Best Buy (BBY) Q3 2026 earnings call transcript

REFINITIV STREETEVENTS EDITED TRANSCRIPT BBY. N - Q3 2026 Best Buy Co Inc Earnings Call EVENT DATE/TIME: NOVEMBER 25, 2025 / 1:00PM GMT OVERVIEW: Company Summary REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. C O R P O R A T E P A R T I C I P A N T S Mollie Obrien Best Buy Co Inc - Investor relations Corie Barry Best Buy Co Inc - Chief Executive Officer, Director Matthew Bilunas Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Jason Bonfig Best Buy Co Inc - Senior Executive Vice President - Customer Offerings and Fulfillment C O N F E R E N C E C A L L P A R T I C I P A N T S Simeon Gutman Morgan Stanley - Analyst Peter Keith Piper Jaffray Inc - Analyst Joseph Feldman Telsey Advisory Group LLC - Analyst Gregory Melich Evercore Inc - Analyst Jonathan Matuszewski Jefferies LLC - Analyst Seth Sigman Barclays Services Corp - Analyst Christopher Horvers JPMorgan Chase & Co - Analyst Anthony Chukumba Loop Capital Markets LLC - Analyst P R E S E N T A T I O N Operator Ladies and gentlemen, thank you for standing by.

(Operator Instructions) I will now turn the conference call over to Mollie O'Brien, Head of Investor Relations. Mollie Obrien - Best Buy Co Inc - Investor relations Thank you, and good morning, everyone. Joining me on the call today are Corie Barry, our CEO; Matt Bilunas, our Chief Financial and Strategy Officer; and Jason Bonfig, our Chief Customer, Product, and Fulfillment Officer. During the call today, we will be discussing both GAAP and non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and an explanation of why these non-GAAP financial measures are useful can be found in this morning's earnings release, which is available on our website, investors. bestbuy. com. Some of the statements we will make today are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements may address the financial condition, business initiatives, growth plans, investments, and expected performance of the company and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's current earnings release and our most recent Form 10-K and subsequent Form 10-Q for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. And now, I will turn the call over to Corie. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv.

'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY.

N - Q3 2026 Best Buy Co Inc Earnings Call Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director Good morning, everyone, and thank you for joining us. Today, we are very pleased to report strong results for the third quarter. On revenue of $9.7 billion, we delivered an adjusted operating income rate of 4% and increased our adjusted earnings per share 11% year over year to $1.40. We delivered better-than-expected comparable sales growth of 2.7%. Our better-than-expected profitability was due to the higher revenue and lower-than-expected SG&A expenses. We continue to drive strong sales performance across computing, gaming, and mobile phones. We also saw growth in other categories, including wearables and headphones. This growth was partially offset by declines in the home theater, appliance, and drone categories.

In computing, we delivered our seventh consecutive quarter of positive comps, with sales growth coming from across the assortment and price points. This is due to continued momentum driven by customers' need to replace and upgrade products, combined with our unique blend of broad assortment and expert advice, service, and support. We were there for students and their families, no matter their budget, and were pleased with our back-to-school sales performance. We were also focused on helping customers get what they needed to transition to Windows 11 as Microsoft ended support for the Windows 10 operating system mid-October. This contributed to our comparable sales performance, evidenced by strong Windows-based sales overall and almost 30% year-over-year growth in desktop computers. In gaming, we continued to see strong demand for the Nintendo Switch 2.

As expected, the growth rate slowed from the more material Q2 launch timeframe. We also continued to see healthy demand for handheld gaming and augmented reality glasses. In mobile phones, we leveraged our expanded partnerships and in-store operating model improvements with the largest carriers to drive strong sales growth across phones. Our Q3 enterprise comparable sales were driven by growth across both our online assets and our stores. Online sales were up for the fourth consecutive quarter due to higher traffic and increased customer adoption of our highly rated app. We also drove our fastest shipping fulfillment speed ever, coupled with our highest on-time rate for a third quarter. According to our five-star surveys, our store customer experience ratings for product availability, store appearance, and associate availability all improved year over year.

We were also pleased to see continued year-over-year growth in our overall relationship Net Promoter Score, reflecting improved customer perception on all relationship attributes, with the largest gain in meeting my tech needs for the second straight quarter. For the most part, customer shopping behavior in Q3 did not change materially from the commentary we have shared for the past several quarters. Customers remained resilient but deal-focused and attracted to more predictable sales moments, including our back-to-school sales events and our Techtober sales held in close proximity to the October Prime Day event. September, which was relatively quiet outside of the Labor Day sales event, had the slowest growth of the quarter. Importantly, while customers continue to be thoughtful about big-ticket purchases in the current environment, they are willing to spend on high-price-point products when they need to or when there is technology innovation.

To summarize our Q3 performance, we are flexing the unique strengths of our model as customers need to upgrade or replace their CE and new products are coming to market. I want to thank our amazing employees for their dedication to our customers and their strong execution in delivering these Q3 results and setting us up well for an exciting holiday quarter. I would like to provide a few updates on the progress we are making on our fiscal '26 strategy. As a reminder, our strategy is to continue to strengthen our position in retail as a leading omnichannel destination for technology while, at the same time, building and scaling new profit streams that we believe will drive returns in the future.

Our first fiscal '26 strategic priority is to drive omnichannel experiences that resonate with our customers. Last quarter, we provided multiple examples of store refreshes and upgrades planned for the back half of the year, many of which were in partnership with our vendors. A few updates. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY. N - Q3 2026 Best Buy Co Inc Earnings Call We launched the latest AI glasses from Meta across all stores.

In more than 50 locations, we now have immersive showcase areas staffed by Meta experts to help customers discover and try the technology hands-on. The strong customer demand for in-person demos continues to outpace available appointments. We introduced new experiences with Breville and SharkNinja that feature expanded assortments for at-home baristas and chefs and innovative health and beauty solutions. Very early reads are positive, and we are excited to monitor customer response during the holidays, as many of these new experiences will be staffed with expert sales associates to bring this innovation to life for our customers. We expanded the merchandising areas featuring TVs from TCL, Hisense, and LG, which are staffed by dedicated experts to address questions and help customers get what they need.

These were not all live for the whole quarter, but very early reads are showing positive results. And earlier this month, we implemented most of the new IKEA pilots we announced last quarter. These 1,000-square-foot areas are staffed by IKEA coworkers and showcase kitchen and laundry room settings from IKEA and appliances from Best Buy. While there are only 10 pilot locations, this is the first time IKEA products and services are available through another US retailer, creating innovative ways for both of us to meet customer needs in a changing environment. We continue to drive the digital experience forward as well. Usage of our app is growing every quarter, which helps us recognize more customers as they shop with us and gives us the opportunity to provide better personalization and product recommendations.

In addition to launching our Marketplace, we continue to make online customer enhancements. A few specific examples. We improved the online TV shopping experience by both lowering the price for our delivery and installation services and improving the digital flow to make it even easier for customers to add the services to their online TV purchase. For shippable products across categories, customers in all our markets can now pick a two-hour window for delivery up to seven days out. This capability was only available in about a third of our markets last year. This is a great option for customers, especially those who may want more security around their high-price-point purchases. As always, we have a relentless focus on the employee experience and being the Best Place to Work, which is driving engagement, historically low turnover, and healthy applicant pools.

This, in turn, allows us to provide our customers the expert service that Best Buy is known for across stores, online, and in-homes. On top of that, our vendors have grown their investment in our specialized labor programs to augment our staff. We continue to expect vendor labor investment to be approximately 20% higher than last year in the second half of the year. Our second strategic priority for fiscal '26 is focused on incremental profitability streams. We are excited about our new Best Buy Marketplace. We are about three months into the launch and have more than 1,000 sellers and 11 times more SKUs available online for customers than we did before. Now, we have more tech options than ever for our customers, both from big names like Samsung, Dell, HP, and Intel, and new vendors that help us level up our tech assortment across categories.

We also have hundreds of new brands in new categories, like licensed sporting goods, seasonal decor, and much more. For our sellers, our Marketplace provides an additional avenue to increase their reach and build their brands, leveraging our qualified traffic. I will share some early results and learnings. As expected, and an important goal of Marketplace, we are seeing high unit sales in categories like accessories and small appliances. The five-star customer reviews for 3P experiences are similar to those we see for our first-party business. Customer return rates for Marketplace items have been running lower than our first-party return rates. And for customers who do have a return, they are taking advantage of the convenient return-to-store option for more than 80% of product returns.

Marketplace ramped through Q3 in terms of sellers, SKUs, traffic conversion rate, and sales. We expect to continue to ramp through Q4. Our Marketplace results had a positive impact on our Q3 gross profit rate, and we expect it to positively impact our Q4 gross profit rate as well. And it is already providing opportunities for Best Buy ads through new advertisers. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY. N - Q3 2026 Best Buy Co Inc Earnings Call Speaking of Best Buy ads, during the quarter, we hosted our first-ever client showcase in September called We Got Next.

It spotlighted our scale, performance, and innovation to key decision-makers across agencies, brands, partners, and press. We were encouraged by the reception. Advertisers are particularly excited about our new in-store takeover product. Unique to Best Buy, this high-impact program features both large-format signage across the store and screens across the TV wall and computer monitors. It begins running in January with Meta and ESPN. We continue to invest in strengthening and advancing the technology platform we need to capitalize on the opportunity we see ahead. During the quarter, we launched our self-serve platform, My Ads, which is particularly important for our new Marketplace sellers. We also enabled onsite programmatic buying, augmented our reporting capabilities, and expanded our onsite ad supply.

We are successfully expanding into new opportunity areas like agencies and demand-side platforms, or DSPs. We are also gaining traction in non-endemic categories, with several partners testing the platform in differentiated ways. Financial services is emerging as a standout vertical, with PayPal, Klarna, and Cap One Shopping all activating campaigns. Other new non-endemic categories include quick-serve restaurants and sports entertainment. Our retail media network is already highly profitable, and our Q3 growth in ad collections had a positive impact on our gross profit rate, and we expect it to positively impact our Q4 gross profit rate as well. We expect a neutral impact on this year's operating income rate compared to last year due to the investments we are making in technology and talent.

This brings us to our third strategic priority for fiscal '26, which is a long-standing strategic imperative. Driving efficiencies and identifying cost reductions are crucial to help fund investment capacity for new and existing initiatives and offset pressures in our business. There are many ways we realize these efficiencies, with technology and analytics, through ongoing vendor partnerships and vendor selection throughout the enterprise, and by modifying existing processes or customer offerings. In our customer support capability, we are leveraging AI to streamline interactions and provide new experiences that empower customers with more self-serve content and options. As a result, we drove a 17% decline in the number of customer contacts in Q3 and improved our customer experience scores. By leveraging our new data-driven sourcing solution to choose the most efficient location to fulfill more than 70% of our online orders, we are seeing faster delivery times, better on-time delivery, and lower costs.

Going forward, we will continue to use AI-augmented optimization across multiple areas of our business, from scam detection to customer support to personalized email marketing. And we are increasingly using AI for product search, product recommendations, and enriching product content, as well as expanding into conversational AI and agentic commerce. We have officially kicked off the holiday season. We feel well positioned with compelling deals on hot products, strong marketing, and competitive fulfillment options. From a timing perspective, our promotional plans, for the most part, line up with last year. Doorbusters drop every Friday through the holiday, and our Black Friday sales started the week before Thanksgiving. We have something for every budget, with deals across a wide range of price points.

Because of our unique position, we can also offer customers great prices for the latest innovation and premium products and assortments that not everyone has. This includes limited-quantity hardware, games, and toys that drive traffic and excitement to our stores and digital properties through invitation-only and other exciting launch events. We expect gaming to be a hot holiday gift category, with products like the Nintendo Switch 2, the Asus ROG Xbox Ally handheld gaming system, gaming laptops, and gaming monitors. Other exciting gifts for holiday include AI glasses from Ray-Ban and Oakley, 3D printers, OLED TVs, the new Hyperboot by Nike, limited-quantity Pokémon cards and LEGO toys, and JBL Partybox speakers. For those looking for gifts that can be used every day, we have great deals on the new reMarkable Paper Pro and Copilot+ laptops, small appliances like Ninja SLUSHi machines and Breville Barista espresso machines, health products like the new Oura Ring 4, and much more.

In stores, you can interact with our immersive experiences and demos and get advice from our blue shirts and vendor experts. And every year ahead of holiday, we, like many vendors, hire thousands of seasonal flex employees. This year, we tried something new and brought all the new REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY. N - Q3 2026 Best Buy Co Inc Earnings Call associates together for a full weekend earlier this month.

The event was a resounding success. Not only in training the new employees on products, tools, and transacting, but immersing new team members in the values, energy, and collaboration that define Best Buy's culture. Of course, all the in-store products and more are available for customers who prefer to shop from home. We have our Holiday Gift Ideas page with curated gift lists based on interest and a personalized Discover page designed to help customers discover new technology. In addition to great price points, we have our comprehensive trade-in program that we will highlight throughout the holiday to help customers more easily get new technology. For example, customers can save up to $1,200 by trading in their tablets or up to $1,100 trading in their phones.

We also have great no-interest programs available on the credit card in addition to buy now, pay later options to help customers complete their holiday shopping list. We are excited about our holiday marketing campaign that meets people where they already are across sports, streaming, and social. We're teaming up with more than 200 influencers and Best Buy creators as they highlight the tech that's topping their gift lists. And this year, we are going even deeper with sports. We continue to be the official home entertainment retailer of the NFL. And our holiday campaign will have an increased in-game presence across NBC, Peacock, CBS, Fox, and Netflix. We will also have presence on CBSSports. com and across streaming sports content on ESPN.

In summary, we are pleased with our Q3 financial results and execution, which included improved share positions. We expect to deliver sales growth for the year. The high end of our Q4 outlook assumes growth in computing, gaming, and mobile. It also reflects trend improvements in TVs driven by a blend of sharp pricing, increased marketing, specialty retail, and improved delivery and install offerings. Our results demonstrate an important aspect of our thesis. Our model really shines when there is innovation. This is because we are the trusted source for the latest and greatest new technology. We have a broad range of assortments and price points for every budget, in addition to unique in-store and digital experiences. We also have Geek Squad services to help our customers.

And we are a true partner to our vendors, working with them from early in the product development cycle all the way to launching products on our sales floor. And now, I would like to turn the call over to Matt for more details on our Q3 performance and Q4 outlook.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Good morning. Let me start with an overview of how the third quarter performed versus expectations we shared with you last quarter. Enterprise comparable sales growth of 2.7% exceeded our outlook of being similar to our second-quarter growth of 1.6%. Our adjusted operating income rate of 4% was 30 basis points better than expected, which was largely driven by lower-than-planned SG&A expense. I will now talk about our third-quarter results versus last year. Enterprise revenue of $9.7 billion increased 2.4% versus last year. Our adjusted operating income rate increased 30 basis points compared to last year. And our adjusted diluted earnings per share increased 11% to $1.40.

By month, our enterprise comparable sales were up approximately 3% in August, 1% in September, and 5% in October. In our Domestic segment, revenue increased 2.1% to $8.9 billion, driven by comparable sales growth of 2.4%. Our online revenue of 2.4% increased 3.5% on a comparable basis and represented 31.8% of our Domestic revenue. Our online comparable sales growth includes a net commission revenue earned from our third-party marketplace sellers. From an organic standpoint, the blended average sales price of our products was approximately flat to last year, with unit growth being the primary driver of our sales growth. International revenue of $794 million increased 6.1% versus last year. The revenue increase was primarily driven by comparable sales growth of 6.3% and revenue from Best Buy Express locations that are not yet included in comparable sales.

The previous items were partially offset by the negative impact from foreign exchange rates. From a category standpoint, the largest drivers of International comparable sales growth were Computing and Mobile Phones. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY. N - Q3 2026 Best Buy Co Inc Earnings Call Our Domestic gross profit rate decreased by 30 basis points to 23.3%. This was primarily due to lower product margin rates, partially offset by rate improvement within the Services category.

The lower product margin rates were primarily driven by an unfavorable sales mix and increased personalized promotional offers. Our International gross profit rate increased 30 basis points to 22.8%. The higher gross profit rate was primarily due to favorable supply chain costs.

Moving to SG&A, where our Domestic adjusted SG&A decreased $4 million, which included lower Best Buy Health expenses that were largely offset by higher incentive compensation expense. During the third quarter, we recorded pre-tax non-cash asset impairments of $192 million related to Best Buy Health, which were excluded from our adjusted results. The impairments were prompted by a change in Best Buy Health's customer base during the quarter and reflect downward revisions in our long-term projections, in part due to pressures in the Medicaid and Medicare Advantage markets. Year to date, we have returned a total of $802 million to shareholders through dividends of $602 million and share repurchases of $200 million. For the year, we still expect to spend approximately $300 million on repurchases.

Let me next share color on fourth-quarter guidance. From a top-line perspective, we expect our fourth-quarter comparable sales to be in the range of down 1% to up 1%. In addition, our fourth-quarter comparable sales outlook for Canada more closely aligns with our expectations for the Domestic segment. On the profitability side, we expect our fourth-quarter adjusted operating income rate of 4.8% to 4.9%, which compares to 4.9% last year.

Moving to gross profit, we expect our fourth-quarter gross profit rate to decline versus last year due to a lower product margin rate, which is primarily due to increased promotional investments. Other notable drivers that are expected to benefit our gross profit rate include growth from Best Buy ads, our recently launched online marketplace, and improved profitability from our Services category. Moving next to SG&A, where the most notable planned puts and takes are the following: increased SG&A in support of our Best Buy ads and Marketplace initiatives, which include advertising, technology, and employee compensation expense. Offsetting these items are lower Best Buy Health and incentive compensation expense.

Lastly, the low end of our guidance reflects our plans to further reduce our variable expenses, including incentive compensation, to align with sales trends. Let me provide more details on our updated full-year fiscal '26 guidance, which incorporates the color I just shared on the fourth quarter and is the following: revenue in the range of $41.65 billion to $41.95 billion; comparable sales growth of 0.5% to 1.2%; adjusted operating income rate of approximately 4.2%; an adjusted effective income tax rate of approximately 25.4%; adjusted diluted earnings per share of $6.25 to $6.35; and capital expenditures of approximately $700 million. Our full-year gross profit and SG&A working assumptions are still very similar to what we shared last quarter, and some of the key call-outs are the following.

We believe our fiscal '26 gross profit rate will now decline approximately 15 basis points compared to last year. The high end of our guidance continues to reflect incentive compensation that is approximately flat to last year. As I noted, we now expect our adjusted effective income tax rate to be approximately 25.4%, which compares to our prior guidance of 25%. I will now turn the call over to the operators for questions.

It looks like the comp may be light from what we were expecting standing from the second quarter, meaning once you guided the prior quarter, but a little bit better on profit. So can you talk about -- I guess there's a lot of scenarios what could amount, but how you set up your fourth-quarter guide and any difference in thinking from when we talked about it three months ago? Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Yeah. Overall, the high end of our Q4 guide from a sales perspective is pretty similar to what we guided the last time, maybe just a little bit lower. We did raise the bottom end of that sales guide from something that was implied to down 4% or maybe more to the number we talked about here today of down 1%.

So feeling good about where sales are effectively similar to where we expected them to be now on the August call. On the EBIT side, we actually slightly lower the EBIT expectations from what we would have implied last Q4 closer to 5%. So most of that was on the low end. We did have a little bit more rate pressure on the low end because we have adjusted the revenue expectations, and therefore, the incentive compensation changed a little bit. So overall, at the high end, not a very big difference from what we would have implied in the guide on the August call.

How do you think about it as you go into fourth quarter and into next year? Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Sure. I mean, I think to support the fourth-quarter guide, we are still expecting growth on the Computing side and Mobile Phones. Computing is still going to be fueled by the need to replace and upgrade and plus all the ongoing innovation around AI. That will continue into Q4 and likely continue into next year as we still see that there are millions of people who have yet to upgrade their Win10 device and that there's further opportunities even on the Mac side of the business who haven't upgraded to the newest chip technology.

We think about mobile phones as expected to continue to grow as we get into Q4. Likely as we get into next year as well, we are seeing continued benefit from the in-store improvements with the carriers. On the Entertainment side, as we get into Q4, still expect to see Switch help us grow in Q4, but on the other console side, that will likely slow as you get into the later stages of the replacement cycle of those two other consoles. Plus, there's been some pretty transparent price increases that are obviously probably having a little bit of an impact as you get into next year. Likely still a little opportunity before we lap the Switch to launch midway through the year.

We are expecting to see improved trends on the TV side as we get into Q4. We have very competitive pricing. We've put more marketing into the business and with additional labor and just some changes to the service, obviously, we feel like that's going to help us improve the trends on the TV side as well. We are seeing already some improvements on the exercise units grow a little bit in Q3 on the TV, so that is helpful. Plus, we have a lot of other initiatives. We have the Marketplace that's continuing to ramp and scale as we get into Q4. So we feel really good about that, especially as we get into Marketplace next year, being able to scale even more along with the ads business.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Yeah. Let me start at a high level for Q3. Like I said, we're expecting a pretty similar Q4 guide overall from a sales perspective. If I start back in Q3, it did come in a bit better than we expected. We saw a strong back-to-school period. We saw a strong October with the Techtober in the early part of the year. So we are seeing a positive growth as we go into Q4, although the Q4 did see some growth last year versus Q3 that saw a little bit more sales pressure, so the comparisons get a little bit tougher as you get into Q4.

Obviously, the holiday is never easy to predict. What we do believe is we have a range of scenarios, and the range we've provided gives us a great place to plan our business operationally. Some of the categories that change a little bit in terms of sales growth momentum as you get in from Q3 to Q4, gaming, we are expecting it to grow overall, but maybe not at the same pace that we saw in Q3 and Q4. Wearables would be another category -- I would say probably aren't going to see the same type of growth that we had saw in Q3.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director Yeah. I'm incredibly proud of the work the team has done to launch the Marketplace in a very omnichannel way. We mentioned now more than 1,000 sellers that we onboarded in a quarter and 11 times more SKUs. Right away, we can see customers looking for that broader assortment. We can see them leaning into some of the unit growth that we were looking for in places like accessories where you can have a much deeper assortment or small appliances where again you have that ability to have more breadth across what we're doing. We're really happy with that. We did hit a few of those on the call where we're seeing that high unit sales and categories.

We're seeing return rates be actually a little bit less than what we're seeing in first party and 80% of those returns coming back to stores. We really like the customer experience metrics we're seeing. In general, those early indicators really feel healthy and good to us. But it still is really early in the ramp. We want to make sure we give ourselves enough time to create the scale that we're going to see throughout Q4. But we're excited with the progress that we're making and how quickly we've been able to broaden that assortment and how much our customers are leaning into that broader assortment for us. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv.

All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY.

N - Q3 2026 Best Buy Co Inc Earnings Call Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Yeah. Regarding the OI rate impact for the year, we had previously said we thought maybe it would be a little bit of a rate improvement for the enterprise for the year. We're now expecting that to be a bit more neutral. Nothing super material has changed in our outlook. There's been just a little bit of a different product mix and a little bit slower ramp than we would have had originally modeled. Again, we never really expected it to have a really huge impact to the rate this year, but it's more neutral this time at this quarter-end.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director The last thing I'd say, Peter, I think the great part about having this, especially as we head into Q4, is it just really extends the amount of giftable items that we have for our customers. And the teams are finding really interesting ways to highlight these new extended assortments. So as you look on our global homepage or as you look at Search, we're finding new ways to pull the depth of this assortment up so people really realize there's a lot more out there that our customers can find to be the perfect gift giver.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director Thanks, Peter.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Thank you.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director Yeah. I mean, obviously, our membership program remains a really important part of our customer experience and the way in which we engage with our customers. We have more than 100 million members across our three tiers. Obviously, the free my Best Buy membership is the one that has the greatest reach. But on the paid membership side, which is Best Buy Plus and Best Buy Total, we ended the year with nearly 8 million paid members. That was up from 7 million the year before. And what our focus is right now is how can we continue to drive real value and unique offers for those members.

And so one of the things that we have found to be really working well for us is the strategic use of some very personalized promotions. And it's where we can use the breadth of our data to really try to re-engage maybe some of those customers who haven't been engaged with us. You can use this data we have about our customers plus these signals we're seeing from customers in the way that they're shopping and really target them carefully with offers, which we're REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv.

'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY. N - Q3 2026 Best Buy Co Inc Earnings Call finding is a very unique way for us to re-engage those customers who maybe would have lapsed or wouldn't have been shopping with us this holiday season. And another piece that we tried and we have talked about is a deep discount on the NFL Sunday ticket for Plus and Total members. It's more that idea of because you're a member with us, are there other ancillary, especially services and subscriptions that might really resonate. And we're going to continue to test and try and build on those learnings across our membership.

The goal, no matter what, is consistent: we want to drive engagement. We want to increase the share of wallet. And we want to use this as another tool that helps us fuel our ads business. And so I think the evolutions that you'll continue to see from here will all be based in continuing to fulfill that goal for our customers.

And then just maybe shifting gears a little bit, and it may be early, but I did want to ask about how are you thinking about stores and store investment for the coming year? You've done a lot of things to keep tweaking the model and trying different things inside the stores. I'm just curious how your initial thoughts for next year would look. Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director Yeah. I'm going to start where I always start, which is our stores are incredibly crucial assets. They provide not only differentiated experiences, not only differentiated services, but also amazing multi-channel fulfillment options. We still are running at 46% in-store pickup, no matter what all of the advancements that we've made in terms of shipping speed are.

So this is a really important asset base for us. And we've been very consistent, and this is true for this year and it will bleed into next year. Our focus right now is on great store look and feel. And so a lot of our capital investments this year have been about ensuring that we're really investing in that look and feel. We've listed a number of the ways we're doing that, both ourselves and in partnership with our vendors. And that will continue, as we think, into next year as we continue to refresh and make sure that we feel like our store updates reflect those great immersive experiences in places like AR and gaming and TVs, small appliances, many of the categories that we've talked about, including the experiences that we're driving in mobile in partnership with some of our vendors.

We do have some cohort of stores where they're a little bit larger than what we need. And so we've been working on several different ways, and this, again, will move into next year, including relocations, resizing some of the existing formats. Now, we're looking at some of the new and more innovative ways where maybe we can consolidate the space and bring in partners like the IKEA pilot is a great example of that. But you can imagine there's a multitude of partners who might be interested in having some of that shop-in-shop space. And then finally, we've talked about some of the smaller format stores. We now have three new small format stores open, testing a couple different concepts.

One is somewhere like Bozeman, where maybe we can enter a market we wouldn't otherwise enter. In other areas, it's closing a larger store and opening a small one. We like what we're seeing in those small format stores, and I would expect us to lean into those a bit as we head into next year as well. So I think all in all, what we're really focused on is making sure that if someone makes the trip to the store -- and here's a fascinating small data point. When we look at our demographics, interesting, our youngest cohort, Gen Z, is really leaning into the store experience. We can see it in their visits, and we can see it in where they choose to interact.

And we can see it in our ability to start to grow share with this cohort. And it's a cohort who is starting to see our brand as updated, refreshed, and more relevant. So I think this idea of leaning in here both ourselves and with our vendor partners, augmenting maybe with the fewer smaller locations, I think that's what you're going to see us focus on as we head forward. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

NOVEMBER 25, 2025 / 1:00PM, BBY.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Thank you.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director Thank you.

Is it all in the numbers now or the base? Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Yeah. Overall, like we talked about in prepared remarks, our ASP at an enterprise level is essentially pretty flat year over year, and most of the growth is coming from the unit side of the business. So that would infer that all the tariff changes that we would have made on select portions of our assortment would be flowing through in the price. Any tariff increases we would have had were only on small portions of the assortment overall. The effective tariff rate is probably still in the mid-teens, if you will, but that is not what the actual price increase on those portions of assortment, the rate is close to that number.

So all of that would be implied in the ASP generally being flat year over year. What's different about our industry is that it's a very promotional industry, and so even though they're tariffs, we have to be competitively priced all the time to be competitive. That sometimes will mute the overall impact ASPs. Also, we have product at every part of someone's budget, whether you're in Computing or TVs, and so any product mix changes, assortment changes can also have an impact on ASPs as well. So overall, they are included, but we're also seeing a competitively priced industry. And our ASPs, like I said, are not necessarily the ones that are driving our business overall. It's more on the unit side.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director I just want to lift up one thing that Matt said. Our number one focus is on our customer and ensuring we have every price point and every budget available. And one of the interesting things when we looked at our price bands, you can imagine we're looking at how many SKUs we have in each price band, and a couple of our largest categories, year over year, very similar amount of SKUs by price band. And so I think the team is doing an amazing job staying focused on having that breadth of assortment regardless of, to Matt's point, whether or not we have a few small price adjustments coming through so that whatever the budget is, we're there for them, and that will be the goal through the holiday.

REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY.

I'd love to follow up on labor and working with vendors. Could you just level set us on how much of the store has some vendor support into labor? I think you said that you're adding TVs recently. I'd love to hear how that really helps engagement scores with customers when you have vendors funding some of the labor in the store. Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director The amount of vendor labor is not a static answer. It flexes and depends on both time of year and, of course, launches or innovation as different vendors choose to lean in and lead out at various points in time. I think one of the differences in our model when it comes to labor is we actually have a number of different ways in which we interact with customers from a labor perspective.

We have everything from that advisor who can flex over the whole store all the way into our own specialized category labor or something like an appliance pro who really understands appliances all the way into vendor labor, which the team, again, I give them a lot of credit, has done a great job. That is a very close partnership between us and our vendors. And in most cases, that is our labor that we are training and deploying that is, of course, more trained against that particular vendor assortment but is part of our broader umbrella of labor here at Best Buy. And then sometimes, we have a few examples where we also have just flat-out vendor-provided labor that's in our stores.

And what I think we've gotten good at is the operating model amongst all of those different types of labor. So you know when to hand off to a specialist who might have more experience in a certain product. And those specialists also understand when it's time to maybe hand back off to someone who might be more of a generalist because they want to go shop at a different department. And so that -- when we concentrate on how does the operating model work at Best Buy, it is embracing that vendor partnership labor but also ensuring it stays consistent with the culture, the values, the way that we think about serving the customer here at Best Buy.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director Thank you.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Thank you.

N - Q3 2026 Best Buy Co Inc Earnings Call Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director My timeline is fast. How's that? But at the same time, joking aside, you really have to prioritize not just where the incremental margin flows through but what does the customer experience really look like. And particularly in a business like ours that often includes maybe scheduled delivery, maybe installation, maybe services or membership, you really need to think about in instant checkout how do you want those experiences to translate for the customer. And that's just when we're talking about the actual transaction point. More broadly, we want to make sure we're thinking about how does our brand, how does our specific knowledge of our customers show up, and how is it helpful to customers as they're using a variety at this point of agentic tools.

So we're obviously working quickly to make sure that we are relevant and showing up in the right places, but most important for us is protecting the customer experience so that that stays consistent with how we would want them to experience our own digital assets.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Yeah, thanks. We're not obviously going to guide next year, but I do think as it relates to how we're thinking about next year at a high level, we're clearly seeing some sales momentum this year and we would hope to be able to continue to drive some continued momentum on the sales side as we get into next year and obviously higher sales helps from a rate leverage perspective. It is likely true that as we get into next year for some of our initiatives, we're going to need to continue to invest in both the Marketplace and the ads business.

Exactly how much and how much flows through, still haven't completed the math on that quite yet, but that is something we want to do, because over the long period of time, it's going to help us drive more rates and fuel our other parts of our business over the long term and we think that's a good tradeoff. So exactly how much that looks next year, hard to say, but we do think it's an accretive thing for us over the one- to three- to five-year period.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Thank you.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director Thank you.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Yeah. I mean, for Q3, I think we did see a great favorability on the SG&A side. A lot of that came from the higher-than-expected sales expectations and higher sales year over year. We did see a combination of a few things come in better than we expected like lower technology spend, a little bit lower labor spend in the quarter. Again, nothing -- we also had a few smaller settlements that also helped us in the quarter as well. Those things, none of them were dramatic, but a lot of that SG&A favorability on the rate is just coming from the leverage we get on the sales in terms of our performance.

So as we get into next year, again, not guiding, but there's places where we're obviously always have a little bit of inflation as we go year to year in terms of wages and whatnot. We'll factor those in and there's some places where we feel like we're going to need to continue to invest to drive long-term growth. We just talked about a couple of Marketplace and the ads business. But that would be our goal to be able to drive sales over the long term and get rate leverage as we grow that sales. Exactly how much, like I said, we're still doing the math on that next year. But we have been really good about finding operational efficiencies and cost reductions to help offset the pressures that we have.

We've been doing that for years, and we would continue to expect to be able to do that. We've talked a lot about those places in the past where we're using new data-driven sourcing around our supply chain. We have a primary relationship with FedEx as a partial carrier. We've talked about the automated guided vehicles in our warehouse which we continue to test and roll out. And then there's just a lot of efficiencies through technology and analytics that we can help with our partners to drive more efficiencies around customer support capabilities and just future AI opportunities as it relates to a lot of our business areas overall. So there are places for us to offset some of those pressures that do come every year like we've been doing.

So we feel like over the long term that would be -- our intent is to try to drive more profitability in our business as we grow the sales.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Thanks for the question. The Appliance category is probably the most difficult one that we have. In the market today, the vast majority of the appliance market is direct customers, meaning that they're replacing a product that is broken in some way. We're also seeing a very high amount of single unit purchases, meaning a washer breaks, they're not replacing the washer and dryer pair. They're just replacing the washer, which is just very different than what generally happens in the market. And that is a very high percentage in total, which means that promos are not as effective as they are in total because you're dealing with a fixed customer base.

We also don't have a pro business. And really, our sweet spot is primarily premium and packages in historic years. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY. N - Q3 2026 Best Buy Co Inc Earnings Call Really, what we have to do is shift our model a little bit. So we're looking at increasing our labor coverage in the department, also looking at focusing on delivery and speed of delivery in particular, which is critical in a direct market.

And then also looking at even having opportunities in some of our stores for a customer to be able to take the product with them that day, which is also something that is emphasized more in the market that we're in. So looking to adjust our model until it flips back a little bit more towards our sweet spot, which is, again, that premium and packages. But we really need to meet the customer where they're at in a very direct market. And hopefully, as housing and different things change, then the market starts to swing back to something that might be a little bit more normal.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director On the TV side, I would just make a couple comments there. Our revenue performance did improve sequentially, even though it was still down year over year. What's interesting is that our unit performance really accelerated and moved to slight growth in the quarter. And so you can see some of the industry-wide ASP compression there, which we've talked about. Our share trends have improved materially on the unit side, and we believe that we're up slightly year over year on TV. A lot of that is because we have invested in some of the things that we've been talking about, the sharp pricing, the increased marketing, that expanded specialty labor, and those expanded merchandising experiences in the stores with TCL and Hisense and LG.

And then augmenting that with the expanded services offerings and working on how that experience works digitally, all of that, I think the team is doing a great job putting together a more fulsome assortment and even more price point options for our customers, which is at least moving that business in the right trajectory.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director Happy holidays.

N - Q3 2026 Best Buy Co Inc Earnings Call Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Yeah. I'll break down a little bit for both the different parts of the P&L here.

First, if I think about gross profit rate for both ads and Marketplace, they both help the gross profit rate in the back half of this year. So obviously, on the Marketplace side, we're scaling that business. If you think about the rate is helpful there. As we get into next year, we would continue to expect the Marketplace to scale. We're clearly going to lap the launch in midway through next year, which might have an impact. But generally speaking, the more you grow it, the more GMV, the more net commissions should be helpful to the gross margin rate. Not exactly -- not linear every quarter, depending on the scaling and when we lap. On the ad side, from a gross profit rate perspective, again, we're continuing to explore and expand into new parts of the ads business.

And to the extent that we are successful in driving incremental revenue and profitability from that, which we're planning to do, that would also be helpful to the gross profit rate into the future. Now, again, exactly how much and how it laps every quarter might not be exactly the same, but those would be the intent. Then on the OI rate side, I think it's going to come down to, as we talked a little bit earlier, how much do we feel like we need to invest and what the opportunity for that investment and return looks like. And so as we get into next year, that's something we're still evaluating in terms of the technology, the people, and other things that we might need to drive those two initiatives.

We think those are the right decisions overall, over time, for us to drive more rate opportunities from those two initiatives. Exactly how much flows through to OI, we're not quite ready to commit to at this point, but we do believe it's a good return for us.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director And Chris, the last thing that I would add, and I know you know this, but I feel compelled. Our goal here is really to stay more relevant with the customer. And our goal is to drive more units, to be there more often in consideration, and to make sure that we are leveraging like partnerships, we mentioned a few on the call, to stay relevant with that consumer as so many choices. And so that part, we're starting to see early green shoots on. And that becomes really the flywheel that we've been talking about that helps feed all parts of the business. And that's as much what we're focused on building and expanding next year as anything.

Matthew Bilunas - Best Buy Co Inc - Senior Executive Vice President - Enterprise Strategy, Chief Financial Officer Yeah. I mean, as we start Q4, we are lapping strong sales last year. As we noted on the call last year, we were running at about 5% growth for the first three weeks of November. I'm not sure how much the government shutdown -- we haven't done the math on specifically the government shutdown. It probably doesn't help. Certain geographies obviously are more impacted than others, but we are comping a pretty larger amount of growth through the first three weeks of November. So the shape of the quarter is likely going to be a little bit different this year compared to last year.

November was up 4% last year. December was down 2%, so as we get into December, the comparison will get a little easier. And we are seeing people gravitate towards those big events that obviously this week and the weeks before Christmas are the biggest events in the holidays, so we do feel like there's an opportunity there for us. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY. N - Q3 2026 Best Buy Co Inc Earnings Call So I still feel like there's an opportunity for us to grow our sales.

The shape will look a little different even though the timing is pretty similar to how we saw it last year.

So how do you think about that at a high level? Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director I appreciate where you started, Anthony, which is it is really difficult in this industry. There just isn't a single source of share information, and there are multiple cuts. That being said, when we try to pull and triangulate all the data sources, we believe we have improved our share position over the last two quarters, and in Q3, we estimate that our share was flattish to slightly up. Obviously, we've always said share is a long game conversation for us, and all the initiatives that we're talking about are driving toward more of the sustained ability to, at the highest level, drive shares.

And in that, you're going to constantly be making trade-off promotion decisions, trade-off pricing decisions. We feel like we're strong right now, particularly in Computing and Gaming. I talked about our TV unit share position, which now we feel like is erring on the positive side, and there's a lot of these newer categories or the expanded assortment that we're seeing in the Marketplace that is bolstering our point of view about how we feel like we're sitting for share. So again, always a conversation, longer game, but I feel like the trajectory is headed the direction that we want.

Jason Bonfig - Best Buy Co Inc - Senior Executive Vice President - Customer Offerings and Fulfillment Yeah. Thank you for the question. We've actually been very happy with Switch 2. Obviously, the launch was outstanding. It drove growth last quarter, and we do expect gaming to continue to grow as we lead into Q4. It's been highly publicized that the amount of Switch 2 units in the market is a lot higher than what Switch 1 was in the same timeframe. So we have actually been happy with the ability to come closer to meeting customer demand. We do think demand over holiday will continue to still be very strong. REFINITIV STREETEVENTS | www. refinitiv. com | Contact Us ©2025 Refinitiv.

All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 25, 2025 / 1:00PM, BBY. N - Q3 2026 Best Buy Co Inc Earnings Call And then in gaming in general, it's not just Switch. There are other aspects of that business that are driving growth. We're just seeing handheld in general, whether it be the new product from Asus that is a partnership with them on Xbox or other products from companies like Lenovo with their Legion Go. Just handheld gaming is a driver across the entire gaming segment. We're really excited that we think we have the best assortment there and can really meet customers' needs across anything they want to do, whether it be Switch all the way up to any aspect of handheld gaming in total.

And that's really making up for some of the slowing sales that you see in just the traditional PS5 and Xbox as those get to the end of their life cycle.

Corie Barry - Best Buy Co Inc - Chief Executive Officer, Director And one of the things that I think is interesting about all the devices that Jason just talked about, these are pretty high-price-point devices. And especially considering they're gaming, they tend toward a younger cohort. So we really like our position here, and we're doubling down both physically and digitally to make sure we offer the best possible experience. I give our teams a ton of credit. Part of the reason that we're able to get the allocations we can is because we can deliver these amazing experiences, especially at retail.

So with that, I think that's our last question. Thanks, Anthony. Appreciate it. So I think that's our last question. Thank you all so much for joining us. We hope you all have a lovely holiday season. And we look forward to speaking with you all at the end of our year.