounting policies are discussed in 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. We have not made any material changes to our accounting policies or methodologies during the past three fiscal years. We believe that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results. These estimates require our most difficult, subjective or complex judgments and generally incorporate significant uncertainty.
Vendor Allowances
Description
We receive funds from our merchandise vendors through a variety of programs and arrangements, primarily in the form of purchases-based or sales-based volumes and for product advertising and placement. We recognize vendor allowances based on purchases and sales as a reduction of cost of sales when the associated inventory is sold. Vendor allowances for advertising and placement are recognized as a reduction of cost of sales ratably over the corresponding performance period. Funds that are determined to be a reimbursement of specific, incremental and identifiable costs incurred to sell a vendor's products are recorded as an offset to the related expense within SG&A when incurred.
Judgments and uncertainties involved in the estimate
Due to the quantity and diverse nature of our vendor agreements, estimates are made to determine the amount of funding to be recognized in earnings or deferred as an offset to inventory. These estimates require a detailed analysis of complex factors, including proper classification of the type of funding received and the methodology to estimate the portion of purchases-based funding that should be recognized in cost of sales in each period, which considers factors such as inventory-turn by product category and actual sell-through of inventory.
Effect if actual results differ from assumptions
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.
Goodwill
Description
Goodwill is evaluated for impairment annually in the fiscal fourth quarter or whenever events or circumstances indicate the carrying value may not be recoverable. The impairment test involves a comparison of the fair value of each reporting unit with its carrying value. Fair value reflects our estimate of the price a potential market participant would be willing to pay for the reporting unit in an arms-length transaction.
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 $298 million, respectively, as of January 31, 2026.
Judgments and uncertainties involved in the estimate
Determining the fair value of a reporting unit requires complex analysis and judgment. We use a combination of discounted cash flow ("DCF") analysis and market data, such as revenue multiples and quoted market prices, for observable comparable companies. DCF analysis requires detailed forecasts of cash flow drivers, such as revenue growth rates, margin rates and capital investments, and estimates of weighted-average cost of capital rates. These estimates incorporate many uncertain factors, such as the effectiveness of our strategy, changes in customer behavior, technological changes, competitor actions, regulatory changes and macroeconomic trends.
Effects if actual results differ from assumptions
For our Best Buy Domestic reporting unit, fair value is primarily derived from market data and exceeded carrying value by a substantial margin in fiscal 2026, fiscal 2025 and fiscal 2024. 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 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. Factors that drive this uncertainty include macro-economic conditions, the regulatory environment, government funding programs, competitor actions, technology changes and other trends in the health and care sectors. Changes in any of these factors could lead to further lowering our expectations, which could result in further goodwill impairment.
Inventory Markdown
Description
We value our inventory at the lower of cost or net realizable value through the establishment of inventory markdown adjustments. Markdown adjustments reflect the excess of cost over the net recovery we expect to realize from the ultimate sale or other disposal of inventory and establish a new cost basis. No adjustment is recorded for inventory that we expect to return to our vendors for full credit.
Judgments and uncertainties involved in the estimate
Markdown adjustments involve uncertainty because the calculations require management to make assumptions and to apply judgment about the expected revenue and incremental costs we will generate for selling current inventory. Such estimates include the evaluation of historical recovery rates, as well as factors such as product type and condition, forecasted consumer demand, product lifecycles, promotional environment, regulatory actions, vendor return rights and the expected sales channel of ultimate disposition. We also apply judgment in the assumptions about other components of net realizable value, such as vendor allowances and selling costs.
Effect if actual results differ from assumptions
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.
Tax Contingencies
Description
Our income tax returns are routinely examined by domestic and foreign tax authorities. Taxing authorities audit our tax filing positions, including the timing and amount of income and deductions and the allocation of income among various tax jurisdictions. At any one time, multiple tax years are subject to audit by the various taxing authorities. In evaluating the exposures associated with our various tax filing positions, we may record a liability for such exposures. A number of years may elapse before a particular matter, for which we have established a liability, is audited and fully resolved or clarified. We adjust our liability for unrecognized tax benefits and income tax provisions in the period in which an uncertain tax position is effectively settled, the statute of limitations expires for the relevant taxing authority to examine the tax position or when more information becomes available. Our effective income tax rate is also affected by changes in tax law, the tax jurisdiction of new stores or business ventures, the level of earnings and the results of tax audits.
Judgments and uncertainties involved in the estimate
Our liability for unrecognized tax benefits contains uncertainties because management is required to make assumptions and apply judgment to estimate the exposures associated with our various tax filing positions. Such assumptions can include complex and uncertain external factors, such as changes in tax law, interpretations of tax law and the timing of such changes, and uncertain internal factors such as taxable earnings by jurisdiction, the magnitude and timing of certain transactions and capital spending.
Effect if actual results differ from assumptions
To the extent we prevail in matters for which a liability has been established or are required to pay amounts in excess of our established liability, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement generally would require use of our cash and may result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement may reduce our effective income tax rate in the period of resolution.
Service Revenue
Description
We sell membership plans that include access to benefits such as technical support, price discounts on certain products and services and product protection plans. We allocate the transaction price to all performance obligations identified in the contract based on their relative fair value. For performance obligations provided over the term of the contract, we typically recognize revenue on a usage basis, an input method of measuring progress over the related contract term. This method involves the estimation of expected usage patterns, primarily derived from historical information.
Judgments and uncertainties involved in the estimate
Estimates involve complex calculations and judgment, for example, in estimating the relative standalone selling price for bundled performance obligations; the appropriate recognition methodology for each performance obligation; and, for those based on usage, the expected pattern of consumption across a large portfolio of customers. When insufficient reliable and relevant history is available to estimate usage, we generally recognize revenue ratably over the life of the contract until such history has accumulated.
Effect if actual results differ from assumptions
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 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.
Best Buy Co. Inc. published this content on March 18, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 18, 2026 at 20:10 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]