Best Buy Co. Inc (BBY) — Q4 2026 Earnings Call Transcript

Thank you, and good morning, everyone. Joining me on the call today are Corie Barry, our CEO, Matthew M. Bilunas, our Chief Financial and Strategy Officer, and Jason J. 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 used, 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-Ks and subsequent 10-Qs 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. I will now turn the call over to Corie.

Good morning, everyone, and thank you for joining us. Today, we are reporting better-than-expected profitability for the fourth quarter. On revenue of $13,800,000,000, we delivered an adjusted operating income rate of 5% and adjusted earnings per share of $2.61, both of which are slightly up from last year. Our Q4 comparable sales were down 0.8% versus last year, within our guidance range for the quarter. Our data sources show our market share was at least flat, pointing to slightly softer consumer demand for our industry during the holiday quarter. Our holiday customer demand patterns were also different than modeled, despite sales event timing that was very similar to last year's. We saw softer-than-expected sales in November and December. We then experienced strong sales in the last two weeks of December and the January week of the quarter. Sales were negatively impacted by weather-induced store closures during that time. We were prepared for a promotional holiday, and the environment was even a bit more than we had factored heading into the quarter. I'm proud of how our team strategically pivoted throughout the quarter in terms of marketing, promotional activities, and labor. From a product category perspective, we delivered our eighth consecutive quarter of positive comparable sales in computing, driven by laptops, desktops, and accessories. In mobile phones, we delivered our fourth consecutive quarter of growth, driven by our expanded partnerships and in-store operating model improvements with large carriers. We grew our gaming category revenue, but at a much slower rate than the previous two quarters, as expected. We also saw strong growth in newer and emerging categories, like AI glasses, 3D printers, collectibles and toys, health rings, and PC gaming handhelds. These positive growth categories were offset by declines in home theater and appliances. We are pleased with the progress we have made in our ads and marketplace, both of which delivered positive contributions to gross profit rate in the quarter. We are also pleased with our customer experience metrics. Our relationship NPS was up materially year-over-year and at the highest it has been in 11 consecutive quarters. We delivered significant year-over-year gains across all five of our most valued attributes including helpfulness, empathy, meeting tech needs like no other company can, value, and ease. As we exited the year, we saw continued Five Star customer satisfaction gains in associate availability, product availability, and store appearance. For our online customers, we reached our fastest-ever fulfillment speeds for our fourth quarter, with 70% of online purchases fulfilled within two days. As I step back and look at the full year, I am proud of what we have accomplished. First, we returned to positive comparable sales and stabilized our share position while navigating a complex and often evolving tariff environment. We successfully launched and scaled our U.S. digital marketplace, onboarding more vendors than originally expected, and drastically increasing our available SKU count for our customers. We grew Best Buy Co., Inc. ads while almost doubling the number of ad partners compared to the prior year. We were able to both make the necessary investments in our marketplace and ads initiatives, and expand our enterprise operating margin through a combination of disciplined expense management and efficiency optimization efforts. We leveraged new technology in many areas to elevate customer experience and drive efficiencies, including faster online shipping and delivery speeds and improved customer support capabilities. We further strengthened our in-store customer experience by partnering with multiple key vendors to expand their investment in immersive merchandising areas as well as expert labor. We remain committed to being the best place to work, and our most recent employee engagement survey improved year-over-year, ahead of industry benchmarks, and we continue to have industry-leading retail employee retention rates. Finally, we returned $1,100,000,000 to investors in the form of dividends and share repurchases. I'm incredibly grateful for the hard work, dedication, and resourcefulness of our more than 80,000 employees to achieve these results. Moving forward to fiscal 2027, we are excited about the momentum in our business. We also expect to continue to navigate a mixed macro environment. For the year, we are guiding comparable sales growth in the range of down 1% to up 1%. I'll highlight some key assumptions. Consistent with the past several quarters, we continue to see a consumer who is still spending, but is value-focused and attracted to sales moments. Importantly, while customers continue to be thoughtful about big ticket purchases, they are willing to spend on high price point products when they need to and when there is technology innovation. We do expect consumers to spend a portion of their higher tax refunds at Best Buy Co., Inc., concentrated in the first quarter. From a product category perspective, we are planning for continued growth in computing, driven by industry momentum from replacement cycles, the end of support for Windows 10, and innovation driven by AI. We expect continued growth in mobile phones from the new carrier labor models and system enhancements we have implemented over the past year. We anticipate continued growth in our newer emerging categories that I referenced earlier, like AI glasses, 3D printers, collectibles and toys, health rings, and PC gaming handhelds. We see opportunities to improve the sales trends in home theater from expanded store experiences, increased expert labor, and our role as the national retail launch partner for an exciting new technology called RGB in the middle of the year. As you are aware, the significantly increased demand for memory components is driving cost inflation and supply uncertainty, particularly in computing. We are partnering with our vendors to mitigate impacts on the business. We are focused on five major navigation themes. First, we are bringing in as much inventory as we can. We are providing our vendors with a longer forecast horizon to better plan allocations across commercial and consumer segments, and collaborate more effectively with memory partners. Second, regarding terms, we want to ensure that business and operational terms are situated to make Best Buy Co., Inc. a preferred partner in the eyes of our vendors during a constrained environment. Third, we are using our ability in computing to specify configurations to hit price points that match consumer budgets. Fourth, we are narrowing assortments to improve stock where there may be constraints. Finally, we are focused on educating customers on why now is still a good time to buy. Their current device may not be performing optimally, we have quality options for every budget, and they can get a better device today on the same budget as their last purchase, which may have been years ago. We have a number of tools to highlight, including trade-in, financing, refurbished products, and easy upgrades with Geek Squad. As we think about the impact on our fiscal 2027 outlook, the high end of our comparable sales guide reflects a more neutral impact as higher prices are offset by lower unit sales. At the low end of the guide, inventory is more constrained across several categories. Now I will talk about our multiyear strategy, which remains consistent. We will continue strengthening our position in retail as a leading omnichannel destination for technology while at the same time, scaling new profit streams. Our priorities and resource allocation philosophy remain consistent as we build upon the momentum from fiscal 2026. These are: one, drive omnichannel experiences that resonate with our customers; two, scale Best Buy Co., Inc. ads and marketplace; and three, drive efficiencies and identify cost reductions that are crucial to help fund investment capacity and offset pressures in our business. Let me provide some key details on initiatives across stores, digital assets, and our services offerings. Last year, we provided multiple examples of store refreshes and upgrades we implemented in partnership with our vendors, including Meta, Breville, SharkNinja, TCL, Hisense, and LG. We are expanding these experiences to yet more additional stores this year, demonstrating the value these are driving for our vendors and our customers. Additionally, we are continuing to improve our stores' look and feel by using our square footage more strategically. For example, in approximately 70 stores, we will move computing to the center of the store, consolidate space, and allocate open spaces to value-generating initiatives. Many of these open spaces will be filled with a much larger and more comprehensive assortment from Meta. In other stores, we are piloting either outlet sections or outdoor furniture from our Yardbird brand. In these cases, we are shifting from stand-alone locations to leveraging the space and traffic we already have. This year, we expect to have new domestic Best Buy Co., Inc. store growth for the first time in more than a decade. We plan to open six new stores to better meet demand in markets that have grown, including areas where we have not previously had a physical presence. We have created and tested a smaller store model that drives incremental revenue in these types of markets. Like the Bozeman store we opened last year, we expect to close only two Best Buy Co., Inc. stores as a result of our ongoing review of leases as they come up for renewal. We are pleased with the investments we have made in customer-facing labor over the past couple of years. We plan to keep our labor flat as a percentage of revenue, balancing the growth in dedicated specialized labor with more flexible and multipurpose resources. We expect the level of vendor-provided labor hours to grow again this year after growing 20% in the second half of last year. Together with our vendors, we provide in-person expert consumer electronics experiences for our customers that are unmatched in today's retail world. As you would expect, we are also focused on our digital experience. We have already begun to activate ways to bring our products to life through AI platforms this year. First, we are partnering with OpenAI to give our customers a new way to explore and discover our products. We are among the early retailers to make it easier for our product catalog to be displayed on ChatGPT, creating a more seamless path for product inspiration. We are also an early ads partner and exploring more opportunities to enhance our shopping experience with OpenAI. Additionally, we support Google on its new universal commerce protocol, a cross-industry standard that helps create a more seamless shopping journey across the web. Using this universal commerce protocol, we are working with Google to build a new way for customers to purchase directly in AI mode in Google Search and the Gemini app. We are also the first retail partner to launch a native checkout integration with Wizard, an AI-powered commerce platform. As AI commerce matures, we want to serve our customers in new ways both on and off platforms. That includes evolving bestbuy.com to be more AI-friendly, and ensuring our site is ready for AI agents to browse and discover on behalf of our customers. Our fiscal 2027 online priorities include strengthening customer recognition and personalization, increasing app adoption and engagement, enhancing our new invite-only capability, and driving online conversion for categories like major appliances and TVs. Now I will discuss our services offerings, which have long been a key differentiator for Best Buy Co., Inc. To sustain our leadership, a priority for us this year is to reassess our Geek Squad services by simplifying our portfolio, while at the same time making our services accessible to more customers. The good news is we are making progress in simplifying our range of offerings with different price points to create customer choice. We are also planning to move beyond break-fix and product installation services to dive into experiential solutions that cater to a variety of evolving customer needs. Whether it is a simple product upgrade or a full premium home installation, we will be there for our customers with speed, expertise, and convenience. We are continuing to prioritize our renowned Geek Squad agent support in-home, in-store, and virtually. At the same time, we are enhancing our digital and AI experiences. This dual approach allows customers to choose how they want to receive service, whether it is through direct interaction with an agent or more autonomous digital solutions, empowering customers to get the support they need on their own terms. Our services are also instrumental to the growth of our Best Buy Co., Inc. business arm. Here, we focus on business segments like education, hospitality, builders, health care, and corporate enterprises. Product sales are concentrated in computing, home theater, and major appliances and often paired with services such as field installation and end-to-end product support services like device lifecycle management. Our Best Buy Co., Inc. business team generated more than $1,100,000,000 in revenue in fiscal 2026, and we expect to generate a mid-single-digit sales growth rate again in fiscal 2027. Now I'd like to provide an update on our Best Buy Co., Inc. marketplace. First, we have been very pleased with the outcome and performance. Our customers are responding favorably as sales ramped through the back half of the year and represented approximately $300,000,000 in domestic GMV in the fourth quarter. Furthermore, our five-star ratings for third-party purchase experiences are consistent with that of first-party purchases. This outcome affirms that the team adopted the appropriate design principles to deliver a seamless customer experience regardless of whether the product is first-party or third-party. Customer return rates for marketplace items continue to be lower than our first-party return rates. These customers are taking advantage of the convenient return-to-store option for more than 80% of product returns. Top unit categories in Q4 included mobile phone accessories, computer accessories, movies, and small kitchen appliances, illustrating momentum and opportunity in traditionally lower share categories for Best Buy Co., Inc. As a result, our marketplace is driving unit market share growth. While we are still early in our journey, our third-party seller community remains highly motivated and excited about the initial performance. To date, we have enlisted over 1,100 sellers on the Best Buy Co., Inc. marketplace, and over 90% of our sellers with an open storefront are experiencing sales in any given week. I would add that our store employees are equipped with the right tools to help customers get what they want even if we do not carry it ourselves and are contributing to the marketplace GMV. Moving to Best Buy Co., Inc. ads. In fiscal 2026, our gross advertising collections were just over $900,000,000. This is up more than 7% versus last year. Today, these collections show up mostly as an offset to our cost of goods sold with a small amount flowing through revenue. In fiscal 2027, we anticipate growth of approximately 10%. By the end of fiscal 2026, we had 750 advertising partners, nearly doubling the count from last year. Most of this growth stemmed from marketplace third-party partners following our August launch. Additionally, our first-party partners are investing more, with an average annual investment up 16% year over year. Our on-site inventory mix was just over 40% last year, lower than many other retail media networks. On-site inventory drives a higher margin than off-site. As we continue to create more on-site inventory and grow this mix, there is significant margin growth potential over time. Both ads and marketplace positively contributed to our gross profit rate in Q4, and we expect continued gross profit rate contribution this year. From an operating income rate perspective, we expect a slight contribution this year due to ongoing investments in our technology stack, marketing, and headcount across our sales, operations, and technology teams. We expect fiscal 2027 to be the last major investment year, with more material operating income rate contribution coming in fiscal 2028 and fiscal 2029. In order to invest in initiatives like these that will bring long-term value and offset pressures in the business, our third long-standing business priority is crucial, and that is driving efficiencies and identifying cost reductions. 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 fiscal 2027, our key opportunity areas are supply chain, customer care, reverse logistics, and continued optimization of our health business. In summary, I'm pleased with the progress we made in fiscal 2026 and excited about what we expect to accomplish in fiscal 2027 as it relates to our multi-year strategy. We are deepening customer relationships and successfully strengthening our position in retail as a leading omnichannel destination for technology while at the same time scaling new profit streams that we expect will provide considerable benefit over time. I will now turn the call over to Matt.

Good morning. Let me start with our fourth quarter performance compared to the expectations we shared last quarter. Enterprise comparable sales declined 0.8% and were on the lower end of our guidance range. Despite the softer sales, our adjusted operating income rate of 5% was better than planned and included slightly favorable rates for both gross profit and SG&A. I will now talk about our fourth quarter results versus last year. Enterprise revenue of $13,800,000,000 decreased 1% versus last year. Our adjusted operating income rate increased 10 basis points compared to last year, and our adjusted diluted earnings per share increased 1% to $2.61. By month, our enterprise comparable sales were down approximately 3% in November, before improving to 0.2% in December and up 0.4% in January. Our domestic segment revenue decreased 1.1% to $12,600,000,000, driven by a comparable sales decline of 0.8%. From a category standpoint, the largest contributors to comparable sales decline were home theater and appliances, which were partially offset by growth in computing and mobile phones. Our online revenue of $4,900,000,000 decreased 2.3% on a comparable basis and represented 39% of our domestic revenue. Our online comparable sales growth includes the 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. International revenue of $1,200,000,000 increased 0.5% versus last year. The revenue increase was primarily driven by the favorable impact of foreign exchange rates, which was partially offset by a comparable sales decline of 1.3%. Our domestic gross profit rate of 20.9% was flat to last year. During the quarter, our gross profit rate benefited from increased collections from Best Buy Co., Inc. ads and growth in marketplace commissions. These items were offset by lower product margin rates, which were primarily driven by an unfavorable sales mix and increased promotions. Our international gross profit rate decreased 90 basis points to 20.5%. The lower gross profit rate was primarily due to lower product margin rates. Moving to SG&A, our domestic adjusted SG&A decreased by $36,000,000. This decrease was primarily driven by reduced compensation expenses, which included incentive compensation, and lower Best Buy Co., Inc. Health expenses. These items were partially offset by increased expenses related to marketplace and Best Buy Co., Inc. ads, including higher advertising and technology expenses. During fiscal 2026, total capital expenditures of $704,000,000 were essentially flat compared to fiscal 2025. During fiscal 2026, we returned $1,100,000,000 to shareholders through share repurchases and dividends. We remain committed to being a premium dividend payer and this morning announced that we are increasing our quarterly dividend to $0.96 per share, which is a 1% increase. This increase represents the thirteenth straight year we have raised our regular quarterly dividend. Moving on to our full year fiscal 2027 financial guidance, which includes the following: revenue in the range of $41,200,000,000 to $42,100,000, comparable sales of down 1% to up 1%, an adjusted operating income rate of approximately 4.3% to 4.4%, an adjusted effective income tax rate of approximately 25.5%, adjusted diluted earnings per share of $6.30 to $6.60, capital expenditures of approximately $750,000,000, and lastly, we expect to spend approximately $300,000,000 on share repurchases. From a phasing standpoint, the repurchases are planned to occur primarily during the fourth quarter, resulting in our weighted average share count remaining near the levels at fiscal 2026 year-end. Next, I will cover some of the key working assumptions that support our guidance. Earlier, Corie provided context on our fiscal 2027 top line assumptions, so let me spend more time on the profitability outlook. We expect our gross profit rate to improve by approximately 30 basis points compared to the prior year due to growth from Best Buy Co., Inc. ads and our U.S. marketplace. Now moving to adjusted SG&A expectations, which include the following puts and takes. SG&A is planned to increase in support of ads and marketplace, which includes advertising, technology, and employee compensation expense. We expect higher incentive compensation as we reset our performance target for the next year, with the high end of our guidance assuming an increase of $30,000,000 compared to fiscal 2026. Store payroll expenses are expected to increase at the high end of our revenue guidance, with minimal impacts from a rate perspective. Partially offsetting the previous items are expected to be lower Best Buy Co., Inc. Health expenses. Lastly, the low end of our guidance reflects our plans to further reduce our variable expenses, including incentive compensation, to align with sales trends. Before I close, let me share a couple of comments specific to the first quarter. We expect our first quarter comparable sales growth to be approximately 1%. From a monthly phasing perspective, comparable sales were down approximately 1% in February and are expected to increase in March and April. We expect our first quarter adjusted operating income rate to be approximately 3.9% with gross profit rate expansion being the primary driver of the 10 basis points year-over-year improvement. I will now turn the call over to the operator for questions.

Hi. This is Grace on for Kate. Thank you so much for taking our question. We were wondering in the case that product prices do increase due to the higher memory pricing, what that could look like, and what do margins look like across the different computing categories, like good, better, and best? Thank you.

So overall for next year, our guide for gross profit is about a 30 basis points increase year-over-year, which is primarily driven by both ads business and marketplace growth. The remaining parts of the gross profit rate are pretty neutral, even inclusive of the product margin rate. So for the year, product margin rate is going to be assumed to be pretty flat year-over-year. So within that context, there could be some categories, some pressure on margins because of memory cost. But overall, we would expect to be able to navigate based on the list of things that we talked about in our prepared remarks. The ability to manage some of that pressure that might exist. So overall, pretty neutral impact to product margin rates in total, but there could be unique areas within computing that might have some impact.

Good morning, guys. Hope you are well. Two questions. First, can you talk about what you saw in the fourth quarter in big screen TV sales, especially as a big competitor was really aggressive in that category from what we could tell? And then secondly, I guess, a bit more open-ended, how should we think about the growth opportunities around Meta and Google Glasses and any more details on how you are partnering with those vendors in that specific category? Thanks.

Okay. Thanks for the question. From a TV perspective, both revenue and units were below expectations in Q4 from an industry perspective. We are actually happy with the way that we showed up from a positioning perspective, but there just was a little bit more softness than expected. However, we are excited and optimistic as we move into next year, and there is a new technology trend, Corie mentioned, as we get into the middle of the year. With RGB technology across all of our major suppliers, we do think that is going to drive a lot of demand. It is going to drive a lot of interest in our store. It is really something that you need to see in person, and we will be there with our vendors to make sure that we put that on display in the best way possible. From a Meta perspective and just AI glasses in general, it is a significant growth trend for us. It does show up in gaming when we talk about it. We do think we have the best relationship with vendor partners, and our relationship with Meta is phenomenal. The way that they show up in our stores and the way we have been able to bring their new products to market are impressive. We have also been supporting locations that are more of a showcase where we have partnered with them on display products and bringing that to market. There are other things happening from an AI glass perspective. There is a lot of noise at CES and we expect that to be even more products not only from the partners that we already do, but probably also from new partners as this continues to be a growth category for us.

Scot, strategically, just to build on that a bit, I think the idea of AI for the consumer is kind of a long tail space where we will have a unique advantage. Some of that we have already been leaning into, which is think about enhancing existing technology, such as Copilot+; it is AI in computing. It is AI in phones. It is our ability to explain that and bring it to market. Some of it is what Jason is hitting on and what you asked about, that lifestyle tech example. There will be lots of different ways we will see that. Interactive gaming, we will see it in glasses. You are going to see probably some reinvigorated categories, things like smart home that are just going to get a lot smarter. There are a lot more use cases that you are going to see for consumers. And then, ultimately, I think there is the question of what I would call always-on AI support. So what is right now OpenAI, connected TVs, talk about AirPods with cameras, kind of this idea of how do all these platforms start to show up actually in hardware and our experiences? Our goal is, and this is our sweet spot, as this technology comes to life, we want to be that key partner for our vendors to really help explain it to customers.

Morning. Thank you so much for taking my question. Do you think you have appropriately embedded enough margin flexibility in your guidance in order to compete effectively in the year ahead? It seems like the industry just gets a little bit more competitive each day, and 30 basis points of gross margin expansion may not be sufficient in order to drive the top line. Thank you.

I mean, I think we will obviously navigate the year as we know more. Michael, I think a couple of points. Our space is always very competitive. If you think about just FY 2026, it was already a very promotional year. On top of a high promotion year, we had a sales mix impact from the margin rates as well. I think as you consider next year, we are certainly not expecting to not be promotional—probably a similar level of promotionality, but maybe in some quarters, a little less sales mix pressure potentially, which helps mitigate some of the potential product margin rates that might come with memory cost adjustments. So we will clearly navigate as best we can, but right now, we feel like we have appropriately built in the product rate pressure that we need to be competitive.

Two things I would add, Michael. We have made it very clear that we want to position ourselves to ensure we are driving particularly unit share. And I can see that happening for us as we come out of Q4. You can imagine we are trying to build in enough flexibility to achieve that. Matt also hit on it in his prepared remarks. I did as well. This is where ads and marketplace are also very helpful to our model, especially on the gross profit side of things because this is the fuel we are looking for to continue to be able to reinvest in the base business. So you have to remember, it is all those factors put together that shows up in that gross profit expectation.

Understood. Thank you very much. And it seems like your message this morning is, listen, we expect 2026 to be a bit more challenging year because of these memory shortage challenges, but you will navigate through it appropriately. Can you anchor the market to a longer-term expectation? Is 2026 just a transition year? The company can get back to positive same-store sales growth at the mid of whatever you would expect in the year after that? And what would be the key driver of that? Because presumably, if memory shortages are going to persist for an extended period of time, and the industry landscape is not going to get any easier. Thank you very much.

If we take a step back, this is an industry that, let us go pre-COVID, was, let us call it, flattish to up single digits pretty consistently. What that relied on was also a pretty consistent kind of replacement behavior by consumers and a consistent innovation arm from our vendor partners. As long as there was kind of the innovation and the replacement that really sustained a pretty decent growth trajectory for the industry, then our job was to continue to maintain our position, if not grow our share position, in that industry. Obviously, there have been lots of ups and downs over the last six years. Lots of pull forward. Now what we are getting back into is an interesting situation. You called out some of that mixed macro that we had also discussed, whether it is the ongoing situation or whether it is memory. Conversely, we are also starting to see more innovation and more—I am going to call it—replacement behaviors, especially in computing and even mobile than we have seen in some time. For our fiscal 2027, calendar 2026, what we are trying to do is put all of that together and say, for the coming year, here is what we see. And you are right. Some of that may persist. But the good news is there is also some innovation and replacement behavior that will counterbalance some of the mixed macro impacts we talked about. So I still believe over time, over the longer term, this is a great industry where, believe me, the world's biggest companies are working on new products to market, especially given the rise of AI. It is just about how we navigate some of the challenges in front of us. Moreover, I have confidence in our team’s ability to navigate these together with our vendors based on how they have handled the previous year.

The only thing I would add would be, on the guide for next year, clearly at the high end of our guide, we are factoring some level of memory cost impacting units, but we also potentially get the benefit on the ASP side too so that ASP potentially mitigates some of the unit declines on the higher end of any sort of outcome. At the low end, obviously, there could be a situation where you have more constraints just broadly within the computing industry that could bring it to the bottom of the guide. I would also say during the last couple of years, we have seen that we have price points across computing in all of our areas. So to the extent that there are cost increases, what we have learned is that people come in with a budget, they look to buy a certain product. We always have something in a range of products that that customer wants. Thus, we are seeing some of that mitigate the potential impact of cost increases. We just learned this through the last couple of years with the tariffs.

Hi, good morning. So my first question, I guess, shorter-term in nature. Just as we look at fiscal Q1. I want to make sure I heard this correctly. So you said comps were down 1% in February, but you are planning for a plus 1% for the full fiscal quarter. What underpins that expected acceleration here through the balance of the quarter?

Yeah. Thank you. We are expecting the full quarter to be about a 1% comp for Q1. In the quarter, we expect to see continued growth in computing, in gaming, in mobile phones. We also expect to see improved trends within TVs based on the vendor pads that we have added in the specialty labor and just making sure we are priced in the right spot. Regarding phasing, as I said, we are seeing February down approximately 1%. There are a few unique factors that impact the monthly phasing. First, we are, as Corie talked about in prepared remarks, expecting the benefit of tax refund spending. More of that is weighted towards March and April for us than it is February. Secondly, a couple of more material phone launches have shifted from February to March. Those actually have a pretty significant impact on a given month's comp. Therefore, that phasing can account for a lot of the start to the quarter, and we expect other more important launches to hit in the back half of the quarter as well. So that really accounts for the majority of the phasing between February, March, and April.

That is very helpful. I appreciate it. Then my second question, I think you mentioned tariffs. This is in response to Michael's question previously. I just want to hit harder on tariffs. Where are we right now as far as dealing with tariffs and mitigation efforts? How does anything with tariffs and what Best Buy Co., Inc. is doing to deal with them affect or impact the guidance you laid out for the current fiscal year?

Brian, thanks for the question. I always start with it this way because it’s important. Our number one focus is our customers and meeting their budgets wherever they are. Our approach has been to deliver the right assortments to match customer needs and budgets while we partner with our vendors to ensure there’s a good outcome for all of us. I’m proud of how the team has been navigating. Currently, I can say the recent Supreme Court ruling led to a lower effective tariff rate for our products. At this point, we have not modeled major impacts to our year based on that. Nevertheless, there are still moving pieces to consider. Our industry is highly promotional and is characterized by a constantly changing assortment with different components and features. Innovation tends to drive prices up, while older price points decline. It is a global supply chain. Vendors are making decisions across the entire globe. Our breadth of products across varied price points allows customers to find options that match their budgets. While many changes are happening in the space, we are seeing our ASP has remained relatively flat in Q4. This means our customers can continue to find products that fit their budgets, and we are working with our vendor partners to facilitate that.

I believe the team has done an excellent job working with our vendor partners to ensure we show up for our customers.

Hey. Good morning. Thanks very much for taking my questions. The first one I wanted to ask was just how should we be thinking about the same-store sales cadence for the year? Would we expect every quarter to kind of be within the range? And then you gave the commentary on the memory impact, which is very helpful. Is there a cadence to be mindful of when it comes to ASPs and unit volumes just given the disruption?

Yeah. I think, broadly, if I look at the year, clearly talking about about a 1% comp for Q1. We clearly have not guided the rest of the quarters. But if you think about where maybe the more opportunity for us on a comp is probably in Q1 and Q4, while some of our stronger quarters last year were in Q2 and Q3, so that might be areas where we might see a little bit of a lower comp than maybe Q1 and Q4 as we analyze it today. In terms of the memory, I think we are already starting to see some costs and prices go up because of the memory in some small parts of categories. So it has begun a little bit. I anticipate as we move into the future, that will likely continue to roll through into upcoming quarters. It’s hard to say exactly when or how quickly ASPs change, but we are noticing signs that some areas are actually starting to increase.

Corie, maybe just following up on Michael's comment from before. You mentioned average sales price flat, I think, in 2025. Then you also talked about configuration changes in conjunction with the vendors to meet certain price points. If it is not enough, maybe could you just baseline the outlook for average sales price for the company as a whole in 2026? And if you can maybe just talk about computing in particular as we marry together all these elasticity concerns.

Do I wish I had the perfect organic forecast for you? To be clear, ASPs were flat in Q4. They were actually kind of down a bit in some of the other quarters, up a bit, but that was a Q4 quote. In terms of what we see going forward, we are not going to guide based on organic because, again, the goal here is to have as many different price point opportunities available for the customer. That is true across our assortment, whether it is television—back to the earlier question where we continue to play really strongly in large screen—whether that is computing, whether that is mobile phones. The goal here is to have as many price points as possible and then have customers opt into what they want. So it is not even as easy as, 'Alright, if all the SKUs go up X percent, that is probably not how it is going to work because the customer might come in with a budget and they are not going to look at a certain SKU.' We are focused on having varied price points and working with vendor partners to ensure we have the best configurations possible for customer choice.

That is helpful clarity. And then just, I guess, the second question around vendor support. You mentioned vendor-sponsored labor hours up, I believe, 20%, and I think there are some concerns out there around just promotional support. So I do not know if we can just talk about the various sort of components of vendor support and if there are any factors where you anticipate change, promotional support maybe being one of focus for investors.

Yes. So thanks for the question. Our vendors continue to make more investments in Best Buy Co., Inc. That is in physical experiences in our store. A long list of vendors continue to contribute and want to grow that presence. There has also been a significant uptick in the number of vendor labor supported, which does not even include the training that they do throughout the year with our labor in total. From a promotionality perspective, we are not seeing a dramatic change there. I think there is one adjustment that naturally occurs and you are probably observing it in computing first, which is price increases are not the first thing that happens. The first thing that happens is promotions are pulled back a little bit. There’s not less of an impact or less funding of promotions, but there is less promotional activity. In computing, you have actually seen less pure cost increases and more of a general slight pullback in promotions from computing vendors, which is the first reaction from them under this memory situation. The second thing is that the cost changes will come through. That’s really the only area where we have observed any difference, and it is not a difference in level of support to Best Buy Co., Inc. It is actually an industry difference in level of promotional aggressiveness in a particular category. And just to clarify, the 20% reference was 20% growth in labor in the second part of last year. We expect vendor-provided labor to grow this year as well, but that 20% reference was specific to the second half of last year.

Hey. Good morning, guys. I am going to ask questions in one. So first, the positive comp trends in the first quarter, can you talk about the complexion? Is there any difference from the way the year ended? Then if you can merge that into thinking about the comp outlook for fiscal 2027 in totality. And then Matt, I know you mentioned promotionality. When we saw you in December, you talked about reserving the right to be more promotional if need be. So can you talk about how that tone progressed through Q4 and then the position you enter fiscal 2027?

Sure. Yeah. So as we enter Q1, we do expect Q1 to see growth in areas that are pretty consistent with what we had been seeing. Places like computing and gaming—we haven’t quite lapped the Switch launch in Q2 of last year. Mobile phones, we would expect to be a growth area for us in Q1. We expect improved TV trends. That will be something we carry through the rest of the year. Additionally, as I said, we have some product timing shifts between the months here in Q1—from the mobile phone launch and other new product launches. Therefore, that will carry as you reach the latter part of the year. Continue to expect computing to grow at the high end of that guide. At the low end, it will assume some level of constraints that we cannot foresee at this moment. This growth is supported by the end of support for Windows 10 and improving use cases for AI along with continued need for replacement cycles. The growth in mobile phones will continue to be fueled this year through the new carrier labor models and system enhancements implemented last year. Interestingly, as you consider this year, there are many newer emerging categories we have discussed, like AI glasses, 3D printers, collectibles, toys, and health rings. They are all small individually, but collectively they contribute significantly to our growth next year—potentially half a point or more. We will certainly enhance our business there. Lastly, to reiterate, better TV trends are anticipated as the year progresses. As Corie mentioned earlier, we have not thought about any changes in regards to the tariff news we had heard. However, we do expect GTA input will benefit us in the back half of the year. Additionally, gaming will see growth in Q1, and we will be lapping that Switch launch later in the year, indicating some variation in sequence growth for the gaming category.

As it relates to promotionality, we have been pretty clear and consistent. Customers have been drawn to key value events. Additionally, we have been explicit about leaning into those key areas with our vendors to ensure we remain competitive. As Matt pointed out and when you heard him laugh, we recognize that these key moments—whether it’s a holiday, Fourth of July, or Super Bowl—are when customers are actively seeking deals in the marketplace, and we plan to lean into those scenarios. Furthermore, we have several tools at our disposal to facilitate this, including a strong focus on personalized promotional levers effectively backed by signals we now utilize to re-engage customers with our brand. Those strategies have proven very effective. Our objective is to ensure when customers are looking for excellent value, we are ready and competitive by offering trade-in options, refurbished products, outlet services, and financing that can all help bring out the best deals for our customers.

Hey. Good morning. So with the SG&A moving parts around vendor labor as well as investments, could you update us on your leverage point in 2027? And then as the investment cadence dials back in 2028, how does that impact your leverage point and incremental margins going forward?

I believe we have showcased our ability to respond to sales moves, whether they are positive or negative. Thus, we have effectively adjusted our SG&A to mitigate the impact of variance while continuing to leverage a relatively fixed cost base. You can see us doing this effectively. First, as sales performance and ROI performance declines, incentive compensation will be the first to scale back. We reflect this in our guide. Hence, at the low end of our guide, we might cut about $100,000,000 of incentive compensation in response to a minus 1% sales guide. Additionally, we will also judiciously adjust store labor, marketing, and other variable expenses to align with our anticipated sales outlook. You’ve seen us manage our expenses responsively and prudently, even when sales are lower, allowing us to generate operating income outcomes that are often on par with higher sales expectations.

Got it. And then on the appliance category, you have had some challenges there. I’m curious about any thoughts on the game plan for fiscal 2027 to return to share gain? How should we think about the glide path towards returning to positive comps?

Yep. Thank you for the question. Appliances continues to be in a tough environment. As you know, home sales and remodels are down. Consequently, the overwhelming majority of the market continues to feel the impact, leading to more replacement needs. The market has been very promotional; however, we need to evaluate the effectiveness of the promotions driving actual business. We are keeping a close watch on vendor partners to confirm which promotions are truly beneficial for the business. Given that the market is leaning heavily on replacement due to wear and tear, we are focusing on two main areas: increased investments from our vendor partners, which entails more specialized labor associated with appliances, as well as commitment towards improving customer experience. We believe specialty labor will improve the overall customer experience within appliances, as will offering customers options to take appliances home with them when desired. We are also focusing on increasing delivery speed, critical for customers needing replacements promptly. We will ensure we have a core SKU set that is both readily available and can be delivered quickly—ideals we apply to faster service than our competitors. Our strategy will give us a balance as the market shifts from a more duress-driven environment to one that's focused on upgrades and enhanced experiences.

Got it. Thanks for the time.

Thank you.

Great. Good morning, Corie and Matt. Two questions. First one, you are in top-to-top meetings with vendors frequently. Do your supplier conversations reveal plans to slow the pace of innovation and product launches in 2026, given the memory chip shortage distraction? And my second question, there is conjecture that recent computing and smartphone category performance could be aided by a pull-forward in demand with consumer awareness of potentially higher prices ahead. Are you seeing any evidence that would support a thesis of pull-forward? Thank you.

Great questions. On the first one, we are not seeing indications from our vendor partners of a slowdown in innovation. In fact, during times like this with memory challenges, there tends to be a push to find alternate innovations that can provide substantial value from a feature-and-benefit perspective for customers and continue to fuel growth within the individual categories. Hence, we are witnessing attentiveness to technological advances in computing; it could involve aspects like screen size, quality, and AI features, targeting interests in the category. Thus, we do not perceive a risk at this point. As for pull-forward dynamics, our inventory pull-ins are managed wherever possible, but we are continuing to observe stability and growth in demand. We discussed computing experiencing growth across the last eight quarters, while mobile phones have seen growth for the last four quarters. We do not experience strong signals pointing towards pull-forward behaviors at present.

Moreover, it is critical to note that the rise in memory or component costs or shortages is not an unfamiliar challenge in our industry. We’ve handled peak periods like this for over 25 years. Reinforcing Jason's earlier point, our vendor partners are remarkably adept at pivoting and adapting to market changes. Every vendor partner is motivated to drive consumer demand and ensure their products stand out in the market, so this is a familiar challenge. We have yet another series of features that we need to adapt alongside our vendor partners. Finally, I believe that wraps up our Q&A session. Thank you for joining in today, and we look forward to updating you on our results and progress on our next call in May.

Thank you, everyone.