Q4 2024 Best Buy Co Inc Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. Welcome to Best Buy's 4th Quarter School 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Ladies and gentlemen, thank you for standing by welcome to Best Buy's fourth quarter, Let's call. It 2024 earnings conference call. At this time all participants are in listen only mode. Later, we will conduct a question and answer session.

Operator: Later, we will conduct a question-and-answer session. At this time, if you have a question, you will need to press star 1 on your phone. If you choose to be taken out of the question queue, please press star one again. As a reminder, this call is being recorded for playback and will be available at approximately 1 p.m. Eastern Time today. If you need assistance on the call at any time, please press star zero, and an operator will assist you.

I mean, if you have a question you will need to press star one on your phone.

If you take it out of the question queue. Please press star one again.

This call is being recorded for playback and will be available.

One P M eastern time today.

If you need assistance on the call it high <unk>.

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Molly O'Brien: I will now turn the conference call over to Molly O'Brien, Vice President of Investor Relations. Thank you, and good morning, everyone. Joining me on the call today are Corie Barry, our CEO, and Matt Bilunas, our CFO. During the call today, we will be discussing both GAAP and non-GAAP financial measures. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, and an explanation of why these non-GAAP financial measures are useful, can be found in this morning's earnings release, which is available on our website, InvestorsBoughtBestBuy.com. Additionally, some of the statements we will make today are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995.

I will now turn the conference call over to Mollie O'brien, Vice President of Investor Relations.

Mollie O'brien: Thank you and good morning, everyone. Joining me on the call today are Corie, Barry our CEO and Matt Balloonist, our CFO.

Mollie O'brien: During the call today, we will be discussing both GAAP and non-GAAP financial measures.

Mollie O'brien: A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Mollie O'brien: 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 dot com.

Mollie O'brien: 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.

Molly O'Brien: 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 10-K 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.

Mollie O'brien: From such forward looking statements.

Mollie O'brien: Please refer to the company's current or it seems release and our most recent 10-K and subsequent 10-Qs for more information.

Mollie O'brien: These risks and uncertainties.

Mollie O'brien: 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.

Mollie O'brien: I will now turn the call over to Corey.

Corie Sue Barry: Good morning, everyone, and thank you for joining us. I'm proud of the performance of our teams across the company as they showed resourcefulness, passion, and unwavering focus on our customers this past fiscal year. Throughout fiscal 24, we demonstrated strong operational. As we navigated a pressured CE sales environment, this allowed us to deliver annual profitability at the high end of our original guidance, even though sales came in below our original guidance. Importantly, we grew our paid membership base and drove customer experience improvements in many areas of our business, particularly in services and delivery. For Q4 specifically, we are reporting profitability at the high end of our expectations with revenue near the middle of our guidance. However, our comparable sales declined 4.8% in the quarter. At the same time, we expanded our gross profit rate by 50 basis points from last year due to profitability improvements in our membership program, as well as Best Buy Health. Excluding the impact of the extra week, we lowered our SG&A expense compared to last year as we tightly controlled expenses and adjusted our labor expense rate with sales fluctuations.

Corey: Good morning, everyone and thank you for joining us I'm proud of the performance of our teams across the company as they showed resourcefulness passion and unwavering focus on our customers. This past year throughout fiscal 'twenty four we demonstrated strong operational execution as we navigated a pressured CE sales environment. This allowed us.

Corey: To deliver annual profitability at the high end of our original guidance range, even though sales came in below our original guidance range. Importantly, we grew our paid membership base and drove customer experience improvements in many areas of our business, particularly in services and delivery.

For Q4, specifically, we are reporting profitability at the high end of our expectations with revenue near the middle of our guidance range, our comparable sales declined four 8% in the quarter at the same time, we expanded our gross profit rate 50 basis points from last year due to profitability improvements in our membership program as well as best.

Corey: My health excluding.

Corey: Excluding the impact of the extra week, we lowered our SG&A expense compared to last year as we tightly controlled expenses and adjusted our labor expense rate with sales fluctuations.

Corie Sue Barry: As expected, customers were very deal focused through the holiday season, and the promotional environment overall was in line with our expectations. However, while shopping patterns more closely resembled historical holiday periods, and Black Friday and Cyber Week performances were in line with our expectations, the sales lull in December was even steeper than we had modeled. Then, customer demand strengthened considerably and was higher than we expected during the four days before Christmas. Our Q4 digital sales mix was flat to last year at 38% of total domestic. Customer in-store pickup of online orders was also consistent at 44%. We improved our delivery speeds, expanding the percent of ship-to-home online orders delivered in two days. We have been very focused on getting our app in the hands of customers, and I'm pleased to say that on Black Friday, it ranked number three across shopping apps and number four across all apps on Apple's App Store.

Corey: As expected customers were very deal focus through the holiday season, and the promotional environment overall was in line with our expectations.

Corey: While shopping patterns more closely resembled historical holiday periods, and Black Friday, and cyber week performances were in line with our expectations. The sales lull in December was even steeper than we had modeled.

Corey: Then customer demand strengthened considerably and it was higher than we expected during the four days before Christmas.

Corey: Q4 digital sales mix was flat to last year at 38% of total domestic sales.

Corey: Customer in store pickup of online orders was also consistent at 44%, we improved our delivery speeds expanding the percent of ship to home online orders delivered in two days.

Corey: We have been very focused on getting our app in the hands of customers and I'm pleased to say that on Black Friday. It ranked number three of cross shopping apps and number four across all apps on Apple's App store.

Corie Sue Barry: We ended the quarter and year with 7 million members across our two tiered My Best Buy paid memberships. Paid members consistently showed higher levels of interaction with comparatively higher levels of spend at Best Buy and a shift of spend away from competitors. From a financial perspective, membership delivered another quarter of higher-than-expected operating income rate contracts. When you include the changes we made to the free tier and the impact of the mid-year changes we made to the paid program benefits, our membership program contributed approximately 45 basis points of enterprise year over year operating income rate expansion for the full year. And our Best Buy Health business achieved its operating income contribution target of 10 basis points for the year. In addition, we announced strategic partnerships with Advocate Health, Geisinger Health, and Mass General Brigham, and our Care at Home platform is now being used in eight of the top 20 health systems in the U.S. Now, I would like to look forward to fiscal 25. We expect this to be a year of increasing industry stabilization. Our strategy is to focus on sharpening our customer experiences and industry positioning while maintaining, if not expanding, our operating income rate on a 52-week basis. Therefore, our fiscal 25 priorities are as follows.

Corey: We ended the quarter and year with 7 million members across our two tiered my best buy paid membership.

Corey: Paid members consistently showed higher levels of interaction with comparatively higher levels of spend at bestbuy and a shift of spend away from competitors.

From a financial perspective membership delivered another quarter of higher than expected operating income rate contribution when.

Corey: When you include the changes we made to the free tier and the impact of the midyear changes we made to the paid program benefits. Our membership program contributed approximately 45 basis points of enterprise year over year operating income rate expansion for the full year.

Corey: I know best buy health business achieved its operating income contribution target of 10 basis points for the year.

Corey: In addition, we announced strategic partnerships with advocate health Geisinger health and mass general Brigham and our care at home platform is now being used in eight of the top 20 health systems in the U S.

Corey: Now I would like to look forward to fiscal 'twenty five.

We expect this to be a year of increasing industry stabilization. Our strategy is to focus on sharpening our customer experiences and industry positioning while maintaining if not expanding our operating income rate on a 52 week basis.

Corey: Therefore, our fiscal 'twenty five priorities are as follows.

Corie Sue Barry: One, invigorate and progress targeted customer experiences to drive operational effectiveness and efficiency. Three, continue our disciplined approach to capital allocation. And four, explore, pilot, and drive incremental revenue. There's a lot to unpack.

Corey: One invigorate and progressed targeted customer experiences.

Corey: To drive operational effectiveness and efficiency three.

Three continue our disciplined approach to capital allocation.

Corey: Poor explore pilot and drive incremental revenue streams.

There's a lot to unpack.

Corie Sue Barry: I'll start with a discussion about the macro environment, the CE industry, and our sales. At the highest level, there have been and continue to be macro pressures impacting retail overall and CE more specifically. First, inflation has been slowing, but prices for the basics, like food and lodging, are still much higher, and consumers have to prioritize and make trade-offs. Second, there is a consumer propensity to spend on services like concerts and vacations in lieu of goods, which has remained sticky, even as the prices there, too, have improved. Third, we have a relatively stagnant housing market.

Corey: I'll start with a discussion about the macro environment, the CE industry and our sales expectations.

Corey: At the highest level there have been and continue to be macro pressures impacting retail overall and see more specifically first inflation has been slowing but prices for the basics like food and lodging are still much higher and consumers have to prioritize and make tradeoffs spend decisions second there is a consumer propensity to spend on services.

Corey: Concerts indications in lieu of goods, which has remained sticky even though the prices there to have in place.

Corey: Third we have a relatively stagnant housing market.

Corie Sue Barry: Fourth, CE was a significant recipient of a pull-forward of demand during the first two years of the pandemic. However, when consumers need to prioritize the basics, that usually does not include the product purchases they recently pulled forward. And lastly, the level of CE product innovation has been lowered during the pandemic and supply chain challenge. It's not so much about each of these individually, but when you stack the five, it has been a heavy weight on the industry. On the positive side, experience tells us that these are all cyclical and transient in nature.

Corey: Fourth C was a significant recipient of a pull forward of demand during the first two years of the pandemic when consumers need to prioritize the basics that usually does not include the product purchases. They recently pulled forward and lastly, the level of CE product innovation has been lowered during the pandemic and supply chain challenged years.

Corey: It's not so much about each of these individually, but when you stack. The five it has been a heavy weight on the industry on the positive side experience tells us that these are all cyclical in transient in nature and while they are ebbing and flowing we are optimistic that several indicators will continue to show favorability. This year. These include decreasing inflation, leading to the lowering of interest.

Corie Sue Barry: And while they are ebbing and flowing, we are optimistic that several indicators will continue to show favorability this year. These include decreasing inflation leading to the lowering of interest rates, continued low unemployment, encouraging trends in consumer confidence, and the beginnings of a housing market boom. Thanks for watching. We remain confident that our industry will grow again after two years of decline. It's simply a matter of the timing.

Corey: Rates continued low unemployment encouraging trends in consumer confidence and the beginnings of a housing market rebound.

Corey: We remain confident that our industry will grow again after two years of declines there is simply a matter of the timing our underlying thesis is consistent.

Corie Sue Barry: Our underlying thesis is consistent. First, we believe that much of the growth during the pandemic was incremental, creating a larger installed base of technology products and consumers' homes. Second, we expect to see the benefit of the natural upgrade and replacement cycles for the tech bot early in the pandemic kick in this year and into the next few. Third, we are returning to a more normalized pace of meaningful innovation after a pause during the pandemic. Taking all these factors and considerations into account, we expect fiscal 25 comparable sales to be flat to last year on the high end of our guidance range, down in the first half and up in the second half of the year. The low end of our annual comp sales range is a decline of 3%, reflecting a scenario where the mix of the factors I just discussed results in lower customer demand.

Corey: First we believe that much of the growth during the pandemic was incremental creating a larger installed base of technology products in consumers' homes.

Corey: We expect to see the benefit of the natural upgrade and replacement cycles for the tech part early in the pandemic kick in this year and into the next few years.

Corey: Third we are returning to a more normalized pace of meaningful innovation after a pause during the pandemic.

Corey: Taking all these factors and considerations into account, we expect fiscal 'twenty five comparable sales to be flat to last year on the high end of our guidance range down in the first half and up in the second half of the year. The low end of our annual comp sales range is a decline of 3%, reflecting a scenario where the mix of the factors I just discussed resulted in lower customer.

Yeah.

Corie Sue Barry: From a category standpoint, we expect sales in our computing category to improve through the year and show growth for the full year as early replacement and upgrade cycles gain momentum, and new products featuring even more AI capabilities are released as we move through the year. We are already beginning to see the improvement as year over year comparable sales for laptops turned slightly positive in the fourth quarter and are trending positively so far this quarter. At this point in time, we expect revenue for the rest of our product categories to stabilize through the year and be flattish to slightly down for the full year, partially offset by the continued growth of our services revenue. Even though overall we are expecting flattish sales growth for the full year, there are many examples of innovation both already introduced and expected through the year that we believe will drive growth, including the Samsung AI-enabled phone. We are already seeing materially more demand than we expected, new emerging content for VR and AR devices, Ray-Ban smart glasses, Bose OpenEar headphones, EV universal charging devices, and a proliferation of 98-inch screen TV Also, the level of exciting and cool new tech at the Consumer Electronics Show in January felt. Of course, some of that cool new tech hits the market over the following year, while some of it is still a few years from consumer loss.

Corey: From a category standpoint, we expect sales in our computing category to improve through the year and show growth for the full year as early replacement and upgrade cycles gained momentum and new products featuring even more AI capabilities are released as we move through the year.

Corey: We are already beginning to see the improvement as year over year comparable sales for laptops turned slightly positive in the fourth quarter and are trending positively so far this quarter.

Corey: At this point in time, we expect revenue for the rest of our product categories to stabilize through the year and be flattish to slightly down for the full year, partially offset by the continued growth of our services revenue.

Corey: Even though overall, we are expecting flattish sales growth for the full year. There are many examples of innovation both already introduced unexpected through the year that we believe will drive interest, including the Samsung AI enabled phone we are already seeing materially more demand than we had expected new emerging content for VR a our devices.

<unk> Smart glasses Bose open your headphones EV universal charging devices and a proliferation of 98 inch screen Tvs to name a few also the level of exciting and cool new tech at the consumer Electronics show in January felt back to normal of course, some of that cool new tech hits the market over the following year, while some of it is still a few.

Corey: Years from consumer launch.

Corie Sue Barry: Now I would like to provide more details on some of the key initiatives within each of our fiscal 25 priorities to capitalize on that industry stability. As I mentioned, our first priority is to invigorate and progress the targeted customer experience. Our first initiative is to materially elevate personalization. We are focused on providing increasingly personalized, highly relevant, and motivational content for our known identified customers. We can attribute roughly 90% of our annual revenue to known customers. Let's start with our efforts around our paid membership. Here, we're creating seamless, tailored experiences for our members based on their unique preferences or content. Our At First Member Deals experience is a great example of this.

Corey: Now I would like to provide more details on some of the key initiatives within each of our fiscal 'twenty five priorities to capitalize on that industry stability.

Corey: As I mentioned, our first priority is to invigorate and progressed targeted customer experiences.

Our first initiative is to materially elevate personalization, we are focused on providing increasingly personalized highly relevant and motivational content for our known identified customers. We can attribute roughly 90% of our annual revenue to known customers.

Corey: Let's start with our efforts around our paid membership program.

Corey: Here, we're creating seamless tailored experiences for our members based on their unique preferences or context. Our App first member deals experience is a great example of us rather than bombarding our members with thousands of great member deals we focus on the experience on the most relevant offers based on their preferences and observed member data.

Corie Sue Barry: Rather than bombarding our members with thousands of great member deals, we focus on the experience on the most relevant offers based on their preferences and observed member data. Additionally, we're adding personalization across the membership journey, including in store at POS, where later this year, we will include prompts to provide both sales associates and customers with relevant contextual information about their membership, like their savings, rewards, protection plans, and also We will also include personalized dynamic messaging in our communications to members about their upcoming program. These efforts and more will serve to increase membership engagement and continue to improve retention as we think about our broader known customers. We are fortunate to have a tremendous amount of first-party customer data for our advanced analytics capabilities to leverage. While we are enhancing personalization across our customer interactions, I'm particularly excited about the work we are doing with our app. We are currently testing a personalized version of the app homepage, with the stories and actions that matter most to customers, along with critical content, and plan to launch it to all customers during the second quarter.

Corey: Additionally, we're adding personalization across the membership journey, including in store at POS were later this year will include props to provide both sales associates and customers with relevant contextual information about their membership like their savings rewards protection plans and offers we will also include personalized dynamic messaging and.

Corey: Our communications to members about their upcoming program renewals.

Corey: These efforts and more will serve to increase membership engagement and continue to improve retention.

Corey: As we think about our broader known customer base. We are fortunate to have a tremendous amount of first party customer data for our advanced analytics capabilities to leverage while we are elevating personalization across our customer interactions I'm, particularly excited about the work we are doing with our app.

Corey: We are currently testing a personalization centric version of the App homepage with the stories and actions that matter most to customers along with critical content and plan to launch to all customers during the second quarter.

Corie Sue Barry: The second initiative is to invest back into our store experience. Our stores are crucial assets that provide customers with differentiated experiences, services, and convenient multichannel fulfillment. Customer shopping behavior has evolved in the last four years.

Corey: The second initiative is to invest back into our store experience. Our stores are crucial assets that provide customers with differentiated experiences services and convenient multichannel fulfillment.

Corey: Customer shopping behavior has evolved in the last four years and this year, we are particularly focused on ensuring we provide the experience that customers expect to have when they take the time to come into our stores as a result, our capital investments for fiscal 'twenty five are concentrated more on existing store updates and refreshes and less on major remodels our store openings.

Corie Sue Barry: And this year, we are particularly focused on ensuring we provide the experience that customers expect to have when they take the time to come into our stores. As a result, our capital investments for fiscal 25 are concentrated more on existing store updates and refreshes and less on major remodels or store openings. We plan to touch every single store in the chain in some fashion, improving both our merchandising and ease of shopping for customers. This includes improving and livening the merchandising presentation given the shift to digital shopping and the corresponding lower need to hold as much inventory on the sales floor. It also includes right-sizing a number of categories to ensure we're leveraging the space in the center of our stores in the most exciting, relevant, and efficient way possible. For example, we will be removing physical media and updating our mobile, digital imaging, computing, tablets, and smart home.

Corey: We plan to touch every single store in the chain in some fashion, improving both our merchandising and ease of shopping for customers.

Corey: This includes improving enlivening, the merchandising presentation, given the shift to digital shopping and corresponding lower need to hold as much inventory on the sales floor. It also includes right sizing a number of categories to ensure we're leveraging the space in the center of our stores in the most exciting relevant and efficient way possible. For example, we will be removing physical media.

Corey: In updating our mobile digital imaging computing tablets, and smart home departments.

Corie Sue Barry: We are also excited to partner even more with our vendors this year as it relates to their branded in-store merchandise experience. The coming innovation, combined with our plan to refresh every store in our fleet, provides much more opportunity for vendor investments in our stores. A few examples I can share at this time include Tesla, Lovesac, and Starlet.

Corey: We are also excited to partner, even more with our vendors this year as it relates to their branded in store merchandise experiences, becoming innovation combined with our plan to refresh every store in our fleet provides much more opportunity for vendor investments in our stores. A few examples I can share at this time include Tesla love sack and startling.

Corie Sue Barry: Although we still see opportunities for additional large experience store remodels, we believe we have a better opportunity to improve existing store experiences at scale in fiscal 25. At the same time, we are planning to open a few additional outlet centers and new formats to continue to test two important concepts. First, we will open small locations in a couple out-of-state markets where we have no prior physical presence and our omni-channel sales penetration is low to measure our ability to capture untapped share. Second, we will test our ability to close a large format store and open a small format store nearby, thereby maximizing physical store retention through convenience. These learnings will collectively continue to help us refine our forward-looking store strategy. In addition to a great physical experience, we want to ensure our customers receive the expert service interactions they want and Best Buy is known for when they come to our stores.

Corey: Although we still see opportunities for additional large experienced store remodels. We believe we have a better opportunity to improve existing store experiences at scale in fiscal 'twenty five.

Corey: At the same time, we are planning to open a few additional outlet centers and new formats to continue to test two important concepts first we will open small locations and a couple out state markets, where we have no prior physical presence and our omnichannel sales penetration is low to measure our ability to capture untapped sure Seth.

Corey: We will test our ability to close a large format store and opened a small format store nearby, thereby maximizing physical store retention through convenience.

Corey: These learnings will collectively continue to help us refine our forward looking store strategy.

Corey: In addition to a great physical experience, we want to ensure our customers receive the expert service interactions they want and best buy is known for when they come to our stores during fiscal 'twenty five we will continue to leverage our multi skilled store associates at <unk>.

Corie Sue Barry: During fiscal 25, we will continue to leverage our multi-skilled store associates. But in hundreds of stores, we will also add back fully dedicated to expert categories like major appliances, home theater, and. Our plan is to deploy some of our most skilled sellers against these categories and double down on category-specific training and certifications for these employees. We know that our selling certifications create a better experience for our customers, as our certified employees, on average, drive nearly 15% higher revenue per transaction and garner higher net promoter scores than a non-certified employee.

Corey: <unk> of stores, we will also add back fully dedicated expertise in key categories like major appliances home theater and computing.

Corey: Our plan is to deploy some of our most skilled sellers against these categories and double down on category specific training and certifications for these employees, we know that our selling certifications create a better experience for our customers as our certified employees on average drive nearly 15% higher revenue per transaction and garner.

Corey: Higher net promoter scores that are non certified employee.

Corie Sue Barry: In fact, the third initiative under our Drive Targeted Customer Experiences priority is to make sure we are prepared to bring emerging innovation to life for customers in ways no one else can. This means we need to be ready to leverage the unique strengths that make us the best place for customers to see new tech and the best partner for vendors to launch new. This includes everything from expertly trained associates who can explain the new technology and what it can do for you, the best merchandising presentation both in-store and online, all the way to great trade-in values for customers who use technology. This will be particularly important later this year when more computing products featuring AI are expected.

Corey: In fact, the third initiative under our drive targeted customer experiences priority is to make sure. We are prepared to bring coming innovation to life for customers in ways No one else can.

This means we need to be ready to leverage the unique strengths that make us the best place for customers to see new Tech and the best partner for vendors to launch New Tech. This includes everything from expertly trained associates, who can explain the new technology and what it can do for you the best merchandising presentation, both in store and online all the way to great trade in values for customers.

Corey: This technology this will be particularly important later this year with more computing products featuring AI are expected to watch as a reminder, we hold one third of the retail market share in both the U S computing and television industry's roughly 20% in gaming and well over 10% share in other categories like major appliances, we intend to strengthen our position in this.

Corie Sue Barry: As a reminder, we hold one-third of the retail market share in both the US computing and television industries, roughly 20% in gaming, and well over 10% in other categories like major appliances. We intend to strengthen our position in these key categories through the initiatives I just outlined, as well as targeted marketing spend and sharp prices. Our second key priority for the year is to drive operational effectiveness and efficiency. We have a long-standing commitment to identifying cost reductions and driving them to help offset inflationary pressures in our business and fund investment capacity for new and existing initiatives. Our fiscal 25 initiatives are focused on driving further efficiencies across forward and reverse supply chains, our geek squad repair operations, and our customer care experience. We will continue to lean heavily on analytics and technology to achieve these efficiencies, and this includes leveraging AI safely and effectively. Let me provide a few specific examples of how we are leveraging AI. One, we're using AI to route our in-home delivery and installation trucks to drive more efficient scheduling and a better customer experience.

Corey: Key categories through the initiatives I, just outlined as well as pointed marketing spend and sharp pricing.

Corey: Our second key priority for the year is to drive operational effectiveness and efficiency, we have a longstanding commitment to identifying cost reductions and driving efficiencies to help offset inflationary pressures in our business and fund investment capacity for new and existing initiatives.

Corey: Our fiscal 'twenty five initiatives are focused on driving further efficiencies across forward and reverse supply chain, our geek squad repair operations and our customer care experience.

Corey: We will continue to lean heavily on analytics and technology to achieve these efficiencies. This includes leveraging AI safely and effectively let me provide a few specific examples of how we are leveraging it.

Corey: One we're using AI to route our in home delivery and installation and trucks to drive more efficient scheduling and a better customer experience.

Two we are leveraging AI to summarize the main points in follow ups from each of our customer service calls. It also improves the accuracy of the interaction and data collection, while reducing average engagement time by almost 5%.

Corie Sue Barry: To address this need, we're leveraging AI to summarize the main points and follow-ups from each of our customer service calls. It also improves the accuracy of the interaction and data, while reducing average engagement time by almost 5%. To help us enhance our overall tech development effectiveness, we are leveraging Gen AI code generation and shared resources for our engineers. We are also establishing a digital and technology hub in Bangalore, India, which will give us expanded, more economical access to talent and skills. The hub will open and begin the process of onboarding team members later this year.

Corey: To help us enhance our overall tech development effectiveness, we are leveraging gen AI cogeneration and shared resources for our engineers. We're also establishing a digital and technology hub in Bangalore, India, which will give us expanded more economical access to talent and skills. The hub will open and began the process of Onboarding team members later this year.

Corey: In addition in fiscal 'twenty five we are taking actions to one ensure our resources are directed at the right strategic areas and two to rightsize our model based on current operations.

Corie Sue Barry: In addition, in fiscal 25, we are taking actions to one, ensure our resources are directed at the right strategic areas, and two, to right-size our model based on current operations. These actions will allow us to do the following. Balance field labor resources to make sure we are providing the optimal experience for customers where they want to shop; redirect corporate resources to make sure we have the necessary assets dedicated to areas like AI and other elements of our strategy, and right-size parts of the business where we expect to see lower volume than we envisioned a few years ago, whether that is the result of lower industry sales or due to decisions we made like evolving our paid membership benefits. While we made these decisions during the fourth quarter, which resulted in a restructuring charge that Matt will discuss later, many of the actions will be implemented through the first half of fiscal 25, and we will provide more details as we move through the year. Our third key priority for the year is to continue our disciplined approach to capital allocation.

Corey: These actions will allow us to do the following.

Corey: <unk> field labor resources to make sure we are providing the optimal experience for customers, where they want to shop.

Corey: Direct corporate resources to make sure we have the necessary assets dedicated to areas like AI and other elements of our strategy.

Corey: And right sized parts of the business, where we expect to see lower volume than we envisioned a few years ago, whether that is the result of lower industry sales are due to decisions, we made like evolving our paid membership benefits.

Corey: While we made these decisions during the fourth quarter, which resulted in a restructuring charge that Matt will discuss later many of the actions will be implemented through the first half of fiscal 'twenty five and we will provide more details as we move through the year.

Corey: Our third key priority for the year is to continue our disciplined approach to capital allocation. This will include striking the appropriate balance of prioritizing areas that best position us for the future while prudently dealing with the near term uncertainty in the CE industry. There are a few key points that I want to highlight first as it relates to our capital allocation.

Corie Sue Barry: This will include striking the appropriate balance of prioritizing areas that best position us for the future while prudently dealing with the near-term uncertainty in the CE industry. There are a few key points that I want to highlight. First, as it relates to our capital allocation strategy, our overall approach isn't changing. We still plan to first fund operations and investments in areas necessary to grow our business. And next, return excess free cash flow to shareholders through dividends and share refunds. Second, while our enterprise capital expenditures for fiscal 25 are planned at a similar level to last year, our domestic segment capital expenditures are expected to decline by approximately $50 million due to the store portfolio investment approach I discussed earlier and lower technology-related expenses. This is offset by a year-over-year planned increase in CapEx in Canada to reflect investments in new stores and necessary supply chain automation projects. Third, and consistent with our practice over the past several years, we will continue to tightly manage our working capital.

Corey: <unk>, our overall approach isn't changing we still plan to first fund operations and investments in areas necessary to grow our business and next return excess free cash flow to shareholders through dividends and share repurchases.

Corey: Second while our enterprise capital expenditures for fiscal 'twenty five are planned at a similar level to last year. Our domestic segment capital expenditures are expected to decline by approximately $50 million due to the store portfolio investment approach I discussed earlier and lower technology related expense.

This is offset by a year over year planned increase in Capex in Canada to reflect investments for new stores and necessary supply chain automation projects.

Corey: Third and consistent with our practice over the past several years, we will continue to tightly manage our working capital our teams have done a tremendous job managing our inventory in a very uneven sales environment, keeping inventory aligned with our forward looking sales projections, while at the same time, maintaining as much flexibility as possible and lastly, this morning, we announced a two.

Corie Sue Barry: Our teams have done a tremendous job managing our inventory in a very uneven sales environment, keeping inventory aligned with our forward-looking sales projections while, at the same time, maintaining as much flexibility as possible. And lastly, this morning, we announced a 2% increase in our quarterly data. This represents the 11th straight year of dividend increases and puts our current dividend yield near 5%.

Corey: Percent increase in our quarterly dividend this.

Corey: This represents the 11th straight year of dividend increases and puts our current dividend yield near 5%.

Corie Sue Barry: Our fourth key priority for Fiscal 25 is longer term in focus. We will continue to explore opportunities that leverage our scale and capabilities to drive incremental profitable revenue streams over time. The most developed example of this is Best Buy Health, where we are leveraging our expertise and our Geek Squad agents to capitalize on the growing use of technology to help provide health care in the home.

Corey: Our fourth key priority for fiscal 'twenty five is longer term in focus we will continue to explore opportunities that leverage our scale and capabilities to drive incremental profitable revenue streams over time.

Corey: The most developed example of this is best buy health, where we are leveraging our expertise and our geek squad agents to capitalize on the growing use of technology to help provide health care in the home well.

Corie Sue Barry: While still very small in relation to our core business, our fiscal 25 Best Buy health sales are expected to grow faster than the core business, which, combined with cost synergies from fully integrating acquired companies, are expected to drive another 10 basis points of NRI's operating income rate expansion. Another example is our recently announced collaboration with Bell Canada to operate 165 small format consumer electronics retail stores across Canada. These stores, previously known as The Source, which was a wholly owned subsidiary of Bell Canada, will be rebranded as Best Buy. Best Buy will provide the CE assortment as well as the supply chain, marketing, and e-com. Bell will continue to be the exclusive telecommunications services provider and will also be responsible for the store operating costs and labor components of the partner. This collaboration will allow Best Buy to expand its presence in malls and in smaller and mid Best Buy Express stores are expected to roll out during the second half of this year.

Corey: While still very small in relation to our core business our fiscal 'twenty five best buy health sales are expected to grow faster than the core business, which combined with cost synergies from fully integrating acquired companies are expected to drive another 10 basis points of annualized operating income rate expansion.

Corey: Another example is our recently announced collaboration with Bell, Canada to operate 165 small format consumer electronics retail stores across Canada. These stores previously known as the source, which was a wholly owned subsidiary of Bell, Canada will be rebranded as Bestbuy Express.

Corey: We will provide the CE assortment as well as supply chain marketing and ecommerce Bell will continue to be the exclusive telecommunications services provider and will also be responsible for the store operating costs and labor components of the partnership.

Corey: This collaboration will allow us to expand our presence in malls and in smaller and mid sized communities across Canada Bestbuy Express stores are expected to rollout during the second half of this year.

Corie Sue Barry: Other examples of opportunities we are pursuing include continuing to build out our business case for Geek Squad as a service and adding vendors to our Supply Chain Partner Plus program. Before I close and turn the call over to Matt, I wanted to touch on a few of the ways we are being recognized for the support we provide our employees. From an employee standpoint, I'm proud to share that we continue to maintain industry-low turnover rates, and our fiscal 24 employee turnover was down on a year over year basis. To that end, this is our second year as the number one retailer on the Just Capital list, which evaluates and ranks the largest publicly traded companies in the US in part on how a company invests in its workforce. This year will also mark the fifth anniversary of our Caregiver Pay Benefit.

Corey: Other examples of opportunities. We are pursuing include continuing to build out our business case for geek squad as a service and adding vendors to our supply chain partner plus program.

Speaker Change: Before I close and turn the call over to Matt I wanted to touch on a few of the ways. We are being recognized for the support we provide our employees and communities from an employee standpoint, I'm proud to share that we continue to maintain industry low turnover rates and our fiscal 'twenty four employee turnover was down on a year over year basis.

Matthew M. Bilunas: To that end. This is our second year as the number one retailer on the just capitalist which evaluates and ranks the largest publicly traded companies in the U S in part and how our company invest in its workforce.

Matthew M. Bilunas: This year will also mark the fifth anniversary of our caregiver pay benefit during that time, we've supported 22000 employees with almost 3 million hours of time away. So they can care for those who matter. Most we continue to be credited as a leader in sustainability in Q4 for the 13th year, we were named to the annual Dow Jones sustainability.

Corie Sue Barry: During that time, we've supported 22,000 employees with almost 3 million hours of time away so they could care for those who matter most. And we continue to be credited as a leader in sustainability. In Q4, for the 13th consecutive year, we were named to the annual Dow Jones Sustainability North America Index. We were also just named to the CDP's prestigious Climate A-List, which looks at how organizations demonstrate best practices associated with environmental leadership.

Matthew M. Bilunas: In North America Index. We were also just named for the seventh consecutive year to the cdp's prestigious climate, a list, which looks at how organizations demonstrate best practices associated with environmental leadership.

Corie Sue Barry: In summary, we are focused and energized about delivering on our purpose to enrich lives through technology and our vibrant always. We don't sort tech products just for the sake of technology; we see technology in the service of humans. And as the largest CE specialty retailer, with our unique range of product assortment and expert services, we deliver that human experience to millions of customers. I want to reiterate our fiscal 25 strategy. In what we expect to be a year of increasing industry stabilization, we are focused on sharpening our customer experiences and industry positioning while maintaining, if not expanding, our operating income rate on a 52-week basis. We are putting ourselves in the best position for fiscal 25 and beyond.

Matthew M. Bilunas: In summary, we are focused and energized about delivering on our purpose to enrich lives through technology and a vibrant always changing industry. We don't assort Tech products just for the sake of technology, we see technology and service of humans and as the largest E specialty retailer with our unique range of product assortment and expert services, we deliver that.

Matthew M. Bilunas: Human experience to millions of customers.

Matthew M. Bilunas: I want to reiterate our fiscal 'twenty five strategy and what we expect to be a year of increasing industry stabilization. We are focused on sharpening our customer experiences and industry positioning while maintaining if not expanding our operating income rate on a 52 week basis.

We are putting ourselves in the best position for fiscal 'twenty, five and beyond as our industry returns to growth, we expect to grow our sales and expand our operating income rate I will now turn the call over to Matt for more details on Q4 financial performance and our outlook.

Matthew M. Bilunas: As our industry returns to growth, we expect to grow our sales and expand our operating income rates. I will now turn the call over to Matt for more details on our Q4 financial performance and our outlook. Good morning, everyone.

Matthew M. Bilunas: Good morning, everyone before getting into our quarterly results. Let me start by sharing a few details on the extra week that occurred in the fourth quarter.

Matthew M. Bilunas: Before getting into our quarterly results, let me start by sharing a few details on the extra week that occurred in the fourth quarter. We estimate that the extra week added approximately $735 million in enterprise revenue and approximately $0.30 in non-GAAP diluted earnings per share to the quarter. Also, as a reminder, revenue from the extra week is excluded from our comparable sales calculation. Next, I will share details on the fourth quarter results, including the extra week. Enterprise revenue of $14.6 billion declined 4.8% on a comparable basis.

Matthew M. Bilunas: We estimate that the extra week added approximately $735 million in enterprise revenue and approximately 30 non-GAAP diluted earnings per share to the quarter.

Matthew M. Bilunas: As a reminder, revenue from the extra week is excluded from our comparable sales calculation.

Matthew M. Bilunas: Next I will share details on the fourth quarter results, including the extra week.

Matthew M. Bilunas: Enterprise revenue of $14 6 billion declined four 8% on a comparable basis, our non-GAAP operating income rate of 5% improved 20 basis points compared to last year that included a 50 basis point improvement in our gross profit rate.

Matthew M. Bilunas: Our non-gap operating income rate of 5% improved 20 basis points compared to last year and included a 50 basis point improvement in our gross profit rate. Non-GAAP SG&A dollars were $30 million higher than last year and increased approximately 30 basis points as a percentage of revenue. Compared to last year, our non-gap diluted earnings per share increased 4% to $2.72.

Matthew M. Bilunas: non-GAAP SG&A dollars were $30 million higher than last year and increased approximately 30 basis points as a percentage of revenue.

Matthew M. Bilunas: Paired to last year, our non-GAAP diluted earnings per share increased 4% to $2 72.

Matthew M. Bilunas: When viewing our performance compared to our expectations revenue was near the midpoint of our guidance.

Matthew M. Bilunas: When viewing our performance compared to our expectations, revenue was near the midpoint of our guidance. As Corie mentioned, our comparable sales trends were not linear, with the more traditional holiday shopping days being our strongest from a growth perspective. For comparable sales by month, we're November down 5%, December down 2%, and January down 12%. Although our sales were near the midpoint of our guidance, our non-GAAP operating income rate of 5% was at the high end. Our gross profit rate was higher than we expected, primarily driven by a more favorable gross profit rate in our services category, which includes our membership offerings. Our non-GAAP SG&A expense was near the high end of our expectations due to additional incentive compensation. Next, I will walk through the details on our fourth quarter results compared to last year. In our domestic segment, revenue decreased 0.9% to $13.4 billion, driven by a comparable sales decline of 5.1%, as partially offset by approximately $675 million in revenue from the extra week.

Matthew M. Bilunas: Corey mentioned, our comparable sales trends, we're not linear with the more traditional holiday shopping days being our strongest from a growth perspective.

Matthew M. Bilunas: Our comparable sales by month, where in November down, 5% December down 2% in January down 12%.

Matthew M. Bilunas: Although our sales were near the midpoint of our guidance our non-GAAP operating income rate of 5% was at the high end.

Our gross profit rate was higher than we expected primarily driven by a more favorable gross profit rate in our services category, which includes our membership offerings.

Our non-GAAP SG&A expense was near the high end of our expectations due to additional incentive compensation.

Matthew M. Bilunas: Next I will walk through the details of our fourth quarter results.

Matthew M. Bilunas: Third to last year.

In our domestic segment revenue decreased 9% to $13 $4 billion driven by a comparable sales decline of five 1% that was partially offset by approximately $675 million in revenue from the extra week.

Matthew M. Bilunas: From a category standpoint, the largest contributors to comparable sales decline in the quarter were home theater, appliances, mobile phones, and tablets, which were partially offset by growth in gaming. From an organics perspective, the overall blended average selling price of our products was slightly higher than last year. The growth was primarily due to an increased mix of units coming from higher-ticket items such as notebooks and TVs, even though the individual ASBs for both of those categories were down year over year. International revenue of $1.2 billion increased 2.7%, primarily driven by approximately $60 million of revenue from the extra week, which was partially offset by a comparable sales decline of 1.4%.

Matthew M. Bilunas: From a category standpoint, the largest contributors to comparable sales declined in the quarter for home theater appliances, mobile phones, and tablets, which were partially offset by growth in gaming.

From an organic perspective, the overall blended average selling price of our products was slightly higher than last year.

Matthew M. Bilunas: Growth was primarily due to an increased mix of units coming from higher ticket items, such as notebooks and TV.

Matthew M. Bilunas: Even though the individual asp's for both of those categories were down year over year.

Matthew M. Bilunas: International revenue of $1 2 billion increased two 7%, primarily driven by approximately $60 million of revenue from the extra week, which was partially offset by a comparable sales decline of one 4%.

Matthew M. Bilunas: Our domestic gross profit rate increased 60 basis points to 24%.

Matthew M. Bilunas: Our domestic gross profit rate increased 60 basis points to 20.4%. The higher gross profit rate was primarily driven by improvements in our membership offerings, which included a higher gross profit rate in our services category. In addition, a higher gross profit rate from our Best Buy health initiatives also contributed to the improved rates. The previous items were partially offset by lower product margins.

Matthew M. Bilunas: Our gross profit rate was primarily driven by improvements from our membership offerings, which included a higher gross profit rate in our services category.

Matthew M. Bilunas: In addition, the higher gross profit rate from our best buy health initiatives also contributed to the improved rate.

Matthew M. Bilunas: Previous items were partially offset by lower product margin rates.

Matthew M. Bilunas: Consistent with the third quarter, approximately $20 million of vendor funding qualified to be recognized as an offset to SG&A, which was a reduction to cost of sales last year. We anticipate similar recognition of this funding in the first half of fiscal 25, approximately $20 million a quarter. Moving to SG&A, our domestic non-GAAP SG&A increased $17 million, which was primarily driven by the extra week and higher incentive compensation, which was partially offset by lower store payroll costs and reduced advertising expense. Our international non-GAAP SG&A increased $13 million, which was primarily driven by higher incentive compensation and the extra... In the fourth quarter, as Corie alluded to, we incurred $169 million in restructuring costs. The related actions span multiple areas across our organization and include approximately $65 million for actions that won't be implemented until fiscal 26. Moving to the balance sheet, we ended the year with $1.4 billion in cash.

Matthew M. Bilunas: Consistent with the third quarter, approximately $20 million of vendor funding qualified to be recognized as an offset to SG&A, which was a reduction to cost of sales last year.

Matthew M. Bilunas: Similar recognition of this funding in the first half of fiscal 'twenty, five approximately $20 million a quarter.

Matthew M. Bilunas: Moving to SG&A, our domestic non-GAAP SG&A increased $17 million, which was primarily driven by the extra week and higher incentive compensation, which were partially offset by lower store payroll costs and reduced advertising expense.

Matthew M. Bilunas: Our international non-GAAP, SG&A increased $13 million, which was primarily driven by higher incentive compensation and the extra week.

Matthew M. Bilunas: In the fourth quarter as Cory alluded too, we incurred $169 million in restructuring costs.

Matthew M. Bilunas: The related action spend multiple areas across our organization and include approximately $65 million for actions that wont be implemented until fiscal 'twenty six.

Moving to the balance sheet, we ended the year with $1 4 billion in cash.

Matthew M. Bilunas: Our year-on-inventory balance was approximately 4% lower than last year's comparable period, and we continue to feel good about our overall inventory position as well as the health of our inventory. During fiscal 24, our total capital expenditures were $795 million versus $930 million in fiscal 23. The largest driver of the year-over-year decline was a reduction in store-related investment. We also returned $1.1 billion to shareholders through dividends and share repurchase. Moving on to our full year fiscal 25 financial guidance, which is the following. Enterprise revenue in the range of $41.3 billion to $42.6 billion, enterprise comparable sales of down 3% to flat, Enterprise non-GAAP operating income rate in the range of 3.9% to 4.1%, which compares to an estimated 4% non-GAAP operating income rate for fiscal 24 on a 52-week basis, a non-GAAP effective income tax rate of approximately 25%, and non In addition, we expect capital expenditures of approximately $750 million to $800 million.

Matthew M. Bilunas: Our year end inventory balance was approximately 4% lower than last year's comparable period, and we continue to feel good about our overall inventory position as well as the health of our inventory.

Matthew M. Bilunas: During fiscal 'twenty four our total capital expenditures were $795 million versus $930 million in fiscal 'twenty three.

Matthew M. Bilunas: The largest drivers of the year over year decline was a reduction in store related investments.

We also returned $1 1 billion to shareholders through dividends and share repurchases.

Matthew M. Bilunas: Moving onto our full year fiscal 'twenty five financial guidance, which is the following.

Matthew M. Bilunas: Enterprise revenue in the range of $41 3 billion to $42 6 billion.

Matthew M. Bilunas: Enterprise comparable sales of down 3% to flat.

Matthew M. Bilunas: Enterprise non-GAAP operating income rate in the range of three 9% to four 1%, which compares to an estimated 4% non-GAAP operating income rate for fiscal 'twenty four on a 52 week basis.

Matthew M. Bilunas: Our non-GAAP effective income tax rate of approximately 25%.

Matthew M. Bilunas: non-GAAP diluted earnings per share of $5 75 to $6 20.

Matthew M. Bilunas: In addition, we expect capital expenditures of approximately $750 million to $800 million Lastly, we expect to spend approximately $350 million on share repurchases, which is similar to our fiscal 'twenty four spend.

Matthew M. Bilunas: And lastly, we expect to spend approximately $350 million on share repurchases, which is similar to our fiscal 24 spend. Next, I will cover some of the key working assumptions that support our guidance, which is in our ongoing practice. We will continue to close existing traditional stores during our rigorous review of stores as their leases come up for renewal. In fiscal 24, we closed 24 stores. In fiscal 25, we expect to close 10 to 15 stores.

Matthew M. Bilunas: Next I will cover some of the key working assumptions that support our guidance.

Matthew M. Bilunas: Earlier, Corie provided context on our fiscal 25 top line assumptions. Now, let me spend more time on the profitability outlook. We expect to drive gross profit rate expansion of 20 to 30 base points compared to fiscal 24 due to the following actions and initiatives. First, continued profitability improvements in our services and membership offerings are expected to provide approximately 45 basis points of gross profit rate expansion. The achievement of this improvement essentially recoups the original investment of our previous total tech offering that was scaled nationally in October of 2021. The expected rate improvement is due to higher revenue from installation and delivery services, which were previously included benefits of paid membership, and a lower cost to serve due to lower expected volume for in-home installation and other related services. The unit volume of these services is still expected to be above pre-pandemic levels but below the elevated levels we experience when all TAC members receive them as a benefit at no incremental cost.

Matthew M. Bilunas: Due to higher revenue from installation and delivery services, which were previously included benefits are paid membership.

Matthew M. Bilunas: And a lower cost to serve due to lower expected volume for in home installation and other related services.

Matthew M. Bilunas: Volume of these services is still expected to be above pre pandemic levels are below the elevated levels. We experienced when total tech members receive them as a benefit at no incremental costs.

Matthew M. Bilunas: We also expect Best Buy Health to add a benefit of approximately 10 basis points to our enterprise profit gross profit rate on a year-over-year basis, partially offsetting the previous item's approximately 20 basis points of expected pressure from a lower profit share on a credit card arrangement. In Fiscal 24, our profit share was approximately 1.4% of domestic revenue, consistent with Fiscal 23. The expected pressure in fiscal 25 is primarily due to expected increases in net credit losses. This estimate does not include the implications of any proposed changes to late fee regulation.

Matthew M. Bilunas: We also expect best buy health to add a benefit of approximately 10 basis points to our enterprise profit gross profit right on a year over year basis.

Partially offsetting the previous items, approximately 20 basis points expected pressure from a lower profit share on a credit card arrangement.

And physical 24 or profit share was approximately 1.4% domestic revenue.

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Expected pressure in fiscal 25 is primarily due to expected increases in net credit losses.

Matthew M. Bilunas: This estimate does not include implications from any proposed changes too late fee regulation.

Matthew M. Bilunas: We also expect that our product margin rates will experience slight pressure. Now, moving to our SG&A and AX, but the High Endeavor Guidance assumes SG&A dollars are similar to Fiscal 24, which includes the following puts and takes. We expect higher incentives of compensation as we reset our performance targets for the new year, with the high end of our guidance assuming an increase of $40 million compared to fiscal 24. We expect advertising expense to increase by approximately $50 million.

Matthew M. Bilunas: We also expect that our product margin rates will experienced slight pressure.

Matthew M. Bilunas: Now moving to our SG&A expectations.

Matthew M. Bilunas: The high never guidance assumes SG&A dollars are similar to physical 24, which includes the following puts and takes we.

Matthew M. Bilunas: We expect higher incentive compensation as we reset our performance targets for the new year with a high end of our guidance, assuming an increase of $40 million compared to physical 24.

Matthew M. Bilunas: We expect advertising expense to increase by approximately $50 million.

Matthew M. Bilunas: Partially offsetting the previous items is the benefit of one less week, which is estimated at approximately $90 million. So our payroll expense is expected to be approximately flat for fiscal 24 as a percentage of sales. Lastly, the low end of our guidance reflects our plans to further reduce our variable expenses to align with sales trends. Before I close, let me share a couple of comments specific to the first quarter. We anticipate that our first quarter comparable sales will decline approximately 5%, which aligns with our estimated February performance. Additionally, we expect our non-GAAP operating income rate to be approximately flat to fiscal 24's first quarter rate of 3.4%. We expect our gross profit rate to improve compared to last year in line with the 20 to 30 base point improvement we are expecting for the full year. SG&A dollars are expected to decline as a percentage in the low single-digit range, with a decrease primarily due to lower store payroll.

Matthew M. Bilunas: Partially offsetting previous items has the benefit of one last week, which is estimated at approximately $90 million.

Matthew M. Bilunas: So apparel expenses expected to be approximately flat to fiscal 24 as a percentage of sales.

Matthew M. Bilunas: Lastly, the low end of our guidance reflects our plans to further reduce our variable expenses to align with sales trends.

Speaker Change: Before I close let me share a couple of comments specific to the first quarter.

Speaker Change: We anticipate that our first quarter comparable sales will decline approximately 5%.

Speaker Change: Which aligns with our estimated February performance.

Speaker Change: We expect our non-GAAP operating income right to be approximately flat to fiscal 24 first quarter rate of 3.4%.

Speaker Change: We expect our gross profit right <unk>.

Speaker Change: Improve compared to last year in line with a 20 to 30 basis point improvement we are expecting for the full year.

Speaker Change: SG&A dollars are expected to decline as a percentage in the low single digit range with a decrease primarily due to lower store payroll expense.

Operator: I will now turn the call over to the operators. At this time, I would like to remind everyone that in order to ask a question, simply press button number one on your telephone keypad. First questions from the line of Scott Ciccarelli with Truist Securities. Please go ahead. Good morning guys, Scott Ciccarelli. This is probably difficult to answer, but I'd be interested in any color you might have.

Speaker Change: We'll know till the call over to operators of a question.

Speaker Change: At this time I would like to remind everyone in order to ask a question simply press.

Speaker Change: The number one the onto a telephone keypad.

Speaker Change: Questions from the line of Scott <unk> with a tree with the Security's. Please go ahead.

Scott: Good morning, guys Mexican rally.

Scott: This is probably gets called to answer might be interested in any color you might have when you kind of look at the performance an account declined.

Corie Sue Barry: When you kind of look at the comp performance and the comp decline, how would you segment it between, let's call it, broader pressures on discretionary spending versus, let's call it, the pull-forward of demand that happened during the pandemic? Because we're kind of getting into that, you know, kind of four-year period since the pandemic, the typical life cycle of a lot of your products is three to five years. How are you guys kind of thinking about that, or is it at all possible to segment that? I wish there was an exact science to this one.

Scott: How would you segmented between that's called broader pressures on discretionary spending versus let's call. It the the pull forward a demand that happened during the pandemic cause we're kind of getting into that kind of a four year period since the pandemic typical life life cycle out your products is three to five years, just how're you guys kind of thinking about that or is it.

Scott: At all possible to segment that.

Speaker Change: I wish there was an exact science to that's fine that being said, we did try to give you and they're prepared remarks F. U indicators that we're seeing that say, we might be starting to get into that replacement cycle. We talk specifically about laptop units returning to growth in queue for and that trend continuing here as we.

Corie Sue Barry: That being said, we did try to give you in the prepared remarks a few indicators that say we might be starting to get into that replacement cycle. We talked specifically about laptop units returning to growth in Q4 and that trend continuing here as we head into Q1. That, to me, feels like an early indicator of at least some foray into that replacement cycle because, honestly, really right now, there isn't any massive current innovation that would spur you to go buy a new laptop. There's a little bit, but we're expecting more as the year goes on.

Speaker Change: <unk> that to me feels like an early indicator of at least some fall right into that replacement because honestly really right now there isn't any mass is current innovation that would spur you to go buy a new laptop, there's a little bit, but we're expecting more as the year goes on them and then obviously that that lap.

Corie Sue Barry: And then obviously, the laptop category would be kind of earlier in the realm of replacement cycles that we've talked about. So I think you're starting to see some goodness there, Scott, which makes me think a little bit more of the overhang that we're seeing is that kind of combo platter of five macro factors that I talked about that continue to weigh on the industry and haven't abated nearly at the pace that I think anyone thought from a macro perspective would be helpful, Corey. And then one other quick one, like you guys talked a bit earlier in the script about personalization. I guess the question is for your kind of category.

Speaker Change: Category would be kind of earlier in the realm of replacement cycles that we've talked about so I think you're starting to see some goodness there Scott, which makes me think.

Speaker Change: More of the overhang that we're seeing is that kind of combo platter of five macro factors that I talked about that continue to weigh on the industry and haven't debated nearly to the pace that I think anyone thought from a macro perspective.

Speaker Change: That's helpful for you and then one other quick one like you guys talked a bit earlier in the script on personalization I guess the question is for your kind of category you get enough frequency in terms of customer visits to really be able to leverage that that data and the personalization that you're targeting thanks.

Corie Sue Barry: Do you get enough frequency in terms of customer visits to really be able to leverage that data and the personalization that you're targeting? Thank you. I think what's important is to differentiate purchase frequency from the frequency of interacting with the brand. And we have the luxury because we do know, like I said, 90% of our purchasing customers we can identify, we can actually see many behaviors. And people don't just come to us because they want to make a purchase. There's a lot of research done in this category. Also, there are repairs done in this category.

Speaker Change: I think what's important is to differentiate purchase frequency from the frequency of interacting with the brand.

Speaker Change: And we have the luxury because we do now like I said 90 per cent of our purchasing customers. We can identify we can actually see many behaviors and people don't just come to us because they want to make a purchase.

Speaker Change: Research done in the category there are repairs done it in the category.

Corie Sue Barry: There is curiosity about upgrades done in the category. And so we do see enough frequency of visits and our ability to understand how the consumer is acting that do allow us to make those personalizations. And it's why one of the things that we mentioned, then why we try to get really specific examples in the app, having that personalized front page means we're not just targeting you for what you might purchase next. We're literally trying to figure out your next best action. And that action might just be discovery.

Speaker Change: There are curiosity about upgrades got it in the category and so we we do see enough frequency of visits and our ability that I understand how the consumer is acting that do allow us to make those personalization and it's Y one of the things that we mentioned then why are we tried to it really specific examples is in the app.

Having that personalized front page means we're not just targeting you for what you might purchase next we're literally trying to figure out your next best action and that action might just be discovery, you might just want to come and scroll through and take a look at what's new or what's coming and educate yourself and and we will gladly help you do that.

Corie Sue Barry: You might just want to scroll through and take a look at what's new or what's coming and educate yourself. And we will gladly help you do that. And so I think the next realm of personalization often gets lumped in with purchase. And that's the case for us in particular because we really deal with the full life cycle of how people use these products. It's a lot broader than that. Excellent Thanks a lot, guys. Yep, thank you. Your next question is from the line of Brian Nagel with Oppenheimer. Please go ahead. Good morning. Thanks for taking my question. So I want to start with Corey, you know, the bigger picture.

Speaker Change: And so I think the next one I'm a personalized I think personally Jason often gets lumped in with purchase and it's for US in particular, because we really deal with the full lifecycle of how people use these products is a lot broader than that.

Speaker Change: Excellent. Thanks, a lot guys yep.

Speaker Change: Yep. Thank you.

Speaker Change: Your next question is from the line of Brian legal with Oppenheimer. Please go ahead.

Brian William Nagel: Good morning, Thanks for taking my question.

Brian William Nagel: I'm Gonna start Corey bigger picture now you mentioned in your comments and we'd be talking to wildlife pay I talked with some of the products and help the spice.

Corie Sue Barry: Now you mentioned in your prepared comments. I know we've been talking a while about this AI, and we talked about some of the products and how Best Buy is utilizing AI in its own business problems. The question I have is you're talking now to your vendor partners and maybe going back to see, yes, or before, how much excitement is starting to really build around AI, as you know, in terms of products that we could see in the relatively near term for Best Buy from a consumer standpoint? Yeah, I will give you my very best qualitative answer here. I think if you followed what happened at the Consumer Electronics Show in January at all. It was, I would argue, the largest foray into how AI will impact our world going forward from here, particularly as it relates to consumer electronics.

Brian William Nagel: <unk> the question I have is yours.

Brian William Nagel: Talking now to your.

And your partners or maybe going back to see Yasser before.

Brian William Nagel: How much excitement is starting to really build around a I.

Brian William Nagel: In terms of products that we could choose relative near term for best buy from the consumer piece of standpoint.

Speaker Change: Yeah, I'll give you my very best quality it is answer here.

Speaker Change: I think if you followed what happened at the consumer Electronics show in January at all.

Speaker Change: It was I would argue the largest foray into how a I will impact our world going forward from here, particularly as it relates to consumer electronics and I think in the coming year, there's enough noise out there that you can get a feel that you're gonna start to see the computing side of this.

Corie Sue Barry: And I think in the coming year, there's enough noise out there that you can get this feel that you're going to start to see the computing side of this really start to take off and make it easier and more seamless for everyone to be able to use tools that will help them be more efficient and effective. But the horizon question, and that's how I like to think about it, I like to think about it as the kind of innovation horizon, which I think is really vibrant right now in terms of what AI technology might be able to do, because it's not just compute, it gets into like, how smart can I make the things around me? And one of the things that's really interesting about AI is that it actually makes consumer electronics products more human. And so there's this question of, how do I make these CE products interact with me more seamlessly? How are the robots that are in my house even smarter because they can triangulate faster, and they just get smarter on their own?

Speaker Change: Really start to take light and make it easier and more seamless for everyone to be able to use tools that will help them be more efficient and effective but the horizon question and that's how I like to think about I like to think about it is that kind of innovation horizon I think is really vibrant right now.

Speaker Change: In terms of what AI technology might be able to do because it's not just compute it gets into like how smart can I make the things around me and and one of the things that's really interesting about AI is it actually makes consumer electronics products more humid and so there's this question of how do I make these C E products interact with me more seamlessly.

Speaker Change: How are the robots that are in my house, even smarter because they can triangulate faster and they just get smarter on their own. So my my little robot vacuum gets smarter every single time that I use it right and so these are just innovations in the compute side of things are starting to see it in the phone side of things you're starting to see it and how far can we kind of pushed.

Corie Sue Barry: So my little robot vacuum gets smarter every single time that I use it, right? And so these aren't just innovations in the computing side of things; you're starting to see it in the phone side of things, you're starting to see it in how far we can kind of push the envelope on what consumer electronics can do for you in your home to just make your home life more seamless. So I'm not saying it's going to be a revolution overnight, Brian, to be clear, but I do definitely see more excitement and kind of this breakthrough in how technology can fit even more seamlessly into your life. That's very, very helpful. I appreciate that. Then, just a follow up on related, With regard to the given normalization within the C category.

Speaker Change: The envelope on what consumer electronics can do for you in your home. So just make your home life more seamless so uhm I'm not saying, it's going to be a revolution overnight, Brian to be clear, but I do definitely see more excitement and kind of just unlock in how technology can fit even more seamlessly and.

Speaker Change: To your life.

Speaker Change: Oh, that's that's really very helpful. I appreciate that.

Speaker Change: This is a follow up on related.

Speaker Change: With regards to Utah.

Speaker Change: So you should within the C category.

Corie Sue Barry: You talked about through the holiday, you know, promotions being, I guess, normal. But the question I have is, are you seeing more, you know, more non-specific CE retailers come back to the category now as the overall consumer backdrop normalizes post-pandemic? I wouldn't say there are more.

Speaker Change: You talked about the holidays promotions being I guess.

Speaker Change: Could I get the question I have is are you see more <unk> a non specific see retailers come back to the category knowledge is the overall super backdrop normal I just <unk>.

Speaker Change: I Wanna say, there's more I mean, I think when we went ahead and the holiday. We said this is typically a category that is promotional it's typically a category that many different partners.

Corie Sue Barry: I mean, when we were headed into holiday, we said this is typically a category that is promotional. It's typically a category that many different partners play in for the holiday, because whether or not it blows the doors off, it is always a category that people look for as it relates to holiday. And so I think you always see some players come in and out of the space as it relates to gifting and CE as a gift. And from my personal point of view, I didn't see more than we would have expected this holiday than any other.

Speaker Change: For the holiday, because whether or not it blew the doors off it is always a category that people look for as it relates to holidays and so I think you always see some players come in and out of the space as it relates to gifting and C E. As a gift and I have my personal point of view didn't see more than we would.

Speaker Change: Have expected this holiday than any other uhm, obviously, we're always watching the the competitive landscape, but I think that's why we're really focused in the coming year on our unique positioning and the C. E landscaping. The both pre purchase and then post purchase offerings that we have that are pretty unique in the marketplace no matter who enters.

Corie Sue Barry: Obviously, we're always watching the competitive landscape, but I think that's why we're really focused in the coming year on our unique positioning in the CE landscape and the both pre-purchase and then post-purchase offerings that we have that are pretty unique in the marketplace, no matter who enters. I appreciate all the color.

Corie Sue Barry: Thank you. Thank you. Your next question is from the line of Michael Lasser with UBS. Please go ahead. Good morning.

Speaker Change: Well I appreciate all the color.

Speaker Change: <unk>.

Speaker Change: Thank you ma'am thank you.

Speaker Change: Your next question is from the line of Michael Lesser with UBS. Please go ahead.

Corie Sue Barry: Thank you so much for taking my question. It's based on market share trends. Best Buy has always been very dynamic in its strategies. It's one of the factors that has led to its success that it's been able to change with the market. But it does seem like in the last several years, the pace of change with the strategy has increased significantly, whether it comes to membership, store format, and the composition of the store associates. How do you think this is having an impact on Best Buy's market share, especially in light of the fact that, if we look at Best Buy's sales in the domestic segment for this year, it's likely that the company's going to be on pace to have sales Thank you very much.

Michael Lasser: Good morning. Thank you so much for taking my question.

Michael Lasser: <unk> <unk>.

Michael Lasser: He's always been very dynamic with this strategy is one of the factors that has led to success that it's been able to change with the market, but it does seem like in the last several years.

Michael Lasser: Piece of change with this strategy has increased significantly whether it come to membership store format.

Michael Lasser: <unk> how.

Michael Lasser: How do you think this is having an impact on best buys markets here, especially in light of the fact that if we look at.

Michael Lasser: Sales in the domestic segment for this year, it's likely that the companies give me one piece to have feels better about $2 billion below where they were in 2019. Thank you very much.

Corie Sue Barry: Yeah, so let me start with something near term. And then I'll work my way back to a little bit longer term. You're right, there have been a number of strategic pivots in the model. And to be clear, this is in service of bolstering our position in the market. That is why we are making the changes that we are.

Speaker Change: Yeah. So let me start a little near term and then I'll work my way back to a little bit longer term, you're right. There have been a number of strategic pivot in the model and to be clear. This is in service of bolstering our position in the market that is why we are making the changes that we are and it's also in service of a.

Corie Sue Barry: And it's also in service of a changing consumer who expects a different experience. So we've said it many times, Michael, and I know you're familiar, there isn't a great single source of share here for consumer electronics because nobody covers all the categories that. But for the Cercana Trace categories, which represent about 70% of our revenue, we held share in Q4 and for the full year, year over year. With the same caveats, as I think about the last several years, and this is one where we have to try to analyze multiple sources over a longer period, we believe we've actually largely held share in the key categories since the beginning of the pandemic. As I said, it is a difficult science because there are so many different sources, but you can imagine, as you started with the question, strategically, we are incredibly focused on those real key categories So we are tracking this carefully, and I can promise you that the changes to the model are not for the fun of it. The changes are definitely in service of different customer expectations and our commitment to hold a position in this industry. Thank you very much for that.

Speaker Change: Changing consumer who expects a different experience. So we've set it many times myself and I know you're familiar it isn't there isn't a great single source of share here for consumer electronics, because nobody covers all the categories that we do but for the start can attract categories, which represent about 70% of our revenue.

Speaker Change: We held Sharon Q4 and for the for the full year you're over a year.

Speaker Change: With the same caveat is I think about the last several years and this is one where you have to try to analyze multiple sources over a longer at a longer term period. We believe we've actually largely held share in the key categories. Since the beginning of the pandemic like I said it is a difficult science.

Speaker Change: There are so many different sources, but you can imagine as you started with the question strategically we are incredibly focused on those real key categories that are important in underlie our strategy to really kind of one that home experience in that seat you experienced and to and for our consumers. So we are tracking this carefully.

Speaker Change: And I can promise you that the changes to the model or not for the <unk>. The changes are definitely in service of different customer expectations and our commitment to hold position in this industry.

Matthew M. Bilunas: My follow-up question is, as we look at our models and make an assessment of what the recovery in consumer electronics retail looks like over the next few years, what is the rule of thumb that we should be using in regards to Best Buy sales versus its operating margin and the amount of leverage that the model will produce in light of all the changes that have been made in the last few years? Is there a rule of thumb that you can give us to guide us on how we should be projecting over the next couple of years? Thank you very much. Yeah, Michael, I'll take that.

Speaker Change: Thank you very much for that my my follow up question.

Speaker Change: Is.

Speaker Change: Look at our models and make an assessment of what the recovery in consumer electronics retail looks like over the next few years what is it.

Speaker Change: That we should be using.

Regards to my sale versus it's operating margin and the amount of leverage that the <unk>. The model will produce in light of all the changes that have been made in the last few years is there a rule of thumb that you can give us to.

Speaker Change: <unk> and how we should be projecting over the next couple of years. Thank you very much.

Matthew M. Bilunas: I think if I look at just going forward in an ideal setting, you know, when you get past the flat to slightly down year this year, we do expect when you look out into the next number of years that the industry will continue to grow and that we will grow along with it. I think it is our expectation that we will continue to grow sales. It's our expectation that we will continue to expand our operating profit rate as we do that. And to your point, part of that is we expect to be able to leverage SG&A and, you know, take advantage of not just all the initiatives that are adding to our improvements over the last year but also just a good focus on cost control and efficiency.

Speaker Change: Yeah, Michael I'll I'll I'll take that I I think if I look at just going forward in an ideal setting uhm.

Speaker Change: When you get past the flat to slightly down here. This year, we do expect when you look out into the next number of years that the industry will continue to grow and that we will go along with it I think it is our expectation that we will continue to grow sales. It's our expectation that we will continue to.

Speaker Change: Expand our operating profit right as we do that and to your point part of that is we we expect to be able to leverage on SG&A and take advantage of not just all the initiatives that are adding to our improvements over over the last over this last year, but also just a good focus on.

Matthew M. Bilunas: And so I think by that standard, I'm not going to give you a specific how much the rate improves by every point of comparison, but it would be our expectation as we grow, you know, a few percentage points, we will be able to expand our rate. And I think, year to year, I think that takes on a little different color as you think about one given year and you move into the next year with a different level of operating revenue with a consistent level of cost structure. You can imagine that it does help expand your rate a little bit more as you go from one year to the next. Thank you very much and good luck.

Speaker Change: Cost controlling inefficiency and so I think by that standard I I'm not going to give you a specific how much does rate improve by every point of carpet, but it would be our expectation as we grow up you know.

Speaker Change: A few percentage points, we will be able to expand our right and I think <unk> year to year I think that takes on a different a little different color as you'd think about one given year and you move into next year, we'll go with a different level of operating revenue with a with a consistent level of cost structure. You can <unk> you can imagine that it does help expand you wait a little bit more a little bit more as you can.

Speaker Change: From one year to the next.

Corie Sue Barry: Thank you. Your next question is from the line of Seth Sigman with Barclays. Please go ahead. Hey, good morning, everyone.

Speaker Change: Thank you very much and good luck.

Speaker Change: Thank you. Thank you.

Speaker Change: Your next question is from the lineup Sigmund with Barclays. Please go ahead.

Corie Sue Barry: I wanted to follow up on the sales outlook. As you think about sales down in the first half, up in the second half, any more views on the role that housing and moving activity play in that? You know, I think some of our work has suggested that there is an impact, but obviously, it's not the only driver, innovation, and a lot of the other things you've talked about make sense. But I guess, how do you think about housing and what's embedded here in the outlook? As you think about the opportunity for improvement?

Sigmund: Hey, good morning, everyone I wanted to follow up on the sales outlook is do you think about sales down in the first half up in the second half.

Sigmund: More reviews on the rule that housing and moving activity plays in that you know I think some of our work has suggested that there is an impact but obviously, it's not the only driver innovation and what are the other things you've talked about makes sense, but I guess, how do you think about housing and what's embedded here in the outlook as you think about the opportunity for improvement. Thank you.

Corie Sue Barry: Thank you. You said it very well. It's not a perfect correlation with our business, the housing market, I mean, but there are definitely pieces of the business that tend to correlate more highly, particularly as you think about appliances, and then somewhat as you kind of creep into television. Those tend to be the areas that are most highly correlated. In the prepared remarks, I talked about the kind of stacked macro pressures on CE and then alluded to the fact that the high end of the range at a flat comp for the year, we're assuming that a few of these, in particular, start to abate. You're starting to see inflation pull back a bit; that one's important. And also, you are starting to at least see what I'd like to call the green shoots of the housing market maybe start to turn in a bit more positive direction.

Speaker Change: You said it very well, it's not a perfect correlation with our business does the housing market I mean, but there are definitely pieces of the business that tend to correlate more highly particularly if you think about appliances and then somewhat as you kind of creep into television. So those tend to be the areas that are most highly correlated in the prepared remarks, I talked about that kind of staff.

Speaker Change: Macro pressures on C E and then alluded to the fact that the high end of the range at a flat comp for the year, we're assuming that a few of these in particular start to abate uhm, you're starting to see inflation pull back a bit that one's important and also you are starting to let me see that what I'd like to call. The green shoots of the housing.

Speaker Change: Market, maybe start to turn in a bit more positive interaction. So I would assume that in that that again that that top end of the guy that we were talking about we continue to maybe see a bit about slow progression of improvement. There is nothing that would say we expect it changes overnight. There's nothing that was saying we expect all of a sudden it's all sunshine and roses and the housing market, but I think in general.

Corie Sue Barry: So I would assume that again, at that top end of the guide that we were talking about, we continue to maybe see a bit of that slow progression of improvement. There is nothing that would say we expect it to change overnight; there's nothing that would say we expect all of a sudden, it's all sunshine and roses in the housing market. But I think in general, we're starting to see enough green shoots that make you feel like, "yep, there might be a bit of improvement there that helps buoy at least that part of the business." But, that being said, we also said on the downside scenario at a down three comp, you maybe don't see the level of recovery and any of those macro factors that we talked about. So I think that's why we're prudently trying to create a range that acknowledges we're early in the year and early in trying to see some of the recovery and some of these more cyclical macro items.

Speaker Change: We're starting to see enough of the green shoots that make you feel like yep mm there might be a bit of improvement there that helps the way at least that part of the business that being said, we also sat on the downside scenario at a down three comp you maybe don't see the level of recovery in any of those macro factors that we talked about so I think that's why we're prudently <unk>.

Speaker Change: Trying to create a range that acknowledges where early in the urine early in trying to see some of the recovery and some of these more cyclical macro items.

Corie Sue Barry: Okay, that's really helpful. And then my follow-up question, as you think about, you know, online sales growth seems to outpace store pumps, very slightly, but for the first time since 2020. And I appreciate the role that stores and online both play in driving a single transaction. But I'm just curious, anything notable that you're seeing as it relates to consumer behavior across the channels? And how does that tie in with your store closure plans? Thank you. I think we've had a pretty consistent view on the fact that we believe online penetration will first stabilize because it went so high during the pandemic; we knew there'd be some level of pullback. And the last 18 months, I'm going to call it like 18 months, have been a little bit more around where does it stabilize, particularly as a percent of our overall, And that, for the last year, has been a little bit more stable year over year in terms of penetration of digital sales. But our forward-looking hypothesis has been that, at a more normalized pace, we probably will continue to see online penetration continue to increase. Now, you led in with what I want to remind everyone, which is that this is not a channel that has taken a loan in and of itself.

Speaker Change: Got it Okay. That's really helpful. And then my follow up as you think about online sales growth seem to outpace store pumps very slightly but the first time since 2020th and I appreciate the role that stores and online both play and driving a single transaction, but I'm just curious anything notable that you're seeing as it.

Speaker Change: <unk> the consumer behavior across the channels and how does that tie in with your store closure plans. Thank you.

Speaker Change: I think we've had a pretty consistent view on the fact that we believe online penetration, we kind of said well first stabilize it because it was so high during the pandemic, we knew there'd be some level of pull back and the last I'm gonna call. It like 18 months have been a little bit more around where does it stabilized particular aly as a percent of our overall revenue.

Speaker Change: And that for the last year has been a little bit more stable year over year in terms of penetration of digital sales, but are forward looking hypothesis has been that at a more normalized Paisley probably continue to see online penetration continue to increase now <unk> with what I want to remind everyone, which is this is <unk>.

Corie Sue Barry: The other interesting fact that we laid out in the prepared remarks is that 44% of what we sell online is still picked up in a store. And that number was consistent year over year, even though we're shipping faster, and we talked about our ability to ship in two days even faster than the year before. And so, for our model in particular, there is this really important interplay between digital sales, even as they keep penetrating, and convenience and the ability to ubiquitously search online but also go into a store if I would like to, regardless of where I choose to make the purchase. Which is why we are moving at a methodical pace, I would say, in terms of the evolution of our store footprint.

Speaker Change: A channel that is taken alone in and of itself. The other interesting fact that we laid out in the prepared remarks is at 44% of what we sell online still picked up in a store and that number was consistent year over year, even though we're shipping faster and and we talked about our ability to ship in two day, even faster than the year before and so.

Speaker Change: Four hour model in particular, there is this really important interplay between the digital failed, even though they keep penetrating and the convenience and the ability to Ubiquitously search online, but also go into the store if I would like to regardless of where I choose to make the purchase which is why we are moving Arab methodical pace I would say in terms of.

Corie Sue Barry: And it's why I also believe this year our focus is more on touching as many stores as we can and making sure that that shopping experience feels good, carefully thinking about what the right portfolio looks like over a longer period. And I think Matt and the team have done a really nice job continuing to make sure we are in the right places at the right times and then testing our way into what we think the right footprint of the future is, because it's just not as easy as, "Is it stores, or is it online?". It really is the interplay between the two, uniquely, I would argue, for us as a consumer electronics specialty. Okay, very helpful. Thanks, Corie.

Speaker Change: Of the evolution of our store footprint and it's why I also believe this year. Our focus is more on touching as many stores as we can and making sure that that shopping experience feels good carefully thinking about what the right portfolio looks like over the longer period, and I think Matt entertainment than a really nice job uhm continuing to make sure we are in the.

Speaker Change: Right places at the right time, and then testing our way into what we think the rightful put into the future is because it's just not as easy as is it stores or is it online. It really is the interplay between the two uniquely I would argue for us as a consumer electronics specialty retailer.

Corie Sue Barry: Mm-hmm. Your next question is from the line McShane with Goldman Sachs. Please go ahead. Hi, good morning.

Speaker Change: Got it okay very helpful. Thanks Court.

Speaker Change: Mhm.

Speaker Change: Your next question is from the lineup Mcshane with Goldman Sachs. Please go ahead.

Matthew M. Bilunas: Thanks for taking our question. I'm just back in the comp range. I was wondering how we should think about traffic versus tickets when it comes to the down three to flat.

Mcshane: Hi, Good morning, Thanks for taking my question. It gets back to the camp range I was wondering how we should think about check traffic versus ticket when it comes to the down three to flag. It seems like there's some moving parts and ticket and we just wanted to better understand the dynamic of maybe some pressure on prices.

Matthew M. Bilunas: It seems like there's some moving parts in the ticket, and we just wanted to better understand the dynamic of maybe some pressure on prices versus NIC. Yeah, sure, Kate. When you think about next year, I think, you know, what we've been seeing. If I look just back at last year, we saw our average selling prices a little more pressured for a little bit in the first part of the year, and then it started to stabilize in Q3. And in Q4, in fact, our average selling price was up compared to last year. And you know, some of that was this unit mix that we talked about, as well. As we look to next year, we clearly are trying to see both some level of ASP stabilization and some unit growth, which is why we've seen such a promotional environment to kind of stimulate the unit side of this equation. And so I think it all kind of obviously depends by category. And I think the categories are somewhat different phases in there, where the right ASP is to drive the right type of unit velocity.

Mcshane: Verses next.

Speaker Change: Yeah sure Cade, if when you figure out next year I think what we've been <unk> just packets last year, we saw our average selling prices be a little more pressured and a little bit in the first part of the year and then it started to Stabilise in Q3 and in queue for in fact.

Speaker Change: Ridge selling price was.

Speaker Change: Compared to last year and you know some of that was this this unit mix that we talked about as well as as we look to next year. We clearly are are trying to see both you know some level of of ESP Stabilizations Simunic growth, which is why we're we've seen such a promotional environments stimulate the unit side of this equation and so I think it is.

Speaker Change: It all kind of obviously depends by category and I think the cameras are somewhat different phases in there in there, whereas the right ask you to drive the right type of unit velocity and so I think probably somewhat I would guess mixture similar to what we've seen this year there could be quarters, where you see a little ESP pressure a little bit more more you coming from unit.

Matthew M. Bilunas: And so I think probably somewhat, I would guess next year, similar to what we've seen this year, there could be quarters where we see a little ASP pressure, a little bit more coming from units, and vice versa. So, hard to know exactly by quarter, but it's probably nothing too dissimilar from what we've seen the last year. Okay, thank you.

Speaker Change: And vice versa, so hard to know exactly by quarter, but it it's probably nothing too dissimilar from what we've seen the last year.

Matthew M. Bilunas: And our second question was just on the usage of your credit cards. If you're seeing anything different, or did you see anything change in the fourth quarter in terms of frequency or size of transactions? Nothing really different in terms of usage.

Speaker Change: Okay. Thank you and a second question was just on the usage of your credit cards, if you're seeing anything different or did you see anything change in the fourth quarter in terms of frequency or size of the transaction.

Matthew M. Bilunas: It's still an amazing offering for us. We have about 25% of our sales transacted on our cars, which has been pretty consistent for the past five years. And last year, 1.4% of our domestic sales were similar to FY 23. So nothing too different in terms of the usage.

Speaker Change: No nothing really different in terms of usage, it's still amazing offering for us we have about 25 per cent of our sales transacted on a car, which has been pretty consistent for the past five years last year was the 1.4% of our domestic sales similar to wasn't FY twenty-three so nothing too different in terms of the youth.

Corie Sue Barry: And in fact, we still see a continued level of our cars being used for external purchases that's been growing over the last number of years. Thank you. Your next question is from the line of Greg Melich with Everett ISI. Please go ahead.

Speaker Change: <unk> and in fact, we still see a continued level of our card being used for external purchases that's been growing over the last number of years.

Thank you.

Speaker Change: Thank you.

Speaker Change: Your next question is from the line of Greg Millett with.

Corie Sue Barry: Hi, thanks. I wanted to follow up on membership and services. Could you give us an update there in terms of either households and the number of members or what percentage of services revenues are there and what behavior you're seeing? Yeah, we haven't explicitly broken out the percent of services that is membership. But we did say we now have 7 million members, and that is compared to 5.8 million at the start of the year. During Q4, we actually signed up 35% more paid members compared to the fourth quarter of last year. So remember that we have a new tier in there.

Gregory Scott Melich: Oh, sorry. Please go ahead.

Gregory Scott Melich: Oh thanks.

Gregory Scott Melich: To follow up on a membership and services could you give us an update there in terms of your household and a number of members or what percentage of services revenues or their behavior, you're saying.

Gregory Scott Melich: Yeah, we have it explicitly broken out the percent of services that is membership, but we did say, we now have 7 million members and that as compared to 5.8 million at the start of the year. During the Q4, we actually signed up 35% more paid members compared to the fourth quarter of last year. So remember that we have a new.

Corie Sue Barry: So we have the My Best Buy Total and the My Best Buy Plus. And so that has driven some growth. And I think it's important to remember, our goal here is to drive engagement and increased share of wallet. And what we do is we're doing that across three main aspects. You hit on acquisition, but there's also, we talked on the call about engagement and retention.

Gregory Scott Melich: Here and there so we have that <unk> I total under my best buy plus and so that has driven some some gross and I think it's important to remember our goal here is to drive engagement and increased share of wallet and what we do is we're doing that across three main aspects you hit on acquisition, but there's also we talked on the call about engagement.

Corie Sue Barry: And I think we're happy because right now, our paid members continue to interact with the brand more frequently compared to non-members. And in addition, as we've been analyzing incremental spend, that says, based on data from Cercana, that indicates that our total tech members are shifting their share of wallet to us as well. So it's not just about how many of them are using services, but it's also about how frequently are they interacting with the brand, and are we keeping them loyal to the Best Buy brand? And I think we're happy, again, with what we're seeing so far there and making good progress. We haven't yet completed the new rollout.

Gregory Scott Melich: And retention and I think we're happy because right now are paid members continue to interact with the brand more frequently compared to non members.

Gregory Scott Melich: And in addition, as we've been analyzing incremental spend that says based on data from <unk> that indicates that our total tech number's are shifting a share of wallet to us as well. So it's not just about how many of them are using services, but it's also about how frequently are they interacting with the brand and I'll be keeping them loyal to the best buy.

Gregory Scott Melich: Brandon I think we're happy again with what we're seeing so far there and making good progress we haven't yet lapped the new roll out. So you know we still have a little bit of time to understand just how well where we're doing in that day in but right now we're really happy with our ability to acquire member's maybe just for a little additional context. This services growth you see at 6%.

Matthew M. Bilunas: So, you know, we still have a little bit of time to understand just how well we're doing in that vein, but right now, we're really happy with our ability to acquire members. Maybe just for a little additional context, the services growth you see at 6% in Q4, that growth was driven more by increased revenue collected from our installation business. As Corey mentioned, we've shifted and changed our membership program.

Gregory Scott Melich: Q for that growth was driven more by increased revenue collected from our installation business is Cory mentioned, we'd shifted changed our membership program. So we're seeing more of that revenue growth that would come off the installation revenue that way I'll collect them because it's no longer part of the benefits of total tech.

Corie Sue Barry: So we're seeing more of that revenue growth now come from the installation revenue that we're now collecting because it's no longer part of the benefits of total tech. And so although we're growing more members, the price point is changing a bit. So you see more coming from that installation business from a dollar perspective than you would have seen in previous quarters. Great. And my follow-up question on that is really, I think you mentioned that ad expense or marketing expense would be up 50 million this year. Could you just say what that's on? And I'm curious, are there any efforts being made?

Gregory Scott Melich: And so the although we're throwing more members the price point is changing a bit so you see more growth coming from it installation business.

Gregory Scott Melich: Dollar perspective, then you would've seen in previous quarters.

<unk> M. At all of US on that is really I think you mentioned that add expense or marketing expensive 50 million. This year could you say, what that's on and I'm curious are there any efforts to use all the data that you're getting whether it from your members are just customers in general to maybe get some revenue from all that day.

Matthew M. Bilunas: to use all the data that you're getting, whether it's from your members or just customers in general, to maybe get some revenue from all that data and insight. Sure, I'll start and then Corie can jump on the last part of the question. I think overall, we're adding about $50 million in advertising expenses this year. It's for a number of different things, and I'll give you a couple items.

Gregory Scott Melich: Get an insight.

Sure I'll I'll start and then of course it can jump on the last part of the question.

Gregory Scott Melich: Overall, we're adding about $50 million of advertising expenses here. It's it's for a number of different things and I'll I'll I'll give you a couple of items first we are expecting a Brian relaunched the back half of this year. So some of this.

Matthew M. Bilunas: First, we are expecting a brand relaunch in the back half of this year. So some of this money will be used for some additional branding spend that we have. I would also say this is a very unique year in terms of having things like the Olympics and a presidential election.

Speaker Change: Money is used for some additional branding spend that we have I would say also this is <unk>.

Matthew M. Bilunas: So the inflation on marketing actually comes up in periods during these periods of time, which is part of that increase. We're also trying to ensure that we are positioned right across our key categories and making sure we have the right amount of low funnel marketing spend pointed at growing our categories when we need to. So I think it's a collection of those things that I would explain. It all adds up to that $50 million.

Speaker Change: Nuclear in terms of we have things like the Olympics and a presidential options so that the.

Speaker Change: Inflation on marketing actually comes up in periods in these periods of time, which is part of that increase. We're also trying to ensure that we are a position right across our key categories and making sure. We have the right amount of low <unk> marketing spend pointed at groveling or categories. When when <unk> when we need to so I think it's a collection of those things that I wouldn't explain it.

Corie Sue Barry: So again, positioning ourselves for great, great stabilization and growth in the future and making sure we're in the market in the right spots. And I love the question about data. It's one of the most powerful tools we have in terms of how we reach our customers, and so we have a Best Buy ads business that continues to grow top line collections and profitability. And it's been outpacing our core business, I think, as you would expect. And I think it's important to know this isn't new for us. I mean, at Best Buy, we've had very close partnerships with our vendors for a very long time in terms of our advertising. It has gotten more scientific.

Speaker Change: It all adds up to that $50 million, so again positioning ourselves for a great a great stabilization and growth in the future and making sure. We're in the market in the right spots.

Speaker Change: I love that the question about data, it's one of the most powerful tools, we have in terms of how we reach our customers and so we have a best buy ads business that continues to grow top line collections and profitability and it's been outpacing our core business I think as you would expect and I think it's important to know this isn't new for US I mean at best buy we've had very.

Speaker Change: Three close partnerships with our vendors for a very long time in terms of our advertising. It has gotten more scientific it has gotten a lot more personalized and I think that first party data that we have is a much more powerful than it has ever been historically and obviously, we can also leverage our strong share possession in places like even smart T.

Corie Sue Barry: It has gotten a lot more personalized, and I think that the first-party data that we have is much more powerful than it has ever been historically. And obviously, we can also leverage our strong share position in places like even Smart TV, where we do have established relationships and partnerships with both Amazon on Fire TV and Roku. And so we also have partnerships that allow us to partner on those leading streaming platforms, and we can grow that advertising business and deliver even more value to our vendor partners through some of the partnerships we have uniquely there. So you're right, the data that we have stretches not only on our own platforms like the app but also into how uniquely we can serve those customers. Yeah, well, thanks, and good luck. Thank you. Today's final question will come from the line of Joe Feldman with Telsey Advisory Group. Please go ahead.

Speaker Change: <unk>, where we do have established relationships and partnerships without Amazon on fire television and broke Lou and so we also have partnerships that allow us.

Speaker Change: To partner around those bleeding streaming platforms, and we can grow that advertising business and deliver even more value to our vendor partners through some of the partnerships. We have uniquely there so you're right that the data that we have stretches not only on our own platforms like the app. It stretches into how uniquely we can serve those customers.

Speaker Change: Well, thanks, and good luck.

Speaker Change: Thank you.

Corie Sue Barry: Hey guys, thanks for taking the question. Adam, I want to follow up. Can you share a little more color on the store refreshes and what we should expect to see, you know, over the course of the year as you touch up the stores and maybe make them a little more engaging from a merchandising standpoint? Yeah, absolutely. Let me start by being clear; we're not remodeling every store in the fleet. So I have to be clear there. But what we are doing is taking, I would argue, kind of a stronger position than we ever have, to ensure that the shopping experience reflects that kind of excitement and that sparkle that technology brings to life. So we've given examples before, like some of the investments that we are making in our end caps and those vendor experiences that you see throughout the store. Super important for positions in the store because they tend to be the most customer-facing.

Speaker Change: Today's final question will come from the line of Joe Feldman with Telsey Advisory Group. Please go ahead.

Joseph Isaac Feldman: Hi, guys, Sir Thanks for taking my question.

Joseph Isaac Feldman:

Joseph Isaac Feldman: Can you share a little more color on the store refreshes and what we should expect to see you know over the course of the year as you do touch up the stores and maybe make them a little more engaging from a merchandising standpoint.

Speaker Change: Yeah, absolutely let me start with you declare we're not remodeling every store in the fleet. So I'd have to be clear there, but what we are doing is taking I would argue kind of a stronger position than we ever have to ensure that the shopping experience reflects that kind of excitement and that's sparkle.

Speaker Change: Technology brings to life. So we've given examples before like somebody the investments that we are making an R. N caps and those vendor experiences that you see throughout the store super important for positions in the store because they tend to be the most customer facing and so are you gonna see has continued to bring those to life I think you're also going to see his right side.

Corie Sue Barry: And so you're going to see us continue to bring those to life. And I think you're also going to see us right-size a number of the categories. And that's particular emphasis on that center of the store area because we want that excitement, we want that relevancy, and we also want it to be efficient for our associates. And so we're moving physical media, updating mobile, digital imaging, computing, tablets, and smart home, things that allow us to make that center of the store really feel a bit more vibrant and exciting. And so the goal here is not that every single store is going to look like an experience. The goal, though, is that every single one has a bit of a refreshed look and feel, has more of those vendor partnership opportunities, and has a better ability for our associates to merchandise in a way that makes everything feel kind of full and exciting.

Speaker Change: I as a number of the categories and in that particular emphasis on that center of the sore area. Because we want that excitement we want that relevancy. We also wanted to be efficient for our associates and so we're moving physical media updating mobile digital imaging computing tablets and smart home thing that allows us to make that center of the store really feel.

Speaker Change: A bit more vibrant and and exciting and so the goal here is not that every single sorry, it's gonna look like an experienced or at the goal. Though is that every single one has a bit of a refresh look and feel has more of those vendor partnership opportunities and has a better ability for our associates to merchandise in a way that makes everything feel kind of <unk>.

Corie Sue Barry: And with that, oh, do you have a follow-up, Joe? Sorry. No, no, no. That's good.

Speaker Change: An exciting.

Operator: You can we end it there. Oh, no, no problem. Thanks for the question. And with that, that was our last question.

Speaker Change: And with that do you have a follow up Joe sorry, No no no. That's good you can we can edit there sorry, I'm fine. Thanks, Oh no no problem. Thanks for the question and with that that was our last question I want to thank everyone for joining us today during what I know is a very busy earning season, we look forward to updating you on our results and progress during our next calling me have a great day.

Operator: I want to thank everyone for joining us today during what I know is a very busy earnings season. We look forward to updating you on our results and progress during our next call in May. Have a great day. Thank you for all. Thank you all for joining today's conference call. You may now disconnect; you will be updated on our results and progress during our next call in May. Have a great day!

Speaker Change: Thank you for all thank you all for joining to this conference calls you may now disconnect.

Speaker Change: You're on our results and progress during our next calling me have a great day.