Q2 2025 Best Buy Co Inc Earnings Call

August 29, 2024

Ladies and gentlemen, thank you for standing by. Welcome to Best Buy's second quarter fiscal 2025 earnings conference call.

Operator: Quarter, Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, you will need to press star one on your phone. If you choose to be taken out of the question queue, please press the pound key.

Speaker Change: At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press star 1 on your phone.

Operator: As a reminder, this call is being recorded for playback and will be available by approximately 1 o'clock PM Eastern Time today. If you need assistance on the call at any time, please press star zero and an offer.

Speaker Change: If you choose to be taken out of the question queue, please press the pound key. As a reminder, this call is being recorded for playback and will be available by approximately 1 o'clock PM Eastern Time today.

Speaker Change: If you need assistance on the call at any time, please press star zero and an operator will assist you. I will now turn the conference call over to Molly O'Brien by President of Investor Relations.

Molly O'Brien: I will now turn the conference call over to Molly O'Brien, Vice President of Investor Relations.

Molly O'Brien: Thank you and good morning, everyone. Joining me on the call today are Corie Barry, our CEO, and Matt Ballunas, our CFO. During the call today, we will be discussing both GAP and non-GAP financial measures.

Molly O'Brien: Thank you and good morning everyone. Joining me on the call today are Corie Barry, our CEO and Mepalunas, our CFO. During the call today we will be discussing both GAP and non-GAP financial measures. A reconciliation of these non-GAP financial measures to the most directly comparable GAP financial measures.

Molly O'Brien: A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and an explanation of why these non-GAAP financial measures are useful. And we found in this morning's earnings release, which is available on our website, investors.bestby.com.

Molly O'Brien: and an explanation of why these non-gap financial measures are useful, and be found in this morning's earnings release, which is available on our website. Investors.bestbyte.com.

Molly O'Brien: Some of the statements we will make today are considered forward looking within the meaning of the Private Security's Litigation Reform Act of 1995. These statements may address the financial condition, business initiatives, growth plans, investments, and expected performance of the company, and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.

Molly O'Brien: Some of the statements we will make today are considered forward-looking within the meeting of the private securities litigation reform act of 1995.

Molly O'Brien: These statements may address the financial condition, business initiatives, growth plans, investments, and an expected performance of the company, and our subject to risk and uncertainties that could cause actual results to differ materially from such forward-looking statements.

Molly O'Brien: 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 obligations, update, or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call.

Molly O'Brien: Please refer to the company's current earnings release and our most recent 10K and subsequent 10Ks from more information on these risks and uncertainties.

Corie: 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.

Molly O'Brien: I will now turn the call over to Corie.

Corie Barry: Good morning, everyone, and thank you for joining us. Today we are reporting better-than-expected results for the second quarter. Our comparable sales performance sequentially improved to a decline of 2.3%, compared to our guidance of down 3%, and last quarter's decline of 6.1%. At the same time, we delivered a non-GAAP operating income rate of 4.1%, which was higher than our guide of 3.5%, due to lower than expected SG&A expense. On a year-over-year basis, our non-GAAP OI rate expanded 30 basis points, largely due to gross profit rate expansion in our membership and services offers. From a category perspective, we drove comparable sales growth in tablets, computing, and services.

Corie: Good morning, everyone and thank you for joining us.

Corie: Today we are reporting better than expected results for the second quarter. Our comparable sales performance sequentially improved to a decline of 2.3% compared to our guidance of down 3%. And last quarter's decline of 6.1%.

Corie: At the same time, we delivered a non-gap operating and come rate of 4.1% which was higher than our guide of 3.5% due to lower than expected SG&A expense.

Corie: On a year over year basis, our non-gap OI rate expanded 30 basis points, largely due to gross profit rate expansion in our membership and services offers.

Operator: Quarter, Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you will need to press star one on your phone. If you choose to be taken out of the question queue, please press the pound key. As a reminder, this call is being recorded for playback and will be available by approximately 1 o'clock PM Eastern time today. If you need assistance on the call at any time, please press star zero and an offer.

Corie: From a category perspective, we drove comparable sales growth in tablets, computing and services. This grows with more than offset by declines in appliances, home theater, and gaming.

Corie Barry: This gross was more than offset by declines in appliances, home theater, and gaming. We delivered strong results in our domestic tablet and computing categories, which together posted comparable sales growth of 6% versus last year. With our market position, expert sales associates, and compelling merchandising, we capitalized on demand driven by our customers' desire to replace or upgrade their products, combined with new innovations. Overall, customers remained deal-focused and attracted to more predictable sales moments. With 4th of July, Black Friday, and July, and the beginning of back-to-school sales events, July comps were the best of the quarter. In this environment, many categories, including major appliances and TVs, continue to be very promotional in pursuit of stimulating interest and sales.

Corie: We delivered strong results in our domestic tablet and computing categories, which together posted comparable sales growth of 6% versus last year.

Corie: with our Market Position, Experts Sales Associates, and Compiling Merchandising, we capitalized on demand driven by our customers' desire to replace or upgrade their products, combined with new innovation.

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 Ballunas, our CFO. During the call today, we will be discussing both GAP and non-GAP financial measures. A reconciliation of these non-GAP financial measures to the most directly comparable GAP financial measures and an explanation of why these non-GAP financial measures are useful.

Corie: Overall, customers remained field-focused and attracted to more predictable sales moments.

Corie: with 4th of July, Black Friday in July, and the beginning of back to school sales events, July Comps, where the best of the quarter.

Corie: In this environment, many categories, including major appliances and TVs, continue to be very promotional and pursuit of stimulating interest and sales. We were targeted and thoughtful regarding where and when we made our promotional investments, strategically balancing possibility and sales.

Corie Barry: We were targeted and thoughtful regarding where and when we made our promotional investments, strategically balancing possibility and sales. Our omnichannel operations provided strong support for our Q2 online sales, which remain consistent at 32% of domestic revenue. Almost 60% of our packages are delivered or available for pickup within one day, and more than 40% of our digital sales are picked up in stores by our customers, with more than 90% of these orders available within just 30 minutes. Our paid membership program continued to drive positive contributions to our results as we grew the base of members and the impact from the changes we made to the program last year once again delivered better-than-expected profitability.

Molly O'Brien: And we found in this morning's earnings release, which is available on our website, investors.bestby.com. Some of the statements we will make today are considered forward looking within the meeting of the Private Security's 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 risk and uncertainties that could cause actual results to differ materially from such forward-looking statements.

Molly O'Brien: Please refer to the company's current earnings release and our most recent 10K and subsequent 10Qs for more information on these risks and uncertainties. The company undertakes no obligations, update, or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call.

Corie: Our Army Channel operations provided strong support for our Q2 online sales, which remain consistent at 32% of domestic revenue.

Speaker Change: Almost 60% of our packages are delivered or available for pick-up within one day, and more than 40% of our digital sales are picked up in stores by our customers, with more than 90% of these orders available within just 30 minutes.

Speaker Change: Our paid membership program continued to drive positive contributions to our results as we grew the base of members and the impacts from the changes we made to the program last year once again delivered better than expected profitability.

Corie Barry: As always, I am grateful for the hard work, dedication, and drive our team members across the company showed to deliver these Q2 results. As we look to the back half of the year, we expect our industry to continue to show increasing stabilization. Last quarter, we said we were likely trending toward the midpoint of our original comparable sales guidance of flat to down 3%. Today, we are updating our annual sales guidance to a decline in the range of 1.5% to 3%. At the same time, we are raising our earnings per share guidance range as we largely flow through the better-than-expected results of the first half of the year.

Speaker Change: As always, I am grateful for the hard work, dedication, and drive our team members across the company showed to deliver these Q2 results.

Corie Barry: I will now turn the call over to Corie. Good morning, everyone, and thank you for joining us. Today we are reporting better than expected results for the second quarter. Our comparable sales performance sequentially improved to a decline of 2.3%, compared to our guidance of down 3%, and last quarter's decline of 6.1%. At the same time, we delivered a non-GAP operating income rate of 4.1%, which was higher than our guide of 3.5%, due to lower than expected SGNA expense.

Speaker Change: As we look to the back half of the year, we expect our industry to continue to show increasing stabilization. Last quarter, we said we were likely trending toward the midpoint of our original comparable sales guidance of flat to down 3%.

Speaker Change: Today we are updating our annual sales guidance to a decline in the range of 1.5% to 3%. At the same time, we are raising our earnings per share guidance range as we largely flow through the better than expected results of the first half of the year.

Corie Barry: On a year-over-year basis, our non-GAP OI rate expanded 30 basis points, largely due to gross profit rate expansion in our membership and services offers. From a category perspective, we drove comparable sales growth in tablets, computing, and services. This gross was more than offset by declines in appliances, home theater, and gaming. We delivered strong results in our domestic tablet and computing categories, which together posted comparable sales growth of 6% versus last year.

Corie Barry: From a major category standpoint, we continue to expect sales in our computing category and services to show growth for the year. While most other categories are expected to be down for the year, we expect ongoing improvement in their trends at the high end of our annual comp sales guidance. For the third quarter specifically, we expect comparable sales to be down approximately 1% versus last year. Based on our month-to-date performance, we estimate August comparable sales will be approximately flat to last year. We are encouraged by these results and continue to be very thoughtful about the time periods between sales events, as well as possible election-related impact to demand in October.

Speaker Change: From a major category standpoint, we continue to expect sales in our computing category and services to show growth for the year. While most other categories are expected to be down for the year, we expect ongoing improvement in their trends at the high end of our annual Comp Sales Guidance.

Speaker Change: For the third quarter specifically, we expect comparable sales to be down approximately 1% versus last year. Based on our month to date performance, we estimate August comparable sales will be approximately flat to last year.

Corie Barry: With our market position, expert sales associates, and compelling merchandising, we capitalized on demand driven by our customers' desire to replace or upgrade their products combined with new innovations. Overall, customers remained deal-focused and attracted to more predictable sales moments. With 4th of July, Black Friday and July, and the beginning of back-to-school sales events, July comps were the best of the quarter. In this environment, many categories, including major appliances and TVs, continue to be very promotional in pursuit of stimulating interest and sales.

Speaker Change: We are encouraged by these results and continue to be very thoughtful about the time period between sales events, as well as possible election-related impact to demand in October.

Corie Barry: Our strategic plan and priorities for the year have been built to sharpen our customer experiences and industry positioning while also maintaining our profitability in the still uneven environment. At the beginning of the year, we laid out our fiscal 25 priorities. They are: one, invigorate and progress targeted customer experiences; two, drive operational effectiveness and efficiency; three, continue our disciplined approach to capital allocation; and four, explore pilot and drive incremental revenue streams. I would like to provide some highlights of our progress. We have initiatives targeting customer experiences across our digital and store channels. We are encouraged by the material, sequential, and year-over-year improvement in our relationship NPS, which tracks Zoomers' likelihood to recommend Best Buy.

Speaker Change: Our strategic plan and priorities for the year have been built to sharpen our customer experiences and industry positioning while also maintaining our profitability in the still uneven environment.

Speaker Change: At the beginning of the year, we laid out our fiscal 25 priority. They are, one, and figure out and progress targeted customer experiences to drive operational effectiveness and efficiency.

Speaker Change: 3. Continue our disciplined approach to capital allocation and 4. Explore pilot and drive incremental revenue stream.

Speaker Change: I would like to provide some highlights of our progress.

Speaker Change: We have an initiative targeting customer experiences across our digital and store channels. We are encouraged by the materials, sequential and year-over-year improvement in our relationship NPS, which traps consumers likely who'd to recommend best-by.

Corie Barry: In our app, our increasingly personalized, relevant, and motivational content is driving increased engagement with our customers. Testing has shown that customers receiving our personalized homepage are engaging in content, product, and tools in our app, almost 70 percent more than customers who didn't receive it. During the quarter, we completed the roll-out of this personalization to all our app users. We also scaled other new app experiences, including a digital wallet that provides easy access to payment methods, coupons and offers, and deal alerts that allow customers to be notified when their favorite products go on sale. Outside of the app, we continue to focus on making the mobile shopping experience even better with faster browsing, more sophisticated search, and enriched content.

Corie Barry: Our paid membership program continued to drive positive contributions to our results as we grew the base of members and the impact from the changes we made to the program last year once again delivered better than expected profitability. As always, I am grateful for the hard work, dedication, and drive our team members across the company showed to deliver these Q2 results.

Speaker Change: In our app, our increasingly personalized, relevant and motivational content is driving increasing engagement with our customers.

Speaker Change: Testing has shown that customers receiving our personalized homepage are engaging in content, product, and tools in our app, almost 70% more than customers who didn't receive it.

Speaker Change: During the quarter, we completed the rollout of this personalization to all our app users.

Corie Barry: As we look to the back half of the year, we expect our industry to continue to show increasing stabilization. Last quarter, we said we were likely trending toward the midpoint of our original comparable sales guidance of flat to down 3%. Today, we are updating our annual sales guidance to a decline in the range of 1.5% to 3%. At the same time, we are raising our earnings per share guidance range as we largely flow through the better than expected results of the first half of the year.

Speaker Change: We also scaled other new app experiences, including a digital wallet that provides easy access to payment methods, coupons and offers, and deal alerts that allow customers to be notified when their favorite products go on sale.

Speaker Change: Outside of the app, we continue to focus on making the mobile shopping experience even better with faster browsing, more sophisticated search and enriched content.

Corie Barry: During the quarter, we launched a market-leading new experience for our in-home delivery and installation customers. On the day of their appointment, customers can now digitally track the live, to the minute ETA of their in-home delivery and installation. Already 60% of customers are engaging with the tracking, and the feedback has been overwhelmingly positive. Not only is this a great experience for customers, but it should also lower costs by reducing calls to our customer service team. We are able to offer this new customer experience because of the work we did last year to more efficiently and effectively route all of our in-home delivery and installation trucks using AI technology.

Speaker Change: During the quarter, we launched a market-leading new experience for our in-home delivery and installation customers.

Corie Barry: From a major category standpoint, we continue to expect sales in our computing category and services to show growth for the year. While most other categories are expected to be down for the year, we expect ongoing improvement in their trends at the high end of our annual comp sales guidance. For the third quarter specifically, we expect comparable sales to be down approximately 1% versus last year. Based on our month-to-date performance, we estimate August comparable sales will be approximately flat to last year. We are encouraged by these results and continue to be very thoughtful about the time periods between sales events as well as possible election-related impact to demand in October.

Speaker Change: On the day of their appointment, customers can now digitally track the lives to the minute ETA of their in-home delivery and installation.

Speaker Change: already 60% of customers are engaging with the tracking and the feedback has been overwhelmingly positive. Not only is this a great experience for customers, but it should also lower costs by reducing calls to our customer service team.

Speaker Change: We are able to offer this new customer experience because of the work we did last year to more efficiently and effectively route all of our in-home delivery and installation trucks using AI technology.

Corie Barry: In our stores, we are refreshing the fleet to update merchandising presentations across multiple categories. We began in Q2 and will finish in Q3 ahead of the holiday season. Not every store will be touched in the same way, of course, but our plans include optimizing and refreshing mobile phones, headphones, smart home, and digital imaging and creating new experiences in tablets and gaming and computing monitors. In the areas completed in Q2, we already can see related sales improvements, particularly in monitors and digital imaging. At the same time, we are updating or creating new branded in-store experiences with our vendor partners, including GoPro, Tesla, LoveSac, DreamWorks, and Starlink.

Speaker Change: In our stores, we are refreshing the fleet to update merchandising presentations across multiple categories.

Speaker Change: We began in Q2 and we'll finish in Q3 ahead of the holiday season. Not every store will be touched in the same way of course.

Corie Barry: Our strategic plan and priorities for the year have been built to sharpen our customer experiences and industry positioning while also maintaining our profitability in the still uneven environment. At the beginning of the year, we laid out our fiscal 25 priorities. They are, one, invigorate and progress targeted customer experiences, two, drive operational effectiveness and efficiency, three, continue our disciplined approach to capital allocation, and four, explore pilot and drive incremental revenue streams. I would like to provide some highlights of our progress.

Speaker Change: But our plans include optimizing and refreshing mobile phones, headphones, smart home, and digital imaging, and creating new experiences in tablets and gaming and computing monitors.

Speaker Change: In the areas completed in Q2, we already can see related sales improvements, particularly in monitors and digital imaging.

Speaker Change: At the same time, we are updating or creating new branded, in-store experiences with our vendor partners, including GoPro, Tesla, LoveSack, GreenWorks, and Starlink.

Corie Barry: We are adding a new merchandising solution in hundreds of stores. This is a modular experience that will transition more frequently to provide vendors the opportunity to create a branded stage for new technology solutions and innovations. And of course, we continue to update departments as new products come out. For example, computing looks different than it did six months ago as we refresh the department around Co-Pilot Plus. To support the expected growth and customer demand during the quarter, we added fully dedicated expert labor to our computing department in hundreds of stores. Toward the end of the quarter, we began the process to do the same in our home theater and major appliance department.

Corie Barry: We have initiatives targeting customer experiences across our digital and store channels. We are encouraged by the material, sequential and year-over-year improvement in our relationship NPS, which tracks Zoomers' likelihood to recommend Best Buy. In our app, our increasingly personalized, relevant, and motivational content is driving increased engagement with our customers. Testing has shown that customers receiving our personalized homepage are engaging in content, product and tools in our app, almost 70 percent more than customers who didn't receive it.

Speaker Change: We are adding a new merchandising solution in hundreds of stores. This is a modular experience that will transition more frequently to provide vendors the opportunity to create a branded stage for new technology solutions and innovation. And of course, we continue to update departments as new products come out.

Speaker Change: For example, computing looks different than it did six months ago, as we reached the department around co-pilot class.

Speaker Change: To support the expected growth and customer demand, during the quarter, we added fully dedicated expert labor to our computing department in hundreds of stores. Towards the end of the quarter, we began the process to do the same in our home theater and major appliance department.

Corie Barry: During the quarter, we completed the roll-out of this personalization to all our app users. We also scaled other new app experiences, including a digital wallet that provides easy access to payment methods, coupons and offers, and deal alerts that allow customers to be notified when their favorite products go on sale. Outside of the app, we continue to focus on making the mobile shopping experience even better with faster browsing, more sophisticated search and enriched content.

Corie Barry: We have continued to focus on certifications and trainings for all store employees. Our certifications are earned by department. So if an associate is certified in home theater, for example, it validates his or her ability to effectively utilize the knowledge and skills necessary to deliver an outstanding customer experience. Employees practice with their leader, each other, or specialty coaches to role play, receive feedback, and ultimately become certified. We continue to see our certified employees, on average, drive higher revenue per transaction and stronger overall customer experience rating compared to non-certified employees. We are ahead of plans with more than 60% of our sales associates certified in at least two categories.

Speaker Change: We have continued to focus on certifications and trainings for all storm plays.

Speaker Change: Our certifications are earned by department, so if an associate is certified in home theater, for example, it validates his or her ability to effectively utilize the knowledge and skills necessary to deliver an outstanding customer experience.

Speaker Change: In plays practice with their leader, each other, or specialty coaches to role play receive feedback and ultimately become certified.

Corie Barry: During the quarter, we launched a market leading new experience for our in-home delivery and installation customers. On the day of their appointment, customers can now digitally track the live to the minute ETA of their in-home delivery and installation. Already 60% of customers are engaging with the tracking and the feedback has been overwhelmingly positive. Not only is this a great experience for customers, but it should also lower costs by reducing calls to our customer service team.

Speaker Change: We continue to see our certified employees on average drive higher revenue protection and stronger overall customer experience rating compared to non-certified employees. We are ahead of plan with more than 60% of our sales associates certified in at least two categories.

Corie Barry: Our training program provides continuous learning to keep employees updated on new products and technology. For example, we trained 30,000 sales associates and geek flood agents on the new AI technology. Our vendor partnerships are also an important part of the expertise we provide customers in our stores. Last quarter, we announced an expansion of our vendor partnership with Samsung to include vendor-provided expert labor in appliance departments across hundreds of stores. More recently, Verizon, AT&T, TCL, LG, and others have all increased their labor investments in Best Buy store locations. Across our business, we are reinforcing our unique experiences to capitalize on demand we expect from the confluence of replacement, upgrade, and innovation in the coming years.

Speaker Change: Our training program provides continuous learning to keep employees updated on new products and technologies. For example, we train 30,000 sales associates and Geek Squad agents on the new AI technology.

Corie Barry: We are able to offer this new customer experience because of the work we did last year to more efficiently and effectively route all of our in-home delivery and installation trucks using AI technology. In our stores, we are refreshing the fleet to update merchandising presentations across multiple categories. We began in Q2 and will finish in Q3 ahead of the holiday season. Not every store will be touched in the same way, of course, but our plans include optimizing and refreshing mobile phones, headphones, smart home and digital imaging and creating new experiences in tablets and gaming and computing monitors.

Speaker Change: Our vendor partnerships are also an important part of the expertise we provide customers in our stores. Last quarter, we announced an expansion of our vendor partnership with Samsung to include vendor provided expert labor in appliance departments across hundreds of stores.

Speaker Change: More recently, Verizon, AT&T, TCL, LG, and others have all increased their labor investments in best-by-store location.

Speaker Change: Across our business, we are reinforcing our unique experiences to capitalize on demand we expect for the confluence of replacement, upgrade and innovation in the coming years.

Corie Barry: In the areas completed in Q2, we already can see related sales improvements, particularly in monitors and digital imaging. At the same time, we are updating or creating new branded in-store experiences with our vendor partners, including GoPro, Tesla, LoveSack, DreamWorks and Starlink. We are adding a new merchandising solution in hundreds of stores. This is a modular experience that will transition more frequently to provide vendors the opportunity to create a branded stage for new technology solutions and innovations.

Corie Barry: In Q2, we believe the growth in laptop sales continued to be largely driven by customers' desire to replace and upgrade their products. The performance of Copilot Plus in the quarter was in line with our expectations, but at this early point, a small part of the total revenue. We believe we are just at the beginning of the impact of AI on tech innovation and customer demand. For example, the June introduction of the Copilot Plus laptops was one of the first launches with important AI capabilities still to be released. In addition, Apple Intelligence has been announced with capabilities and features expected to be released over time that will be available across devices.

Speaker Change: In Q2, we believe the growth and laptop sales continued to be largely driven by customers desire to replace and upgrade their products.

Speaker Change: The performance of co-pilot plus in the quarter was in line with our expectations, but at this early point, a small part of the total revenue.

Speaker Change: We believe we are just at the beginning of the impact of AI on tech innovation and customer demand. For example, the June introduction of the Copilot plus laptops was one of the first launches. With an important AI capability still to be released.

Corie Barry: And of course, we continue to update departments as new products come out. For example, computing looks different than it did six months ago as we refresh the department around co-pilot plus. To support the expected growth and customer demand during the quarter, we added fully dedicated expert labor to our computing department in hundreds of stores. Toward the end of the quarter, we began the process to do the same in our home theater and major appliance department.

Speaker Change: In addition, Apple Intelligence has been announced with capabilities and features expected to be released over time that will be available across devices. We believe AI inspired capabilities and innovation will continue to spread across categories and devices over the next few years.

Corie Barry: We believe AI-inspired capabilities and innovation will continue to spread across categories and devices over the next few years.

Corie Barry: We also believe the role our customers want us to play in their lives has evolved. To bring this to life and to highlight our tech and our unique positioning, we recently kicked off our new branding as we entered back to school. The new branding is centered on creating customer experiences that inspire curiosity and enable discovery and includes asking our customers what is, as well as a new tagline, "imagine that." This branding reflects the role that Best Buy and our amazing associates play in our customers' research and purchase journey. And our training is also focused on bringing these experiences to life.

Speaker Change: We also believe the role our customers want us to play in their lives has evolved. To bring this to life and to highlight our tech and our unique positioning, we recently kicked off our new branding as we entered back to school.

Corie Barry: We have continued to focus on certifications and trainings for all store employees. Our certifications are earned by department. So if an associate is certified in home theater, for example, it validates his or her ability to effectively utilize the knowledge and skills necessary to deliver an outstanding customer experience. Employees practice with their leader, each other or specialty coaches to role play, receive feedback and ultimately become certified. We continue to see our certified employees on average drive higher revenue per transaction and stronger overall customer experience rating compared to non certified employees.

Speaker Change: The new branding is centered on creating customer experiences that inspire curiosity and enable discovery and includes asking our customers what it, as well as a new tagline, imagine that.

Speaker Change: This branding reflects the role that best by and our amazing associates play in our customers' research and purchase journey. And our training is also focused on bringing these experiences to life.

Corie Barry: Additionally, along with our new tagline, we're giving our brand a modern look and feel with new colors and a new creative construct, which will be phased in over time.

Speaker Change: Additionally, along with our new tagline, we're giving our brand a modern look and feel with new colors and a new creative construct which will be phased in over time.

Corie Barry: We are ahead of plans with more than 60% of our sales associates certified in at least two categories. Our training program provides continuous learning to keep employees updated on new products and technology. For example, we trained 30,000 sales associates and geek flood agents on the new AI technology. Our vendor partnerships are also an important part of the expertise we provide customers in our stores. Last quarter, we announced an expansion of our vendor partnership with Samsung to include vendor provided expert labor in appliance departments across hundreds of stores. More recently, Verizon, AT&T, TCL, LG, and others have all increased their labor investments in Best Buy store locations.

Corie Barry: We are making good progress on the second key priority of our fiscal 25 strategy, which is to drive operational effectiveness and efficiency. As is often the case, much of what we are doing to improve the effectiveness of our customer and employee experiences also generates efficiencies. The evolution of our store model is a great example. As you may recall, we decreased the store staff and labor hours during the pandemic when we found more of our revenue structurally shift to our digital channel. We have been iterating ever since to support the ever changing customer, balancing our need to react to the sales environment with our desire to provide the experience customers expect.

Speaker Change: We are making good progress on the second key priority of our fiscal 25 strategy, which is to drive operational effectiveness and efficiency. As is often the case, much of what we are doing to improve the effectiveness of our customer and employee experiences, also generates efficiencies.

Speaker Change: The evolution of our store model is a great example. As you may recall, we decreased the store staff and labor hours during the pandemic when we saw more of our revenues structurally shift to our digital channel.

Speaker Change: We have been iterating ever since to support the ever-changing customer, balancing our need to react to the sales environment with our desire to provide the experience customer's expect.

Corie Barry: Last year, we took actions to streamline our leadership structure, which has allowed us to shift dollars into more customer-facing sales associate hours in our store. More recently, during the second quarter, we made changes to our dedicated in-home sales team that helped fund the investments into our home theater and appliances store labor. While in-home consultations continue to be an important competitive advantage, the volumes are not at the level envisioned a few years ago when we expanded the dedicated in-home team. Therefore, we both reduced the overall number of employees and brought the home theater and appliances experts back into the stores to better balance field labor resources and make sure we are providing the optimal experience for customers where they want to shop.

Speaker Change: Last year, we took actions to streamline our leadership structure, which has allowed us to shift dollars into more customer-facing sales associate hours in our stores.

Corie Barry: Across our business, we are reinforcing our unique experiences to capitalize on demand we expect from the confluence of replacement, upgrade, and innovation in the coming years. In Q2, we believe the growth in laptop sales continued to be largely driven by customers desire to replace and upgrade their products. The performance of Copilot Plus in the quarter was in line with our expectations, but at this early point, a small part of the total revenue.

Speaker Change: More recently, during the second quarter, we made changes to our dedicated in-home sales team that helped fund the investments into our home theater and appliances store labor.

Speaker Change: While in-home consultations continue to be an important competitive advantage, the volumes are not at the level envisioned a few years ago when we expanded the dedicated in-home team.

Speaker Change: Therefore, we both reduce the overall number of employees and brought the home theater and appliances experts back into the stores to better balance field labor resources and make sure we are providing the optimal experience for customers where they want to shop.

Corie Barry: We believe we are just at the beginning of the impact of AI on tech innovation and customer demand. For example, the June introduction of the Copilot Plus laptops was one of the first launches with an important AI capabilities still to be released. In addition, Apple Intelligence has been announced with capabilities and features expected to be released over time that will be available across devices. We believe AI-inspired capabilities and innovation will continue to spread across categories and devices over the next few years. We also believe the role our customers want us to play in their lives has evolved.

Corie Barry: We are continuing to enhance our labor strategy as some store customers prefer a self-service sales experience, while others want a more guided sales experience. We will continue to leverage the flexible workforce we established during the pandemic with associates that can work across the store, the checkout lanes, and the front door, for example. These employees drive efficiencies by flexing where the customer is, across categories and functions. Based on customer feedback, we know there is an appetite for even more expert labor, and that is why we are also focused on certifications and adding back zone labor in key categories.

Speaker Change: We are continuing to enhance our labor strategy as some store customers prefer a self-service sales experience, while others want a more guided sales experience.

Speaker Change: We will continue to leverage the flexible workforce we established during the pandemic with associates that can work across the store, the checkout lanes, and the front door for example. These employees drive a session these by flexing where the customer is across categories and functions.

Corie Barry: To bring this to life and to highlight our tech and our unique positioning, we recently kicked off our new branding as we entered back to school. The new branding is centered on creating customer experiences that inspire curiosity and enable discovery and includes asking our customers what is, as well as a new tagline, imagine that. This branding reflects the role that best by and our amazing associates play in our customers' research and purchase journey.

Speaker Change: Based on customer feedback, we know there is an appetite for even more expert labor, and that is why we are also focused on certifications and adding back zone labor and key category.

Corie Barry: These are just two examples of how we are constantly driving customer experience improvements, as well as effectiveness in our labor model. It is how we have kept our labor rate flat as a percent of sales through the last few years as we experienced revenue decline, and it is how we expect to hold that rate as revenue grows over time. We also continue to lean heavily on analytics and technology to achieve efficiencies. For example, in partnership with Google, this quarter, we rolled out enhanced self-service support that leverages a gen AI-powered virtual assistant to help our customers quickly troubleshoot product issues, make changes to their order delivery and scheduling, and even manage their software, Geeks Glad subscriptions, and membership.

Corie Barry: And our training is also focused on bringing these experiences to life. Additionally, along with our new tagline, we're giving our brand a modern look and feel with new colors and a new creative construct, which will be phased in over time.

Speaker Change: These are just a few examples of how we are constantly driving customer experience improvements as well as effectiveness in our labor model. It is how we have kept our labor rate flat as a percent of sales through the last few years as we experienced revenue decline.

Speaker Change: and it is how we expect to hold that rate as revenue grows over time.

Speaker Change: We also continue to leave heavily on analytics and technology to achieve efficiencies.

Speaker Change: For example, in partnership with Google, this quarter, we rolled out enhanced cell service support that leverages a gen AI powered virtual assistant to help our customers quickly troubleshoot product issues. They changes to their order delivery and scheduling, and even manage their software, geese glad subscriptions and membership.

Corie Barry: We can now help 60% of our chat users solely with this technology, without the need for a live customer support process. We are in the early stages of rolling this capability to our IVR phone system. The customers can get their questions answered without having to wait for a live agent. We are, of course, closely observing feedback as we implement these capabilities to ensure we are maintaining a good customer experience. As I take a step back, the technology enhancements and process improvement we have made in our customer service capability in the last three years have decreased our cost per customer contact by more than 20%.

Speaker Change: We can now help 60% of our chat users solely with this technology without the need for a live customer support person.

Speaker Change: We're in the early stages of rolling this capability to our IVR phone system, so customers can get their questions answered without having to wait for a live agent.

Speaker Change: We are, of course, closely observing feedback as we implement these capabilities. To ensure we are maintaining a good customer experience.

Corie Barry: We have been iterating ever since to support the ever changing customer balancing our need to react to the sales environment with our desire to provide the experience customers expect. Last year, we took actions to streamline our leadership structure, which has allowed us to shift dollars into more customer facing sales associate hours in our store. More recently, during the second quarter, we made changes to our dedicated in-home sales team that helped fund the investments into our home theater and appliances store labor.

Speaker Change: As I take step back, the technology enhancements and process improve we have made in our customer service capability in the last three years have decreased our cost per customer contact by more than 20 percent, while improving the customer experience.

Corie Barry: Well, improving the customer experience.

Corie Barry: Within this work, we are very proud to have recently been named a recipient of Foresters' 2024 Technology Strategy Impact Award. This award recognizes our work to use AI to create better, more human experiences for both our customers and employees.

Speaker Change: Within this work, we are very proud to have recently been named a recipient of Foresters 2024 Technology Strategy Impact Awards. The support recognizes our work to use AI to create better, more human experiences for both our customers and employees.

Corie Barry: While in-home consultations continue to be an important competitive advantage, the volumes are not at the level envisioned a few years ago when we expanded the dedicated in-home team. Therefore, we both reduced the overall number of employees and brought the home theater and appliances experts back into the stores to better balance field labor resources and make sure we are providing the optimal experience for customers where they want to Shop. We are continuing to enhance our labor strategy as some store customers prefer a self-service sales experience, while others want a more guided sales experience.

Corie Barry: Our third key priority for the year is to continue our disciplined approach to capital allocation in this environment. We expect our enterprise capital expenditures for fiscal 25 will be about 50 million dollars lower than last year at approximately 750 million dollars. We are raising our expectation for share repurchases from 350 million dollars to 500 million dollars for the year.

Speaker Change: Our third key priority for the year is to continue our disciplined approach to capital allocation in this environment.

Speaker Change: We expect our enterprise capital expenditures for fiscal 25 will be about $50 million lower than last year at approximately $750 million. We are raising our expectations for share repurchases from $350 million to $500 million for the year.

Corie Barry: As we previously discussed, our fourth key priority for fiscal 25 is longer term in nature. We will explore opportunities that leverage our scale and capabilities to drive incremental, profitable revenue streams over time. This includes our collaboration with Bell Canada to operate 167 small format consumer electronics retail stores across Canada. These stores, previously known as The Source, which was a wholly owned subsidiary of Bell Canada, are being rebranded as Best Buy Express. We open the first store in June, and as of today, we have completed more than 70 implementations. We expect to roll out the rest of the stores by the end of the year.

Corie Barry: We will continue to leverage the flexible workforce we established during the pandemic with associates that can work across the store, the checkout lanes, and the front door for example. These employees drive efficiencies by flexing where the customer is, across categories and functions. Based on customer feedback, we know there is an appetite for even more expert labor, and that is why we are also focused on certifications and adding back zone labor in key categories.

Speaker Change: As we previously discussed, our fourth key priority for fiscal 25 is longer term in nature. We will explore opportunities that leverage our scale and capabilities to drive incremental, profitable revenue stream over two.

Speaker Change: This includes our collaboration with Bell Canada to operate 167 small format consumer electronics retail stores across Canada.

Speaker Change: These doors previously known as the source, which was a wholly-owned subsidiary of Bell Canada, are being rebranded as best-by-express. We open the first door in June, and as of today, we have completed more than 70 implementations.

Corie Barry: These are just two examples of how we are constantly driving customer experience improvements as well as effectiveness in our labor model. It is how we have kept our labor rate flat as a percent of sales through the last few years as we experienced revenue decline, and it is how we expect to hold that rate as revenue grows over time. We also continue to lean heavily on analytics and technology to achieve efficiencies.

Corie Barry: We are providing a curated CE assortment and Geeks Quad Services, as well as supply chain, marketing, and e-commerce. That is the exclusive telecommunications services provider and is also responsible for the store operating costs of the partnership. This collaboration allows us to expand our presence in malls and in smaller and mid-size communities, reaching 61 brand new markets for Best Buy Canada. We are very encouraged by the results of the two pilot stores and proud of the rapid pace with which our teams are implementing locations.

Speaker Change: We expect to roll out the rest of the stories by the end of the year.

Speaker Change: We are providing a curated CE assortment and Geeks Club services, as well as supply chain marketing and e-commerce.

Speaker Change: Valencia exclusive telecommunications services provider and is also responsible for the store operating cost of the partnership.

Corie Barry: For example, in partnership with Google, this quarter, we rolled out enhanced self-service support that leverages a gen AI-powered virtual assistant to help our customers quickly troubleshoot product issues, make changes to their order delivery and scheduling, and even manage their software, geeks glad subscriptions, and membership. We can now help 60% of our chat users solely with this technology without the need for a live customer support process. We are in the early stages of rolling this capability to our IVR phone system, the customers can get their questions answered without having to wait for a live agent.

Speaker Change: This collaboration allows us to expand our presence in malls and in smaller and mid-sized communities, reaching 61 brand new markets for Beth by Canada. We are very encouraged by the results of the two pilot stores and proud of the rapid pace with which our teams are implementing locations.

Corie Barry: Switching to the US, we have a team branded Best Buy Business. That is focused on providing tech products and solutions for businesses in specific industries, including education, healthcare, and hospitality. This business generates more than a billion dollars per year in sales and delivered low single-digit growth in the first half of the year. We have a dedicated online website for business customers, leading to a 60% digital mix of revenue. In addition, we expect to increasingly leverage our unique Geek Squad capabilities to provide services like device lifecycle management to other businesses, on top of the meaningful growth we have already seen in the services part of this business.

Speaker Change: switching to the U.S., we have a team branded best-by-business that is focused on providing tech products and solutions for businesses in specific industries, including education, healthcare and hospitality.

Corie Barry: We are of course closely observing feedback as we implement these capabilities to ensure we are maintaining a good customer experience. As I take step back, the technology enhancements and process improvement we have made in our customer service capability in the last three years have decreased our cost per customer contact by more than 20%. Well, improving the customer experience.

Speaker Change: This business generates more than a billion dollars per year in sales and delivered low single-digit growth in the first half of the year. We have a dedicated online website for business customers leading to a 60% digital mix of revenue.

Speaker Change: In addition, we expect to increasingly leverage our unique, geekswad capabilities to provide services like device life cycle management to other businesses. On top of the meaningful growth we have already seen in the services part of this business.

Corie Barry: Within this work, we are very proud to have recently been named a recipient of Foresters 2024 Technology Strategy Impact Award. This award recognizes our work to use AI to create better more human experiences for both our customers and employees.

Corie Barry: In addition, we continue to partner with our vendors in ways that drive incremental revenue streams. We are growing our Partner Plus program, leveraging our supply chain and fulfillment capabilities. Vendor partners can offer their own online customers the option to conveniently pick up their products at a local Best Buy store, or we will ship the product to their customer's home. In addition to our current partners like Samsung, Lenovo, TheraBody, and ORA, we are adding incremental partners to further drive both units and profit growth. In another example, during the quarter we expanded our multi-year agreement with Amazon to build Insignia and to Shiba branded televisions with the Fire TV operating system.

Speaker Change: In addition, we continue to partner with our vendors in ways that drive incremental revenue streams.

Speaker Change: We are growing our partner plus program, leveraging our supply chain and facilitating capabilities, vendor partners can offer their own online customers the option to conveniently pick up their products at a local best-by store, or we will ship the product to their customers home.

Speaker Change: In addition to our current partners like Samsung, Lenovo, Therabadi, and aura, we are adding incremental partners to further drive both units and profit growth.

Speaker Change: In another example, during the quarter we expanded our multi-year agreement with Amazon, to build insignia and to achieve a branded televisions with the Fire TV operating system.

Corie Barry: We're excited Fire TV will be available on all Insignia TVs ranging from the 24-inch model to our largest 85-inch model, as well as new screen sizes in the future, with more inventory availability across all price points. Customers can also purchase these TVs from us on Amazon.com, with the option to conveniently pick up their products at a local Best Buy store. We also have an agreement with Roku to sell their Roku branded TVs. With this agreement, advertisers can leverage our first-party audiences when buying Roku media with improved targeting and closed-loop reporting. This gives advertisers a unique opportunity to reach in-market consumers with greater precision within the leading streaming platform.

Corie Barry: As we previously discussed, our fourth key priority for fiscal 25 is longer term in nature. We will explore opportunities that leverage our scale and capabilities to drive incremental profitable revenue streams over time. This includes our collaboration with Bell Canada to operate 167 small format consumer electronics retail stores across Canada. These stores previously known as the source, which was a wholly owned subsidiary of Bell Canada, are being rebranded as Best Buy Express.

Speaker Change: We're excited, Fire TV will be available on all insignia TVs, ranging from the 24-inch model to our largest 85-inch model, as well as new screen sizes in the future.

Speaker Change: with more inventory availability across all price points.

Speaker Change: Customers can also purchase these TVs from awesomeamazon.com with the option to conveniently pick up their products at a local best-by-store.

Speaker Change: We also have an agreement with Roku to sell their Roku branded TV.

Corie Barry: We open the first store in June and as of today, we have completed more than 70 implementations. We expect to roll out the rest of the stores by the end of the year. We are providing a curated CE assortment and Geeks Quad Services as well as supply chain, marketing, and e-commerce. That is the exclusive telecommunications services provider and is also responsible for the store operating costs of the partnership. This collaboration allows us to expand our presence in malls and in smaller and mid-size communities, reaching 61 brand new markets for Best Buy Canada. We are very encouraged by the results of the two pilot stores and proud of the rapid pace with which our teams are implementing locations.

Speaker Change: with this agreement, advertisers can leverage our first party audiences when buying real-cool media with improved targeting and closed loop reporting. This gives advertisers a unique opportunity to reach in-market consumers with greater precision within the leading streaming platform.

Corie Barry: Before I close and turn the call over to Matt, I want to take a moment to recognize Arms Plays for their continued work to support the communities we serve. This summer, we welcomed more than 3,000 kids and teens at Geeks Flat Academy camps across the country. These camps provide the opportunity to learn skills on everything from coding, game design, digital music, and more. The response within these communities has been incredible, and I continue to be inspired and amazed every summer by the work of our Geeks Flat agents, employees, and volunteers to inspire young minds. We are proud to be named to the 2024 Best Places for High School Graduates to Start a Career list, a first-of-a-kind ranking released by the American Opportunity Index.

Speaker Change: Before I close and turn the call over to Matthew, I want to take a moment to recognize our employees for their continued work to support the communities we serve. This summer we welcomed more than 3,000 kids and teens at Geeksblood Academy camps across the country.

Speaker Change: These camps provide the opportunity to learn skills on everything from coding, aim design, digital music, and more.

Speaker Change: The response within these communities has been incredible and I continue to be inspired and amazed every summer by the work of our geeksplad agents, employees and volunteers to inspire young minds.

Corie Barry: Switching to the US, we have a team branded Best Buy Business. That is focused on providing tech products and solutions for businesses in specific industries, including education, healthcare, and hospitality. This business generates more than a billion dollars per year in sales and delivered low single-digit growth in the first half of the year. We have a dedicated online website for business customers leading to a 60% digital mix of revenue. In addition, we expect to increasingly leverage our unique geek squad capabilities to provide services like device lifecycle management to other businesses, on top of the meaningful growth we have already seen in the services part of this business.

Speaker Change: We are proud to be named to the 2024 best places for high school graduates to start a career list. A first of a kind ranking released by the American Opportunity Index.

Corie Barry: And I'm also proud to share that for the 10th consecutive year, Best Buy has been named a Best Place to Work for Disability Inclusion, earning a top score of 100% on the 2024 Disability Equality Inclusion.

Speaker Change: and I'm also proud to share that for the 10th consecutive year that I has been named a best place to work for disability inclusion, earning a top score of 100% on the 2024 disability equality index.

Corie Barry: In summary, we executed well in the first half of the year, and the sequential improvement in sales supports our beliefs that this will be a year of increasing stabilization. As we all observe, the broader macro narrative can change often and sometimes quickly. We see a consumer who is seeking value in sales events and one who is also willing to spend on high price point products when they need to or when there is new compelling technology. We don't believe anything in our data signals that customer behavior has changed in a way that would make us increasingly cautious.

Speaker Change: In summary, we executed well in the first half of the year, and a sequential improvement in sales supports our belief that this will be a year of increasing stabilization.

Corie Barry: In addition, we continue to partner with our vendors in ways that drive incremental revenue streams. We are growing our partner plus program, leveraging our supply chain and fulfillment capabilities, vendor partners can offer their own online customers the option to conveniently pick up their products at a local Best Buy store or we will ship the product to their customers home. In addition to our current partners like Samsung, Lenovo, TheraBody, and ORA, we are adding incremental partners to further drive both units and profit growth.

Speaker Change: As we all observe, the broader macro narratives can change often and sometimes quickly. We see a consumer who is seeking value in sales events, and one who is also willing to spend on high price point products when they need to or when there is new compelling technology.

Speaker Change: We don't believe anything in our data signals that customer behavior has changed in a way that would make us increasingly cautious. Thus, we are balancing our optimism in both the industry and our positioning, with a pragmatic approach to likely uneven customer behavior going forward.

Corie Barry: Thus, we are balancing our optimism in both the industry and our positioning with a pragmatic approach to likely uneven customer behavior going forward. As I said earlier, this year, we are focused on continuing to sharpen our customer experiences and industry positioning while expanding our operating margin on a 52-week basis. We intend to strengthen our position in key categories by computing home theater and major appliances through elements related experiences that capitalize on innovation, pointed marketing spend, and sharp for pricing. We are the largest CE specialty retailer with the unique range of product assortment and expert services to help our customers discover how unexpected technology solutions can bring to life what matters to them.

Corie Barry: In another example, during the quarter we expanded our multi-year agreement with Amazon to build insignia and to Shiba branded televisions with the Fire TV operating system. We're excited Fire TV will be available on all insignia TVs ranging from the 24-inch model to our largest 85-inch model, as well as new screen sizes in the future, with more inventory availability across all price points. Customers can also purchase these TVs from us on Amazon.com, with the option to conveniently pick up their products at a local Best Buy store.

Speaker Change: As I said earlier, this year we are focused on continuing to sharpen our customer experiences and industry positioning while expanding our operating margin on a 52 week basis.

Speaker Change: We intend to strengthen our position in key categories by computing, home theater, and major appliances through elevated experiences that capitalize on innovation, pointed marketing spend, and sharp processing.

Speaker Change: We are the largest CE specialty retailer with a unique range of product assortment and expert services to help our customers discover how unexpected technology solutions can bring to life what matters to them.

Corie Barry: We also have an agreement with Roku to sell their Roku branded TVs. With this agreement, advertisers can leverage our first party audiences when buying Roku media with improved targeting and closed loop reporting. This gives advertisers a unique opportunity to reach in-market consumers with greater precision within the leading streaming platform.

Corie Barry: We believe we are putting ourselves in the best position for fiscal 25 and beyond. As our industry returns to growth, we expect to grow our sales and expand our operating income.

Speaker Change: We believe we are putting ourselves in the best position for fiscal 25 and beyond. As our industry returns to growth, we expect to grow ourselves and expand our operating income.

Matt Ballunas: I will now turn the call over to Matt for more details on Q2 financial performance and our outlook.

Speaker Change: I will now turn the call over to Matt for more details on YouTube financial performance and our outlook.

Matt Ballunas: Good morning, everyone. Let me start by sharing a few details on our second quarter results, and surprise revenue of $9.3 billion declined 2.3% on a comparable basis. Our non-GAAP operating income rate of 4.1% improved 30 basis points compared to last year, which was driven by improvement in our growth profit rate. Non-GAAP SGN $8 were $53 million lower than last year and were flat as a percentage of revenue. Our non-GAAP blooded earnings per share increased 10% to $1.34. By month, our comparable sales decreased 2% in May and 4% in June before improving to be approximately flat in July.

Corie Barry: Before I close and turn the call over to Matt, I want to take a moment to recognize arms plays for their continued work to support the communities we serve. This summer, we welcomed more than 3,000 kids and teens at Geeks Flat Academy camps across the country. These camps provide the opportunity to learn skills on everything from coding, game design, digital music, and more. The response within these communities has been incredible, and I continue to be inspired and amazed every summer by the work of our Geeks Flat agents, employees, and volunteers to inspire young minds.

Matt: Good morning, everyone. Let me start by sharing a few details on our second quarter results. Enterprise revenue of $9.3 billion, declined 2.3% on a comparable basis.

Matt: Our non-gap operating income rate per 4.1%, improved 30 basis points compared to last year, which was driven by improvement in our growth profit rate.

Matt: $9 gap as she made dollars were $53 million lower than last year and were flat as a percentage of revenue. Our non-gap polluted earnings per share increased 10% to $1.34.

Corie Barry: We are proud to be named to the 2024 Best Places for High School graduates to start a career list, a first of a kind ranking released by the American Opportunity Index. And I'm also proud to share that for the 10th consecutive year, Best Buy has been named a Best Place to Work for Disability Inclusion, earning a top score of 100% on the 2024 Disability Equality Inclusion.

Matt: 5 months, our comparable sales decreased 2% in May and 4% in June before improving to be approximately flat in July.

Matt Ballunas: As a reminder, our comparable sales are not computed on a like-for-like fiscal weeks and are not shifted to more closely aligned calendar weeks following last year's 53rd week year. For the year, we estimate the impacts to be immaterial. In the second quarter, the calendar shift benefited our reported comparable sales by approximately 90 basis points. The shift negatively impacted our first quarter comparable sales by approximately 30 basis points. We expected to negatively impact our comparable sales by approximately 20 basis points in the third quarter and 60 basis points in the fourth quarter. Back to our Q2 results.

Matt: As a reminder, our comparable sales are not our computed on a like for like fiscal weeks and are not shifted to more closely aligned calendar weeks, following last year's 53rd week year.

Matt: For the year, we estimate the impact.

Matt: to be immaterial. In the second quarter, the Canada ship benefited our reported comparable sales by approximately 90 basis points.

Matt: The ship negatively impacted our first quarter of comparable sales by approximately 30 basis points.

Matt: We expect it to negatively impact our comparable sales by approximately 20 basis points in the third quarter and 60 basis points in the fourth quarter.

Corie Barry: We don't believe anything in our data signals that customer behavior has changed in a way that would make us increasingly cautious. Thus, we are balancing our optimism in both the industry and our positioning with a pragmatic approach to likely uneven customer behavior going forward. As I said earlier, this year, we are focused on continuing to sharpen our customer experiences and industry positioning while expanding our operating margin on a 52 week basis.

Matt Ballunas: Compared to the outlook we shared entering the quarter, our non-GAAP operating income rate of 4.1% was 60 basis points higher and was primarily driven by lower non-GAAP SG&A. The favorable SGNA was primarily due to lower employee benefit expense, which included medical claims, lower technology expense, and a favorable legal settlement.

Matt: Back to our Q2 results.

Matt: Compared to the outlook we shared entering the quarter, our non-gap operating income rate of 4.1% with 60 basis point higher, who was primarily driven by lower non-gap SGNA.

Matt: The favorable SGA was primarily due to lower employee benefit expense, which included medical claims, lower technology expense and a favorable legal settlement.

Matt Ballunas: Berlin. Our overall gross profit rate aligned very closely to our expectations, with better than expected performance in our services category offering, better performance in our service category, offsetting lower product margins. Next, I will walk through the details on our second quarter results compared to last year. In our domestic segment, revenue decreased 3% to $8.6 billion, given by a comparable sales decline of 2.3%. The overall blended average selling price for ASPs of our products was higher than last year. The growth was primarily due to an increased mix of units coming from higher ticket items such as laptops, and a lower mix of units coming from lower ticket categories such as movies and gaming software.

Corie Barry: We intend to strengthen our position in key categories by computing home theater and major appliances through elements related experiences that capitalize on innovation, pointed marketing spend, and sharp for pricing. We are the largest CE specialty retailer with the unique range of product assortment and expert services to help our customers discover how unexpected technology solutions can bring to life what matters to them. We believe we are putting ourselves in the best position for fiscal 25 and beyond. As our industry returns to growth, we expect to grow our sales and expand our operating income.

Matt: are overall gross profit rate aligned very closely to our expectations.

Matt: with better than expected performance in our services category offering.

Matt: Offset the better performance in our service category, Offsetting the lower product margins.

Speaker Change: Next, I will walk to the details on our second Corie results compared to last year.

Speaker Change: In our domestic segment, revenue decreased 3% to 8.6 billion dollars, given by a comparable sales decline of 2.3%.

Speaker Change: The overall blended average selling price for ASP's of our products was higher than last year.

Matt Ballunas: I will now turn the call over to Matt for more details on Q2 financial performance and our outlook.

Speaker Change: The growth was primarily due to an increased mix of units coming from higher ticket items such as laptops and a lower mix of units coming from lower ticket categories such as movies and gaming software.

Matt Ballunas: Good morning, everyone. Let me start by sharing a few details on our second quarter results and surprise revenue of $9.3 billion declined 2.3% on a comparable basis. Our non-gap operating income rate of 4.1% improved 30 basis points compared to last year, which was driven by improvement in our growth profit rate. Non-gap SGN $8 were $53 million lower than last year and were flat as a percentage of revenue. Our non-gap blooded earnings per share increased 10% to $1.34.

Matt Ballunas: International revenue of $665 million decreased 4%, given by the negative impact of foreign exchange rates, and a comparable sales decline of 1.8%. Our domestic gross profit rate increased 40 basis points to 23.5%. The higher gross profit rate was primarily driven by improvement within our services category, which includes our membership offerings. This was partially offset by lower product margin rates and lower credit card profit sharing revenue. Consistent with the past three quarters, approximately $20 million of our vendor funding qualified to be recognized as an offset to SG&A, which was a reduction to cost of sales in the first half of last year.

Speaker Change: International revenue of $665 million, decreased to 4% different by the negative impact of foreign exchange rates. An comparable sales decline of 1.8%.

Speaker Change: Our domestic gross profit rate increased to 40 basis points to 23.5 percent. A higher gross profit rate was primarily driven by improvement within our services category.

Speaker Change: which includes our membership offerings. This was partially offset by lower product margin rates and lower credit card profit sharing revenue.

Matt Ballunas: By month, our comparable sales decreased 2% in May and 4% in June before improving to be approximately flat in July. As a reminder, our comparable sales are not computed on a like for like fiscal weeks and are not shifted to more closely aligned calendar weeks following last year's 53rd week year. For the year, we estimate the impacts to be immaterial. In the second quarter, the calendar shift benefited our reported comparable sales by approximately 90 basis points.

Speaker Change: Consistent with the past three quarters, approximately $20 million of our vendor funding qualified to be recognized as an offset to SGA, which was a reduction to cost the sales in the first half of last year.

Matt Ballunas: We have now fully lapped the recognition change. Our international gross profit rate decreased 30 basis points to 23.9%. The lower gross profit rate was primarily due to lower product margin rates and higher supply chain costs, which were partially offset by growth in the higher margin services category. Moving to SGNA, our domestic non-GAAP SGNA decreased $46 million, which was driven by lower employee compensation expense and reduced expenses across multiple areas, such as vehicle rental costs and credit card fees. These decreases were partially offset by higher advertising expense.

Speaker Change: We have now fully laughed the recognition change.

Speaker Change: Our international growth profit rate decreased to 30 basis points to 23.9%. The lower growth profit rate was primarily due to lower product margin rates and higher supply chain costs, which were partially offset by growth in the higher margin services category.

Matt Ballunas: The shift negatively impacted our first quarter comparable sales by approximately 30 basis points. We expected to negatively impact our comparable sales by approximately 20 basis points in the third quarter and 60 basis points in the fourth quarter. Back to our Q2 results. Compared to the outlook we shared entering the quarter, our non-gap operating income rate of 4.1% was 60 basis points higher and was primarily driven by lower non-gap SGNA. The favorable SGNA was primarily due to lower employee benefit expense, which included medical claims, lower technology expense and a favorable legal settlement.

Speaker Change: Moving to SGNA, our domestic non-gap SGNA decreased $46 million, which was driven by lower employee compensation expense and reduced expenses across multiple areas, such as vehicle rental costs and credit card fees.

Speaker Change: These decreases were partially offset by higher advertising expense.

Matt Ballunas: Moving on to our updated full year fiscal 25 guidance for the enterprise, which is the following. Revenue in the range of $41.3 billion to $41.9 billion. Comparable sales decline of 1.5% to 3%. Non-GAAP operating income rates in the range of 4.1%, the 4.2%, a non-GAAP effective income tax rate of approximately 24%, and non-GAAP diluted earnings per share of $6.010 to $6.35. As Cory mentioned, we are raising our profitability outlook to largely flow through the favorable performance in the first half of the year. The overall drivers of our annual profitability outlook are consistent with our prior guidance.

Speaker Change: Moving on to our updated fiscal year fiscal 25 guidance for the enterprise which is the following.

Speaker Change: Revenue in the range of $41.3 billion to $41.9 billion, comparable sales decline of 1.5% to 3%.

Speaker Change: 9GAP operating income rate in the range of 4.1% to 4.2% and 9GAP effective income tax rate of approximately 24% and 9GAP diluted earnings per share of $610 to $6.35.

Speaker Change: As Corie mentioned, we are raising our profitability outlook to largely flow through the favorable performance in the first half year.

Corie: The overall drivers of our annual profitability outlook are consistent with our prior guidance.

Matt Ballunas: We believe our gross profit rate will expand approximately 35 basis points compared to last year, which aligns with our previous guidance of more than 20 to 30 basis points of expansion. The main drivers are still the following. First, we expect profitability improvement from our services and membership offerings, which is primarily due to the following factors. Higher revenue from installation and delivery services, which were previously included benefits of paid membership, reduced cost to serve due to lower planned volumes for in-home installation and other related services, and higher standalone warranty revenue. Second, we expect lower product margin rates for the year, which is primarily driven by pricing investments in the $40 million vendor support geography item, the first half of the year that I previously mentioned.

Corie: We believe our gross profit rate will expand, approximately 35 basis points compared to last year, which aligns with our previous guidance of more than 20 to 30 base points of expansion.

Matt Ballunas: The growth was primarily due to an increased mix of units coming from higher ticket items such as laptops, and a lower mix of units coming from lower ticket categories such as movies and gaming software. International revenue of $665 million decreased 4%, given by the negative impact of foreign exchange rates, and a comparable sales decline of 1.8%. Our domestic gross profit rate increased 40 basis points to 23.5%. The higher gross profit rate was primarily driven by improvement within our services category, which includes our membership offerings.

Speaker Change: The main drivers are still the following. First, we expect profitability improvement from our services and membership offerings, which is primarily due to the following factors.

Speaker Change: Higher revenue from insulation delivery services, which were previously included benefits of paid membership, reduced cost to serve due to lower plant volumes for in-home insulation in other related services, and higher standalone warranty revenue.

Speaker Change: Second, we expect lower product margin rates for the year, which is primarily driven by pricing investments in the $40 million vendor support geography item, the first half of the year that I previously mentioned.

Matt Ballunas: Third, we still expect approximately 20 basis points of pressure from a lower profit share on our credit card arrangement, which has unchanged since the start of the year. We expect to see growth profit rate expansion in the second half of the year, but not as much as we saw in the first half of the year. This is largely because the benefit from our services and membership offerings will be smaller as we lap the major changes to the program at the end of June.

Matt Ballunas: This was partially offset by lower product margin rates and lower credit card profit sharing revenue. Consistent with the past three quarters, approximately $20 million of our vendor funding qualified to be recognized as an offset to SGNA, which was a reduction to cost of sales in the first half of last year. We have now fully lapped the recognition change. Our international gross profit rate decreased 30 basis points to 23.9%. The lower gross profit rate was primarily due to lower product margin rates and higher supply chain costs, which were partially offset by growth in the higher margin services category.

Speaker Change: Third, we still expect approximately 20-based appoints a pressure from a lower profit share on our credit card arrangement, which is unchanged since the start of the year.

Speaker Change: We expect to see girls' proper rate expansion in the second half of the year, but not as much as we saw in the first half of the year.

Speaker Change: This is largely because the benefit from our services and membership offerings will be smaller as we laughed the major change to the program at the end of June.

Matt Ballunas: Next, I will share details on our annual SGNA expectations. The high end of our annual guidance now assumes non-GAAP SG&A dollars declined by approximately 2% compared to last year, which includes the following puts and takes. The benefit of having one less week this fiscal year is estimated at $90 million. Store payroll expense is expected to be approximately flat to fiscal 24 as a percentage of sales, which results in lower SG&A dollars compared to last year. vendor support geography lowers SGNA by approximately 40 million dollars in the first half of the year. In sense of compensation, is now expected to be very similar to fiscal 24 at the high end of our guidance range.

Speaker Change: Next I will share details on our annual SGA expectations.

Speaker Change: The high end of our annual guidance now assumes non-gap SUNA dollars declined by approximately 2% compared to last year.

Matt Ballunas: Moving to SGNA, our domestic non-GAP SGNA decreased $46 million, which was driven by lower employee compensation expense and reduced expenses across multiple areas, such as vehicle rental costs and credit card fees. These decreases were partially offset by higher advertising expense.

Speaker Change: which includes the following puts in takes.

Speaker Change: The benefit of having one last week, this fiscal year is estimated at $90 million.

Speaker Change: Store payroll expense is expected to be approximately flat to fiscal 24th as a percentage of sales, which results in lower SGA dollars compared to last year.

Matt Ballunas: Moving on to our updated full year fiscal 25 guidance for the enterprise, which is the following. Revenue in the range of $41.3 billion to $41.9 billion. Comparable sales decline of 1.5% to 3%. Non-GAP operating income rates in the range of 4.1%, the 4.2%, a non-GAP effective income tax rate of approximately 24% and non-GAP diluted earnings per share of $6,010 to $6.35. As Cory mentioned, we are raising our profitability outlook to largely flow through the favorable performance in the first half of the year.

Speaker Change: Then there's support geography lowers SGMA by approximately $40 million in the first half of the year. Incentive compensation is now expected to be very similar to fiscal 2024 at the high end of our guidance range.

Matt Ballunas: Partially, I've said in the previous items, our advertising expense is still expected to increase by approximately 50 million dollars versus last year, with increased weighted more in the second half of the year. The low end of our guidance reflects our plans to further reduce our variable expenses, which includes incentive compensation to align with sales trends.

Speaker Change: partially offsetting the previous items, our advertising expense is still expected to increase by approximately $50 million versus last year.

Speaker Change: with increased weighted more in the second half of the year.

Speaker Change: The low end of our guidance reflects our plans to further reduce our variable expenses which includes incentive compensation to align with sales trends.

Matt Ballunas: Before I close, let me share a couple of comments specific to the third quarter. We expect a modest sequential improvement in our comparable sales compared to the second quarter, with our Q3 comparable sales planned down approximately 1%. We expect our non-GAAP operating income rate to be approximately 3.7%.

Speaker Change: Before I close, let me share a couple of comments specific to the third quarter. We expect the modest, sequential improvement in our comparable sales compared to the second quarter. With our Q3 comparable sales planned down approximately 1%. We expect our non-gap operating increment to be approximately 3.7%.

Matt Ballunas: The overall drivers of our annual profitability outlook are consistent with our prior guidance. We believe our gross profit rate will expand approximately 35 basis points compared to last year, which aligns with our previous guidance of more than 20 to 30 basis points of expansion. The main drivers are still the following. First, we expect profitability improvement from our services and membership offerings, which is primarily due to the following factors. Higher revenue from installation and delivery services, which were previously included benefits of paid membership, reduced cost to serve due to lower planned volumes for in-home installation and other related services, and higher standalone warranty revenue.

Operator: I will now turn the call over to the operators for questions.

Operator: Thank you. We will now open the line and take your question. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.

Speaker Change: I will now turn the call over to the operators for questions.

Speaker Change: Thank you. We'll now open the line and take your questions.

Speaker Change: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to wish to ask your question, press the pound key.

Operator: If you would like to a star your question, press the pound key. If you are dialed in and listening, be allowed speaker on your device. Please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: If you are dialed in and listening to the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Scott Chicarelli: Our first question comes from the line of Scott Chicarelli with Truist Securities.

Speaker Change: Our first question comes from the line of Scott Chisorelli with tourist securities. Please go ahead.

Scott Chicarelli: Please go ahead. Good morning, guys. Too quick, quickly, and hopefully.

Matt Ballunas: Second, we expect lower product margin rates for the year, which is primarily driven by pricing investments in the $40 million vendor support geography item, the first half of the year that I previously mentioned. Third, we still expect approximately 20 basis points of pressure from a lower profit share on our credit card arrangement, which has unchanged since the start of the year. We expect to see growth profit rate expansion in the second half of the year, but not as much as we saw in the first half of the year. This is largely because the benefit from our services and membership offerings will be smaller as we lap the major changes to the program at the end of June.

Scott Chisorelli: Good morning, guys.

Corie Barry: First, can you remind us of the comparisons you faced for the balance of the quarter, giving your comments that you were running earlier and flat for August? And then secondly, can you help us better understand that the mix that you're seeing in the laptops, obviously kind of later quarter where you got to roll out a lot of the AI enable chip devices, but just how quick are consumers kind of adopting to that. Thank you. Yeah, so in terms of the comparison, I think it was the first part of the question. Last year, our August was down about, I think we talked about this down 6%. September.

Scott Chisorelli: Two quick quicks, hopefully. First, can you remind us of the comparisons you faced that the balance of the quarter, giving you comments that you're running, or you're in flat for August.

Speaker Change: and then secondly, can you help us better understand that the mix that you're seeing in the laptop's obviously kind of later quarter where you got to roll out a lot of the AI and able chip devices, but you know, just how quick or consumers kind of adopt them to that. Thank you.

Speaker Change: Yeah, so in terms of the comparative, I think is the first part of the question.

Speaker Change: Last year, our August was down about, I think we talked about this, a down 6%.

Matt Ballunas: Next, I will share details on our annual SGNA expectations. The high end of our annual guidance now assumes non-gap SGNA dollars declined by approximately 2% compared to last year, which includes the following puts and takes. The benefit of having one less week this fiscal year is estimated at $90 million. Store payroll expense is expected to be approximately flat to fiscal 24 as a percentage of sales, which results in lower SGNA dollars compared to last year, vendor support geography lowers SGNA by approximately 40 million dollars in the first half of the year.

Corie Barry: I think was down around seven, and October was down about eight. So pretty similar across the quarter's last year. And the second part related to, yeah, as it relates to the laptop mix for the quarter, Co Pilot Plus was still a relatively small percentage of the sales. And we've set up a core at like most new and emerging technology, these are higher price point ASPs, more fully featured devices. So that's why, in the prepared comments, we kind of tried to make it clear we continue to see people just want to replace an upgrade, not dependent on just the co-pilot plus computing, but just broadly in general continuing that trend.

Speaker Change: September, I think it was down around seven and October was down about eight so pretty similar across that's the Corie's last year and the second part related to. Yeah, as it relates to the laptop mix.

Pope: For the quarter, Pope I-Lit Plus was still a relatively small percentage of the sales.

Speaker Change: and we've set up a report like most new and emerging technology these are higher price point, ASP's more fully featured devices. So that's why in the prepared comments we kind of tried to make it clear we continue to see people just want to replace and upgrade. Not dependent on just the co-pilot plus.

Matt Ballunas: In sense of compensation is now expected to be very similar to fiscal 24 at the high end of our guidance range. Partially, I've said in the previous items, our advertising expense is still expected to increase by approximately 50 million dollars versus last year, with increased weighted more in the second half of the year. The low end of our guidance reflects our plans to further reduce our variable expenses, which includes incentive compensation to align with sales trends.

Corie Barry: And we've been talking about basically since Q4 last year where we started saying those laptop units were growing year over year; we continue to see that. So, while CoPilot Plus was a relatively small percentage. We like what we're seeing in terms of consumer behavior. The last thing that I would say is it's not just about co-pilot plus per se; it creates a nice halo effect on the entire department, right? We've talked about adding in more expertise. We've talked about updating and upgrading the displays in the stores.

Speaker Change: Computing but just broadly in general continuing that trend we've been talking about basically since Q4 of last year where we started saying those laptop units were growing year over year we continued to see that so well co-pilot plus was a relatively small percentage.

Speaker Change: We like what we're seeing in terms of consumer behavior. The last thing that I would say is it's not just about coal-pile, let's plus per say. It creates a nice halo effect on the entire department, right? We've talked about adding in more expertise. We've talked about updating and upgrading the displays and the stores. We've put a lot into the kind of discovery work that we're doing in our app and all of those things have a nice halo effect across the category.

Matt Ballunas: Before I close, let me share a couple of comments specific to the third quarter. We expect a modest sequential improvement in our comparable sales compared to the second quarter, with our Q3 comparable sales planned down approximately 1%. We expect our non-gap operating income rate to be approximately 3.7%.

Corie Barry: We've put a lot into the kind of discovery work that we're doing in our app, and all of those things have a nice halo effect across the category.

Scott Chicarelli: Got it. Thanks.

Operator: I will now turn the call over to the operators for questions. Thank you.

Speaker Change: God, it's thanks God.

Michael Lasser: Our next question comes from the line of Michael Lasser with UBS. Please go ahead. Good morning. Thank you so much for taking my question. So the second quarter came in a little bit better than you were expecting. All this is flat so far. You have easier comparison in September and October. Yet you took down the comp guidance for the rest of the year. So what motivated that change?

Speaker Change: Yes, good.

Operator: We will now open the line and take your question. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to a star your question, press the pound key. If you are dialed in and listening, be allowed speaker on your device. Please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: Our next question comes from the line of Michael Lasser with UBS. Please go ahead.

Michael Lasser: Good morning. Thank you so much for taking my question. So the second quarter came in a little bit better than you were expecting.

Michael Lasser: August is flat so far. You have easier comparison in September and October. Yeah, you took down the comp guidance for the rest of the year. So what motivated that change?

Scott Chicarelli: Our first question comes from the line of Scott Chicarelli with Truist Securities. Please go ahead. Good morning, guys.

Corie Barry: I think, well, good morning. Hi. I think in general, what we are acknowledging is it is still an unpredictable and uneven consumer environment. And while we made it explicit to say we haven't seen anything so far this year that changes behavior. And we're acknowledging there will be an election impact, and there always is historically, no matter what kind of election we're entering into. So we know that that is likely coming. And you're entering into the holiday season, which often can also create some unpredictability. Consumer behaviors probably consumers who might even wait for some of the more values that they I would guess assume that they're going to see over holiday.

Corie Barry: Too quick, quickly and hopefully. First, can you remind us of the comparisons you faced for the balance of the quarter, giving your comments that you were running earlier and flat for August? And then secondly, can you help us better understand that the mix that you're seeing in the laptops obviously kind of later quarter where you got to roll out a lot of the AI enable chip devices, but just how quick are consumers kind of adopting to that.

Speaker Change: I think, well, good morning. I think in general what we are acknowledging is it is still a unpredictable and uneven consumer environment.

Speaker Change: And while we made it explicit to say we haven't seen anything so far this year that change of behavior and ignored knowledgeing, there will be an election impact and there always is historically no matter what kind of election we're entering.

Speaker Change: We know that that is likely coming and you're entering into the holiday season which often can also create some unpredictable consumer behaviors. Probably consumers who might even wait for some of the more values that they would guess assume that they're going to see over holiday.

Corie Barry: Thank you. Yeah, so in terms of the comparison, I think it was the first part of the question. Last year, our August was down about, I think we talked about this down 6% September. I think was down around seven and October was down about eight. So pretty similar across the quarter's last year. And the second part related to, yeah, as it relates to the laptop mix for the quarter, co pilot plus was still a relatively small percentage of the sales.

Corie Barry: And so I think we're looking at consumer indicators that continue to be uneven. Resilient consumer so far, but acknowledging into the back half there, especially at the tail end of Q3. There's probably an even greater risk that the consumers are a little bit unsettled.

Speaker Change: and so I think we're looking at consumer indicators that continue to be uneven, resilient consumer so far, but acknowledging into the back half, especially at the tail end of Q3, there's probably an even greater risk that the consumer is a little bit unsettled.

Michael Lasser: Understood. My follow-up question is, do you think science of stabilization in the category. It would appear that your market share is also stabilizing to a. Is that a fair assessment on your market share.

Corie Barry: And we've set up a core at like most new and emerging technology, these are higher price point ASPs more fully featured devices. So that's why in the prepared comments, we kind of tried to make it clear we continue to see people just want to replace an upgrade, not dependent on just the co pilot plus computing, but just broadly in general continuing that trend. And we've been talking about basically since q4 last year where we started saying those laptop units were growing year over year, we continue to see that.

Speaker Change: My father question is, do you think that is a stabilization?

Speaker Change: and even the category, it would appear that your market here is also stabilizing.

Corie Barry: And if we make the assumption that this continues into next year, ultimately resulting in positive sales growth in 2025, what are they going to need the critical puts and takes in your profitability that are going to influence the incremental margins as you do experience an upturn in sales. Thank you very much. I will take part one and then hand it over to Matt for part two. So, as it relates to share, I think the perception of rough stabilization feels right. Now, let me start by saying I like you talking about next year. Shares a long game for us.

Speaker Change: to A.E. is that a fear of attachment on your market here?

Speaker Change: and if we make the assumption that this continues into next year, ultimately resulting in positive sales growth in 2025, what are they going to be the critical puts and takes?

Corie Barry: So while co pilot plus was a relatively small percentage. We like what we're seeing in terms of consumer behavior. The last thing that I would say is it's not just about co-pilot plus per se, it creates a nice halo effect on the entire department, right? We've talked about adding in more expertise. We've talked about updating and upgrading the displays in the stores. We've put a lot into the kind of a discovery work that we're doing in our app and all of those things have a nice halo effect across the category. Got it. Thanks. Yes.

Speaker Change: in your profitability that are going to influence the incremental margins as you do experience and upturn in sales. Thank you very much.

Speaker Change: I will take part one and then hand it over to Matt for part two. So as it relates to share, I think the perception of rough stabilization yields.

Speaker Change: Right!

Matt: Now, let me start by saying, I like you talking about next year, share the long game for us. It's not exactly a perfect size quarter by quarter and we've been pretty clear to say, this is a really hard industry to measure because there isn't a great source that's going to walk you through everything as it relates to share. So we've talked about in some categories, we absolutely feel like we've had a strong and good shared game position. Think about things like the computing compensation we were having or even year to date what we've been seeing in gaming. I think we've had some really strong positioning. I think there are some other categories, where back to your point about stabilization, we're starting to see at least a little bit better stabilization.

Corie Barry: It's not exactly a perfect science, quarter by quarter. And we've been pretty clear to say this is a really hard industry to measure because there isn't a great source that's going to walk you through everything. As it relates to share. So we talked about in some categories, we absolutely feel like we've had a strong and good share game position. Think about things like the computing conversation we were having or even year to date what we've been seeing in gaming. I think we've had some really strong positioning. I think there are some other categories. We're back to your point about stabilization.

Corie Barry: We're starting to see at least a little bit better stabilization. A TV is one that's been on even depending on the corner, but it feels like I think the team has done a really nice job leaning into the spaces where we play best, our exclusive brands, our large, large extra large screens. Think 92 inches plus. And I think that is that is helping. I think there's still some spaces where, again, we saw maybe slightly sequentially better results, but still not where we want to be. And then that I would talk about major appliances as an example where we've been pretty transparent.

Michael Lasser: Hi. I think in general, what we are acknowledging is it is still a unpredictable and uneven consumer environment. And while we made it explicit to say we haven't seen anything so far this year that changes behavior. And we're acknowledging there will be an election impact and there always is historically no matter what kind of election we're entering into. So we know that that is likely coming. And you're entering into the holiday season, which often can also create some unpredictable.

Matt: TV's as one that's been on even depending on the corner, but it feels like I think the team has done a really nice job leaning into the spaces where we play best, our exclusive brands, our large, large, extra-large screens, thank you to 92 inches plus, and I think that is not as helping. I think there are still some spaces where, again, we saw maybe slightly sequentially better results, but still not where we want to be, and then that I would talk about major appliances, as an example, where we've been pretty transparent, that's an incredibly promotional category right now. It is also a category that is skewing almost 80% to direct sales right now based on the data that we can see, which is, again, not exactly the place where we tend to play best for a little bit more of a complete solution.

Corie Barry: That's an incredibly promotional category right now. It is also a category that is skewing almost 80% to direct sales right now based on the data that we can see, which is again, not exactly the place where we tend to play best for a little bit more of a complete solutions. And so the housing slowdown definitely disproportionately hurts us. So I think at the highest level, this idea of moderation feels right. But we're really targeting, you know, kind of at the category level, where and how we want to play with a consumer who's very either value oriented or innovation replace.

Michael Lasser: Consumer behaviors probably consumers who might even wait for some of the more values that they I would guess assume that they're going to see over holiday. And so I think we're looking at consumer indicators that continue to be uneven. Resilient consumer so far, but acknowledging into the back half there, especially at the tail end of Q3. There's probably an even greater risk that the consumers a little bit unsettled.

Matt: and so the housing slow down definitely just proportionally heard so. So I think at the highest level this idea of moderation feels right, but we're really targeting kind of at the category level where and how we want to play with a consumer who's very either value-oriented or innovation replacement oriented.

Corie Barry: Understood. My follow up question is, do you think science of stabilization in the category. It would appear that your market share is also stabilizing to a is that a fair assessment on your market share. And if we make the assumption that this continues into next year, ultimately resulting in positive sales growth in 2025, what are they going to need the critical puts and takes in your profitability that are going to influence the incremental margins as you do experience and upturn in sales.

Speaker Change: Yeah, and so I would relate to next year, I think, obviously we're not going to provide long-term guidance today. But as we think about the next few years, as that industry continues to grow as we expect it to.

Speaker Change: and we continue to try to drive our market share with it, we would also expect to be able to.

Speaker Change: Spanned ROI rate over that time as well. It's a little really to talk entirely about the puts and takes for next year. I think what we've been able to do is be very thoughtful about our cost reduction in efficiencies.

Corie Barry: Simeon Gutman. I think the other parts of the business supply chain, at this point, as much as we can see, somewhat neutral as relates to a year-to-year perspective next year, but again obviously we'll know more as we get towards the end of this year and provide more updates. One last thing that I can't resist adding, Michael, is I'm a share conversation. I just want to make it clear, we do tend to outperform when there's innovation and when we can leverage our competitive differentiation. And we absolutely, even though the co-pilot plus side of things is small right now, it definitely underscores kind of that part of our thesis, that is the space where we tend to outperform.

Speaker Change: who drive improved profitability from that regard and then there's a layering in of the other initiatives that we would hope to contribute also positively to the OI over who I read over time.

Corie Barry: Thank you very much. I will take part one and then handed over to Matt for part two. So as it relates to share, I think the perception of rough stabilization feels right. Now, let me start by saying I like you talking about next year shares a long game for us. It's not exactly a perfect science quarter by quarter. And we've been pretty clear to say this is a really hard industry to measure because there isn't a great source that's going to walk you through everything.

Corie Barry: As it relates to share. So we talked about in some categories, we absolutely feel like we've had a strong and good share game position. Think about things like the computing conversation we were having or even year to date what we've been seeing and gaming. I think we've had some really strong positioning. I think there are some other categories. We're back to your point about stabilization. We're starting to see at least a little bit better stabilization.

Speaker Change: I think the other parts of the business supply chain. At this point, as much as we can see, somewhat neutral as relates to your perspective next year. But again, obviously, we'll know more as it gets towards the end of the year and by more updates.

Speaker Change: One laughing that I can't resist adding, uh, Michael is...

Michael Lasser: I'm a share conversation. I just want to make it clear. We do tend to outperform when there's innovation and when we can leverage our competitive differentiation and we absolutely even know the co pilot plus side of things is small right now. It definitely underscores kind of that part of our species that that is the space where we tend to outperform.

Michael Lasser: Thank you very much, and good luck. Thank you.

Speaker Change: Thank you very much in Good Luck.

Mike Baker: Our next question comes from the line of Mike Baker with DA Davidson. Please go ahead. Okay, thanks. Two questions for me. Just so, laptops, computers doing well even without the co-pilot plus, and that feels like about the right timing in terms of product cycles, four years after everyone upgraded around COVID, and that's usually the product cycle for laptops.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Mike Baker with DA Davidson. Please go ahead.

Corie Barry: A TV is one that's been on even depending on the corner, but it feels like I think the team has done a really nice job leaning into the spaces where we play best, our exclusive brands, our large, large extra large screens. Think 92 inches plus. And I think that is that is helping. I think there's still some spaces where again, we saw maybe slightly sequentially better results, but still not where we want to be.

Mike Baker: Okay, thanks two questions for me.

Mike Baker: One just so laptop computers doing well even without the...

Co-Pilot Plotten: Co-Pilot Plotten, and that feels like about the right timing in terms of product cycles, you know, four years after everyone.

Speaker Change: Upgraded around COVID, and that's usually the product cycle for laptops. I guess I'm interested in what's next. What's the next product cycle that you think starts to show and improvement for you?

Corie Barry: I guess I'm interested in what's next. What's the next product cycle that you think starts to show an improvement for you? So I want to make sure that I clarify laptops were strong. We also made a point; the tablets were strong and we're kind of looking at those things together because the newest lineups of tablets that we're seeing, particularly from Apple, are at the same processing power and same price point as some of the most premium laptops that we sell. The reason I bring that up is because both are lovely examples of not massive innovation, but enough innovation in terms of the strengths of these devices, the look and feel of the devices.

Corie Barry: And then that I would talk about major appliances as an example where we've been pretty transparent. That's an incredibly promotional category right now. It is also a category that is skewing almost 80% to direct sales right now based on the data that we can see, which is again, not exactly the place where we tend to play best for a little bit more of a complete solutions. And so the housing slowdown definitely disproportionately hurts us.

Speaker Change: So I would make sure that I clarify laptops were strong. We also made a point to be tablets for strong and we're kind of looking at those things together because the newest lineups of tablets that we're seeing particularly from Apple are at the same processing power and same price point.

Speaker Change: as some of the most premium laptops that we sell. So I think that's the reason I bring that up is because both are lovely examples of not massive innovation, but enough innovation in terms of the strength of these devices, the look and feel of the devices. We also talk just briefly in our comments about desktop, particularly gaming desktop, have been incredibly strong. Again, tire price point, innovation in terms of processing power, and kind of a new way to gain, even as the console side of the business has been a little bit softer.

Corie Barry: So I think at the highest level, this idea of moderation feels right. But we're really targeting, you know, kind of at the category level, where and how we want to play with a consumer who's very either value oriented or innovation replace. Simeon Gutman. I think the other parts of the business supply chain, at this point, as much as we can see somewhat neutral as relates to a year-to-year perspective next year, but again obviously we'll know more as we get towards the end of this year and provide more updates.

Corie Barry: We also talked just briefly in our comments about desktops, particularly gaming desktops, have been incredibly strong. Again, higher price point, innovation in terms of processing power and kind of a new way to gain even as the consult side of the business has been a little bit softer. I can see us heading into based on what's out there and has been announced. Obviously, Apple will make larger announcements here in about a week and a half, but they have made it clear Apple Intelligence is important to them. And again, that's important because it's not just about a phone launch.

Speaker Change: I can see us heading into based on what's out there and hasn't been announced. Obviously Apple will make larger announcements here in about a week and a half, but they have made it clear, Apple Intelligence is important to them. And again, that's important because it's not just about a phone launch.

Corie Barry: Apple intelligence will stretch across devices; it will be on your tablet, it will be on your Mac, it's going to be on your phone. And so the way I characterize this is it's not so much a revolution; it's an evolution. And I think you're going to see AI capabilities bleed into my point of view. Everything with the screen, I think the first rounds will be computing, whether that's laptop, ultimately desktop, tablets, and phones. And in most of those cases, you're going to want that higher processing power in those devices. Obviously, potentially proliferating further from there as you think about smart home capabilities or even televisions in the processing and smarts that you might need to stream effectively.

Speaker Change: Apple Intelligence will stretch across devices. It will be on your tablet. It will be on your Mac. It's going to be on your phone. And so the way I characterize this is it's not so much a revolution. It's an evolution. And I think you're going to see AI capabilities bleed into.

Speaker Change: My point of view, everything with the screen, I think the first wrongs will be computing, whether that's laptop, ultimately desktop, tablets, and phones, and in most of those cases, you're going to want that higher processing power in those devices, obviously.

Corie Barry: One last thing that I can't resist adding, Michael, is I'm a share conversation, I just want to make it clear, we do tend to outperform when there's innovation and when we can leverage our competitive differentiation and we absolutely, even though the co-pilot plus side of things is small right now, it definitely underscores kind of that part of our thesis, that is the space where we tend to outperform.

Speaker Change: Potentially proliferating further from there as you think about smart home capabilities or even televisions and the processing and smart that you might need to stream effectively. So I think this is that that's why we think it's this longer cycle for us and we've been really clear and saying we never expected everyone to be lined up at the door waiting for their AI devices.

Corie Barry: So I think this is that that's why we think it's the longer cycle for us. And we've been really clear in saying we never expected everyone to be lined up at the door waiting for their AI devices. It's more that this continues to proliferate across. screen.

Corie Barry: Thank you very much, and good luck. Thank you.

Mike Baker: Our next question comes from the line of Mike Baker with DA Davidson, please go ahead. Okay, thanks. Two questions for me. Just so laptops, computers doing well even without the co-pilot plus and that feels like about the right timing in terms of product cycles, four years after everyone upgraded around COVID and that's usually the product cycle for laptops. I guess I'm interested in what's next.

Mike Baker: Yeah, okay, fair enough. I appreciate that.

Speaker Change: It's more that those continues to proliferate across screens.

Corie Barry: If I could just ask one clarification question, the monthly trends, major in July, July being flat, how much of that was impacted by the counter shift? In other words, was, you know, so the way you talked about it, July was the best month of the quarter; was that because of the counter shift or, you know, anyway, to sort of quantify that impact? Yeah, we're not going to try to parse out the overall quarterly impact of the week shift by month, but in Q2, more, I would say, generally, more, most of that impact was in May versus July, so July relatively not impacted by that week shift.

Speaker Change: Yep, okay, but fair enough, appreciate that. If I could just ask one clarification question

Speaker Change: The monthly trends, major in July, July being flat, how much of that was impacted by the countershift? In other words, the way you talked about it, July was the best month of the quarter. Was that because of the countershift or any way to sort of quantify that impact?

Speaker Change: Yeah, we're not going to try to parse out the overall quarterly impact of the weak shift by month, but in Q2, more I would say generally more, most of that impact was in May versus July, so July relatively not impacted by that weak shift.

Corie Barry: What's the next product cycle that you think starts to show an improvement for you? So I want to make sure that I clarify laptops were strong. We also made a point, they tablets were strong and we're kind of looking at those things together because the newest lineups of tablets that we're seeing particularly from Apple are at the same processing power and same price point as some of the most premium laptops that we sell.

Mike Baker: Got it. Perfect.

Speaker Change: Got it, perfect, thank you.

Greg Melich: Our next question comes from the line of Greg Melich with Evercore ISI.

Speaker Change: Thank you.

Greg Melich: Please go ahead. Hi, thanks. I wanted to dig a little bit deeper into gross margin. I know that the membership program is getting more profitable. I'd love to hear an update on how the membership program is developing in and of itself and how those folks are behaving as consumers.

Speaker Change: Our next question comes from the line of Greg Millik with Evercore ISI. Please go ahead.

Corie Barry: The reason I bring that up is because both are lovely examples of not massive innovation, but enough innovation in terms of the strengths of these devices, the look and feel of the devices. We also talked just briefly in our comments about desktops, particularly gaming desktops, have been incredibly strong. Again, higher price point, innovation in terms of processing power and kind of a new way to gain even as the consult side of the business has been a little bit softer.

Greg Millik: I wanted to do a little bit deeper into Gross Margin. I know that the membership program is getting more profitable. I'd love to hear an update on how the membership program is developing in and of itself and how those folks are behaving as consumers.

Corie Barry: Sure. So as I always will do, rewind the tape and just talk first. What do we want our membership program to do? You have a membership program because consumers are less brand loyal than they've really ever been historically. And in our case, the goal of membership is to drive both customer engagement and increased share of wallet. So this idea that every time I want to buy CE, why would I go anywhere else? Because Best Buy is the place for me.

Speaker Change: Sure, so as I always will do rewind the tape and just talk first, what do we want our membership program to do?

Corie Barry: I can see us heading into based on what's out there and has been announced. Obviously Apple will make larger announcements here in about a week and a half, but they have made it clear Apple intelligence is important to them. And again, that's important because it's not just about a phone launch. Apple intelligence will stretch across devices, it will be on your tablet, it will be on your Mac, it's going to be on your phone.

Speaker Change: You have a membership program because consumers are less brand loyal than they've really ever been historically and in our case the goal of membership to drive both customer engagement and increase share of wallet. So this idea that every time I want to buy CE, why would I go anywhere else? Because goodbye is the place for me.

Corie Barry: And we look at really three main areas of engagement. One is acquisition. The second is engagement. And the third is retention.

Speaker Change: and we look at really three main areas of engagement. One is acquisition, the second is engagement, and the third is retention. So, two-year question about like how is it performing? Well, across those things, what can we see?

Corie Barry: And so the way I characterize this is it's not so much a revolution, it's an evolution. And I think you're going to see AI capabilities bleed into my point of view. Everything with the screen, I think the first rounds will be computing, whether that's laptop, ultimately desktop, tablets and phones. And in most of those cases, you're going to want that higher processing power in those devices. Obviously, potentially proliferating further from there as you think about smart home capabilities or even televisions in the processing and smarts that you might need to stream effectively.

Corie Barry: So two-year question about how is it performing? Well, across those things, what can we see? One, we continue to grow our new customers compared to Q2 of last year, our new paid customers. Now, again, part of that is we have a new tier in the Plus tier, along with the Total tier. But we like what we're seeing because the whole objective there was to make membership available to a broader population of people. And so we do see materially material growth in those numbers year over year for the quarter. The second thing we are seeing is, for sure, our paid members consistently show higher levels of engagement and interaction with comparatively higher levels of spend at Best Buy.

Speaker Change: One, we continue to grow our new customers in Kuchu compared to Kuchu of last year, our new paid customers. Now, again, part of that is we have a new tier in the plus tier, along with the total tier. But we like what we're seeing, because the whole objective there was to make membership available to a broader population of people, and so we do see material growth in those numbers year over year for the quarter. The second thing we are seeing is...

Corie Barry: So I think this is that that's why we think it's the longer cycle for us. And we've been really clear and saying we never expected everyone to be lined up at the door waiting for their AI devices. It's more that this continues to proliferate across, screen. Yeah, okay, fair enough, appreciate that.

Speaker Change: For sure, our paid members consistently show higher levels of engagement and interaction with comparatively higher levels of spend at best by. So again, back to that original thesis, when people do purchase the membership, it is doing what we want it to do there, engaging more with us, and they're spending more, so we like what we're seeing there.

Corie Barry: So again, back to that original thesis, when people do purchase a membership, it is doing what we wanted to do. They're engaging more with us, and they're spending more. So we like what we're seeing there.

Matt Ballunas: If I could just ask one clarification question, the monthly trends, major in July, July being flat, how much of that was impacted by the counter shift? In other words, was, you know, so the way you talked about it, July was the best month of the quarter, was that because of the counter shift or, you know, anyway, to sort of quantify that impact? Yeah, we're not going to try to parse out the overall quarterly impact of the week shift by month, but in Q2, more, I would say, generally, more, most of that impact was in May versus July, so July relatively not impacted by that week shift. Got it. Perfect. Thank you.

Corie Barry: It's still super early. We just lapped the launch of the new tiers and new construct in June. But at this point, our retention rates are also outperforming our expectations for both Total and Plus. So the early indicators.

Speaker Change: It's still super early, we just laughed the launch of the new tiers and new construct in June.

Speaker Change: But at this point our retention rates are also outperforming our expectations for both total and plus.

Corie Barry: And again, this is, I know I always say this, but we need a little bit of time because our frequency is comparatively lower than other retailers. So it takes us a bit longer to understand our customer behaviors.

Speaker Change: So the early early indicators, and again, this is, I know I always say this, that we need a little bit of time because our frequency is comparatively lower than other retailers, so it takes us a bit longer to understand our customer behaviors.

Corie Barry: But on the whole, we are very pleased with what we're seeing in our membership program.

Corie Barry: And you can imagine, we will continue to think through how do we iterate or add potentially different offers into that mix as we go forward.

Speaker Change: But on the whole we are very pleased with what we're seeing in our membership program and you can imagine we will continue to think through how do we iterate or add potentially different offers into that mix as we go forward.

Greg Melich: Our next question comes from the line of Greg Melich with Evercore ISI. Please go ahead. Hi, thanks.

Greg Melich: I'd love to follow up on that. I think you guys mentioned that some of the promotional environment was bad in appliances.

Speaker Change: I'd love to follow up on that. I think as mentioned that some of the promotional environment was bad in the appliances. And your guidance for the second half, do you expect that to get better or worse? And maybe highlight any other categories where that could get better or worse?

Matt Ballunas: I wanted to dig a little bit deeper into Gross Margin. I know that the membership program getting more profitable. I'd love to hear an update on how the membership program is developing in and of itself and how those folks are behaving as consumers. Sure.

Corie Barry: And your guidance for the second half, do you expect that to get better or worse, and maybe highlight any other categories where that could get better? Of course. Yeah, I think generally what we probably expect, the promotional, promotion alley we saw in both Q1 and Q2 to continue on for the rest of the year. It's quite promotional in many of our categories; appliances we talked about, televisions, are still pretty competitive and promotional with that trade tearing down of purchasing. Computing, as always, is promotional as you get in. And so I think we're just, and we're prepared. Our guidance reflects our need to be competitive.

Speaker Change: Yeah, I think generally we probably expect a promotional, a promotion alley we saw in both Q1 and Q2 to continue on for the rest of the year.

Corie Barry: So as I always will do, rewind the tape and just talk first, what do we want our membership program to do? You have a membership program because consumers are less brand loyal than they've really ever been historically. And in our case, the goal of membership to drive both customer engagement and increased share of wallet. So this idea that every time I want to buy CE, why would I go anywhere else? Because Best Buy is the place for me.

Speaker Change: It's quite promotional in many of our categories, appliances we talked about, televisions is still pretty competitive and promotional with that trade that's tearing down of purchasing, computing is always promotional as you get in and so I think we're just, and we're prepared, our guidance reflect, our need to be competitive as we look out to the Q3Q4.

Corie Barry: So as we look out to the Q3 and Q4.

Corie Barry: And we look at really three main areas of engagement. One is acquisition. The second is engagement. And the third is retention.

Greg Melich: That's great.

Matt Ballunas: And there's just one housekeeping. Did I hear something in an SCNA, a legal settlement, did I? Yeah, we had a one-time legal settlement within the credit card processing area. It should not recur. It was just a one-time benefit to SNA in the second quarter.

Speaker Change: It's great. There's just one housekeeping. Did I hear something in SNA illegal settlement?

Speaker Change: Yeah, we have it right and left.

Speaker Change: We had a one-time legal settlement within the credit card processing area. It should not recur, it was just a one-time benefit to S.G.A. in the second quarter.

Matt Ballunas: Could you quantify that? It's around $10 million. Got it right.

Speaker Change: Good, good, you quantify it.

Speaker Change: It's around ten million dollars.

Matt Ballunas: Well, good luck, and thanks, guys.

Speaker Change: Got it. Alright, we'll good luck and thank you guys.

Corie Barry: And so we do see materially material growth in those numbers year over year for the quarter. The second thing we are seeing is for sure, our paid members consistently show higher levels of engagement and interaction with comparatively higher levels of spend at Best Buy. So again, back to that original thesis, when people do purchase a membership, it is doing what we wanted to do. They're engaging more with us and they're spending more. So we like what we're seeing there.

Steve the Cone: Our next question comes from the line of Steve the Cone with City, please go ahead. Great. Good morning. Thanks for taking my question. I wanted to double-click on the second half outlook.

Speaker Change: Thank you!

Speaker Change: Our next question comes from the line of Steve's the cone with city. Please go ahead.

Steve Sickone: Great morning. Thanks for taking my question. I wanted to double click on the second half outlook.

Corie Barry: So, with August flat, can you just help us understand how back to school is performing overall relative to plan. It will be some more newness as we get into September.

Speaker Change: So with August slide, can you just help us understand how back to school is performing?

Speaker Change: Overall relative to plan presumably there'll be some more newness as we get into September.

Corie Barry: And then can you just help us think through the implied outlook in the fourth quarter, just given the guidance reduction on seems to ourselves, maybe what can help you get to the high end of the range versus the low end of the range, specifically in that fourth quarter. Some quality is so important. Good morning, Steve. As it relates to back to school performance, I would say it's performing basically in line with our expectations. Now, it's your point about September. What's a little tricky is, over the last many years, we've actually seen back to school kind of push further into September.

Speaker Change: and then can you just help us think through the implied outlook in the fourth quarter?

Speaker Change: is given the guidance, reduction on same source sales. Maybe what can help you get to the high end of the range versus the low end of the range specifically in that fourth quarter, some quality is so important.

Speaker Change: Good morning Steve, as it relates to back to school performance, I would say it's performing basically in line with our expectations.

Speaker Change: Now, to your point about September, what's a little tricky is over the last many years, we've actually seen back to school kind of pushed further into September. It almost seems like people are weighing what it is exactly. They're going to need to go back to school with. So, you know, we still have a chunk of the season in front of us, but so far, I would say it is plain to our expectations, which again sits under our whole point of view that we're not seeing a lot right now in customer behavior that's saying they're behaving incredibly differently. Thank you very much.

Corie Barry: It almost seems like people are weighing what it is exactly they're going to need to go back to school with. So, you know, we still have a chunk of the season in front of us, but so far, I would say it is playing to our expectations, which again sits under our whole point of view that we're not seeing a lot right now in customer behavior that's saying they're behaving incredibly differently. Yeah, as it relates to Q4, I think I would say our range reflects something that's anywhere from down 3% to up 2%. I think, obviously, we'll plan for a lot of different outcomes on the high end.

Corie Barry: And you can imagine, we will continue to think through how do we iterate or add potentially different offers into that mix as we go forward.

Corie Barry: I'd love to follow up on that. I think you guys mentioned that some of the promotional environment was bad in appliances. And your guidance for the second half, do you expect that to get better or worse and maybe highlight any other categories where that could get better?

Speaker Change: Yeah, it relates to Q4, I think I would say our range reflects something that's anywhere from down 3% to up 2%. I think...

Speaker Change: Obviously, we'll plan for a lot of different outcomes on the high end, I think we would expect, you know, obviously computing in tablets that can get you to be strong as we look at the back half of the year. I think generally there's an improvement in most of our categories, maybe in a positive, but the decline would improve.

Corie Barry: Of course. Yeah, I think generally what we probably expect, the promotional, promotion alley we saw in both Q1 and Q2 to continue on for the rest of the year. It's quite promotional in many of our categories, appliances we talked about televisions is still pretty competitive and promotional with that trade tearing tearing down of purchasing, computing as always promotional as you get in. And so I think we're just and we're prepared our guidance reflect our need to be competitive. So as we look out to the Q3 and Q4.

Corie Barry: I think we would expect, you know, obviously computing and talents that continue to be strong as we look at the back half of the year. I think generally there's an improvement in most of our categories, maybe not positive, but the declines would improve. We are also cognizant of we have continued price investments, increased marketing in the back half even more than the first half of the year, and dedicated labor will start to be actually more fulsome in the back half as we still ramping up the televisions and appliance areas. So, all those things should help us improve.

Corie Barry: That's great.

Speaker Change: We are also cognizant of we have continued price investments, increased marketing and the back cap even more than the first half of the year. And dedicated labor will start to be actually more full-some in the back cap as we still ramping up the televisions and appliance areas.

Corie Barry: I also know that TVs would be an area we would expect to improve as the quarters Q3 and Q4 progress. In that area, I think there's an expectation that the very large televisions in 97 inches and above are able to help us improve the trend of performance there, amongst other things. So, at the high end, those are the things that would support the top end.

Speaker Change: 12 of those things should help us.

Speaker Change: I also know that TV's would be an era we would expect to improve as the quarter's Q3 and Q4 progress in that area I think there's an expectation that the very large televisions in 97 inches above are able to help us improve the trend of performance theorem amongst others things. So at the high end those are the things that would support the top and obviously at the bottom end.

Matt Ballunas: And there's just one housekeeping. Did I hear something in an SCNA, a legal settlement, did I? Yeah, we had a one time legal settlement within the credit card processing area. It should not recur. It was just a one time benefit to SNA in the second quarter.

Matt Ballunas: Could you quantify that? It's around $10 million. Got it right.

Corie Barry: Obviously, at the bottom end, we would expect in an industry in a performance that's more in line with where we saw comps in Q2, just a general non-improvement or just a more stagnant level within the industry than what we've been seeing more recently. Okay, thanks for that.

Speaker Change: We would expect an industry in a performance that's more in line with where we saw cops in Q2 Just a general not improvement or just a more stagnant level in the industry than what we've been seeing more recently.

Matt Ballunas: Well, good luck and thanks, guys. Thank you.

Corie Barry: The follow-up I have is just on the growth in tablets and computers. Can you talk through how ASPs performed relative to units, and as we think about the path forward where we go from replacement cycle to maybe more newness sprinkling into the assortment, is there potential for ASPs to increase as we get into next year specifically in that category? Yeah, generally when we're not going to go through organics in too much detail, it's not how we plan our business. But in Q2, when you look at mobile computing or the notebooks area, I would say ASPs were actually slightly flat and down a little bit within the notebook category. Tablets, they would be up with the new innovation.

Steve the Cone: Our next question comes from the line of Steve the cone with city, please go ahead. Great. Good morning. Thanks for taking my question. I wanted to double click on the second half outlook. So with August flat, can you just help us understand how back to school is performing overall relative to plan. It will be some more newness as we get into September.

Speaker Change: Okay, thanks for that. The follow-up I had is just on the growth and tablets and computers. Can you talk through how ASP performed relative to units?

Speaker Change: and as we think about the past forward, where we go from replacement cycle to maybe more newness sprinkling into the assortment, is their potential for ASPs to increase as we get into next year specifically in that category.

Speaker Change: Yeah, the generally we're not going to go through organics and too much detail. It's not how we do.

Speaker Change: Playing our business, but in cute and cute too, when you look at mobile computing or...

Speaker Change: The notebooks area would say ASBs were actually...

Speaker Change: slightly flat, the down a little bit.

Speaker Change: within the notebook category, tablets, they would be up with the new innovation. As you go forward, those mixes can change a little bit based on it. With the notebooks you see, we'll see more AI enabled computers, which should generally probably drive the price points up a little bit. And so ASPs could...

Corie Barry: As you go forward, those mixes can change a little bit based on the, with the notebooks you see, we'll see more AI-enabled computers, which should generally probably drive the price points up a little bit, and so ASPs could potentially move up. Tablets could depend upon when you get into the holidays; it's also a very promotional idea, so you can see ASPs may come down a little bit. But generally, again, we don't really plan our business on those organics; we reflect more of like what's being, what are the launches, and where are the categories that in their cycles?

Corie Barry: Now, it's your point about September. What's a little tricky is over the last many years we've actually seen back to school kind of push further into September. It almost seems like people are weighing what it is exactly they're going to need to go back to school with. So, you know, we still have a chunk of the season in front of us, but so far, I would say it is it is playing to our expectations, which again sits under our whole point of view that we're not seeing a lot right now in customer behavior that's saying they're behaving incredibly differently.

Speaker Change: potentially move up.

Speaker Change: Tablets could depend upon when you get into the holidays. It's also very promotional ideas so you can see ASPs may become down a little bit But generally, again, we don't really plan our business on those organics. We reflect more of what's being better the launches and where are the...

Corie Barry: In general, the concept that the proliferation of innovation across the category tends to drive in the early stages of the innovation higher ASPs, that does tend to be the case. So I think the hypothesis that as we see innovation in these categories, you start to, and as it gets large enough as a part of the category, it definitely can help support some of the greater ASPs. That being said, I really want to underscore what Matt said, which is we are an environment that is highly promotional and price sensitive, and a consumer who is as much as they're interested in the innovation also looking for great deals and value.

Corie Barry: Yeah, as it relates to Q4, I think I would say our range reflects something that's anywhere from down 3% to up 2%. I think, obviously, we'll plan for a lot of different outcomes on the high end. I think we would expect, you know, obviously computing and talents that continue to be strong as we look at the back half of the year, I think generally there's an improvement in most of our categories, maybe not positive, but the declines would improve.

Speaker Change: Howdy with that in their cycles.

Speaker Change: in general, the concept to that.

Speaker Change: The proliferation of innovation across the category tends to drive in the early stages of the innovation higher ASPs. That does tend to be the case. So I think the hypothesis that as we see innovation in these kind of categories, you start to, and as it gets large enough as a part of the category, it definitely can help support some of the greater ASPs. That being said, I really want to underscore what Matt said, which is we are an environment that is highly promotional and price sensitive in a consumer, who is as much as they're interested in the innovation, also looking for great deals and value. And so this for us, the objective is not ASP expansion. The objective is meeting the customer where they are across.

Corie Barry: We are also cognizant of we have continued price investments increased marketing in the back half even more than the first half of the year and dedicated labor will start to be actually more fulsome in the back half as we still ramping up the televisions and appliance areas. So, all those things should help us improve. I also know that TVs would be an area we would expect to improve as the quarters Q3 and Q4 progresses.

Corie Barry: And so this for us, the objective is not ASP expansion; the objective is meeting the customer where they are across the full range of products that we have.

Corie Barry: In that area, I think there's an expectation that the very large televisions in 97 inches and above are able to help us improve the trend of performance there amongst other things. So, at the high end, those are the things that would support the top end. Obviously, at the bottom end, we would expect in an industry in a performance that's more in line with where we saw comps in Q2, just a general non improvement or just a more stagnant level within the industry than what we've been seeing more recently.

Corie Barry: Understood. Best of luck in the second half. Thank you.

Speaker Change: the full range of products that we have.

Speaker Change: I understand best of all I can say can have

Steven Forbes: Our next question comes from the line of Steven Forms with Guggenheim. Please go ahead. Good morning, Corey Matt.

Speaker Change: Thank you, thank you.

Speaker Change: Our next question comes from the line of Stephen Forbes with Guggenheim. Please go ahead.

Corie Barry: Corey, I was hoping maybe we could explore how you were thinking about and were planning for the potential of wild cannibalization within the category. As you think about the impact of innovation, should we view it or do you view it as net incremental to wallet share spend, or do you see the risk of cannibalization within the CE industry? Just trying to really gauge your overall confidence that the CE category as a whole can get back to gaining share of total PCE spend. For the category, we've been pretty explicit that there is this fact layer of pressures on the category, which, to your point, have overarchingly for the industry made it difficult for the industry to grow.

Stephen Forbes: Good morning Corie Matt.

Corie: Corie, forward it!

Stephen Forbes: I was hoping maybe we could explore how you are thinking about and we're planning for the potential of wild cannibalization within the category.

Speaker Change: You think about the VM-Tactivineration is it?

Matt Ballunas: Okay, thanks for that. The follow-up I have is just on the growth in tablets and computers. Can you talk through how ASPs performed relative to units, and as we think about the path forward where we go from replacement cycle to maybe more newness sprinkling into the assortment, is their potential for ASPs to increase as we get into next year specifically in that category? Yeah, generally when we're not going to go through organics in too much detail, it's not how we plan our business, but in Q2, when you look at mobile computing or the notebooks area, I would say ASPs were actually slightly flat and down a little bit within the notebook category, tablets, they would be up with the new innovation.

Speaker Change: You should review it or do you view it as net incremental to while it's shared spend or do you see the risk of

Speaker Change: Candlevelization within the C Industry, just trying to really gauge your overall confidence that the C E category of the whole right can get back to gaining share of total PCE spent.

Speaker Change: For the category we've been pretty explicit that there is this.

Speaker Change: Dacked layer of pressures.

Speaker Change: on the category, which, to your point, have overarchingly for the industry made it difficult for the industry to grow. And we've talked about kind of five things. One, inflation, not on our stuff, but on the basic.

Corie Barry: And we've talked about kind of five things. One, inflation, not on our stuff, but on the basics. You're starting to see that ease a little bit, though housing still is a real concern there. And that's going to take a little bit longer to ease. You have spent on experiences. People are continuing to want to spend on experiences versus goods. That's kind of a broad statement, but it's been true. And that has remained relatively sticky, although you're starting to see that pull back just a little bit in some of the early. You got a stagnant housing market.

Matt Ballunas: As you go forward, those mixes can change a little bit based on the, with the notebooks you see, we'll see more AI-enabled computers which should generally probably drive the price points up a little bit and so ASPs could potentially move up. Tablets could depend upon when you get into the holidays, it's also very promotional idea so you can see ASPs may be come down a little bit, but generally again we don't really plan our business on those organics, we reflect more of like what's being, what are the launches and where are the categories that in their cycles?

Speaker Change: You're starting to see that ease a little bit, though housing still is a reconcered there, and that's going to take a little bit longer to ease.

Speaker Change: You have spend on experiences. People are continuing to want to spend on experiences versus good. That kind of a broad statement, but it's been true. And that has remained relatively sticky. Although you're starting to see that pull that just a little bit in some of the early end years.

Corie Barry: You're just not seeing the turnover. That has continued, and I think it's going to take us a little bit of time to get out of that. Then there were kind of two other specifics that are more about our industry. There was a very large pull forward in COVID where people spent a lot on these categories. And then secondarily, we have not seen innovation within the category. So what gives me some confidence going forward and why we talked about moderation into the back half and why industry forecasts that tend to look at least a little bit positive for next year is particularly these last two things, innovation proliferating throughout the categories.

Speaker Change: You got a stagnant housing market, you're just not seeing the turnover, that has continued and I think it's going to take us a little bit of time to get out of that. Then there were kind of two other specifics that are more about our industry. There was a very large pool forward in COVID, where people spend a lot on these categories.

Matt Ballunas: In general, the concept that the proliferation of innovation across the category tends to drive in the early stages of the innovation higher ASPs, that does tend to be the case. So I think the hypothesis that as we see innovation in these categories, you start to, and as it gets large enough as a part of the category, it definitely can help support some of the greater ASPs. That being said, I really want to underscore what Matt said, which is we are an environment that is highly promotional and price sensitive and a consumer who is as much as they're interested in the innovation also looking for great deals and value. And so this for us, the objective is not ASP expansion, the objective is meeting the customer where they are across the full range of products that we have.

Speaker Change: and then, secondarily, we have not seen innovation within the category.

Speaker Change: So, what gives me some confidence going forward and why we talked about moderation into the back half and why industry forecasts tend to look at the little bit positive for next year, if particularly these last two things.

Corie Barry: And starting to lap, and we talked about it earlier at four and a half years out from the pandemic, starting to get into real replacement cycle timing where people are just going to want new devices. And that's why we keep our eyes on those indicators in particular because if you have those two indicators and you start to see a little bit of season. There's a little bit of increasing of inflation in particular that feels like you're starting to get the right combination of things for the total industry to your point about the share of the total wallet with the big W.

Speaker Change: Innovation proliferating throughout the categories.

Speaker Change: and...

Speaker Change: Starting to laugh, and we talked about it earlier, at four and a half years out from the pandemic, starting to get into real replacement cycle timing where people are just going to want new devices and that's why we keep our eyes on those indicators.

Matt Ballunas: Understood, best of luck in the second half. Thank you.

Speaker Change: In particular, because if you have those two indicators and you start to see a little bit of season of inflation, in particular, that to us feels like you're starting to get the right combination of things for the total industry to your point about the share of the total, like wallet with the big W. I think you start to see the total industry then rebound. So we'll keep our eye on those indicators. We'll continue to try to update you on what we're seeing. But I think what we've seen and even as we came out of Q1 and into Q2, is reinforcing our thesis on some of these things.

Steven Forbes: Our next question comes from the line of Steven Forms with Guggenheim. Please go ahead. Good morning, Corey Matt.

Corie Barry: I think you start to see the total industry, then rebound. So we'll keep our eye on those indicators. We'll continue to try to update you on what we're seeing. But I think what we've seen in even as we came out of Q1 and into Q2 is reinforcing our thesis on some of these things.

Corie Barry: Corey, I was hoping maybe we could explore how you were thinking about and were planning for the potential of wild cannibalization within the category. As you think about the impact of innovation, should we view it or do you view it as net incremental to wallet share spend or do you see the risk of cannibalization within the CE industry, just trying to really gauge your overall confidence that the CE category as a whole can get back to gaining share of total PCE spend.

Corie Barry: What's great to hear, and then just a quick follow-up: right, tablets and computing up 6%. Anyway, to frame the percentage of the business today that those two categories represent, or maybe the percentage of the segment disclosure of computing mobile phones that those two categories represent. I think notebooks are computing part of that equation is considerably higher than the tablet side. Although tablet is a fairly sizable category. We've definitely broken those two out. But notebook still is the bigger part of those two within the 6% terms of the weight of the dollars. And the two are definitely the bigger part of the overarching category as we break it.

Speaker Change: and then just a quick follow-up, right tablets and viewing up to 6%.

Speaker Change: Anyway, a frame, the percentage of the business today that those two categories represent or maybe the percentage of the segment disclosure of computing and mobile phones that those two categories represent.

Corie Barry: For the category, we've been pretty explicit that there is this fact layer of pressures on the category, which to your point, have overarchingly for the industry made it difficult for the industry to grow. And we've talked about kind of five things. One, inflation, not on our stuff, but on the basics. You're starting to see that ease a little bit, though housing still is a real concern there. And that's going to take a little bit longer to ease.

Speaker Change: I think notebooks are computing part of that equation is considerably higher than the tablet side, although tablet is...

Speaker Change: Fairly sizable category, we've definitely broken those two out, but no book still is the bigger part of those two within the six percent in terms of the weight of the dollars. And the two are definitely the bigger part of the overarching category as we break it.

Corie Barry: Thank you.

Simeon Gutman: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please go ahead. Good morning everyone, and nice job managing the year so far. I wanted to ask; this was touched on. I wanted to get maybe some more texture, Matt, first on the gross margin between Q3, Q4. I know you talked about what you're planning in terms of promotion, but any texture between the two quarters in the back half of the year. Generally speaking, the back half gross property rate expansion for Q3 and Q4 are pretty similar. We do have the nuance that there is an extra week in Q4, which does have an impact on the girls' property rate a little bit when you take that out.

Speaker Change: Thank you.

Speaker Change #100: Our next question comes from a line of some young gutmen with Morgan Stanley. Please go ahead.

Corie Barry: You have spend on experiences. People are continuing to want to spend on experiences versus goods. That's kind of a broad statement, but it's been true. And that has remained relatively sticky, although you're starting to see that pull back just a little bit in some of the early. You got a stagnant housing market. You're just not seeing the turnover. That has continued and I think it's going to take us a little bit of time to get out of that.

Speaker Change #101: Good morning everyone and nice job managing the year so far. I wanted to ask this was touched on, I wanted to give maybe some more texture Matt first on the gross margin between Q3, Q4. I know you talked about what you're planning in terms of promotion, but any texture between the two quarters and the back half of the year.

Corie Barry: Then there were kind of two other specifics that are more about our industry. There was a very large pull forward in COVID where people spent a lot on these categories. And then secondarily, we have not seen innovation within the category. So what gives me some confidence going forward and why we talked about moderation into the back half and why industry forecasts that tend to look at least a little bit positive for next year is particularly these last two things, innovation proliferating throughout the categories.

Matt: The general speaking, the back half cross-puffer rate.

Speaker Change #102: Expansion for Cuthor and Givore are pretty similar. We do have the nuance that there is an extra week in.

Speaker Change #103: and Q4 which does have an impact on the girl's profit rate a little bit when you put it.

Matt Ballunas: The two quarters are similar. Now those two quarters are likely a bit lower than the first half of the year where we saw we were still lapping the membership program changes that we made. So the net of the year should be 35 basis points. If expansion are a little bit lower in the back half, a little bit higher in the first half. The drivers are very similar. There's product margin rate pressure as you get into each Q3 and Q4, and I would say credit card. Provider is probably more of a little bit pressure in Q3 than it would be in Q4.

Speaker Change #104: takes that out, the two quarters are similar. Now, those two quarters are likely a bit lower than the first half of the year where we saw we were still lapping the membership program changes that we made. So, the net of the year should be 35 base points if expansion, probably a little bit lower in the back half of the little higher in them.

Corie Barry: And starting to lap and we talked about it earlier at four and a half years out from the pandemic, starting to get into real replacement cycle timing where people are just going to want new devices. And that's why we keep our eyes on those indicators in particular because if you have those two indicators and you start to see a little bit of season. There's a little bit of increasing of inflation in particular that feels like you're starting to get the right combination of things for the total industry to your point about the share of the total wallet with the big W. I think you start to see the total industry then rebound.

Speaker Change #104: and the first half, the drivers are very similar. There's a product margin rate pressure as you get in these Q3 and Q4 and I would say credit card, the profit share is probably more of a little bit pressure and Q3 than it would be in Q4. Those are the biggest items but again, the drivers are really dissimilar. It's just more of a

Matt Ballunas: Those are probably the biggest items. But again, the drivers aren't really dissimilar. It's just more of us lapping that program change after Q2.

Matt Ballunas: Okay. And then just to follow up in the gross margin, this particular quarter, there was a benefit from higher services, and then product margin was a little weaker. Can you quantify that and then thinking about product margin going forward in I guess a cycles come through and especially in mobile and computing is there a premise that product margin can be higher because of promotion or is promotion the biggest dictator of product margin going forward or should product margin start to lift as some of this new technology goes through the mix. Yeah, I think so. For a certain of the quantification, we haven't quantified it.

Speaker Change #105: Okay, and then just to follow up in the gross margin, this particular quarter there was a benefit from higher services and then product margin was a little weaker. Can you quantify that and then thinking about product margin going forward?

Corie Barry: So we'll keep our eye on those indicators. We'll continue to try to update you on what we're seeing. But I think what we've seen in even as we came out of Q1 and into Q2 is reinforcing our thesis on some of these things.

Speaker Change #106: I guess a cycle has come through and especially in mobile and computing.

Speaker Change #107: is there a premise that product margin can't be higher because a promotion or is promotion the biggest dictator of product margin going forward or should product margin start to lift as some of this new technology goes through the mix.

Corie Barry: What's great to hear and then just a quick follow up right tablets and computing up 6% anyway to frame the percentage of the business today that those two categories represent or maybe the percentage of the segment disclosure of computing mobile phones that those two categories represent. I think notebooks are computing part of that equation is considerably higher than the tablet side. Although tablet is fairly sizable category. We've definitely broken those two out.

Matt Ballunas: I would say that the benefit from membership and services is significantly more than the overall expansion that we saw in Q1 and 2 in terms of the broad dynamics of promotion. I mean for product margins, you've got a number of items. You've got the promotion at a level. So the extent that the industry starts to stable. And there's less promotion needed to drive units. You can see that being a little bit of a relief or continued pressure, depending on the environment we're sitting in. You always have a level of mix of categories. So there's some categories that have a little bit higher gross profit rate, and some that are a little bit lower, and that can sometimes have an impact.

Speaker Change #108: Yeah, I think so for a series of the quantification we haven't quantified it, I would say that the benefit from membership and services is significantly more than the overall expansion that we saw in.

Corie Barry: But notebook still is the bigger part of those two within the 6% terms of the weight of the dollars. And the two are definitely the bigger part of the overarching category as we break it. Thank you.

Speaker Change #109: and Q and Q one and two.

Speaker Change #109: in terms of the broad dynamics of...

Speaker Change #110: I mean, the product margins you've got a number of items, you've got the promotion hourly level, so to extend that the industry starts to stabilize and there's less promos needed to drive units, you could see that being a little bit of relief for continued pressure depending on the environment we're sitting in.

Speaker Change #110: You always have a level of mix of categories, so there's some categories that have a little bit higher gross profit rate and some that are a little bit lower.

Matt Ballunas: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please go ahead. Good morning everyone and nice job managing the year so far. I wanted to ask this was touched on. I wanted to get maybe some more texture Matt first on the gross margin between Q3, Q4. I know you talked about what you're planning in terms of promotion, but any any texture between the two quarters in the back half of the year.

Matt Ballunas: But those are the biggest, the biggest items in terms of product margin rates. Assuming you're managing inventory well and you don't see a set of write-off markdowns, which we have not seen, I think those are usually the biggest things to think about. Okay, thanks.

Speaker Change #110: and sometimes everything packed.

Torie Wally: The biggest items in terms of product margin rates is assuming you're my engine. I mean, Torie Wally, you don't see it, it says it right off the markdowns, which we have not seen. I think those are usually the biggest things to think about.

Matt Ballunas: Well done.

Matt Ballunas: Good luck in the back half. Thank you.

Speaker Change #112: Okay, thanks. Well done. Not good luck in the back half.

Christopher Horvers: Our next question comes from line of Christopher Horvers with JP Morgan.

Matt Ballunas: Generally speaking, the back half gross property rate expansion for Q3 and Q4 are pretty similar. We do have the nuance that there is an extra week in Q4 which does have an impact on the girls property rate a little bit when you take that out. The two quarters are similar. Now those two quarters are likely a bit lower than the first half of the year where we saw we were still lapping the membership program changes that we made.

Speaker Change #113: Thank you.

Speaker Change #113: Our next question comes from line of Christopher Horvers with JP Morgan. Please go ahead.

Matt Ballunas: Please go ahead. Thanks. Good morning. So not the bolts questions on the quarter date being approximately flat. Is that like you disclosed in May, like your estimate of what the ship is impacting, so it's X, any maybe shift benefit from the back school timing. And then, as you think about the headwind, does that essentially occur in October, you know, as a net headwind of the quarter?

Christopher Horvers: Thanks, good morning, so couple, nuts and bolts questions on the quartered 18 approximately flat.

Christopher Horvers: Is that like you disclosed and made your estimate of what the shift is impacting, so it's X and E.

Speaker Change #115: may be shift benefit from the back school timing and then as you think about the headwind, is that essentially a car in October, you know, as in that headwind to the corner?

Matt Ballunas: So the net of the year should be 35 base points. If expansion are a little bit lower in the back half a little bit higher in the first half. The drivers are very similar. There's product margin rate pressure as you get into each Q3 and Q4 and I would say credit card. Provider is probably more of a little bit pressure in Q3 than it would be in Q4. Those are probably the biggest items. But again, the drivers aren't really dissimilar. It's just more of us lapping that program change after after Q2.

Matt Ballunas: Yeah, as I said, we're not going to get into the specifics of weekly impacts by month. I think if I step all the way back and think about July, was about flat in terms of comp sales. August, we're estimating the approximately flat; the two quarters combined are approximately flat, which is an improvement in trend from what we saw in Q1 and even from what we saw in Q2. It's really difficult to estimate weekly shift impacts by month because it's not just the shift; you also have changes to the promotional calendar. You have different promotions in different weeks that can also impact it, so it's really difficult to break those down much beyond just a quarterly impact.

Speaker Change #116: Yeah, I said we're not going to get into this.

Speaker Change #116: is a specific, sweetly, an X-by month. I think if I step all the way back and think about July was a...

Speaker Change #116: was about flat in terms of comp sales.

Speaker Change #117: August for us made in the approximately flat, the two poorest combined or approximately flat, which is an improvement in trend from what we saw in Q1, and even from what we saw in Q2. It's really difficult to estimate weekly shift impacts by month because...

Matt Ballunas: Okay. And then just to follow up in the gross margin, this particular quarter, there was a benefit from higher services and then product margin was a little weaker. Can you quantify that and then thinking about product margin going forward in I guess a cycles come through and especially in mobile and computing is there a premise that product margin can be higher because of promotion or it's promotion the biggest dictator of product margin going forward or should product margin start to lift as some of this new technology goes through the mix.

Speaker Change #117: It's not just the shift, you also have changes to the promotional calendar, you have different promotions in different weeks that can also impact it so it's really difficult to break those down much beyond just a quarterly impact.

Matt Ballunas: Got it. And then on the SNA front, I know that, you talk about adding back labor, and you're adding back labor sort of an increasing rate as you reset more departments. But then, with the cost savings plan from the end of last year, I think the cost savings built over the year because not all the sort of strategies were put in place. So, is that fair, and does that make SNA dollars in the second quarter the right level to build from?

Speaker Change #117: Clara, and then on the SNA front I know that

Speaker Change #118: You know, you talk about adding back labor and you're adding back labor, sort of an increasing rate as you reset more departments But then with the cost savings plan from the end of last year, I think the cost savings built over the year Because not all the sort of strategies were put in place

Matt Ballunas: Yeah, I think so for a certain of the quantification, we haven't quantified it. I would say that the benefit from membership and services is significantly more than the overall expansion that we saw in Q1 and 2 in terms of the broad dynamics of promotion. I mean for product margins, you've got a number of items. You've got the promotion at a level. So the extent that the industry starts to stable. And there's less promotion needed to drive units.

Speaker Change #119: So, is that fair and does that make SGNA dollars in the second quarter the right level to build from? Thank you.

Matt Ballunas: Thank you. Yeah, I think as it relates to SNA, I think in the first half of the year, our SNA was down about 4%. If you think about the back half of the year, the SNA, when you remove the extra week, is anywhere from up 2% to flat on the low end for the second half. And so I think the SNA favorability in the first half is initially trying to translate to the favorability we see in the back half. And there are a number of reasons that are driving that. The first one is just to your point, the store payroll.

Speaker Change #120: Yeah, I think...

Speaker Change #121: is relates to SG&A, I think in the first half of the year, our SGA was down about 4%.

Speaker Change #122: If you think about the back half of the year, the SGNA, when you remove the extra week, is anywhere from up 2% to flat on the low end.

Matt Ballunas: You can see that being a little bit of a relief or continued pressure, depending on the environment we're sitting in, you always have a level of mix of categories. So there's some categories that have a little bit higher gross profit rate and some that are a little bit lower and that can sometimes have an impact. But those are the biggest, the biggest items in terms of product margin rates. Assuming you're managing inventory well and you don't see a set of write off markdowns which we have not seen, I think those are usually the biggest things to think about. Okay, thanks. Well done. Good luck in the back half.

Matt Ballunas: Thank you.

Speaker Change #122: for the second half.

Speaker Change #122: And so I think the S Un A favorability in the first app is initially trying to translate to the favorability we see in the back half. And there are a number of reasons that are driving that. The first one is just to your point, the store payroll. We saw a lot of favorability and store payroll in the first half of the year. We had yet to cycle those operating metal changes.

Matt Ballunas: We saw a lot of capability and store payroll in the first half of the year. We had yet to cycle those operating metal changes, which we did on Q1 the last year. So that will, will drive up some favorability in the first half and not in the back half. We also have a better sales outlook in the back half of the year. So we're adding sales to support that as well. In the, in the first half, we also had the $40 million of geography change for offsetting SNA versus cost of sales. That is not; that does not occur in the back half of this year.

Speaker Change #122: which we did on Q1 the last year so that will drive up some favourability in the first half and not in the back half. We also have a better sale outlook in the back half of the year so we're adding sales to support that as well.

Christopher Horvers: Our next question comes from line of Christopher Horvers with JP Morgan. Please go ahead. Thanks. Good morning. So not the bolts questions on the quarter date being approximately flat. Is that like you disclosed in May like your estimate of what the ship is impacting so it's X any maybe shift benefit from the back school timing. And then as you think about the headwind, is that does that essentially occur in October, you know, as a net headwind of the quarter?

Speaker Change #122: and the first half we also had the $40 million of geography change.

Speaker Change #122: we're offsetting SGNA versus cost of sales. That's not a curve in the back half of this year. And then also in the first half of the year we saw medical claims cost come in much lower than we saw the year before. So that was a favorability in the first half of the year. So there's a noticeable change in SGNA trajectory as you go from the first half.

Matt Ballunas: And then also in the first half of the year, we saw medical claims cost coming much lower than we saw the year before. So that was a favorability in the first half of the year. So there's a, there's a noticeable change in SNA trajectories. You go from the first half, the back half of the year for those very reasons. And those are largely included in many cases in how we already got it.

Christopher Horvers: Yeah, as I said, we're not going to get into the specifics of weekly impacts by month. I think if I step all the way back and think about July was about flat in terms of comp sales. August, we're estimating the approximately flat, the two quarters combined are approximately flat, which is an improvement in trend from what we saw in Q1 and even from what we saw in Q2. It's really difficult to estimate weekly shift impacts by month because it's not just the shift you also have changes to the promotional calendar.

Speaker Change #123: the back half of the year for the Piddles area reasons, and Piddles are largely included in many cases and how we've already died at home.

Matt Ballunas: Got it. Thanks very much.

Matt Ballunas: Have a great rest of the back school.

Speaker Change #124: Got it, thanks very much, have a great rest of the back school.

Operator: Thank you.

Operator: And that is our last question.

Operator: Thank you so much for taking the time to join us today, and we look forward to speaking to you after Q3. This will conclude best by second quarter fiscal 2025 earnings call. Thank you for your participation.

Speaker Change #125: Thank you. And that is our last question. Thank you so much for taking the time to join us today. And we look forward to speaking to you after Q3.

Christopher Horvers: You have different promotions in different weeks that can also impact it so it's really difficult to break those down much beyond just a quarterly impact. Got it. And then on the SNA front, I know that, you know, you talk about adding back labor and you're adding back labor sort of an increasing rate as you reset more departments. But then with the cost savings plan from the end of last year, I think the cost savings built over the year because not all the sort of strategies were put in place.

Speaker Change #126: This will conclude best by second quarter fiscal 2025 earnings call. Thank you for your participation. You may now disconnect.

Operator: You may now disconnect. Thank you very much.

Speaker Change #126: [inaudible]

Christopher Horvers: So, is that fair and does that make SNA dollars in the second quarter the right level to build from? Thank you. Yeah, I think as it relates to SNA, I think in the first half of the year, our SNA was down about 4%. If you think about the back half of the year, the SNA, when you remove the extra week is anywhere from up 2% to flat on the, on the low end for the, for the second half.

Christopher Horvers: And so I think the, the SNA favorability in the first half is initially trying to translate to the favorability we see in the back half. And there are a number of reasons that are driving that the first one is just to your point, the store payroll. We saw a lot of capability and store payroll in the first half of the year. We had yet to cycle those operating metal changes, which we did on Q1 the last year.

Christopher Horvers: So that will, will drive up some favorability in the first half and not in the back half. We also have a better sales outlook in the back half of the year. So we're adding sales to support that as well. In the, in the first half, we also had the $40 million of geography change for offsetting SNA versus cost of sales. That is not, that does not occur in the back half of this year.

Christopher Horvers: And then also in the first half of the year, we saw medical claims cost coming much lower than we, than we saw the year before. So that was a favorability in the first half of the year. So there's a, there's a noticeable change in SNA trajectories. You go from the first half, the back half of the year for those very reasons. And those are largely included in many cases in how we already got it.

Christopher Horvers: Got it. Thanks very much. Have a great rest of the back school. Thank you. And that is our last question. Thank you so much for taking the time to join us today and we look forward to speaking to you after Q3. This will conclude best by second quarter fiscal 2025 earnings call. Thank you for your participation. You may now disconnect.

Operator: Thank you very much.

Q2 2025 Best Buy Co Inc Earnings Call

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