Best Buy Q1 2026 Earnings Report

Best Buy EPS Results

• Actual EPS: $1.15
• Consensus EPS: $1.09
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $1.20

Best Buy Revenue Results

• Actual Revenue: $8.77 billion
• Expected Revenue: $8.77 billion
• Beat/Miss: Missed by -$3.27 million
• YoY Revenue Growth: -0.90%

Best Buy Announcement Details

• Quarter: Q1 2026
• Date: 5/29/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 29, 2025
• Conference Call Time: 8:00AM ET

Best Buy (NYSE:BBY) Co., Inc. engages in the retail of technology products in the United States, Canada, and international. Its stores provide computing and mobile phone products, such as desktops, notebooks, and peripherals; mobile phones comprising related mobile network carrier commissions; networking products; tablets covering e-readers; smartwatches; and consumer electronics consisting of digital imaging, health and fitness products, portable audio comprising headphones and portable speakers, and smart home products, as well as home theaters, which includes home theater accessories, soundbars, and televisions. The company's stores also offer appliances, such as dishwashers, laundry, ovens, refrigerators, blenders, coffee makers, vacuums, and personal care; entertainment products consisting of drones, peripherals, movies, and toys, as well as hardware and software, and virtual reality and other software products; and other products, such as baby, food and beverage, luggage, outdoor living, and sporting goods. In addition, it provides delivery, installation, memberships, repair, set-up, technical support, health-related, and warranty-related services. The company offers its products through stores and websites under the Best Buy, Best Buy Ads, Best Buy Business, Best Buy Health, Buy Mobile, CST, Current Health, Geek Squad, Lively, Magnolia, Pacific Kitchen, Home, TechLiquidators, and Yardbird brands, as well as domain names comprising bestbuy.com, currenthealth.com, lively.com, techliquidators.com, yardbird.com, and bestbuy.ca. The company was formerly known as Sound of Music, Inc. Best Buy Co., Inc. was incorporated in 1966 and is headquartered in Richfield, Minnesota.

Best Buy Q1 2026 Earnings Call Transcript

Key Takeaways

• Best Buy reported Q1 revenue of $8.8 billion (down 0.9% YoY), an adjusted operating income rate flat at 3.8%, and adjusted EPS of $1.15, demonstrating resilient profitability in a dynamic environment.
• The company narrowed its full-year comparable sales outlook to down 1% to up 1% and expects an adjusted operating income rate of approximately 4.2%, reflecting uncertainty around tariffs and consumer behavior.
• Through tariff mitigation—leveraging vendor diversification, manufacturing flexibility, cost negotiations, assortment rationalization, and selective price changes—Best Buy has reduced its China COGS exposure to 30–35% from 55%.
• Best Buy Marketplace is on track for a midyear launch with over 500 sellers already onboarded, and is expected to be accretive to gross profit and operating income while broadening product assortment.
• Investments in omnichannel and operational efficiencies—such as an AI-powered search overhaul, record on-time delivery performance, and enhanced procurement and supply-chain automation—are driving cost savings and elevating the customer experience.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to Best Buy's First Quarter Fiscal twenty twenty six Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press star one on your phone.

[Operator]

If you choose to be taken out of the question queue, please press star one again. As a reminder, this call is being I will now turn the conference call over to Molly O'Brien, Head of Investor Relations. Please go ahead.

[Mollie O'Brien, Vice President, Investor Relations at Best Buy]

Thank you, and good morning, everyone. Joining me on the call today are Corey Barry, our CEO Matt Palunis, our CFO and Jason Bonfig, our Senior Executive Vice President of Customer Offering and Fulfillment. During the call today, we will be discussing both GAAP and non GAAP financial measures. A reconciliation of these non GAAP 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.

[Mollie O'Brien, Vice President, Investor Relations at Best Buy]

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 Form 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. And now I will turn the call over to Corie.

[Corie Barry, CEO at Best Buy]

Good morning, everyone, and thank you for joining us. It has certainly been an eventful start to the year. I'm proud of how our teams have been navigating the environment and planning our business against the backdrop of dynamic macroeconomic factors. They've employed a calm, strategic and steadfast approach with their ultimate focus on our customers and the partnerships we have with our vendors. Against this backdrop, we executed well in Q1 and delivered better than expected profitability.

[Corie Barry, CEO at Best Buy]

Today, we are reporting first quarter revenue that was slightly below last year as expected and adjusted operating income rate that was flat year over year. On revenue of $8,800,000,000 we delivered an adjusted operating income rate of 3.8% and an adjusted earnings per share of $1.15 From a product category perspective, we drove comparable sales growth in computing, mobile phones and tablets. This growth was offset by declines in home theater, appliances and drones, resulting in a domestic comparable sales decline of 0.7%. We delivered 6% comparable sales growth in the combined computing and tablet categories. Our omni channel operations provided strong support for our Q1 online sales, which grew year over year for the second consecutive quarter.

[Corie Barry, CEO at Best Buy]

They were nearly 32% of total domestic sales, a slightly higher mix than last year. Almost 60% of online purchases are delivered or available for pickup within one day, and we drove our strongest on time ship to home delivery performance in three years. For the most part, customer behavior in Q1 did not change materially from the commentary we have shared for the past several quarters. Customers continued to be deal focused and attracted to more predictable sales moments. We believe the consumer has remained resilient while dealing with persistent inflation, making them value focused and thoughtful about big ticket purchases.

[Corie Barry, CEO at Best Buy]

We also still see a customer that is willing to spend on high price point products when they need to or when there's technology innovation. Additionally, we continue to see material year over year improvement in our domestic relationship net promoter score, which tracks consumers' likelihood to recommend Best Buy during the quarter. We believe this is the direct result of our relentless focus on elevating our unique customer experience. I am excited to discuss the progress we have made in Q1 on our fiscal twenty twenty six strategic priorities. But first, we must address the current tariff environment impacting our industry, our business and consumers overall.

[Corie Barry, CEO at Best Buy]

Let me begin by saying there were some developments overnight that may have future impacts. We are obviously not addressing these in our following prepared remarks as there remains a great deal of uncertainty. As we stressed last quarter, international trade is critically important for our business and industry. The consumer electronics supply chain is highly global, technical and complex. There have been a lot of developments since our March conference call.

[Corie Barry, CEO at Best Buy]

While China remains the number one source for products we sell, we currently estimate the percentage of product COGS it represents is approximately 30% to 35% compared to the 55% metric we shared in March. This is the result of vendors using production capabilities in multiple countries and leveraging their ability to flex sourcing options as the environment evolves. We estimate that the combination of The United States and Mexico are approximately 25% of product COGS at this point. The level of tariff currently varies across our product categories. Let me provide a high level breakdown.

[Corie Barry, CEO at Best Buy]

The consumer electronics products that are coming from Mexico, including televisions and major appliances, are compliant with the USMCA trade agreement and are not subject to tariffs. As it relates to China, there are currently two distinct tariff scenarios. First, categories that are subject to the Section two thirty two semiconductor investigation, including computers, mobile phones, networking and monitors are currently subject to the 20% fentanyl tariff. Roughly half our China COGS falls into this scenario. Second, categories like major and small appliances, gaming consoles, furniture, and accessories are subject to the 20% fentanyl tariff plus the recently instituted 10% baseline tariff.

[Corie Barry, CEO at Best Buy]

Finally, consumer electronics products coming from countries such as Vietnam, India, South Korea, and Taiwan are currently subject to 10% tariff. We have been actively employing many tactics in partnership with our vendors as we navigate the dynamic situation and work to mitigate the impacts of tariffs on our customers and business. I would organize them into five main themes. These include, one, leveraging manufacturing flexibility. Since 02/2018, many vendors, including our own exclusive brands, have created new manufacturing locations that provide optionality two, negotiating costs, including consolidating volume into fewer partners for leverage in negotiations three, increasing country diversification.

[Corie Barry, CEO at Best Buy]

We influence many of our partners to start or continue building resiliency into their supply chains by ensuring there are at least two locations available to manufacture the same or similar products for distribution across the globe. Four, adjusting assortments. We review and modify assortments to ensure a wide range of customer needs and budgets are met and rationalize where appropriate to consolidate volume. And five, as a last review, we adjust prices as tariff related inventory cost changes are implemented. As a reminder, Best Buy only directly imports approximately 2% to 3% of our overall assortment.

[Corie Barry, CEO at Best Buy]

I want to make the point that due to mitigation efforts by both vendors and by Best Buy, the increased product costs that are flowing to us are lower than the tariff rates. And as of mid May, we have already made the related price and promotional adjustments to our assortment. I also want to stress that as always, we are committed to offering competitive prices to our customers. From an inventory perspective, we have continued with our long standing strategy of targeting roughly sixty days of forward supply. At this point in time, we feel good about inventory levels overall and for back to school.

[Corie Barry, CEO at Best Buy]

I am grateful to our deeply tenured and talented teams for their skill in operating through volatile conditions and for their deep partnerships with our vendors. As we look to the rest of the year, there is still uncertainty related to tariff levels, timing and countries involved in addition to the potential actions of others in the industry as well as the potential reaction of American consumers. However, based on the current tariff levels we just articulated, we are updating our annual outlook with our best view at this time. We are lowering our full year comparable sales range to down 1% to up 1% and expect an adjusted operating income rate that is consistent with last year or approximately 4.2%. Our underlying working assumptions are that tariffs stay at the current levels for the rest of the year and there is no material change in consumer behavior from the trends we have seen in very recent quarters.

[Corie Barry, CEO at Best Buy]

As you can imagine and based on our history, we will continue to scenario plan and adjust with agility as the situation evolves. Matt will provide more detail. Now I would like to update you on the progress we are making on our strategic priorities. Our strategy is to continue to strengthen our position in retail as the 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. As a reminder, our fiscal twenty six strategic priorities are as follows.

[Corie Barry, CEO at Best Buy]

One, drive omnichannel experience improvements that resonate with our customers. Two, launch and scale incremental profit streams, including Best Buy Marketplace and Best Buy Ads and three, drive operational effectiveness and efficiency to fund strategic investments and offset pressures. Of course, these priorities are intertwined and work together as a great customer experience drives the level of opportunity to generate incremental profit streams. I will start with our digital experiences, where nearly a third of our domestic revenue is transacted and roughly 60% of our overall purchasers visit at some point during their shopping journey. We are on track to launch our innovative improved search experience across.com, Small View and our app later this year.

[Corie Barry, CEO at Best Buy]

We have already begun rolling the capability out to a small percentage of customers with plans for full rollout by holiday. We are excited about this experience as we believe it will, over time, be a tool used by customers and employees to solve real problems. This new experience will have AI powered prompts to guide customers to more specific searches and natural conversational filtering for easier product discovery. It will also have fewer, higher quality matches that reflect customer intent and richer product information to support confident buying decisions. During q one, we introduced Best Buy storefronts, which allow influencers and creators to build their own branded digital storefronts on bestbuy.com.

[Corie Barry, CEO at Best Buy]

It is early, but we have been pleased with the interest thus far, with more than 400 creators signed up and more than 60 storefronts already launched. Over time, we believe these will help drive increased traffic, engagement, and sales. In our stores, we plan to touch every store this year with shopping experience updates. Starting in Q2, we are adding vendor paths in home theater, expanding tablet and virtual reality departments and enhancing experiences for the upcoming Switch two launch. As expected, there is strong customer demand for this launch and preorder quantities sold out very quickly.

[Corie Barry, CEO at Best Buy]

Best Buy is uniquely positioned for the Switch two launch, being one of the only retailers opening their doors at midnight on June 5 for eager customers to pick up their consoles or grab another game. I would note that 70% of preorder customers elected in store pickup, underlining this important strength. The midnight opening is not only for preorder customers to pick up their products, there will also be additional consoles, games and accessories available for purchase. We continue to focus on our unique in store customer experience. And in partnership with our vendors, we have made investments in our certification and training strategy for merchandising, customer engagement, and selling.

[Corie Barry, CEO at Best Buy]

For example, in March, we brought our major appliances associates together in person for rigorous training to further upscale in the appliances category, which we expect to drive even higher productivity and better experiences for our customers. Earlier this month, we replicated this approach for computing, and we'll do the same in July with the home theater category, ensuring that our teams are well prepared and knowledgeable across all major categories. Of course, we have a long history of augmenting our labor expertise with vendor provided labor. For example, starting last year, both Verizon and AT and T have increased their investments in store labor and have partnered with us to improve technology systems integration in hundreds of stores. As a result, we are driving increased phone sales and activations and delivered our first mobile phones comp sales growth in three years.

[Corie Barry, CEO at Best Buy]

We also feel even better positioned for future product launches. Our second strategic priority for fiscal twenty six is focused on incremental profitability strength. We believe our marketplace launch is even more important in this environment as it provides ultimate flexibility in product assortments, price points, vendors, and SKUs so we can offer customers the broadest and most relevant experience possible, particularly when combined with our upgraded search capability. Also, sellers and advertisers will have an additional avenue to increase their reach and build their brands leveraging our qualified traffic. We have seen strong interest from sellers and have already exceeded the seller count goal we set for the entire year.

[Corie Barry, CEO at Best Buy]

We expect to have at least 500 of them onboarded and ready for the initial midyear launch. At launch, customers will be able to return their products directly to sellers or in our stores, and our customers will have the confidence of knowing all sellers will have a universal return window aligning with Best Buy policies. We continue to expect Marketplace to have a positive impact on our operating income rate for fiscal twenty twenty six even after startup costs, investments and estimated cannibalization of our first party product revenue. Over time, we expect Marketplace to help drive profit dollars and unit share. In addition, it will provide opportunities for our Best Buy Ads business through new advertisers and increased traffic.

[Corie Barry, CEO at Best Buy]

We continue to see fiscal twenty twenty six as a pivotal year for our Best Buy Ads business. We have had a robust retail media network business for a long time in partnership with our vendors. We are proud of the business that we have built and we see opportunities for growth. In Q1, we made material progress on our plan. We expanded the available inventory on our site by adding new ad slot placements on high volume pages to better meet the level of demand and added 20 new vendor advertisers.

[Corie Barry, CEO at Best Buy]

We went live with one of the largest demand site platforms, The Trade Desk. This expands our share of the broader digital dollars to flow to Best Buy ads. We were encouraged by the number of non endemic advertisers who are already advertising with us as a result. We launched the capability called Social Plus in collaboration with Meta. Social Plus will allow advertisers to reach our customers more effectively on Facebook and Instagram.

[Corie Barry, CEO at Best Buy]

We are also expanding our engagement with new types of advertisers like quick serve restaurants. We are excited about the results we were able to drive for a major quick serve restaurant who ran an April campaign leveraging our first party gaming segments. Lastly, we filled key leadership roles and opened our New York office. We continue to expect growth in ad collections to benefit our gross profit rate in fiscal twenty twenty six. From an operating income rate perspective, we expect more of a neutral impact due to the investments we are making.

[Corie Barry, CEO at Best Buy]

We believe the actions we are taking in fiscal twenty twenty six position us for future growth and rate expansion over the next number of years. This brings us to our third strategic priority for fiscal twenty twenty six. It is imperative that we continue to focus on executing well what is within our control, which includes identifying cost reductions and driving efficiencies to help offset pressures in our business and fund investment capacity for new and existing initiatives. There are many ways we realize these efficiencies. They are often achieved with the help of technology and analytics, through ongoing vendor partnerships and vendor selection throughout enterprise and by modifying existing processes or customer offerings.

[Corie Barry, CEO at Best Buy]

Other times, they are the result of us moving on from initiatives that aren't generating the financial return we had initially and originally envisioned. There are a few areas I would like to highlight. Within our procurement operations, we expect to complete the multiyear deployment of our full Source To Pay technology capability in the second quarter. As we shared last quarter, this will give us expanded transparency into billions of dollars of goods not for resale spend. In combination with the enhanced automation of our purchasing process, this paves the way for continuous cost optimization opportunities.

[Corie Barry, CEO at Best Buy]

Within our supply chain operations, we recently replaced our prior rule based shipping process with a data driven sourcing solution that uses real time cost data to choose the most efficient fulfillment location. This helps us deliver orders on time and reduce shipping costs. Within our customer care operations, our use of new conversational AI technology, our upgraded IVR systems, and other operational efficiencies have led to both better customer experience and cost savings. In Q1, we saw record low levels of cost per customer contact and customer call transfer rates, as well as record high levels of customer satisfaction. These results are driving reductions in annual call volume expense.

[Corie Barry, CEO at Best Buy]

In summary, we continue to demonstrate our strong execution through adaptability, strategic investments and operational strength during turbulent times. We expect to navigate the tariff environment and emerge not only as a vital company, but a vibrant one as the landscape stabilizes over time. We are the trusted source for the latest and greatest new tech as well as a broad range of assortment, unique in store and digital experiences, and the expert Geek Squad services to help our customers. We are also a true partner to our vendors, often working with them from early in the product development cycle all the way to launching products on our sales floor. There are many reasons we are excited for the rest of the year.

[Corie Barry, CEO at Best Buy]

From a product category perspective, we expect growth in computing, including tablets, to continue to be driven by the customers' need to replace and upgrade products. We believe this will be helped by both the end of Windows 10 product support in October and ongoing innovation in the form of gradual improvement in AI use cases and the release of new AI features. In mobile phones, we expect benefits from our in store experience improvements with the carriers to deliver growth for the year. In gaming, we expect the new launch and updated store experience to drive sales momentum for the year. We are also excited to expand our in store experience and presence for Ray Ban Meta Glasses.

[Corie Barry, CEO at Best Buy]

This technology and other wearable AI products yet to be launched will transform the way people live, and Best Buy is the ultimate customer education destination. In addition, the launch of our marketplace and relentless focus on our online and in store customer experience will continue to underscore our unique position in the industry. Also, our refreshed brand is resonating more deeply with our customers, and we are driving continuous customer experience improvements across the business. Added to that, our digital growth benefited from increased app adoption, checkout conversion and recognizable customers, allowing us to better personalize their experiences in the future. And finally, we continue to invest in our teams who are ready to truly help our customers enrich their lives through technology through more specialized knowledge, unique in home expertise, and robust support.

[Corie Barry, CEO at Best Buy]

Our recent engagement scores are the highest we have ever seen, and our turnover remains the lowest we have seen in more than five years. I am so deeply appreciative that they choose to work for Best Buy, how they live our values, and for the culture they have created by bringing their unique experiences themselves to work every day. With that, I will now turn the call over to Matt.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Good morning. Let me start with an overview of how the first quarter performed versus the expectations we shared with you last quarter. Enterprise comparable sales declined 0.7%, which was consistent with our outlook. Our adjusted operating income rate of 3.8% was approximately 40 basis points better than expected, which was primarily driven by favorable SG and A expense. The favorable SG and A was primarily the result of an indirect tax settlement and strong expense management.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Our gross profit rate of 23.4% improved approximately 10 basis points versus last year, which was consistent with our outlook. I will now talk about the first quarter results versus last year. Enterprise revenue of $8,800,000,000 decreased 0.9% versus last year. Our adjusted operating income rate was flat to last year with both gross profit and SG and A largely similar to last year as a percentage of revenue. While adjusted operating income dollars were flat to last year, our adjusted diluted earnings per share decreased 4% to $1.15 1 of the drivers of this lower EPS was approximately $10,000,000 of lower investment income, which was due to a lower average cash balance combined with lower short term interest rates.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

By month, our enterprise comparable sales were down approximately 2.5% in February before increasing 0.5% in March and declining 0.4% in April. The shift of Easter improved March and negatively impacted April comparable sales by an estimated two fifty to 300 basis points. In our domestic segment, revenue decreased 0.9% to $8,100,000,000 driven by a comparable sales decline of 0.7%. International revenue of $640,000,000 decreased 0.6% versus last year, which was driven by a comparable sales decline of 0.7%. The revenue decrease also included a negative foreign currency impact of approximately four fifty basis points, which was offset by revenue from Best Buy Express locations that opened in Canada after Q1 fiscal twenty twenty five.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Our domestic gross profit rate increased 10 basis points to 23.5%. The higher gross profit rate was primarily driven by improvement within the services category, which includes our membership offerings. This improvement was partially offset by rate pressure within our Best Buy Health business and lower credit card profit sharing revenue. Our international gross profit rate decreased 80 basis points to 22%. The lower gross profit rate was primarily due to lower product margin rates and unfavorable supply chain costs.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Moving to SG and A, where our domestic adjusted SG and A decreased $13,000,000 which was primarily due to a favorable indirect tax settlement. In addition, we incurred $109,000,000 in restructuring charges this quarter. Those charges are primarily associated with the restructuring initiative within our Best Buy Health business. During the quarter, we returned a total of $3.00 $2,000,000 to shareholders through dividends of $2.00 $2,000,000 and share repurchases of $100,000,000 We have raised our quarterly dividend for twelve straight years and remain committed to being a premium dividend payer. Moving on to our full year fiscal twenty twenty six financial guidance.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

In March, we made it clear that the guidance we provided excluded any estimated impacts from recently announced tariffs. At the same time, we provided a ballpark estimate of approximately one point of comparable sales pressure to our guidance if the China tariffs that went into effect on February 4 remained at the 10% level for the full year. As Corey stated, a lot has changed since March. Tariff rates have changed, the sourcing exposure for many of our products has been changing, and the conversation with our vendors has also progressed. As such, the updated guidance we are providing today includes our best estimate of the range of financial impacts from tariffs.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Within that guidance, our working assumption is that tariffs stay at the current levels for the rest of the year. Clearly, the trade policy discussions are ongoing and tariff rates could change, but anchoring our guidance to the current tariff rates felt most appropriate. In addition, our guidance includes our best estimate for each of our revenue categories, which incorporates the trends we have seen year to date. Our guidance also assumes that there is no material change in consumer behavior from the trends we have seen in recent quarters. Our updated enterprise guidance for fiscal twenty twenty six is the following: revenue in the range of $41,100,000,000 to $41,900,000,000 comparable sales of down 1% to up 1% adjusted operating income rate of approximately 4.2%, and adjusted effective income tax rate of approximately 25%, which is unchanged from our prior guidance, adjusted diluted earnings per share of $6.15 to $6.3 Capital expenditures of approximately $700,000,000 which represents the low end of our prior guidance range.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Lastly, we still expect to spend approximately $300,000,000 on share repurchases. Next, I will cover some of the key working assumptions that support our guidance. We expect our gross profit rate to be slightly unfavorable to last year with most of the primary components of our gross profit planned very similar to fiscal twenty twenty five from a rate perspective. There are a few items I would like to highlight. First, our product margin rates are now expected to be unfavorable compared to last year, which is largely driven by a higher portion of our sales mix coming from lower margin categories such as computing.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

In addition, our outlook reflects our plans to remain competitively priced. Next, growth from the Best Buy ads and the rollout of our U. S. Marketplace is expected to benefit our gross profit rate. We now expect our services category including membership to benefit our gross profit rate compared to the prior year.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Lastly, we still expect the profit share on our credit card arrangement to have a neutral impact in fiscal twenty twenty six. Now moving to our adjusted SG and A expectations. As a percentage of revenue, we now expect our adjusted SG and A to be slightly lower than fiscal twenty twenty five, which includes the following puts and takes. We continue to expect benefits from ongoing efficiencies and effectiveness work streams including Best Buy Health. Indirect tax settlement we received in the first quarter lowers our full year SG and A compared to last year.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Partially offsetting these items are SG and A increases in support of our Best Buy ads and marketplace initiatives, which includes advertising, technology and employee compensation expense. At the high end of our revenue guidance, the store payroll expense and items like credit card processing fees are expected to increase with minimal impacts from a rate perspective. Lastly, the high end of our guidance now reflects incentive compensation that is approximately flat to last year, while 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 second quarter. We expect our second quarter comparable sales to be slightly down versus last year and our adjusted operating income rate to be approximately 3.6%.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Our gross profit rate is planned very similar to last year's second quarter with increased SG and A expected to be the primary driver of the lower operating income rate. As a reminder, last year's second quarter SG and A included a favorable legal settlement and lower medical claims. The combination of these two items provided the benefit of approximately $20,000,000 to last year's second quarter. I will now turn the call over to the operator for questions.

[Operator]

Thank you. You. Your first question comes from Scott Ciccarelli with Truist. Your line is open.

[Scot Ciccarelli, MD & Senior Research Analyst at Truist Securities]

Good morning, guys. So I think we all understand that the tariff scenario has been highly dynamic, but it does sound like you have a pretty significant difference in terms of your China sourcing versus, call it, three months ago. Can you just help us better understand that? Like, is that just a function of, you know, is the vendors moving product around for you? Is it just better understanding where the products are coming from?

[Scot Ciccarelli, MD & Senior Research Analyst at Truist Securities]

Any more color on that. And then part two, just a housekeeping item. How big was the tax element in the s g and a? Thanks.

[Corie Barry, CEO at Best Buy]

Scott, I'll start on that China sourcing question. I'm actually just reiterate a few things to make sure that everyone got all the data points because I do think they're pretty important. First, we said that China has come down to 30 to 35% compared to the 55% metric. And then just to reiterate, about half the China source products are at the 30% tariffs, and then roughly half are at the 20% tariffs pending the February investigation. Then we said combination of US and Mexico are at about 25% of COGS, and that has zero tariffs across both of those.

[Corie Barry, CEO at Best Buy]

That leaves roughly 40%, that are coming from other countries like Vietnam, India, South Korea, Taiwan, which are currently at 10%. As we noted, we only directly import two to 3%. And so, really, it's been about these mitigation efforts that are both coming from the vendors and Best Buy that are and that that's what's making it happen so that the increased product costs that are flowing to us are actually lower than the overall tariff rates. Explicit to those mitigations, Scott, to your point, the first one is one of the most important, and that is more leveraging of manufacturing flexibility than we were seeing prior. Since 2018, many vendors, including ourselves, have created new manufacturing locations, and you can flex some of those new locations up and perhaps perhaps flex down some of the locations that are in China, thereby changing, that mix that you're seeing.

[Corie Barry, CEO at Best Buy]

And remember, these are global supply chains, so they're supplying to many different countries across the globe. And so you're gonna use potentially different locations to supply different countries depending on the tariff situation. Two, we also talked about increasing country diversification just writ large. Obviously, we try to influence our vendor partners. They're influenced, themselves given the situation to continue building resiliency into the supply chains and ensuring there are at least two locations available to manufacture the same or similar products for distribution across the globe.

[Corie Barry, CEO at Best Buy]

And so we're seeing even just some of those newer distributions, come to market, which is helping to create that diversification. And then from there, we get into, the third mitigation strategy, which is negotiating costs, where, obviously, we're gonna work with our vendor partners to absorb part of the tariff burden, cost optimized products, and or consolidate volume into fewer partners for leverage in negotiations. And then fourth, adjusting assortment. So that too can change the mix. Right?

[Corie Barry, CEO at Best Buy]

Because you might adjust your assortment, review it, modify it to ensure we still have a wide range of customer needs and budgets, but you're gonna maybe rationalize where you need to to consolidate that volume, and that might also change your mix. And then finally, as we talked about as a last resort, adjusting prices. And I I think I just wanna reiterate one more time that the cost increase we see does not always automatically translate into customer price increases. We gave you our best view on what we think is translating right now based on what we can see in the market.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Yeah. Scott, into the tax settlement sizing. Our domestic SG and A was about $13,000,000 lower than last year and it's the only item we called out. So it's fair to assume that it's at least $13,000,000 if not a little higher than that.

[Scot Ciccarelli, MD & Senior Research Analyst at Truist Securities]

Got it. Very helpful. Thanks guys.

[Operator]

Thank you. The next question comes from Mike Baker with D. A. Davidson. Your line is open.

[Michael Baker, Managing Director, Senior Research Analyst at D.A. Davidson]

Okay, great. Thanks. Can you talk about do you think you saw any pull forward in demand? Some vendors and other retailers have talked about seeing some pull forward in consumer electronics demand, although it doesn't seem to have shown up in your same store sales. And related to that, any comment on market share?

[Michael Baker, Managing Director, Senior Research Analyst at D.A. Davidson]

How you think you're holding up versus the market and versus other retailers? Thank you.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Sure. Yes, I mean, we started the quarter a little slower. February was a little lower than as we started the quarter and improved throughout the year. It's a little hard to, look at the specific impact to a pull forward, if you will, because of the shifting of of the events for Easter. But likely, there was a a few weeks a couple weeks there that were that were elevated because of the pull forward, but not really hard to size. You can appreciate because of the the Easter shift.

[Corie Barry, CEO at Best Buy]

I think there's one thing that's a little hard to judge in terms of q one consumer demand, and that is at the very April, you saw a lot of preorders come through for the switch. Those are dollars that consumers feel like they've spent in consumer electronics, but you're not gonna actually see those dollars flow through until q two. So, yep, we maybe have two weeks of pull forward in a couple categories, but also we have this kind of weird factor that consumers feel like they're spending money in consumer electronics, but yet they're not act we won't recognize that. They won't actually get the products until June just to add on to Matt's comments. In in terms of market share, I mean, we've said this multiple times.

[Corie Barry, CEO at Best Buy]

There isn't a great single source for everything we sell, especially in consumer electronics. And, obviously, quarter to quarter within categories, you're going to see fluctuations, depending on competitive actions and trade off decisions. I think it's fair to say that we are gonna make strategic pricing and promotional decisions depending on the environment. And in q one, we talked about this going into the quarter. This is a quieter quarter for us from an events perspective.

[Corie Barry, CEO at Best Buy]

There are fewer launches and initiatives, which tend to be the places where we over index in share. And so I, you know, I think in q one, we maybe saw a little bit of share loss, but, we have really good plans for the rest of the year, especially as we think about those launches and we think about the laundry list of things that I gave at the end of my prepared comments in terms of where we are investing and the timing on which we expect to see those returns. And so last year, we gained share in computing. We expect to gain share again this year. Same with gaming where we saw share gains last year and really some record high share levels for us.

[Corie Barry, CEO at Best Buy]

So we I think we have the right plans in place for the year, and we're a little less concerned about precisely in any given quarter exactly where that ends up.

[Michael Baker, Managing Director, Senior Research Analyst at D.A. Davidson]

Fair enough. If I could ask a follow-up. Last quarter, you did indicate that you thought there might be some changes in consumer behavior because of the tariffs. And even though I think you're mitigating a lot and not seeing a lot of price increases, there are I think you're saying some price increases, yet you're saying that you're not seeing any change in consumer behavior. So is the I guess, can you square those as the consumer not pulling back, or are we not seeing any demand destruction from higher prices?

[Corie Barry, CEO at Best Buy]

So let me reiterate what we've been saying about the consumer from literally the last few quarters. That is the consumer is remaining resilient, but we've been very clear to say they are making trade off in their spend and their budget decisions based on higher prices across many areas of their lives. And I think while while tariffs is perhaps an additional one, there's been a great deal of inflation up to this point. So this isn't just a conversation about tariffs. We've been very clear in saying consumers are making trade offs, and we can see that within our categories.

[Corie Barry, CEO at Best Buy]

At the same time, we see a consumer who is seeking value and sales events, and they are willing to spend on higher price points when they need to or when they see compelling new technology. That also is remaining true for us. And so what we're trying to do is take even in the last quarter, are we seeing relatively consistent behaviors? Yes. And there are some categories where, if you take something like televisions, where we can definitely see consumers trying to make some of those value trade offs.

[Corie Barry, CEO at Best Buy]

But at the same time, we see this continued strength in computing and tablets where there's both need and innovation, and they're willing to go ahead and spend in those areas.

[Michael Baker, Managing Director, Senior Research Analyst at D.A. Davidson]

Makes sense. I appreciate it. Thank you.

[Corie Barry, CEO at Best Buy]

Thank you.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Thank you.

[Operator]

Your next question comes from Greg Melich with Evercore ISI. Your line is open.

[Greg Melich, Analyst at Evercore]

Hi, thanks. I have to follow-up on one of the key areas of initiatives, the 3P growth in the advertising. Where does that show up currently? Which segments does that show up in? And then I had a follow-up.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Yeah. The incremental advertising that we were planning to drive through the ad initiative, some of which would show up in revenue and some of which would show up in gross margin. It kinda depends on the nature of the contract and nature of the arrangement that we've made. So the answer is it it depends based on whether in large part of whether it's somebody we already work with in terms of a vendor. If it's not endemic, in many cases, can show up in revenue in addition to margin.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

But, right now, most of that ad ad ad sales that comes through comes through in the margin category. Over time, we would expect to add more to the revenue side as we build out that initiative.

[Greg Melich, Analyst at Evercore]

And for three p, is that the same? How do we think about that?

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Yeah. Three p would be traditionally like other marketplaces where you would recognize the commission, revenue and gross margin. And then we at some point may give like gross sales commentary like other folks do, the gross commissions that will show up in margin from the 3P sellers.

[Greg Melich, Analyst at Evercore]

That's great. Thanks.

[Greg Melich, Analyst at Evercore]

And I just my follow-up is on tariffs. Thanks for all the detail. That's super helpful. I guess it feels like the blended rate, if my algebra works quickly, is in the mid to low teens from where we are today. Can we think about that price elasticity that you talked about earlier in March, do you think that still holds given that sort of this if we land at this tariff rate in the low to mid teens?

[Corie Barry, CEO at Best Buy]

So Greg, I want to reinforce something that I said in my prepared remarks. After I went through all the mitigation efforts that we're talking about, I actually made it a point to say that due to those mitigation efforts, both by vendors and by Best Buy, the increased product costs that are flowing to us are lower than the tariff rates. So while I know you're doing the blended math, and I know that's a great place to start, then you have to assume because of that laundry list of mitigation things I'm talking about, there are other ways for us to try to mitigate some of those tariffs and collectively make sure that we are staying competitive for our customers. And so the elasticity has been that, the team built, and they've done an amazing job, building some models around this, are built on kind of these lower tariff levels that we would expect to flow through based on these ongoing mitigation efforts in partnership, with our very, wonderful vendor partners.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Maybe just that yeah. Maybe just that on, Greg, the the we have we know a lot more since the last time we did this estimate. So we've we've we've taken another attempt at understanding the elasticities, which are quite frankly different, by category. And so we have updated our assumptions based on those elasticities, but everything Corey said was exactly right. Those elasticities are based off of cost increases that aren't necessarily at the level of effective tariff rate that we flowing through.

[Greg Melich, Analyst at Evercore]

That's great. Good luck and thanks for all the help.

[Corie Barry, CEO at Best Buy]

Thanks, Corey.

[Operator]

Your next question comes from Simeon Gutman with Morgan Stanley. Your line is open.

[Lauren Ng, Analyst at Morgan Stanley]

Hi, this is Lauren Ng on for Simeon. Our first question is, you sounded pretty positive on your categories such as computing and tablets, mobile phones due to the replacement cycle or other maybe in store initiatives. Can you bridge that positive sentiment versus your updated comp guidance down one to positive 1%?

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Yeah. I mean, we did a few things for our for our updated guidance range. We first looked at the base level trends that we're seeing happening throughout the Q1 and in some cases things like computing performed better, mobile performed better than we expected. In some other cases, as it always does, some other categories performed a little lower than our expectations. So we looked at those assumptions for the remaining part of the year as best we could, made some adjustments.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

And then what we did was we applied, an updated view of what we believe the tariff impacts could be based on all the all the commentary that we've already given. So there's clearly a range that we're providing for both the high and low in terms of the possible tariff impacts, but those two were also layered on to and not the same, but similar concept to what we provided last three months ago when we said about a one point of comp was for the 10% China tariffs. It's it's the same idea except that we've updated our information and now layer that into the guide overall.

[Lauren Ng, Analyst at Morgan Stanley]

Okay. Great. That's helpful. And then our follow-up is just on gross margins. Is there anything to call out from a cadence perspective?

[Lauren Ng, Analyst at Morgan Stanley]

Specifically, when do you expect maybe benefits from the rollout of The US marketplace to start taking shape? And if you could maybe help size the opportunity of margin benefits from the marketplace? Thank you.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Yeah. We haven't sized the the benefits from either the Best Buy ads initiative or marketplace. We have we have said and continue to believe that the the benefits, the rate should be helped in the back half of the year from both of those items. Marketplace is, actually an OI help OI rate help for the full year. The ads business while helping gross margin rate a bit, it does have a bit of investment, which kind of makes the the OI impact for the year fairly neutral, but they both do help boost the the gross profit rate more towards the back half of the year.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

And we haven't sized them, but they are they are helping to, you know, to to drive a a offset some of the pressures that that always exist as we as we move through the year.

[Lauren Ng, Analyst at Morgan Stanley]

Great. Thank you.

[Corie Barry, CEO at Best Buy]

Thank you.

[Operator]

Your next question comes from Peter Keith with Piper Sandler. Your line is open.

[Peter Keith, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Thanks. Good morning. Appreciate all the detail. Maybe to follow-up on the marketplace. Are you still on track for a mid year launch?

[Peter Keith, Managing Director & Senior Research Analyst at Piper Sandler Companies]

And then on the cannibalization angle, is there any negative impact, on comp this year that that would be factored into the outlook?

[Corie Barry, CEO at Best Buy]

Yeah. We still are on pace for a midyear launch. And I think we were pretty explicit when we talked about it that even after the investments that we're making and the cannibalization, we still saw this as accretive overall both at a gross profit level and at an operating income level. So I think the team is and we have some knowledge from Canada, so we have some pretty good background knowledge on how to estimate that, and, the team has tried to take that into account.

[Peter Keith, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Okay. Fair enough. And and, Corey, certainly, the the switch to coming, should be a nice benefit. Just to the best of your visibility right now, are are there other products or innovation launches that are coming in the upcoming months that you've got your eye on that are that you're excited about?

[Jason Bonfig, Senior Executive VP of Customer Offerings & Fulfillment at Best Buy]

Yes. Thanks for the question. I'll take that one. I think there's a lot of areas that we're excited about in total. You hit on one in the Switch and the excitement around gaming, and that the preorder sold out very quickly, we're very excited about the midnight openings.

[Jason Bonfig, Senior Executive VP of Customer Offerings & Fulfillment at Best Buy]

But there's there's other innovation that happens in a lot of other categories. Computing, in particular, continues to be a category where we see growth and a lot of integrate innovation and upgrade continuing. The AI benefits and features that continue to roll out are something we're excited about. Just the sheer amount of customers that upgraded early in the pandemic. Now have an opportunity to come back into the market and actually get, you know, some great new products across, you know, Windows 11 and, obviously, the benefit associated with Windows 10 not being supported as we move past October, as well as Mac customers.

[Jason Bonfig, Senior Executive VP of Customer Offerings & Fulfillment at Best Buy]

There's millions of Mac customers that are still on older technology and haven't upgraded to the M chip yet and all the benefits associated with that product as they continue to refresh and upgrade those models as well. In addition to that, once you look across other categories, TVs, there's additional technology in, mini LED, anti glare screens, things that are really going to show interest and really solve true pain points for customers. And then Corey hit on it, but we're very excited about what we're seeing in the mixed and AR space. It is a a growing category for us. It's an area where there's a tremendous amount of interest from customers and just new value propositions, new new features and benefits, and people starting to get used to, you know, wearables that actually can do a lot of things in regards to AI, making your life easier, and actually having some entertainment value as well.

[Corie Barry, CEO at Best Buy]

Couple more things I would just add. Lastly, on the handheld gaming space, where I think you're gonna see a lot of innovations, which kind of launching that, but we we kinda see a a few more things coming in the back half of the year. And also in the computing gaming space, computing isn't just about the productivity side. Certainly, kids like mine, you know, the high end gaming computers are are really we're seeing a lot of success in that space. That includes the monitors that go with that that are continuing to innovate.

[Corie Barry, CEO at Best Buy]

So I think we continue to remain pretty excited about that space as well.

[Peter Keith, Managing Director & Senior Research Analyst at Piper Sandler Companies]

Great. Thank you very much.

[Operator]

Your next question comes from Steven Zaccone with Citi. Your line is open.

[Steven Zaccone, Director, Equity Research, Hardlines Retail at Citi]

Great. Good morning. Thanks very much for taking my question. I wanted to focus on the updated comp guidance. Tariffs are obviously creating complex environment.

[Steven Zaccone, Director, Equity Research, Hardlines Retail at Citi]

But as you look over the course of the year, you are facing some tougher comparisons because the computing business started to see improvement last year. Can you just help us understand the drivers to kind of comp the comp in the back half of the year? Given your commentary about pricing happening in mid May, is there also an expectation that maybe pricing is a little bit more of a helper to comps as we think over the course of the year?

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Yeah. Thanks for the question, Steve. We we outlined, many of these at at the beginning of the year as well and and and and reiterate some of those here today. I think one of the the the things yes. Comp computing gets a little tougher as the as the as the year progresses.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

But the items that Jason just mentioned, if you think about the opportunity as Windows 10 becomes unsupported in October, you think about also the need to upgrade millions of Macs out there as well, for the new to leverage the new AI technology. There is a we believe a very strong continued opportunity in the computing space, not to mention what Corey also mentioned, computing gaming desktops has actually wasn't quite as strong last year as it's starting this year, and we believe will continue as well. Mobile phones is is positively comped, which hasn't happened for a while, and we expect the experience changes working with our vendors and and and expertise with that within that category to continue to to help grow and boost sales as the year progresses. And then gaming, maybe not getting to full growth this year, the the the pressure that we've seen will be lessened as you as you progress into q two with the Switch launch and as you get closer into holidays with continued possible growth and and and or less less declines in that category as well. And then a lot of the store experience changes that we that we are rolling out this year, Meta Glasses being one of them, different types of vendor product highlights within our store.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

All those things build towards, we believe, a growing, comp situation as we progress through the year and that support, you know, the high end of the guide. The learn the guide, obviously, it it could suggest that we don't see much of a difference in the back half of the year than we've seen in q one and q two. Obviously, we're planning for a range of outcomes. Hard to know exactly if ASPs are a help given given the tariff situation. We'll know more, as as the year progresses, but that obviously is a possibility in some cases if the elasticities are lower.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

We just have to see that transpire a little bit more before that we would note that any certainty.

[Steven Zaccone, Director, Equity Research, Hardlines Retail at Citi]

Okay. Thanks for that detail. And then to follow-up, it's a bit of a near term question, but since you've adjusted pricing and you've had a kind of this commentary in mid May, have you seen any changes in consumer behavior or maybe from a you know, competitive environment, have you seen any changes from some of your competition on pricing and promotions?

[Corie Barry, CEO at Best Buy]

Not really. Memorial Day was competitive. It's always competitive. And we've said right now you've got a value seeking consumer, which means I think in those key drive times, we're definitely seeing even more competitive stance both, I would argue, from us and from the competition. The last thing that I would add to build on what Matt had said, I mean, we started talking about unit growth in notebook in q four of fiscal twenty four.

[Corie Barry, CEO at Best Buy]

And we're still seeing nice growth in that space. Even in q one, we talked about 6% growth in the notebooks and tablets area. So I think not only are we looking at, to your point, just this very near term, customers seem like they continue to behave the way we would expect. But also just generally on the comp to comp question, we're continuing to see this demand curve around particularly some of the computing and tablets and mobile spaces. And you're just heading into a win 10 upgrade and some more material advancements, I think, in terms of AI use cases.

[Corie Barry, CEO at Best Buy]

So the indicators, at least, feel like and the guide would imply, we kinda feel like we're seeing some consistent behaviors from the consumer.

[Steven Zaccone, Director, Equity Research, Hardlines Retail at Citi]

Okay. Thanks for the detail.

[Operator]

The next question comes from Brian Nagel with Oppenheimer. Your line is open.

[Brian Nagel, MD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.]

Hi, good morning. Thanks for taking my questions. So I actually wanted tariffs, and I appreciate all the detail you've given. In recognizing, look, it's very fluid and what's happening against probably a very sluggish consumer backdrop. But as the tariff rates continue to sort of unfold, I mean, philosophically, is Best Buy more focused on sales or or really maintaining that that gross margin rate and potentially sacrificing sales?

[Corie Barry, CEO at Best Buy]

Yeah. I'm just kidding. I mean, I think, like, always the balance the balance, Brian, for any retailer, certainly for us, is navigating this environment in a way that stimulates consumer demand. Both us and our vendor partners have massive vested interest in ensuring as many customers get as much gear as possible at the best prices. And then, of course, we're like we always do, we're gonna continue to work both internally here and closely with our vendor partners to optimize both pricing and promotionality both during those key drive times and always.

[Corie Barry, CEO at Best Buy]

So I think that I and I think you saw some of it in q one. Like, we we are constantly working to try to balance those two factors. But I don't think at any given point in time, you know, there there's never a clear I always tease my team. There is no or answer. There is always an and answer. And this is definitely one of those places.

[Brian Nagel, MD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.]

No. I got it. That's fair. And then my second question, you you've done a great job of, you know, even with sales week, you know, maintaining or improving the same improving operating margin. So the question there is, I is it you can you maybe describe better, you know, where where where you're seeing the efficiencies?

[Brian Nagel, MD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.]

And then, you know, looking out over any length of time and to the extent that sales re strengthen, will these efficiencies hold or will there be expenses that'll have to come back into the model?

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Yeah. I mean, we we safe to say we're always looking for efficiencies, even in a normal year, which there hasn't been really normal year for a while, but we're always looking for ways to to improve our costs. I think, we've we've outlined a few of those things. We've really revolutionized our customer care operations in terms of using our data to to make that process easier through conversational AI and upgrading our IVR systems. Corey talked about the procurement operation, gives us a lot more visibility to the goods not for sale spend, and that will continue to pay off as we this year and into the years to come.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Supply chain operations has done a lot of things to to to to improve and and drive efficiencies. We talked a little bit about the rule based shipping process and data driven solutions that we're we're employing there. There's also a lot of large product transformation, meaning where are we storing the product, how are we flowing the product, and through adjusting those things you can find continued opportunities. We've even used automated vehicles, in some of our places to invest in leading technology to actually drive cost out as well. So, there there always will be continued opportunities for us to look for look for cost to help make sure we can invest in the right places and and offset any pressures that inevitably come to in any given year.

[Brian Nagel, MD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.]

Got it. I appreciate it. Thank you.

[Operator]

Thank you. Your next question comes from Jonathan Matuszewski with Jefferies. Your line is open.

[Jonathan Matuszewski, Senior Vice President at Jefferies]

Great. Thanks so much. My first question is on pricing. I imagine the approach varies across different SKUs and categories. Is there a way to think about the overall blended price hike that's embedded in the current comp guidance, whether it's mid single digit, higher, lower? Thanks.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

Yeah. We're we're probably obviously is we're not gonna give a specific number there too. We'll we'll continue to learn as as as the year progresses. It's safe to say we obviously ultimately set our pricing.

[Matt Bilunas, CFO & Senior EVP of Enterprise Strategy at Best Buy]

As a reminder, we only bring in 2% to 3% of the goods for sale for our COGS. I want us to make the point that only a portion of it and we talked about here today of the tariff rate increases that that blends out to something lower, only come through in the form of cost increases. And and if it we get to the point where we do raise prices, they they are not that same effective tariff rate, generally speaking. So, we we are providing that providing the information, but, do feel comfortable that at the end of the day, we are always going to be competitively priced regardless of the cost, and we'll find ways to help offset that, through through through, through other means.

[Corie Barry, CEO at Best Buy]

Jonathan, I would just add that this is such an incredibly fluid situation that also us trying to snap the line at any given point in time is almost impossible because all those mitigation efforts that I outlined, those are going on day in and day out by the teams as we make those trade off decisions. So it is not a static number. It is one that we are constantly working.

[Jonathan Matuszewski, Senior Vice President at Jefferies]

Understood. And my follow-up is on Best Buy Health. It sounds like you continue to pursue action aimed at improving the profitability of that business. You know, as you've taken a closer look at it, how do you think about its role in the enterprise versus other alternatives?

[Corie Barry, CEO at Best Buy]

Yeah. I mean, the let's step a second back to the strategy of the health business is enabling care at home for everyone, and that fundamental belief system for us remains. And if you think about the the business that we have called active aging or our lively business or even just some of the care at home business, these remain very viable business models for the future. Now the part that has been harder and taken longer to develop than we initially thought is some of the very discreet in home, health that we are providing in partnership with some of the health care industry. And that's really been made more complex twofold.

[Corie Barry, CEO at Best Buy]

One, by the adoption of hospital at home solutions at scale just being slower because partially the health at home waiver has been caught up in a lot of the administration's budgeting conversations, and it's been inconsistent in terms of how long that waiver will be in place. And two, some of the health care providers have just faced their own financial struggles over the past few years. And so we've been working to optimize that part of the health care business at that buy, but the remaining parts remain very viable. And I think all of us would agree, we absolutely see a future where more of your health care is taken into your own hands using technology and technology devices. You can already see it across our assortment and across how people are choosing to take care of their own health, and we will continue to lean into that part of the strategy.

[Corie Barry, CEO at Best Buy]

And I think with that, we have reached time, and that's the last question today. Thank you everyone for joining us, and we look forward to sharing our q two results in August. Have a great summer.

[Operator]

This concludes today's conference call. Thank you for joining. You may now disconnect.

Participants

Executives

• Mollie O'Brien, Vice President, Investor Relations
• Corie Barry, CEO
• Matt Bilunas, CFO & Senior EVP of Enterprise Strategy
• Jason Bonfig, Senior Executive VP of Customer Offerings & Fulfillment

Analysts

• Scot Ciccarelli, MD & Senior Research Analyst at Truist Securities
• Michael Baker, Managing Director, Senior Research Analyst at D.A. Davidson
• Greg Melich, Analyst at Evercore
• Lauren Ng, Analyst at Morgan Stanley
• Peter Keith, Managing Director & Senior Research Analyst at Piper Sandler Companies
• Steven Zaccone, Director, Equity Research, Hardlines Retail at Citi
• Brian Nagel, MD & Senior Analyst - Consumer Growth & eCommerce at Oppenheimer & Co. Inc.
• Jonathan Matuszewski, Senior Vice President at Jefferies