Q4 2025 Best Buy Co Inc Earnings Call

March 4, 2025

Playback and will be available by approximately one P M eastern time today.

Speaker Change: 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 over to Mollie O'brien head of Investor Relations.

Mollie O'brien: Thank you and good morning, everyone. Joining me on the call today are Corie, Barry our CEO, Matt <unk>, our CFO and Jason Bond Bank, our senior executive Vice president of customer offering and fulfillment.

Mollie O'brien: During the call today, we will be discussing both GAAP and non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and an explanation of why these non-GAAP financial measures are useful can.

Ladies and gentlemen, thank you for standing by.

What's your best Buy's fourth quarter fiscal 2025 earnings conference call.

Mollie O'brien: Can be found in this morning's earnings release, which is available on our website investors bestbuy Dot com.

Minder. This call is being recorded for playback and will be available by approximately one P. M. Eastern time today, if you need assistance on the call at any time, Please press star zero and an operator will assist you.

Mollie O'brien: Beginning this quarter, we have renamed all of our non-GAAP financial measures to adjusted financial measures. For example, non-GAAP SG&A has been renamed to adjusted SG&A.

Now I'll turn the conference over to Mollie O'brien head of Investor Relations.

Mollie O'brien: <unk> for calculating these measures remains unchanged and therefore any previously reported non-GAAP financial measures that are renamed to corresponding adjusted financial measures remain unchanged.

Mollie O'brien: Thank you and good morning, everyone. Joining me on the call today are Corie, Barry our CEO, Matt Lewis, our CFO and Jason Bond, Thank our senior executive Vice president customer offering and fulfillment during.

Mollie O'brien: In addition.

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

Mollie O'brien: I want to remind you that fiscal 'twenty five had 52 weeks compared to 53 weeks in fiscal 'twenty four we estimate the impact of the extra week in Q4 fiscal 'twenty four added approximately $735 million in revenue approximately 15 basis points of adjusted operating income rate and approximately 30.

Mollie O'brien: Can be found in this morning's earnings release, which is available on our website investors bestbuy Dot com.

Mollie O'brien: <unk> of adjusted diluted EPS to the full year results.

Mollie O'brien: Beginning this quarter, we have renamed all of our non-GAAP financial measures to adjusted financial measures. For example, non-GAAP SG&A has been renamed to adjusted SG&A.

Mollie O'brien: Comparable sales for the 14 week Q4 fiscal 'twenty, four and 53 week fiscal 'twenty four exclude the impact of the extra week.

Mollie O'brien: Finally, some of the statements we will make today are considered forward looking within the meaning of the private Securities Litigation Reform Act of 1095.

Mollie O'brien: These statements May address the financial condition business initiatives growth plans investments and expected performance of the company and are subject to risks and uncertainties that could cause actual results to differ materially from such forward looking statements. Please refer to the company's current earnings release and our most recent Form 10-K and subsequent.

Mollie O'brien: In addition.

Mollie O'brien: I want to remind you that fiscal 'twenty five at 52 weeks compared to 53 weeks in fiscal 'twenty four we estimate the impact of the extra week in Q4 fiscal 'twenty four added approximately $735 million in revenue approximately 15 basis points of adjusted operating income rate and approximately 30.

Mollie O'brien: Form 10, Qs for more information on these risks and uncertainties.

Mollie O'brien: <unk> of adjusted diluted EPS for the full year results.

Mollie O'brien: The company undertakes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise. After the date of this call.

Mollie O'brien: Comparable sales for the 14 week Q4 fiscal 'twenty, four and 53 week fiscal 'twenty four exclude the impact of the extra week.

Corey: Now I will turn the call over to Corey.

Corey: Good morning, everyone and thank you for joining us I am pleased to report both better than expected sales and earnings for the fourth quarter, we drove positive enterprise comparable sales growth of 5% on revenue of almost $14 billion. We delivered an adjusted operating income rate of four 9%.

Mollie O'brien: Finally, some of the statements we will make today are considered forward looking within the meaning of the private Securities Litigation Reform Act of 1995.

Corey: And adjusted earnings per share of $2 58.

Mollie O'brien: Please refer to the company's current earnings release, and our most recent Form 10-K, and subsequent Form 10-Qs for more information on these risks and uncertainties.

Corey: As we entered fiscal 'twenty five we were operating in an uneven environment and expected there would be industry pressure our fiscal 'twenty five strategy was to focus on sharpening our customer experiences and industry positioning while maintaining if not expanding our operating income rate on a 52 week basis and with today's results on a 52 week.

Mollie O'brien: The company undertakes no obligation to update or revise any forward looking statements to reflect events or circumstances that may arise. After the date of this call now I will turn the call over to Corey.

Corey: We are reporting 20 basis points of annual adjusted operating income rate expansion on a two 3% comparable sales decline demonstrating our ability to preserve profitability and a softer sales environment.

Corey: The Q4 holiday promotional environment was in line with our expectations going into the quarter as we have seen for the past several quarters customers were deal focused and attracted to more predictable sales moments. We were pleased to see strong customer response to our door Busters and earlier Black Friday sales. This gave us a running start to the quarter.

Corey: Adjusted earnings per share of $2.58.

Corey: And a strong November comparable sales in a holiday season with fewer shopping days between Black Friday and Christmas day.

Corey: Our digital sales were almost 40% of total domestic sales. This Q4, a slightly higher mix than last year, we saw sales growth growth across digital assets, including the best buy App, which hit the number one ranked shopping app position on the Apple App store on Black Friday, this year and saw almost 20% traffic growth.

Corey: We have very competitive fulfillment options offering our online customers on average a 10% faster promise for delivery. This year. In addition, 45% of our online revenue was picked up in our stores by our customers during the quarter showing the value customers put on the convenience of our stores.

Corey: From a product category perspective, we drove comparable sales growth in computing tablets and services. This growth was partially offset by declines in appliances home theater and gaming.

Corey: A strong November comparable sales in a holiday season with fewer shopping days between Black Friday and Christmas day.

Corey: Our digital sales were almost 40% of total domestic sales. This Q4 slightly higher mix than last year, we saw sales growth growth across digital assets, including the best buy App, which hit the number one ranked shopping app position on the Apple App store on Black Friday, this year and saw almost 20% traffic growth.

Corey: We delivered better than expected domestic comparable sales growth of 9% in the combined computing and tablet categories.

Corey: <unk> sales growth, specifically increased to 10% versus 7% growth in Q3.

Corey: Improved sales performances in headphones and in Tvs with the broader within the broader home theater category also added to better sales results compared to the first three quarters of the year.

Corey: As I step back there are several factors that contributed to our results and set us up well for success in fiscal 2006.

Corey: Our stores reset enhanced vendor experiences and labor enhancements contributed to material year over year improvement in our domestic relationship net promoter score, which tracks consumers likelihood to recommend best by the.

Corey: From a product category perspective, we drove comparable sales growth in computing tablets and services. This growth was partially offset by declines in appliances home theater and gaming.

Corey: The investments we made in both digital and store experiences and associate training helped us optimize the computing replacement and upgrade cycle to drive sales growth and share in the category in our digital business, our focus on personalization and speed resulted in app engagement and sales growth.

Corey: We delivered better than expected domestic comparable sales growth of 9% in the combined computing and tablet categories.

Corey: <unk> sales growth, specifically increased to 10% versus 7% growth in Q3.

Corey: Improved sales performances in headphones and in Tvs with the broader within the broader home theater category also added to better sales result, compared to the first three quarters of the year.

Corey: Our investment in marketing and the introduction of our new branding drove traffic and positive lift to brand perception metrics.

Corey: As I step back there are several factors that contributed to our results and set us up well for success in fiscal 'twenty.

Corey: We successfully tested new targeted promotional strategies that delivered higher engagement across all tiers of our my best buy membership.

Corey: Our stores resets enhanced vendor experiences and labor enhancements contributed to material year over year improvement in our domestic relationship net promoter score, which tracks consumers likelihood to recommend backed by the.

Corey: Our prudent and balanced approach to expenses allowed us to invest strategically and our ongoing efforts and investments in onboarding training and our commitment to creating a stable and engaging environment for our employees contributed to our lowest employee turnover metrics in six years and higher engagement scores sequentially and year.

Corey: Over year.

Corey: We are encouraged by and proud of our execution and results and I'm beyond grateful for the passion and hard work our team members across the company demonstrate each and every day.

Our investment in marketing and the introduction of our new branding drove traffic and positive lift to brand perception metrics.

Corey: As we enter fiscal 'twenty six we are excited to build on the momentum from this past year. Our strategy is to continue to strengthen our position in retail as the leading omnichannel destination for technology, expanding our operating income rate while at the same time building and scaling new profit streams that we believe will drive robust returns in the future.

Corey: We successfully tested new targeted promotional strategies that delivered higher engagement across all tiers of our my best buy membership.

Corey: Sure.

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

Corey: One drive Omnichannel experience improvements that resonate with our customers.

Corey: To launch and scale incremental profit stream, including best buy marketplace, and best buy ads and three drive operational effectiveness and efficiency to fund strategic investments and offset pressures.

Corey: Over year.

Corey: We are encouraged by and proud of our execution and results and I'm beyond grateful for the passion and hard work our team members across the company demonstrate each and every day.

Corey: Of course, these priorities are intertwined and work together as a great customer experience drives the level of opportunity to generate incremental profit streams.

Corey: Before providing more detail on these priorities I will share some insights on the assumptions driving our sales expectations.

Corey: We believe the consumer will remain resilient, but is still dealing with high inflation that is driving expenses up across their lives, making them value focused and thoughtful about big ticket purchases. We also still see a consumer that is willing to spend on high price point products, when they need to or when there is technology innovation.

Corey: <unk>.

Corey: Therefore, our fiscal 'twenty six priorities are as follows one drive omnichannel experience improvements that resonate with our customers.

Corey: To launch and scale incremental profit streams, including best buy marketplace, and best buy ads and three drive operational effectiveness and efficiency to fund strategic investments and offset pressures.

Corey: After stabilizing through fiscal 'twenty five we expect the U S CE industry to be flattish to slightly up this year from a category perspective, we expect continued sales growth in computing and improved sales trends across multiple other categories. This leads to our comparable sales guide in the range of flat to 2% growth for the year with <unk>.

Corey: Of course, these priorities are intertwined and work together as a great customer experience drives the level of opportunity to generate incremental profit streams.

Corey: Weighted more in the second half of the year based on the timing of product launches and initiatives.

Corey: Before providing more detail on these priorities I'll share some insights on the assumptions driving our sales expectations.

Corey: We expect growth in computing, including tablets to continued to be driven by customer needs to replace and upgrade products. We believe this will be helped by both the end of Windows 10 product support in October and ongoing innovation in the form of gradual improvement in AI use cases and release of new AI features beyond.

Corey: We believe the consumer will remain resilient, but it is still dealing with high inflation that is driving expenses up across their lives, making them value focused and thoughtful about big ticket purchases. We also still see a consumer that is willing to spend on high price point products, when they need to or when there is technology innovation.

Corey: Beyond computing, we expect other categories to show more stabilization and improved comp sales trends, including home theater mobile phones and major appliances.

Corey: Against this backdrop I need to pause a moment to address the topic of tariffs.

Corey: International trade is critically important to our business and industry. The consumer electronics supply chain is highly global technical and complex, China and Mexico remain the number one and number two sources for products, we sell respectively. While that's my only directly imports, 2% to 3% of our overall assortment we expect our.

Corey: Both weighted more in the second half of the year based on the timing of product launches and initiatives.

Corey: Vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely.

Corey: The fiscal 2006 guidance. We provided this morning does not include the impact of the recently enacted tariffs. This is because it is a highly dynamic situation with uncertainty about the duration timing amount and countries involved in addition to the potential action of others in the industry as well as the potential reaction of.

Corey: Beyond computing, we expect other categories to show more stabilization and improved comp sales trends, including home theater mobile phones and major appliances.

Corey: Against this backdrop I need to pause a moment to address the topic of tariffs.

Corey: International trade is critically important to our business and industry. The consumer electronics supply chain is highly global technical and complex, China and Mexico remain the number one and number two sources for products, we sell respectively, well, that's my only directly imports, 2% to 3% of our overall assortment we expect our.

Corey: The American consumers.

Corey: That being said we believe it is helpful to provide some level of context based on our early analysis, if the China tariffs that went into effect on February 4th remain at the 10% level for the full year. We believe they would have a negative impact in the ballpark of one point of comparable sales this would mainly impact quarters too.

Corey: Vendors across our entire assortment will pass along some level of tariff costs to retailers, making price increases for American consumers highly likely.

Corey: Three or four.

Corey: I want to stress that our deeply tenured and talented teams are experienced at operating in volatile conditions and this is also a situation where our partnerships with vendors are extremely valuable we.

Corey: The fiscal 'twenty six guidance. We provided this morning does not include the impact of the recently enacted tariffs. This is because it is a highly dynamic situation with uncertainty about the duration timing amount and countries involved in addition to the potential action of others in the industry as well as the potential reaction of.

Corey: We intend to execute the strategic plan, we set for this year, while navigating the tariff environment.

Corey: Now I would like to provide more details on this plan and our fiscal 'twenty six strategic priorities.

Corey: The American consumers.

Corey: As I mentioned, our first priority is to drive omnichannel experience improvements that resonate with our customers.

Corey: I will start with our digital experiences where one third of our domestic revenue has transacted and 60% of our purchasers visit at some point during their shopping journey.

Corey: Our first focus for the year is to meaningfully improve our search and discovery capability to make it even easier for our customers to find what they want and need therefore, we will leverage <unk> AI to launch an innovative new search experience across dotcom small view and the app.

Corey: Through for <unk>.

Corey: We intend to execute the strategic plan, we set for this year, while navigating the tariff environment.

Corey: We will also build on the foundation, we established last year as it relates to personalization using AI to make the personalization smarter to drive both engagement and conversion.

Corey: Now I would like to provide more details on this plan and our fiscal 'twenty six strategic priorities as.

Corey: The App is our preferred shopping experience for both our free and paid my best buy members and the personalized home screen was served to members on over 100 million sessions in the fourth quarter driving measurable improvements in engagement.

Corey: As I mentioned, our first priority is to drive omnichannel experience improvements that resonate with our customers.

Corey: I will start with our digital experiences where one third of our domestic revenue has transacted and 60% of our purchasers visit at some point during their shopping journey.

Corey: This spring, we will be introducing best buy storefronts that will allow influencers and creators to build their own branded digital storefronts and best buy Dot com, which we expect to drive increased traffic engagement and sales. Additionally, we will continue to integrate enhanced data and expand video content that improve the customer experience across.

Corey: The shopping journey.

Corey: We will also build on the foundation, we established last year as it relates to personalization using AI to make the personalization smarter to drive both engagement and conversion.

Corey: Our stores are incredibly important for both our customers and our vendors customers know they can visit a best buy store to see and demo product or talk to a knowledgeable sales associates in ways they can't anywhere else.

Corey: The App is our preferred shopping experience for both our free and paid my best five members and the personalized home screen was served to members on over 100 million sessions in the fourth quarter driving measurable improvements in engagement.

Corey: Overall, our plan for our physical stores is similar to last year, we will prioritize merchandising and store health and appearance updates over large scale remodels in doing so we continue to leverage the valuable insights we've gained from testing and deploying unique solutions within our store portfolio in the past few years for example, our resets and monitors.

Corey: This spring, we will be introducing best buy store fronts that will allow influencers and creators to build their own branded digital storefronts and best buy Dot com, which we expect to drive increased traffic engagement and sales. Additionally, we will continue to integrate enhanced data and expand video content that improve the customer experience across the.

Corey: In digital imaging earlier in the year contributed to sales growth for those categories in the holiday quarter.

Corey: Throughout the year, we expect to drive shopping experience updates across the chain, including growing vendor pads and home theater, expanding tablet and virtual reality departments and enhancing experiences for expected iconic gaming launches.

Corey: Dropping journey.

Corey: We will also continue the rollout we began last year of dedicated space to showcase new and emerging tech after seeing positive results for many participating vendors.

Corey: Overall, our plan for our physical stores is similar to last year, we will prioritize merchandising and store health and appearance updates over large scale remodels in doing so we continue to leverage the valuable insights we gain from testing and deploying unique solutions within our store portfolio in the past few years for example, our resets and monitors.

Corey: Many of these planned updates are in partnership with our vendors. They are increasingly investing in our sales floors, both physically and in specialized labor, helping us create unique and engaging merchandising for our customers. For example last year, we repositioned computing to the center of several stores and implemented enhanced Microsoft and Apple experience.

Corey: In digital imaging earlier in the year contributed to sales growth for those categories in the holiday quarter.

Corey: Which are already showing promising results we plan to implement these updates in more stores later this year.

Corey: Throughout the year, we expect to drive shopping experience updates across the cheap, including growing vendor pads and home theater, expanding tablet and virtual reality departments and enhancing experiences for expected iconic gaming launches. We will also continue the rollout we began last year of dedicated space to showcase new and emerging tech.

Corey: We will continue our disciplined annual approach to closing or relocating less profitable locations last year in the U S. We closed 12 traditional big box stores and opened two new stores. This year, we expect to close roughly five to 10 stores and opened a few new smaller format stores.

Corey: After seeing positive results for many participating vendors.

Corey: From a labor perspective in fiscal 'twenty, six we will focus on enhancement and optimization building on the more material changes we have made in the last few years.

Corey: Many of these planned updates are in partnership with our vendors. They are increasingly investing in our sales floor as both physically and in specialized labor, helping us create unique and engaging merchandising for our customers. For example, last year, we repositioned and computing to the center of several stores and implemented enhanced Microsoft and Apple experience.

Corey: Overall, we were pleased with our decision to add dedicated labor focused on computing home theater, and major appliances, and roughly 350 stores.

Corey: We will keep refining to boost sales proficiency and customer experience and expand this model to more locations. This year.

Corey: Which are already showing promising results we plan to implement these updates in more stores later this year.

Corey: To continue the commitment to driving product knowledge merchandising excellence and customer engagement, we plan to bring these dedicated associates together for an intensive vendor supported in person training and certification program in the spring.

Corey: We will continue our disciplined annual approach to closing or relocating less profitable locations.

Corey: Last year in the U S. We closed 12 traditional big box stores and opened two new stores. This year, we expect to close roughly five to 10 stores and opened a few new smaller format stores.

Corey: In our services business, we expect to update our customer offers for home theater delivery and installation. These new service offers will be simplified from the current state and should make our installation services, both more attractive to a wider base of customers and easier to sell clearly highlighting our most differentiated experiences.

Corey: From a labor perspective in fiscal 'twenty, six we will focus on enhancement and optimization building on the more material changes we have made in the last few years.

Corey: Overall, we were pleased with our decision to add dedicated labor focused on computing home theater, and major appliances, and roughly 350 stores.

Corey: Additionally, I will highlight the valuable role that our geek squad agents play in times of New Technology. For example, they help customers understand what is unique about co pilot plus AIP CS or why they would want to upgrade their computers as we approach the upcoming windows 10 upgrade cycle.

Corey: We will keep refining to boost sales proficiency and customer experience and expand this model to more locations. This year.

Corey: To continue the commitment to driving product knowledge merchandising excellence in customer engagement, we plan to bring these dedicated associates together for an intensive vendor supported in person training and certification program in the spring.

Corey: Our second strategic priority for fiscal 'twenty, six focused on incremental profitability stream opportunities as.

Corey: As we mentioned in our last earnings call. We are targeting a mid year launch for our new U S. Bestbuy marketplace, we believe that as the trusted leader in CE, we have an opportunity to leverage our positioning and assets to build a differentiated digital marketplace platform. This will allow us to bring our customers access to much more expansive assortment.

Corey: Our services business, we expect to update our customer offers for home theater delivery and installation. These new service offers will be simplified from the current state and should make our installation services, both more attractive to a wider base of customers and easier to sell clearly highlighting our most differentiated experiences.

Corey: And new categories without needing to own the inventory. In addition, sellers and advertisers will have an additional avenue to increase their reach and build their brands leveraging our qualified traffic.

Corey: We will phase in capabilities over time for example, we plan to facilitate product returns for our customers at best buy stores, when we launched the marketplace.

Corey: Our second strategic priority for fiscal 'twenty, six is focused on incremental profitability stream opportunities.

Corey: We expect to add capabilities, such as fulfillment as a service for sellers in a later phase.

Corey: It is still early in the process and we are pleased with the strong interest from sellers and believe it indicates a promising launch all potential sellers will go through a vetting process. So we can ensure our customers received a positive experience that they would expect at best buy are.

Corey: Our Canada team operates an established growing third party online marketplace, and we have leveraged our learnings and expertise as we build out our plans.

Corey: Even with startup costs investments and estimated cannibalization of our first party product revenue, we expect marketplace to have a positive impact on our operating income rate in fiscal 'twenty six.

Corey: We will face and capabilities over time for example, we plan to facilitate product returns for our customers at best buy stores. When we launched the marketplace, we expect to add capabilities such as fulfillment as a service for sellers in a later phase.

Corey: Overtime, we expect marketplace to help drive profit dollars and unit share.

Corey: In addition, it will provide opportunities for best buy ads through new advertisers and increased traffic.

Corey: We have recently elevated the focus on our best buy ads business and see fiscal 'twenty six is a pivotal year, we've had a robust retail media network business for a long time in partnership with our vendors. We are proud of this business, we have built but see opportunity for further growth.

Corey: Our Canada team operates an established growing third party online marketplace, and we have leveraged our learnings and expertise as we build out our plans.

Corey: Last fall, we brought in a new leader for the business, Lisa Valentino, who brings more than 20 years of media and advertising leadership experience at firms such as Disney <unk> and ESPN. We are currently filling other key leadership roles and plan to open a New York office.

Corey: In fiscal 'twenty six we are investing in capabilities that we believe will unleash growth like competitive market level self service offerings that allow brands to manage their own advertising buys and new AD products that will expand inventory and customer reach we also expect to drive results through agency relationships and a new marketplace.

Corey: Overtime, we expect marketplace to help drive profit dollars and unit share.

Corey: In addition, it will provide opportunities for best buy ads through new advertisers and increased traffic.

Corey: Just discussed in fact, we have just signed our first joint business partnership with one of the largest global hold holding companies.

Corey: We expect agency partnerships to result in new advertisers and revenue growth over time, leveraging our data targeting advanced.

Corey: And innovative data opportunities in areas like commerce sponsorships and in store experiences.

Corey: I will add that our membership program plays multiple roles in our business not only providing unique value to our members, but also serving as a source of growth for our rich first party data that helps fuel best buy ads, we had approximately 100 million members across three tiers free my best buy membership bestbuy plus paid membership.

Corey: And best buy total membership.

Corey: We ended the year with nearly 8 million paid members up from $7 million last year.

Corey: Just discussed in fact, we have just signed our first joint business partnership with one of the largest global hold holding companies.

Corey: We expect growth in AD collections to contribute to gross profit rate improvement in fiscal 'twenty.

Corey: We expect agency partnerships to result in new advertisers and revenue growth over time, leveraging our data targeting advanced.

Corey: From an operating income rate perspective, we expect more of a neutral impact due to the investments we are making we believe the actions we are taking in fiscal 'twenty six position us for future growth and rate expansion over the next number of years.

Corey: And innovative data opportunities in areas like commerce sponsorships and in store experiences.

Corey: I'll add that our membership program plays multiple roles in our business not only providing unique value to our members, but also serving as a source of growth for our rich first party data that helps fuel best buy ads, we had approximately 100 million members across three tiers free my best buy membership bestbuy plus paid membership.

Corey: Our third strategic priority for fiscal 2006 is a consistent one it is to drive operational effectiveness and efficiency, we have a longstanding commitment to identifying cost reductions and driving efficiencies to help fund investment capacity for new and existing initiatives and offset inflationary pressures in our business.

Corey: And best buy total membership.

Corey: In our procurement operations, we expect to complete the multi year deployment of our full source to pay technology capability. This will give us expanded transparency into billions of dollars of goods not for resale spend in combination with the enhanced automation of our purchasing process. This paves the way for continuous cost optimization opportunities.

Corey: We ended the year with nearly 8 million paid members up from $7 million last year.

Corey: We expect growth in AD collections to contribute to gross profit rate improvement in fiscal 2006 from an operating income rate perspective, we expect more of a neutral impact due to the investments we are making we believe the actions we are taking in fiscal 'twenty six position us for future growth and rate expansion over the next number of years.

Corey: As we have discussed previously we have been improving our customer service experience and operational efficiency by modernizing our IV our phone system with AI powered solutions. These advancements intelligently route customers to the right agent, reducing friction and improving resolution speed since implementing AI powered routing logic, we haven't.

Corey: <unk>, a 300 basis point reduction in transfer rates, demonstrating improved accuracy and directing customer inquiries.

Corey: We also leveraged technology to enable seamless self service options for key functions, such as price matching order status inquiries and membership management as a result self service adoption has doubled with nearly 50% of customers managing their memberships by a phone without agent assistance. This shift not only improves customer satisfaction.

Corey: Action by offering faster more convenient solutions, but also optimizes resource allocation within our support teams going forward.

Corey: In addition, during the holiday season, we were able to leverage text analytics with 100% of our customer service agent interactions, creating a real time performance dashboard that highlighted top contact drivers and call volume trends and provide a daily alerts for anomalies.

Corey: <unk>, a 300 basis point reduction in transfer rates, demonstrating improved accuracy and directing customer inquiries.

Corey: This allowed us to quickly identify and resolve issues that were affecting multiple customers. In Q1, we will expand this program to chat interactions.

Corey: Last year, we established a digital and technology hub with a partner in Bangalore, India. This year, we will expand the scope of work being performed by our India resources, leveraging more economical access to talent and skills.

Corey: This shift not only improves customer satisfaction by offering faster more convenient solutions, but also optimizes resource allocation within our support teams going forward.

Corey: I'd like to take a moment to talk about best buy health.

Corey: During the fourth quarter, we recorded an impairment charge to reflect the downward revisions in our longer term projections.

Corey: We still believe in the fundamental strategy of leveraging technology to enable care at home and believe it will be important to the future of health care, but the market is not scaling as fast as we originally forecasted we will continue actions intended to maximize the value and improve the profitability of the business.

Corey: <unk> that were affecting multiple customers in Q1, we will expand this program to chat interactions.

Corey: In summary, we are pleased with our execution and the momentum we built in fiscal 'twenty five.

Corey: We're excited to build on that momentum to bring our fiscal 'twenty six strategy to life, while we continue to navigate uncertain circumstances.

Corey: We often just that we have the luxury of competing with the biggest retailers in the world even though we continue to thrive. It is because we remain committed to our mission to enrich lives through technology. We are the trusted source for the latest and greatest new tech as well as a broad range of assortment unique in store and digital experiences and the expert services to.

Corey: I'd like to take a moment to talk about best buy health.

Corey: During the fourth quarter, we recorded an impairment charge to reflect the downward revisions in our longer term projections.

Corey: Help our customers we.

Corey: We are also a true partner to our vendors often working with them from early in the product development cycle, all the way to launching products on our sales floor.

Matt: And with that I will now turn the call over to Matt.

Corey: In summary, we are pleased with our execution and the momentum we built in fiscal 'twenty five.

Matt: Good morning, before I talk about our fourth quarter results versus last year, Let me start with how the quarter performed versus the expectations. We shared with you last quarter on.

Corey: We're excited to build on that momentum to bring our fiscal 'twenty six strategy to life, while we continue to navigate uncertain circumstances.

Matt: On enterprise revenue of $13 9 billion, our adjusted operating income rate was four 9% both of which exceeded our expectations.

Corey: We often ask that we have the luxury of competing with the biggest retailers in the world. Even so we continue to thrive. It is because we remain committed to our mission to enrich lives through technology. We are the trusted source for the latest and greatest new tech as well as a broad range of assortment unique in store and digital experiences and the expert services to <unk>.

Matt: Our overall gross profit rate was better than expected, which was primarily due to the favorable product margins.

Matt: Whereas adjusted SG&A dollars were unfavorable to our outlook entering the quarter, which was primarily driven by higher incentive compensation.

Corey: Help our customers.

Matt: We are also a true partner to our vendors often working with them from early in the product development cycle, all the way to launching products on our sales floor and with that I will now turn the call over to Matt.

Matt: I will now talk about our fourth quarter results versus last year.

Matt: <unk> always stated this year's fourth quarter included 13 weeks compared to 14 weeks last year, we estimate the extra week was approximately $735 million in revenue and <unk> 30 of adjusted diluted earnings per share and provided a benefit of approximately 40 basis points to last year's fourth quarter adjusted op.

Matt: Good morning, before I talk about our fourth quarter results versus last year, Let me start with how the quarter performed versus the expectations. We shared with you last quarter on.

Matt: On enterprise revenue of $13 9 billion, our adjusted operating income rate was four 9% both of which exceeded our expectations.

Matt: Operating income rate.

Matt: Enterprise revenue increased <unk>, 5% on a comparable basis.

Matt: Our adjusted operating income rate of four 9% declined 10 basis points compared to last year.

Matt: Our overall gross profit rate was better than expected, which was primarily due to the favorable product margins.

Matt: And our adjusted diluted earnings per share decreased to 5% to $2 58.

Matt: Whereas adjusted SG&A dollars were unfavorable to our outlook entering the quarter, which was primarily driven by higher incentive compensation.

Matt: By month, our enterprise comparable sales were up approximately 4% in November before declining 2% in December and ending January slightly up.

Matt: I will now talk about our fourth quarter results versus last year.

Speaker Change: As Mollie stated this year's fourth quarter included 13 weeks compared to 14 weeks last year, we estimate the extra week was approximately $735 million in revenue and <unk> 30 of adjusted diluted earnings per share and provided a benefit of approximately 40 basis points to last year's fourth quarter adjusted.

Matt: In our domestic segment comparable sales increased 2% our revenue decreased five 2% to $12 7 billion.

Matt: The revenue decrease was primarily driven by the lapping of last year's extra week.

Matt: International comparable sales increased three 8% and revenue decreased 2% versus last year to $1 2 billion.

Matt: Operating income rate.

Matt: Enterprise revenue increased <unk>, 5% on a comparable basis, our adjusted operating income rate of four 9% declined 10 basis points compared to last year.

Matt: The revenue decrease was largely due to the extra week last year and a negative foreign currency impact of approximately 500 basis points.

Matt: And our adjusted diluted earnings per share decreased to 5% to $2 58.

Matt: Which were partially offset by revenue from best buy express locations that have opened during fiscal 'twenty five.

Matt: By month, our enterprise comparable sales were up approximately 4% in November before declining 2% in December and ending January slightly up.

Matt: Our domestic gross profit rate increased 50 basis points to 29%.

Matt: In our domestic segment comparable sales increased 2% our revenue decreased five 2% to $12 7 billion.

Matt: The higher gross profit rate was primarily driven by improvement within the services category, which includes our membership offerings.

Matt: This was partially offset by lower credit card profit sharing revenue.

Matt: The revenue decrease was primarily driven by the lapping of last year's extra week.

Matt: Our international gross profit rate increased 40 basis points to 21, 4%.

Matt: International comparable sales increased three 8% and revenue decreased 2% versus last year to $1 2 billion.

Matt: The higher gross profit rate was primarily due to favorable supply chain expense.

Matt: Moving to SG&A, we are domestic adjusted SG&A decreased $30 million.

Matt: The revenue decrease was largely due to the extra week last year and a negative foreign currency impact of approximately 500 basis points.

Matt: The decrease was primarily due to the lapping of last year's extra week, which was partially offset by higher incentive compensation and advertising expense.

Matt: Which were partially offset by revenue from best buy express locations that have opened during fiscal 'twenty five.

Speaker Change: As Corey mentioned, we recorded a goodwill impairment related to best buy health this totaled $475 million and is excluded from our adjusted earnings.

Matt: Our domestic gross profit rate increased 50 basis points to 29%.

Matt: The higher gross profit rate was primarily driven by improvement within the services category, which includes our membership offerings.

Speaker Change: During fiscal 'twenty five our total capital expenditures were $706 million.

Matt: This was partially offset by lower credit card profit sharing revenue.

Speaker Change: Versus $795 million in fiscal 'twenty four.

Matt: Our international gross profit rate increased 40 basis points to 21, 4%.

Speaker Change: The year over year decline was driven by a reduction in both store related investments and technology, which was partially offset by increased expenditures in Canada.

Matt: The higher gross profit rate was primarily due to favorable supply chain expense.

Speaker Change: During fiscal 'twenty, five we returned $1 3 billion to shareholders through share repurchases and dividends.

Matt: Moving to SG&A, we are domestic adjusted SG&A decreased $30 million.

Speaker Change: We remain committed to being a premium dividend payer and.

Matt: The decrease was primarily due to the lapping of last year's extra week, which was partially offset by higher incentive compensation and advertising expense.

Speaker Change: This morning announced that we are increasing our quarterly dividend to <unk> 95 per share, which is a 1% increase.

Matt: As Corey mentioned, we recorded a goodwill impairment related to best buy health this totaled $475 million and is excluded from our adjusted earnings.

Speaker Change: This increase represents the 12th straight year, we have raised our regular quarterly dividend.

Speaker Change: Moving onto our full year fiscal 2006 financial guidance, which as Corey mentioned excludes the impacts of our recent tariffs and is the following.

Matt: During fiscal 'twenty five our total capital expenditures were $706 million versus $795 million in fiscal 2000 and for the.

Speaker Change: Enterprise revenue in the range of $41 4 billion to $42 2 billion.

Matt: The year over year decline was driven by a reduction in both store related investments and technology, which was partially offset by increased expenditures in Canada.

Speaker Change: Enterprise comparable sales of flat to up 2%.

Speaker Change: Enterprise adjusted operating income rate in the range of four 2% to four 4%.

Matt: During fiscal 'twenty, five we returned $1 3 billion to shareholders through share repurchases and dividends.

Speaker Change: And adjusted effective income tax rate of approximately 25%.

Matt: We remain committed to being a premium dividend payer and.

Speaker Change: Adjusted diluted earnings per share of $6 20 to $6 60.

Matt: This morning announced that we are increasing our quarterly dividend to <unk> 95 per share, which is a 1% increase.

Speaker Change: Capital expenditures of approximately $700 million to $750 million.

Matt: This increase represents the 12th straight year, we have raised our regular quarterly dividend.

Speaker Change: And lastly, we expect to spend approximately $300 million on share repurchases with the purchases weighted more heavily to the second half of the year.

Matt: Moving onto our full year fiscal 2006 financial guidance, which as Corey mentioned excludes the impacts of our recent tariffs and is the following.

Speaker Change: Next I will cover some of the key working assumptions that support our guidance.

Matt: Enterprise revenue in the range of $41 4 billion to $42 2 billion.

Speaker Change: Earlier, Cory provided context on our fiscal 'twenty six top line assumptions. So let me spend more time on the profitability outlook.

Enterprise comparable sales of flat to up 2%.

Speaker Change: We expect our gross profit rate to be in a range of flat to up approximately 20 basis points compared to prior year.

Matt: Enterprise adjusted operating income rate in the range of four 2% to four 4%.

Speaker Change: Most of the primary components of the gross profit our planned very similar to fiscal 'twenty five from a rate perspective.

Matt: And adjusted effective income tax rate of approximately 25%.

Matt: Adjusted diluted earnings per share of $6 20 to $6 60.

Speaker Change: Within our gross profit rate outlook. There are a few items that I would like to highlight.

Matt: Capital expenditures of approximately $700 million to $750 million.

Speaker Change: We expect growth from best buy ads and the rollout of our U S marketplace to benefit our gross profit rate.

Matt: And lastly, we expect to spend approximately $300 million on share repurchases with the purchases weighted more heavily to the second half of the year.

Speaker Change: Product margin rates are expected to be flat to slightly down when compared to fiscal 'twenty five.

Speaker Change: We expect our services category, including membership to have a neutral impact to our gross profit rate compared to the prior year.

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

Speaker Change: Earlier, Cory provided context on our fiscal 'twenty six top line assumptions. So let me spend more time on the profitability outlook.

Speaker Change: After being a pressure in fiscal 'twenty five we expect the profit share on our credit card arrangement to have a neutral impact.

Speaker Change: In fiscal 2006.

Speaker Change: We expect our gross profit rate to be in a range of flat to up approximately 20 basis points compared to prior year.

Speaker Change: Now moving to our adjusted SG&A expectations.

Speaker Change: As a percentage of revenue, we expect our adjusted SG&A to be approximately flat to fiscal 'twenty five which includes the following puts and takes.

Speaker Change: Most of the primary components of the gross profit our plan very similar to fiscal 'twenty five from a rate perspective.

Speaker Change: Within our gross profit rate outlook. There are a few items that I would like to highlight.

Speaker Change: SG&A is planned to increase in support of our best buy ads in marketplace initiatives, which includes advertising technology and employee compensation expense.

We expect growth from best buy ads and the rollout of our U S marketplace to benefit our gross profit rate.

Speaker Change: We expect higher incentive compensation as we reset our performance targets for the new year with the high end of our guidance, assuming an increase of $45 million compared to fiscal 'twenty five.

Speaker Change: Product margin rates are expected to be flat to slightly down when compared to fiscal 'twenty five.

Speaker Change: We expect our services category, including membership to have a neutral impact to our gross profit rate compared to the prior year.

Speaker Change: Partially offsetting the previous items are expected benefits from ongoing efficiencies and effectiveness work streams, including in best buy health.

Speaker Change: After being a pressure in fiscal 'twenty five we expect the profit share on our credit card arrangement to have a neutral impact.

Speaker Change: Store payroll expense and items like credit card processing fees are expected to increase at the high end of our revenue guidance with minimal impacts from a rate perspective.

Speaker Change: In fiscal 2006.

Speaker Change: Now moving to our adjusted SG&A expectations.

Speaker Change: As a percentage of revenue, we expect our adjusted SG&A to be approximately flat to fiscal 'twenty five which includes the following puts and takes.

Speaker Change: Lastly, the low end of our guidance reflects our plans to further reduce our variable expenses, including incentive compensation to align with the sales trends.

Speaker Change: SG&A is planned to increase in support of our best buy ads in marketplace initiatives, which includes advertising technology and employee compensation expense.

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

Speaker Change: We expect our first quarter comparable sales to be slightly down versus last year. We expect our Q1 adjusted operating income rate to be approximately three 4%.

Speaker Change: It was 40 basis points lower than last year's first quarter, we expect our gross profit rate to be flat to up 20 basis points, which are aligned with our our guide for the full year.

Speaker Change: Partially offsetting the previous items are expected benefits from ongoing efficiencies and effectiveness work streams, including in best buy health.

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

Speaker Change: Store payroll expense and items like credit card processing fees are expected to increase at the high end of our revenue guidance with minimal impacts from a rate perspective.

Speaker Change: Yeah.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session. At this time I would like to remind everyone to ask a question press the start button followed by the number one on your telephone keypad.

Speaker Change: Lastly, the low end of our guidance reflects our plans to further reduce our variable expenses, including incentive compensation to align with the sales trends.

Speaker Change: I'd like to withdraw your question. Please press star one again one moment. Please for your first question.

Speaker Change: Before I close let me share a couple of comments specific to the first quarter, we expect our first quarter comparable sales to be slightly down versus last year.

Okay.

Speaker Change: Our first question comes from the line of Christopher <unk> with Jpmorgan. Please go ahead.

Speaker Change: We expect our Q1 adjusted operating income rate to be approximately three 4%.

Speaker Change: Thanks, and good morning, let me be the first to ask the first tariff question.

Speaker Change: Which is 40 basis points lower than last year's first quarter, we expect our gross profit rate to be flat to up 20 basis points, which are aligned with our our guide for the full year I will now turn the call over to the operator for questions.

Speaker Change: The one point headwind on the 10% tariffs from China.

Speaker Change: Is that assuming that you raised price in essentially unit elasticity.

Speaker Change: Yeah.

Speaker Change: Offsets that.

Speaker Change: So can you go into that a little bit and then given the range of guidance, you're saying flat to 2%.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session. At this time I would like to remind everyone to ask a question.

Speaker Change: It looks like every comp point is 2000, and so is it fair to assume that one point headwind is equivalent to a 22000 <unk> <unk> EPS headwind.

The start button, followed by the number one on your telephone keypad.

Speaker Change: I would like to withdraw your question. Please press star one again one moment. Please for your first question.

Speaker Change: Okay.

Speaker Change: Sure, let me start and Corie can jump in here I think just broadly first let me just give some context to the estimate.

Speaker Change: Okay.

Christopher <unk>: Your first question comes from the line of Christopher <unk> with Jpmorgan. Please go ahead.

Speaker Change: We didn't include in our guide because it's very highly dynamic situation with a lot of uncertainty about the duration the timing the amount the countries involved with potential actions of the industry and reactions by the American consumer that being said, we thought it would be helpful to provide some context based on our early analysis.

Speaker Change: Yeah.

Speaker Change: Thanks, and good morning, let me be the first to ask the first tariff question.

Speaker Change: The one point of headwind on the 10% tariffs from China.

Speaker Change: Is that assuming that you raised price in essentially unit elasticity.

Speaker Change: And what we're what we're estimating is the 10% that went in on February 4th with China.

Speaker Change: Offsets that.

Speaker Change: So can you go into that a little bit and then given the range of guidance, you're saying flat to 2%.

Speaker Change: And again, we're ballpark came out at about a negative one point of negative comparable sales impact.

Speaker Change: It looks like every comp point is 20. So is it fair to assume that one point headwind is equivalent to a 'twenty 'twenty EPS headwind.

Speaker Change: We're assuming in our estimation that material a portion of the costs are passed on to us by the vendors and then either that's either directly broken out or blended in with a higher cogs or through some level of promotional positioning.

Speaker Change: Sure, let me start and Corie can jump in here I think just broadly first let me just give some context to the estimate.

Speaker Change: Of course, we prefer not to raise prices, but because of the higher Cogs, we need to enact some price increases.

Speaker Change: We didn't include our guide because it's a very highly dynamic situation with a lot of uncertainty about the duration the timing the amount the countries involved with potential actions of the industry and reactions by the American consumer that being said, we thought it would be helpful to provide some context based on our early analysis.

Speaker Change: And that is going to vary based on product category Skus competitive environment and other factors.

Speaker Change: The 1% impact as a combination of unit.

Decreases and a slight level of ASP increase based on the price the price is going up.

Speaker Change: And what we're what we're estimating is the 10% that we went out on February 4th with China.

Speaker Change: The giant wallet wildcard here, obviously is how the consumers are going to react to the price increases in light of a lot of price increases potentially throughout the year and general consumer confidence that is showing a little signs of weakness at the moment I think it's not necessarily fair to take.

Speaker Change: Again, we're ballpark came out at about a negative one point of negative comparable sales impact.

Speaker Change: We're assuming an estimation that material a portion of the costs are passed on to us by the vendors and then that's either directly broken out or blended in with the higher cogs or through some level of promotional positioning of course, we prefer not to raise prices, but but because of the higher cogs, we need to enact some price.

Speaker Change: We're expecting from a profit perspective is really just a normal flow through at this point, but that would be net of any sort other mitigates. We would normally do if business starts to go downward.

Speaker Change: <unk> increases and that is going to vary based on product category Skus competitive environment and other factors.

Speaker Change: And as it relates to <unk>.

Speaker Change: Comp increase and 20 basis points I don't know if these are just extremely linear part of what we're trying to do this year on top of navigating the tariff situation is also investing in our future investing in initiatives and so.

Speaker Change: The 1% impact as a combination of unit.

Speaker Change: Decreases and a slight level of ASP increase based on the price the price is going up.

Speaker Change: We are getting leverage.

Speaker Change: The giant wallet wildcard here, obviously is how the consumers are going to react to the price increases in light of a lot of price increases potentially throughout the year and a general consumer confidence that is showing a little signs of weakness at the moment I think it's not necessarily fair to take.

Speaker Change: With some of that revenue growth and we expect the initiatives that we're driving this year to help expand rate in the future on top of actually also contributing.

Speaker Change: Operating income dollars this year as well so hopefully that answers your question, Chris I would just give like two more bits of of context here, one I think I need to state the obvious we've never seen this kind of breath.

Speaker Change: We're expecting from a profit perspective is really just a normal flow through at this point, but that would be net of any sort of other mitigates. We would normally do if business starts to go downward.

Speaker Change: Tara and this of course impacts the whole industry. So it's not just the best buy question. It is a broad industry question and I say that because that makes the estimation of the impact all the harder, especially when they're in the guts of a replacement and upgrade cycle, where people really need this stuff. So its difficult for us to understand elasticity is perfectly because you don't have anything.

Speaker Change: And as it relates to that.

Speaker Change: <unk> in our history that looks or feels quite like this the second thing I would say then to that same point is this isn't a perfect linear conversation. So I know, it's tempting to say well if the tariffs going from 10% to 20% in China due to double its not going to be a linear point of view on how this impacts, particularly at the end of the day, the consumer who of course, given how the tests are struck.

Speaker Change: We are getting leverage.

Speaker Change: With some of the revenue growth and we expect the initiatives that we're driving this year to help expand rate in the future on top of actually also contributing.

Speaker Change: Operating income dollars this year as well so hopefully that answers your question, Chris I would just give like two more bits of context here, one I think I need to state the obvious we've never seen this kind of breadth of.

Speaker Change: Right now we will have impacts across many of the things that they are purchasing so I think we tried to give you our best take based on what we can see today, but to just point out that the difficulties in trying to assess the situation given how unique it is.

Speaker Change: Yeah I appreciate that I appreciate the challenges, especially with the timing of everything.

Speaker Change: When we're having this call today and that you anticipated My second question, which was the linearity of if 10 went to 20, maybe going to the other side, which is Mexico.

Speaker Change: <unk> in our history that looks or feels quite like this the second thing I would say then to that same point is this isn't a perfect linear conversation. So I know, it's tempting to say well if the tariffs go from 10% to 20% in China do double it's not going to be a linear point of view on how this impacts, particularly at the end of the day, the consumer who of course, given how the tariff structure.

Speaker Change: We estimated maybe Mexico was 15% to 20% of sourcing my understanding is.

Speaker Change: Hunk of that is is your private the private label television program. So you can talk about.

Speaker Change: How youre thinking about the Mexico exposure.

Right now we will have impacts across many of the things that they are purchasing so I think we tried to give you our best take based on what we can see today, but to just point out that the difficulties in trying to assess the situation given how unique it is.

Speaker Change: Is there more of a.

Speaker Change: Bigger headwind.

Speaker Change: Mexico goes into a place and took place because there is not a private label theres not necessarily a shared burden with the vendor base. Thank you.

Speaker Change: Yes, I appreciate that I appreciate the challenges, especially with the timing of everything and when we're having this call today and that you anticipated. My second question, which was the linearity. If 10 went to 20, maybe going to the other side, which is Mexico.

Speaker Change: I'll start with your estimations in terms of size are right in the ballpark.

Speaker Change: Probably about 20% sourced from Mexico in total across the whole vendor profile. So I want to make sure I reinforce that that is appropriate Jason maybe you can comment on the exclusive brand side of thing, Yes, Mexico does impact not only our exclusive brands business, but also a large percentage of the TV business basically of large screen Tvs in particular.

Speaker Change: We estimated maybe Mexico was 15% to 20% of sourcing my understanding is.

Speaker Change: Hunk of that is is your privacy private label television program. So you can talk about.

Speaker Change: <unk> as well as appliances.

Speaker Change: Yeah.

Speaker Change: How youre thinking about the Mexico exposure.

Speaker Change: Got it thank you best of luck.

Speaker Change: Is there more of a.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Bigger headwind.

Speaker Change: Mexico goes into a place and took place because there is not a without private label theres not necessarily a shared burden with the vendor base. Thank you.

Speaker Change: Your next question comes from the line of Brian Nagel Oppenheimer. Please go ahead.

Brian Nagel: Hi, good morning.

Speaker Change: So I want to follow on questions comments about chris's questions about tariff sorry apologize Colin host will be big topic.

Speaker Change: I'll start with your estimations in terms of size are right in the ballpark, we're probably about 20% sourced from Mexico in total across the whole vendor profiles. So I want to make sure I reinforce that that is appropriate Jason maybe you can comment on the exclusive brand side of thing, Yes, Mexico does impact not only our exclusive.

Brian Nagel: So recognizing it's extraordinarily early.

Speaker Change: Literally gave us news.

Brian Nagel: Real time as you are as well.

Brian Nagel: Best buy is.

Brian Nagel: The equivalent over time, an extraordinarily nimble operator or to what extent user flexibility your supply chain because these tariff stick that we are able to you are able to ship some of your <unk>.

Brands business, but also a large percentage of the TV business basically of large screen Tvs in particular as well as appliances.

Brian Nagel: Youre sourcing.

Speaker Change: Yeah.

Brian Nagel: Direct or as you work with your vendors.

Speaker Change: Got it thank you best of luck.

Speaker Change: Thank you.

Speaker Change: So I am biased, Brian, but I do want to stress that we have an incredibly deeply tenure team here and to your point. This is a team that has some life experience in navigating this kind of situation secondarily, we are deeply grateful to our vendor partners who also.

Speaker Change: Yeah.

Speaker Change: Your next question comes from the line of Brian Nagel Oppenheimer. Please go ahead.

Brian Nagel: Hi, good morning.

Speaker Change: So I'd like to I want to follow on questions comments about a christian's questions about tariff, sorry, apologize Greta and host will be a big topic.

Speaker Change: Have been willing to continue to be willing to come to the table and try and work through this with US there are quite a few actions you can imagine that we are taking on so first we are in constant communication with our vendors, making sure that we understand all the way down to the SKU level, what some of the potential impacts might be therefore, we can evaluate some of those.

Brian Nagel: Recognizing it's extraordinarily early.

Brian Nagel: Literally gave us new real time as you are as well.

Brian Nagel: Best buy is.

Brian Nagel: The proven overtime are extraordinarily nimble operator or to what extent user flexibility your supply chain with the visa that these tariffs stick.

Speaker Change: Near term inventory implications and where we might want to add to move our assortment to one or a different SKU depending on what the implications are.

Brian Nagel: We are able if you are able to shift some of your <unk>.

Brian Nagel: Youre sourcing.

Brian Nagel: Direct or or or.

Brian Nagel: Work with your vendors.

Brian Nagel: So I am biased, Brian, but I do want to stress that we have an incredibly deeply tenured team here and to your point. This is a team that has some life experience in navigating this kind of situation.

Speaker Change: Two we're reviewing and adjusting our supply chain and sourcing obviously as a reminder, we said it in the call we only direct import 2% to 3% of our Cogs.

Brian Nagel: Generally we are deeply grateful to our vendor partners who also.

Speaker Change: And we had already diversified a lot of our exclusive brands manufacturing so.

Brian Nagel: <unk> been willing to continue to be willing to come to the table and try and work through this with US there are quite a few actions you can imagine that we are taking on so first we are in constant communication with our vendors, making sure that we understand all the way down to the SKU level, what some of the potential impacts might be therefore, we can evaluate some of those <unk>.

Speaker Change: So we will continue to look at options for that back to the prior question.

Speaker Change: But again, it's not a quick move in any of those cases, and we had done a lot of the work to try to diversify those already.

Speaker Change: We are continuing as we told you to analyze and model the impacts to pricing that is kind of the last thing that we want to adjust we of course wanted to make sure that our prices are as competitive as possible but across the industry.

Brian Nagel: Near term inventory implications and where we might want to add to move our assortment to one or a different SKU depending on what the implications are.

Speaker Change: It is going to be an issue it will impact all parts of the business. We are evaluating the implications for consumer demand because this is bigger that and let's just take a step back even if you think about the Q1 guide. This is bigger than just a discussion about tariffs. It's just a kind of a volatile environment for the consumer and I think you can see that reflected in some of the consumer confidence.

Brian Nagel: Two we're reviewing and adjusting our supply chain and sourcing obviously as a reminder, we said it in the call we only direct import 2% to 3% of our cards and.

Brian Nagel: And we had already diversified a lot of our exclusive brands manufacturing. So we will continue to look at options for that back to the prior question, but.

Speaker Change: <unk> numbers, we're seeing right now and so we're watching that and trying to understand how best do we meet consumer needs in that environment.

Brian Nagel: But again, it's not a quick move in any of those cases, and we had done a lot of the work to try to diversify those already.

Speaker Change: We of course are engaging with any policymakers to ensure they just have our point of view on this really complex set of supply chain ecosystem, and then finally where of course, leveraging some of our industry partners that Cta or the national retail Federation to just make sure that we're kind of bringing the holistic story together across not just <unk>.

Brian Nagel: We are continuing as we told you to analyze and model the impacts to pricing that is kind of the last thing that we want to adjust we of course wanted to make sure that our prices are as competitive as possible, but across the industry. This is going to be an issue. It will impact all parts of the business. We are evaluating the implications for consumer demand.

Speaker Change: Electronics retail, but retail in general.

Speaker Change: That's very helpful color I appreciate it my follow up question, just really gives us more of a just a numbers question.

Brian Nagel: Because this is bigger that and let's just take a step back even if you think about the Q1 guide. This is bigger than just a discussion about tariffs. It's just of kind of a volatile environment for the consumer and I think you can see that reflected in some of the consumer confidence numbers, we're seeing right now and so we're watching that and trying to understand how best do we meet consumer needs in that environment.

Speaker Change: Nice job you pointed this out about you pointed this out in your prepared comments that Yahoo.

Speaker Change: Here you are leveraging expenses.

Speaker Change: This is called calendar 'twenty four was still somewhat weak sales. The question I have is as we look forward to assuming that or.

Speaker Change: Sales backdrop, that's why you're starting to solidify youre starting to see maybe a better trajectory how should we think about the leverage going forward and how much how much is the based on the model set or is there going to be some type of expense to come back to you in sales presumably continue to improve.

Brian Nagel: We of course are engaging with any policymakers to ensure they just have our point of view on this really complex set of supply chain ecosystem, and then finally where of course, leveraging some of our industry partners that Cta or the national retail Federation to just make sure that we're kind of bringing the holistic story together across <unk>.

Speaker Change: Yes. Thanks.

Speaker Change: There.

Speaker Change: Expect that as we continue to grow sales that we would at a core operating unit get leverage on those sales I think what sometimes hard to see is just the fact that in order for us to also improve rate in the future we need to continue to invest in things that will help bolster the profit which are things like ads in things like marketplace and so.

Brian Nagel: Just consumer electronics retail, but retail in general.

Speaker Change: That's very helpful color I appreciate it my follow up question, just really gives us more of a just a numbers question.

Speaker Change: Nice job you pointed this out about you pointed this out in your prepared comments, but here you are leveraging expenses and Bob. This is called calendar 'twenty four was still somewhat weak sales. The question I have is as we look forward to assuming that or.

Speaker Change: This year as we guide zero to plus two comps without tariffs.

Speaker Change: We're also guiding at the high end and expansion of operating income rate and within that you do have core leverage on the sales and then you have some investments going into things like ads in marketplace that has SG&A growing at a similar pace of sales.

Speaker Change: The sales backdrop, that's why you're starting to solidify here, you're starting to see maybe maybe a better trajectory how should we think about the leverage going forward and how much how much.

Speaker Change: As the base and the model set or is there going to be some type of expense to come back to you in sales presumably continue to improve.

Speaker Change: But that is our Oi rate Oi dollar contribution in this year and what we would hope to future years. So in the future we would expect to be able to as sales grow to get some a little bit of leverage and also be able to see expansion of rates supported by other things like ads in marketplace and any other initiatives that we would engage in.

Speaker Change: Yes, Thanks, just a question there.

Speaker Change: I appreciate all the color. Thank you.

Speaker Change: Thank you.

Speaker Change: Year, as we guide zero to plus two comps without tariffs. We are also guiding at the high end of the expansion of operating income rate and within that you do have core leverage on the sales and then you have some investments going into things like ads in marketplace that has SG&A growing at a similar pace of sales.

Speaker Change: Your next question comes from the line of Jonathan Matuszewski with Jefferies. Please go ahead.

Jonathan Matuszewski: Great. Good morning, and thanks for taking my questions Corey could you elaborate on your learnings from the success you've had with the marketplace in Canada over the past several years and just kind of comment on the elements here looking to replicate in the U S and any areas you may be.

Speaker Change: Looking to change thanks, so much.

Speaker Change: Yeah. This is one of those places where we have a distinct advantage in that at least some portion of the company has been dealing with marketplace.

Speaker Change: In Canada that marketplace. It has been historically geared a little bit more towards some of the refurb and rebuilt side of the equation. We have actually had a lot of that same product here in the U S. It hasnt been marketplace, it's been our own refurbished product. So we have some experience on that side of things I think what we've learned from Canada is that.

Speaker Change: I appreciate all the color. Thank you.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Jonathan Matuszewski with Jefferies. Please go ahead.

Speaker Change: There is a demand.

Speaker Change: Demand to go deeper into the Assortments and Thats not just the Canada question, we can see that in customers. We're searching our website and looking for a broader selection or looking for a broader quantity of products and we just don't have them there for them and but what Canada has shown us distinctly is that you can't buy offer.

Speaker Change: Looking to change thanks, so much.

Jonathan Matuszewski: Okay.

Speaker Change: Yes. This is one of those places where we have a distinct advantage in that at least some portion of the company has been dealing with marketplace.

Speaker Change: This deeper selection of product you can capture latent demand that you haven't been able to before because you were so worried about having all of that inventory on hand, I think in the U S. One of the things that we will do that slightly different is will probably offer even more new products and we will have multiple versions of the same SKU that are going to be.

Speaker Change: <unk> in our marketplace and Thats, a little bit different than what we've seen in Canada is actually a learning that we wish we could implement in Canada, and we're actually going to implement in the U S. First so we're trading notes back and forth and I think that's been a really helpful piece of the puzzle in terms of how we prioritize the experiences that we think will matter most in our marketplace here.

Speaker Change: It is a demand to go deeper into the Assortments and Thats not just the Cana that question, we can see that in customers. We're searching our website and looking for a broader selection or looking for a broader quantity of products and we just don't have them there for them and what Canada has shown us distinctly is that.

Speaker Change: That's really helpful and I guess just my follow up question is on the marketplace I think in Canada. One out of every four items shipped on best buy Canada website is from <unk> sellers. So I guess, if you think kind of long term about this initiative is there any reason.

Speaker Change: You can't buy offering this deeper selection of products you can capture latent demand that you hadn't been able to before because you're still worried about having all of that inventory on hand.

Speaker Change: In the U S. One of the things that we will do that slightly different is will probably offer even more new products and we will have multiple versions of the same skus that are going to be available in our marketplace and that's a little bit different than what we've seen in Canada is actually a learning that we wish we could implement in Canada, and we're actually going to implement in the U S. First.

Speaker Change: Why that's not the trajectory for the marketplace in the U S. Thanks.

I think we'll see how it goes what I would say is back to the differences in between Canada and the U S.

Speaker Change: Canada have less one P. Refurb product. So you had a lot of people go in there to get that kind of reap her refurb and value based products and that was a big part of the early demand. Their demand has evolved. Since then is now growing more into some of the new space and a little less in the refurb.

Speaker Change: So we're trading notes back and forth and I think that's been a really helpful piece of the puzzle in terms of how we prioritize the experiences that we think will matter most in our marketplace here.

Speaker Change: We will see how our looks different because we will have some of that SKU overlap and we are going to be geared a lot more toward deeper assortment new product.

Speaker Change: But I think it's going take a little bit of time to evolve in terms of exactly how that looks in the U S.

Speaker Change: But we are bullish on.

Speaker Change: That's not the trajectory for the marketplace in the U S. Thanks.

Speaker Change: Again, because we can see customer behavior, we are bullish on having this deeper assortment available to our customers.

Speaker Change: I think we'll see how it goes what I would say is back to the differences in between Canada and the U S.

Speaker Change: Great Best of luck.

Thank you.

Speaker Change: Canada had less one P. Refurb product. So you had a lot of people go in there to get that kind of re per refurb and value based product and that was a big part of the early demand. Their demand has evolved. Since then is now growing more into some of the new space and a little less in the refurb.

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

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

Speaker Change: The tariffs persist as they.

Michael Lasser: <unk> went into effect today.

Michael Lasser: Much pricing will be seen across the industry is it going to be in the hundreds of basis points high hundreds of basis points.

Speaker Change: So we'll see how <unk> looks different because we will have some of that SKU overlap and we're going to get a lot more toward deeper assortment new product.

Speaker Change: But I think it's going to get a little bit of time to evolve in terms of exactly how that looks in the U S.

Speaker Change: Do you expect to see if these tariffs persist the consumer is going to experience and most likely best buy will participate in terms of raising prices. Thank you.

Speaker Change: But we are bullish on.

Speaker Change: Again, because we can see customer behavior, we are bullish on having this deeper assortment available to our customers.

Speaker Change: Good morning, I wish I could give you a precise answer that would get down to quantity of basis points. I think it is a very difficult situation to answer precisely because it relies on everything from what will vendors absorb two what will we think about trying to <unk>.

Speaker Change: Great Best of luck.

Speaker Change: Thank you.

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

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

Speaker Change: The tariffs persist as they.

Speaker Change: Offset to the competitive landscape to your point, everyone in the industry facing us all the way to what gets passed onto the consumer I think it is fair to say and we said in our prepared remarks that tariffs at this level will result in price increases I think it is very difficult to say given the backdrop that we're in exactly precise.

Speaker Change: It went into effect today.

Speaker Change: Much pricing will be seen across the industry.

Speaker Change: Is it going to be in the hundreds of basis points I hundreds of basis points.

Speaker Change: Do you expect to see if these tariffs persist the consumer is going to experience and most likely best buy will participate in terms of raising prices. Thank you.

Speaker Change: How big that is.

Speaker Change: Okay.

Speaker Change: And could you give us a little bit more flavor on how youre going to approach pricing meeting.

Speaker Change: These tariffs.

Speaker Change: Tariffs that went into effect today are only temporary.

Speaker Change: You Act quickly to raise prices out of really necessity and then if the tariffs go away a month from now will you roll back prices can you give us some sense in your strategy and as part of that.

Speaker Change: Offset to the competitive landscape to your point, everyone in the industry facing us all the way to what gets passed on to the consumer I think it is fair to say and we said in our prepared remarks that tariffs at this level will result in price increases I think it is very difficult to say given the backdrop that we're in exactly precise.

Speaker Change: Instead of copying as high as 2% this year.

Speaker Change: The high end of your guidance translating to 660, if you comped down 2% how should we think about what your earnings is going to look like in that type of scenario. Thank you very much.

Speaker Change: So I'll start and on the pricing side again this isn't as simple as best buy decides to raise prices. This is a full value chain that starts with the manufacturing and then works its way all the way through as we said, we're only the direct importer of record on 2% to 3% of what we sell so this starts much further up.

Speaker Change: How big that is.

Speaker Change: Okay.

Speaker Change: And could you give us a little bit more flavor on how youre going to approach pricing meeting.

These terrorists.

Speaker Change: Tariffs that went into effect today are only temporary will you act quickly to raise prices.

Speaker Change: With our vendor partners, who are navigating this environment along with US you can imagine we carry on average let's call. It six weeks of supply so youre not overnight, it's going to see these applications and that's why even when we talked about the impact we said it would be much more in quarters two through four because depending on how fast any category.

Speaker Change: Out of really necessity and then if the tariffs go away a month from now will you roll back prices can you give us some sense in your strategy and as part of that.

Speaker Change: Instead of copying as high as 2% this year.

Speaker Change: Turns these cost increases will slowly work their way into categories. And then we will also slowly worked their way into price I think our objective in terms of pricing Michael will be the same as it has always been we want to be competitive we want to make sure that we have price points across the spectrum for everyone.

Speaker Change: So I'll start and on the pricing side again this isn't as simple as best buy decides to raise prices. This is a full value chain that starts with the manufacturing and then works its way all the way through as we said, we're only the direct import of record on 2% to 3% of what we sell so this starts much further ups.

Speaker Change: Some value seeking to high end premium seeking and we want to make sure that in a cycle. We're in where people are looking to replace and replenish and in some cases will be almost forced to because we're looking at something like a windows 10 upgrade.

Speaker Change: With our vendor partners, who are navigating this environment along with US you can imagine we carry on average let's call. It six weeks of supply so youre not overnight, it's going to see these implications and that's why even when we talked about the impact we said it would be much more in quarters two through four because depending on how fast any category.

Speaker Change: We want to make sure we're there for them across the assortment that approach to pricing will not change, we're just going to have to navigate in partnership with our vendors how some of the cost profile changes due to the test.

Speaker Change: And to the to the east.

Speaker Change: In your example, where our comps were down negative two this year instead of the guide we gave from flat to up two.

Speaker Change: Can't give you what that exact flow through as Michael I think as you have you seen from our past.

Speaker Change: Our ability to navigate a profit dollar profit rates in light of sales decline.

Speaker Change: From value seeking to high end premium seeking and we want to make sure that in a cycle. We're in where people are looking to replace and replenish and in some cases will be almost forced to because we're looking at something like a windows 10 upgrade.

Speaker Change: So that I think we will obviously try to mitigate as much as we possibly can the reason, it's really hard to say at this moment, we really don't know too much about the total impact or the duration and obviously as you're adjusting your profitability in the structure of your model you have to make sure you are not damaging your long term opportunity to grow in the future by reducing costs. So much that we're in.

Speaker Change: The moment in the year it might actually.

Speaker Change: Help you lower the profit increase the profit that might damage our ability to grow in the future and so there are things that we believe strongly believe that consumer electronics.

Speaker Change: Yes.

Speaker Change: Does that in your example, where our comps were down negative two this year instead of the guide we gave from flat to up two.

Speaker Change: Has a great opportunity in the future and we have to be cognizant.

Speaker Change: Can't give you what that exact flow through as Michael I think as you've seen from our past.

Speaker Change: Cognizant of what we're doing in a given year that might impact our ability to grow in the future. So it's really impossible at this moment, because we really don't know too much about the actual amount of tariffs and the duration of those at this point.

Speaker Change: And our ability to navigate a profit dollar profit rates in light of sales decline.

Speaker Change: Okay. Thank you very much and good luck.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Anthony Tacoma Loop capital markets. Please go ahead.

Speaker Change: Okay.

Anthony Tacoma: Good morning. Thank you so much for taking my question I just wanted to add another tariff related question.

Speaker Change: The moment in the year it might actually.

Speaker Change: Help you lower the profit increase the profit that might damage our ability to grow in the future and so there are things that we believe strongly in and believe that consumer electronics.

Speaker Change: Actually no I'm kidding, I'm not going to ask about tariffs.

Anthony Tacoma: Yeah.

Anthony Tacoma: So.

Anthony Tacoma: Okay. So you did the positive comp in the fourth quarter is the first one in quite some time.

Speaker Change: Has a great opportunity in the future and we have to speak.

Anthony Tacoma: As far as you can tell like how did your <unk>.

Speaker Change: Compare to the industry in other words, like where you're sort of in line with industry growth and to take share I mean do you have any data on that at this point.

Anthony Tacoma: Yeah. Thank you for the question that wasn't tariff related Anthony.

Speaker Change: Okay. Thank you very much and good luck.

Anthony Tacoma: We've said many times and this has been skirting there is no single source for share information in our categories.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Anthony into Combo Loop capital markets. Please go ahead.

Anthony Tacoma: Because you have to cobble it together from multiple places to make sure you get all those subcategories brought in there. We do however try to cobble it altogether and get after Sharon for Q4, we think our share was flattish compared to last year.

Speaker Change: Okay.

Speaker Change: Good morning. Thank you so much for taking my question I just wanted to add another tariff related question.

Speaker Change: Actually no I'm kidding, I'm not going to ask about tariffs.

Speaker Change: Yeah.

Anthony Tacoma: The full year, we think we had some nice share gains in computing and gaming and in fact, we actually reached what we think is our 30 year high in share in gaming consoles. So theres, some really nice wins and some things that really underscore the model and then I think there were some other areas that are a little bit more challenged particularly due to some of the value seeking behaviors that that.

Speaker Change: So.

Speaker Change: Okay. So you did the positive comp in the fourth quarter is the first one in quite some time.

Speaker Change: As far as you can tell like how did your comp compare to the industry in other words, when you sort of in line with industry growth did you take share I mean do you have any data on that at this point.

Speaker Change: Yes. Thank you for the question that wasn't tariff related Anthony.

Anthony Tacoma: We're seeing in the industry. So I think what this underscores is that we historically and we're showing it now we outperformed when theres more differentiation when we have that chance to leverage R.

Speaker Change: We've said many times and this isn't starting there is no single source for share information in our categories.

Anthony Tacoma: Our differentiation in the market and we definitely saw that in some of the computing and tablets results throughout the year and we're excited because as we look ahead, we start to see a little bit more and more innovation, that's coming our way so I.

Speaker Change: Because you have to cobble it together from multiple places to make sure you get all of those subcategories brought in there. We do however try to cobble it altogether and get after Sharon for Q4, we think our share was flattish compared to last year.

Anthony Tacoma: I appreciate the question Anthony.

Anthony Tacoma: Got it and then just a quick follow up on that segways nicely.

Speaker Change: The full year, we think we had some nice share gains in computing and gaming and in fact, we actually reached what we think is our 30 year high in share in gaming consoles. So theres, some really nice wins.

Anthony Tacoma: We know that there's going to be a new switch coming out this year as well as the GTA six I know.

Anthony Tacoma: Software is not as big for you guys that used to be but like how do you think about gaming in the context of your guidance.

Speaker Change: Some things that really underscore the model and then I think there were some other areas that are a little bit more challenged particularly due to some of the value seeking behaviors that that we're seeing in the industry. So I think what this underscores is that we historically and we're showing it now we outperform when theres more differentiation when we have that chance to leverage our R.

Anthony Tacoma: The flat to up two thank you.

Anthony Tacoma: Yeah, we actually it's specifically I'm going to start with we specifically called out on the call that we were going to make some enhancements to our stores and our experiences to really try to leverage that you're right. We're a little bit more about not just the console, but the whole experience of gaming whether that is computing whether that is comparable base in all of the fund accessories that go with all of that.

Speaker Change: Our differentiation in the market and we definitely saw that in some of the computing and tablets results throughout the year and we're excited because as we look ahead, we start to see a little bit more and more innovation, that's coming our way so I.

Anthony Tacoma: And so I think the team is doing a nice job of leaning and Jason I don't know if you want to just talk about some category expectations for the year.

Anthony: I appreciate the question Anthony.

Anthony: Got it and then just a quick follow up on that segways nicely.

And in gaming in particular as Cory alluded to we're making modifications to our store to get ready for some of the new things that we think will happen. This year, specifically from a Nintendo and the excitement that that will bring in probably mostly in the back half and then the other title you mentioned theres a lot of great titles coming out but that one in particular does have implications on not only.

Anthony: We know that there's going to be a new switch coming out this year as well as GTA six I know <unk>.

Speaker Change: Software is not as big for you guys that used to be but like how do you think about gaming in the context of your guidance.

Speaker Change: Flat to up two thank you.

Speaker Change: Yes, we actually specifically I'm going to start with we specifically called out on the call that we were going to make some enhancements to our stores and our experiences to really try to leverage that youre right were a little bit more about not just the consoles, but the whole experience of gaming whether that is computing, whether that is console base and all of the accessories that go with all of that.

Anthony Tacoma: It can drive opportunities for hardware purchase accessories, and then obviously just customers just getting ready for that very exciting titles. So we do see some opportunities in gaming, especially as we move towards the back half of the year.

Anthony Tacoma: That's helpful. Thank you.

Anthony Tacoma: Okay.

Speaker Change: Your next question comes from the line of Frothy owns of Bank of America. Please go ahead.

Speaker Change: And so I think the team is doing a nice job of leaning and Jason I don't know if you wanted to talk about some category expectations for the year.

Speaker Change: Hi, This is matti on for Robyn. Thank you for taking our questions.

Jason: And in gaming in particular as Cory alluded to we are making modifications to our store to get ready for some of the new things that we think will happen. This year, specifically from Nintendo and the excitement that that will bring in probably mostly in the back half and then the other title you mentioned theres a lot of great titles coming out but that one in particular it does have implications on not only.

Speaker Change: I first just wanted to ask I saw that you reported almost a 10% domestic services content for Q. So I was wondering how standalone warranty sales performed in four Q and what was the underlying right what were the underlying drivers for that service is comp and then could you remind us what you expect from services in 2025.

Jason: It can drive opportunities for hardware purchase accessories, and then obviously just customers just getting ready for that very exciting titles. So we do see some opportunities in gaming and especially as we move towards the back half of the year.

Speaker Change: Yes. Thanks for the question in Q4, we continued to see improvement in services revenue across a number of different areas throughout the year, we saw that we.

Jason: That's helpful. Thank you.

Speaker Change: We saw growth in paid membership we saw growth.

Jason: Okay.

Speaker Change: Standalone warranty we saw growth in the deliberate install the paid services.

Jason: Your next question comes from the line of Frothy owns of Bank of America. Please go ahead.

Speaker Change: That was consistent pretty much throughout the year in particular in Q4.

Jason: Hi, This is matti on for Robbie Holmes, Thank you for taking our questions.

Speaker Change: So what's driving the warranty I think it was just obviously there is.

Speaker Change: First just wanted to ask I saw that you reported almost a 10% domestic services comp in <unk>. So I was wondering how standalone warranty sales performed in four Q and what was the underlying right what were the underlying drivers for that service is comp and then could you remind us what you expect from services in 2025.

Speaker Change: The level of labor in stores that is dedicated to helping making sure customers get a full solution and so we have been seeing attachment trends improved throughout last year pretty consistently and that's been helping drive a warranty business, particularly as we think about the next year I think what we expect to see from us.

Speaker Change: Yes. Thanks for the question in Q4, we continued to see improvements in services revenue across a number of different areas throughout the year, we saw that we.

Speaker Change: Services revenue growth is something thats pretty aligned to the <unk>.

Speaker Change: Total enterprise revenue growth as we're starting to now lap a lot of those changes we made to the membership program in fiscal 'twenty four so now a pretty consistent level of services growth in total with what we might see from a product or an enterprise and so total.

Speaker Change: We saw growth in paid membership we saw growth.

Speaker Change: Standalone warranty we saw growth in the deliberate install the paid services.

Speaker Change: That was consistent pretty much throughout the year in particular in Q4.

Speaker Change: Thank you so much and maybe just one more can you provide any color on how we should think about the puts and takes to gross margin in <unk>. I think you said flat to up 20 basis points.

Speaker Change: So what's driving the warranty I think is just obviously there is.

Speaker Change: The level of labor in stores.

Speaker Change: Dedicated to helping making sure customers get a full solution and so we have been seeing attachment trends improve throughout last year pretty consistently and that has been helping drive a warranty business, particularly as we think about the next year I think what we expect to see from our services revenue growth is something thats pretty aligned.

Speaker Change: Yes in the first quarter, we're expecting.

Speaker Change: Gross profit rate range of flat to up 20 basis points similar to <unk>, where we're seeing the whole year, maybe a little bit towards the lower end of that range in total.

Speaker Change: The.

Speaker Change: The Ah <unk>.

Speaker Change: Favorability in Q1 is going to continue to still be driven by the services membership offerings driving a bit of a rate improvement.

Speaker Change: So the <unk>.

Speaker Change: That's because we don't completely anniversary the geek squad up model changes that we did.

Speaker Change: Until the end of Q1 this year.

Speaker Change: What would it be off slightly offsetting that favorability would be product margin rates and best buy health are both planned to be slight pressures in the first quarter. Most of the other drivers within gross profit rate in Q1 are pretty similar on a year on year basis.

Speaker Change: That's very helpful. Thank you.

Speaker Change: Yes in the first quarter, we are expecting.

Speaker Change: Gross profit rate range of flat to up 20 basis points similar to how we see the whole year, maybe a little bit towards the lower end of that range in total.

Speaker Change: Your next question comes from the line of Seth Sigman with Barclays. Please go ahead.

Speaker Change: Hey, guys. This is following a hue on for Seth Sigman.

Speaker Change: The.

Speaker Change: The favorability in Q1 is going to continue to still be driven by the services membership offerings driving a bit of rate improvement.

Speaker Change: Can you guys talk about how you feel about your market share in appliances, and what you're doing to accelerate that and also from a housing perspective, how important is an improvement and housing turnover to achieve.

Speaker Change: Because we don't completely anniversary the geek squad up model changes that we did.

Speaker Change: Until the end of Q1 this year.

Speaker Change: White be off slightly offsetting that favorability would be product margin rates and best buy health are both planned to be slight pressures in the first quarter. Most of the other drivers within gross profit rate in Q1 are pretty similar on a year on year basis.

Speaker Change: You had your sales guidance for this year and can you remind us about how important housing is on some of your audit categories.

Speaker Change: Well thank you.

Speaker Change: From a compliance perspective over the last couple of years Theres, obviously been pressure just based on all the sales and then the home improvement industry. In particular, we believe right now about 80% of the industry is what's called <unk> or break fix which is meaning that a single unit is being replaced.

Speaker Change: That's very helpful. Thank you.

Speaker Change: Your next question comes from the line of Seth Sigman of Barclays. Please go ahead.

Speaker Change: Okay.

Speaker Change: Hey, guys. This is following a hue on for Seth Sigman.

Speaker Change: That is not necessarily best buy a sweet spot, where our sweet spot is more appliance packages and premium sales.

Speaker Change: Can you guys talk about how you feel about your market share in appliances, and what youre doing to accelerate that and also from a housing perspective, how important is an improvement and housing turnover to achieve.

Speaker Change: As a result of that the industry has been highly promotional to try to stimulate interest.

Speaker Change: We've been practical with that we're very targeted with our investments and where we invest from a promotional perspective to make sure that we drive sales as.

Speaker Change: Your sales guidance for this year.

Speaker Change: Remind us about how important housing is on some of your audit categories that as.

Speaker Change: As we look forward, we do think that there's opportunities for the appliance business to not be as negative as it was last year.

Speaker Change: Well thank you.

Speaker Change: Lesser than the double digits that we've seen over the last two years in particular and then we'll continue to watch the housing market to see if that helps them improve but we do think the decline will be less negative than it has been historically and to be explicit our guide assumes no material change in the housing market.

Speaker Change: From a compliance perspective over the last couple of years Theres, obviously been pressure just based on home sales in the home improvement industry. In particular, we believe right now about 80% of the industry is what's called <unk> or break fix which is beating that.

Speaker Change: And to your secondary question that you asked and we see actually little correlation in the other categories that we have with the housing market. As you can imagine we've looked at that pretty carefully a bit in Tvs, but that is nothing even close to what we see on the appliance side.

Speaker Change: Single unit is being replaced that is not necessarily best buy sweet spot, where our sweet spot is more appliance packages and premium sales.

Speaker Change: As a result of that the industry has been highly promotional to try to stimulate interest we have.

Speaker Change: When practical without it we're very targeted with our investments and where we invest from a promotional perspective to make sure that we drive sales.

Speaker Change: Yeah.

Speaker Change: As we look forward, we do think that there's opportunities for the appliance business to not be as negative as it was last year lesser.

Speaker Change: Your next question comes from the line of Steven Forbes with Guggenheim Securities. Please go ahead.

Steven Forbes: Good morning Corey.

Speaker Change: Maybe you're right.

Steven Forbes: A two part question.

Steven Forbes: You have the idea of scaling these incremental profit streams. The first one is just <unk>.

Steven Forbes: On the tier one as you mentioned right marketplace and best buy ads.

Speaker Change: Any way to help sort of frame up.

Steven Forbes: What you see today.

Steven Forbes: What are you sort of think is the potential as you look out over the next couple of years for those to profit streams in terms of both growth contribution.

Steven Forbes: Margin contribution based on everything you know in your conversations with vendors sort of.

Speaker Change: Yeah.

Steven Forbes: Portfolio optimization strategies Youre under under.

Steven Forbes: Undergoing.

Speaker Change: Your next question comes from the line of Steven Forbes with Guggenheim Securities. Please go ahead.

Speaker Change: Any way to help frame up for us how youre sort of thinking about it today.

Steven Forbes: Okay.

Steven Forbes: Yes, I think we would see both of those to continue to present I would say some revenue and profit opportunities as we move forward I mean, obviously, we're only launching in the marketplace midway through the year. This year. So next year, we will see probably more of an impact.

Steven Forbes: Good morning, Corey and Matt.

Speaker Change: Alright.

Speaker Change: A two part question.

Speaker Change: The idea of scaling as an incremental profit stream. So the first one is just on.

Speaker Change: On the tier ones, you mentioned, great marketplace and best buy ads.

Speaker Change: Any way to help sort of frame up what you see today.

Steven Forbes: And that is going to expect it to be contributing to an EBIT dollar and rate this year and I think in the future. We see continued opportunity to scale the number of sellers on the site and as we continue to build out further enhancements to the experience as we get into potentially fulfilling.

Speaker Change: Like what are you sort of think is the potential as you look out over the next couple of years for those to profit streams in terms of both growth contribution and margin contribution based on everything you know in your conversations with vendors sort of the product portfolio optimization strategies youre under under.

Steven Forbes: On those <unk> sales as well I think we do see continued opportunity.

Steven Forbes: Also just expand the number of.

Speaker Change: Undergoing.

Steven Forbes: Categories, and Skus and see how the penetration looks in terms of how the overlap is with our <unk>. So we do think theres an opportunity to really expand the long tail of our assortments to ensure that we're meeting the customer demands I think it's an opportunity to to just help solidify some unit share as well because there is just different.

Speaker Change: Any way to help frame up for us how youre sort of thinking about it today.

Speaker Change: Okay.

Speaker Change: Yes, I think we would see both of those to continue to present I would say some revenue and profit opportunities as we move forward I mean, obviously, we're only launching in the marketplace midway through the year. This year. So next year, we will see probably more of an impact.

Steven Forbes: Type of business you can drive out of the <unk> marketplace that I think will help solidify our customer experience and overall customer penetration that we have and as we've had our ads business. A long time I think we're getting a little bit more into the agency non endemic types of growth areas and to do that we have to scale some technology build out <unk>.

Speaker Change: And that is going to expect it to be contributing to an EBIT dollar and rate this year and I think in the future. We see continued opportunity to scale the number of sellers on the site and as we continue to build out further enhancements to the experience as we get into potentially fulfilling.

Speaker Change: On those three <unk> sales as well I think we do see continued opportunity.

Steven Forbes: Members. So we do see that there is a profit opportunity.

Speaker Change: Also just expand the number of.

Steven Forbes: Probably particularly more next year this year and maybe a little bit more neutral as we are investing a little bit more but.

Speaker Change: Categories, and Skus and see how the penetration looks in terms of how the overlap is with our <unk>. So we do think theres an opportunity to really expand the long tail of our assortment to ensure that we're meeting the customer demands I think it's an opportunity to to just help solidify some unit share as well because there is just different.

Steven Forbes: We're not really sizing to use it for the next few years, but we would say that those are good.

Steven Forbes: Contributors to helping us.

Steven Forbes: Okay.

Steven Forbes: The next couple of years.

Steven Forbes: And then just a quick follow up right as we think about some other profit streams that you guys have talked about in the past.

Speaker Change: Type of business you can drive out of the <unk> marketplace that I think will help solidify our customer experience and overall customer penetration that we have and as we've had our ads business. A long time I think we're getting a little bit more into the agency not endemic types of growth areas and to do that we have to scale some technology build out <unk>.

Steven Forbes: Corporate device lifecycle management partner path.

Steven Forbes: Any sort of update Cory on how youre sort of thinking about yes.

Steven Forbes: How best buy fits into the broader ecosystem for consumer electronics, and just how you're sort of.

Yes framing up those opportunities maybe relative to how best buy health has changed and its outlook.

Speaker Change: Members. So we do see that there is a profit opportunity.

Steven Forbes: Are there any other changes in essence, if both positive or negative.

Steven Forbes: I always like to think about strategies on horizons, and you've got kind of your horizon, one which is what's returning free to rate the second horizon, two which is.

Speaker Change: Probably particularly more next year this year and maybe a little bit more neutral as we are investing a little bit more but.

Speaker Change: We're not really sizing to use it for the next few years, but we would say that those would both be contributors to helping us expand in operating income rate as we get into into the next couple of years.

Steven Forbes: We see lots of really positive indicators, so we're going to lean into it I think about.

Steven Forbes: Ads in some of that name and then there's your horizon three and some of the things that Youre trying in your building and may build themselves into really interesting.

Speaker Change: And then just a quick follow up right as we think about some other profit streams that you guys have talked about in the past.

Speaker Change: Corporate device lifecycle management partner, plus any sort of update Cory on how youre sort of thinking about.

Steven Forbes: Use cases, I think it all the examples you just gave with the team is really focused on is where can we either see customer behaviors or use our distinct assets to optimize future growth potential partner plus continues to grow nicely and again not only has it grown nicely, but it presents a beautiful solution.

Speaker Change: How best buy fits into the broader ecosystem.

Speaker Change: Consumer electronics.

Speaker Change: How you are sort of.

Speaker Change: Framing up those opportunities maybe relative to how best buy health has changed and its outlook.

Speaker Change: Are there any other changes in essence, and both positive or negative.

Steven Forbes: Our vendors and our customers, making it really easy for them to shop, So that was kind of moving closer into horizon as the team continues to scale it.

Speaker Change: We'd like to think about strategies on horizons, and you've got kind of your horizon, one which is what Richard inquiry rate. The second horizon, two which we see lots of really positive indicators. So we're going to lean into it I think about.

Steven Forbes: Device life cycle management, which you mentioned that when I think about a little bit more of a horizon three we're seeing nice growth in our services business associated with our we talked before about our business offerings. We're seeing good growth on the services side of our business offerings, and we continue to kind of build out what would the capabilities need to look like there how might we decide.

Speaker Change: Ads in some of that name and then there is year horizon, three and some of the things that Youre trying in your building and may build themselves into really interesting use.

Speaker Change: Use cases, I think it all the examples you just gave with the team is really focused on is where can we either see customer behaviors or use our distinct assets to optimize future growth potential partner plus continues to grow nicely and again not only has it grown nicely, but it presents a beautiful solution.

Steven Forbes: The future growth potential there, but right now we gave you the biggest rocks that we're most focused on because we think they have the highest near term return potential and you can imagine we're always going to be putting things in that kind of horizon three pipeline to see what might come out the other side effects.

Steven Forbes: And with that Oh, you got it. Thank you I think that was our last question. We thank you all for joining us on this very busy day and we look forward to updating you on our results and our progress during our next call in May Thank you.

Both our vendors and our customers, making it really easy for them to shop. So that was kind of moving closer into horizon as the team continues to scale it.

Speaker Change: Device life cycle management, which you mentioned that when I think about a little bit more of a horizon III, we're seeing nice growth in our services business associated with our we talked before about our business offerings. We're seeing good growth on the services side of our business offerings, and we continue to kind of build out what would the capabilities need to look like there how might we decide.

Speaker Change: Ladies and gentlemen that concludes your conference call. We thank you for participating and ask you to please disconnect your lines.

Steven Forbes: Yeah.

Speaker Change: The future growth potential there, but right now we gave you kind of the biggest rocks that we're most focused on because we think they have the highest near term return potential and you can imagine we're always going to be putting things in that kind of horizon three pipeline to see what might come out the other side.

Steven Forbes: [noise].

Speaker Change: And with that Oh, you got it. Thank you I think that was our last question. We thank you all for joining us on this very busy day and we look forward to updating you on our results and our progress during our next call in May Thank you.

Steven Forbes: Yeah.

Speaker Change: Ladies and gentlemen that concludes your conference call. We thank you for participating and ask that you. Please disconnect your lines.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.

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