Item 1. Business.

Unless the context otherwise requires, the terms “we,” “us” and “our” in this Annual Report on Form 10-K refer to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries. Any references to our website addresses do not constitute incorporation by reference of the information contained on the websites.

Description of Business

We were incorporated in the state of Minnesota in 1966. We are driven by our purpose to enrich lives through technology and our vision to personalize and humanize technology solutions for every stage of life. We accomplish this by leveraging our combination of technology and a human touch to meet our customers’ everyday needs, whether they come to us online, visit our stores or invite us into their homes. We have operations in the U.S. and Canada.

Segments and Geographic Areas

We have two reportable segments: Domestic and International. The Domestic segment is comprised of our operations in all states, districts and territories of the U.S. and our Best Buy Health business, and includes the brand names Best Buy, Best Buy Ads, Best Buy Business, Best Buy Health, CST, Current Health, Geek Squad, Lively, Magnolia, Pacific Kitchen and Home, TechLiquidators and Yardbird and the domain names bestbuy.com, currenthealth.com, lively.com, techliquidators.com and yardbird.com. All of our former stores in Mexico were closed as of the end of the first quarter of fiscal 2022, and our International segment is comprised of all operations in Canada under the brand names Best Buy, Best Buy Mobile and Geek Squad and the domain name bestbuy.ca.

In fiscal 2022, we acquired all of the outstanding shares of Current Health Ltd. (“Current Health”) and Two Peaks, LLC d/b/a Yardbird Furniture (“Yardbird”).

Operations

Our Domestic and International segments are managed by leadership teams responsible for all areas of the business. Both segments operate an omnichannel platform that allows customers to come to us online, visit our stores or invite us into their homes.

Development of merchandise and service offerings, pricing and promotions, procurement and supply chain, online and mobile application operations, marketing and advertising and labor deployment across all channels are centrally managed. In addition, support capabilities (for example, human resources, finance, information technology and real estate management) operate from our corporate headquarters. We also have field operations that support retail, services and in-home teams from our corporate headquarters and regional locations. Our retail stores have procedures for inventory management, asset protection, transaction processing, customer relations, store administration, product sales and services, staff training and merchandise display that are largely standardized. All stores generally operate under standard procedures with a degree of flexibility for store management to address certain local market characteristics. While day-to-day operations of our stores are led by store management, more strategic decisions regarding, for example, store locations, format, category assortment and fulfillment strategy are addressed at a market or regional level.

Our Best Buy Health business has a dedicated leadership team and operations team. The Best Buy Health leadership team manages the day-to-day affairs of all aspects of its business, while receiving support from certain Best Buy enterprise capabilities.

Merchandise and Services

Our Domestic and International segments have offerings in six revenue categories. The key components of each revenue category are as follows:

Computing and Mobile Phones - computing (including desktops, notebooks and peripherals), mobile phones (including related mobile network carrier commissions), networking, tablets (including e-readers) and wearables (including smartwatches);

Consumer Electronics - digital imaging, health and fitness products, home theater, portable audio (including headphones and portable speakers) and smart home;

Appliances - large appliances (including dishwashers, laundry, ovens and refrigerators) and small appliances (including blenders, coffee makers and vacuums);

Entertainment - drones, gaming (including hardware, peripherals and software), movies, music, toys, virtual reality and other software;

Services - consultation, delivery, design, health-related services, installation, memberships, repair, set-up, technical support and warranty-related services; and

Other - other product offerings, including baby, food and beverage, luggage, outdoor living and sporting goods.

Distribution

Customers within our Domestic and International segments who purchase product online have the choice to pick up product at a Best Buy store (including curbside pick-up for select products at most Domestic stores), at an alternative pick-up location or take delivery direct to their homes. Our ship-from-store capability allows us to improve product availability and delivery times for customers. Most merchandise is shipped directly from manufacturers to our distribution centers.

Suppliers and Inventory

Our Domestic and International segments purchase merchandise from a variety of suppliers. In fiscal 2023, our 20 largest suppliers accounted for approximately 79% of the merchandise we purchased, with five suppliers – Apple, Samsung, HP, LG and Sony – representing approximately 57% of total merchandise purchased. We generally do not have long-term written contracts with our vendors that would require them to continue supplying us with merchandise or that secure any of the key terms of our arrangements.

We carefully monitor and manage our inventory levels in an effort to match quantities on hand with consumer demand as closely as possible. Key elements to our inventory management process include the following: continuous monitoring of consumer demand, continuous monitoring and adjustment of inventory receipt levels and pricing, agreements with vendors relating to reimbursement for the cost of markdowns or sales incentives, and agreements with vendors relating to return privileges for certain products.

We also have a global sourcing operation to design, develop, test and contract-manufacture our exclusive brands products.

Store Development

We had 1,138 stores at the end of fiscal 2023 throughout our Domestic and International segments. Our stores are a vital component of our omnichannel strategy, and we believe they are an important competitive advantage. We also have vendor store-within-a-store concepts to allow closer vendor partnerships and a higher quality customer experience. We continuously look for opportunities to optimize our store space, renegotiate leases and selectively open or close locations to support our operations.

Refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, for tables reconciling our Domestic and International segment stores open at the end of each of the last three fiscal years.

Intellectual Property

We own or have the right to use valuable intellectual property such as trademarks, service marks and trade names, including, but not limited to, Best Buy, Best Buy Ads, Best Buy Essentials, Best Buy Health, Best Buy Mobile, Best Buy Totaltech, CST, Current Health, Dynex, Geek Squad, Insignia, Jitterbug, Lively, Magnolia, Modal, My Best Buy, Pacific Kitchen and Home, Pacific Sales, Platinum, Rocketfish, TechLiquidators, Yardbird and our Yellow Tag logo.

We have secured domestic and international trademark and service mark registrations for many of our brands. We have also secured patents for many of our inventions. We believe our intellectual property has significant value and is an important factor in the marketing of our company, our stores, our products and our websites.

Seasonality

Our business, like that of many retailers, is seasonal. A large proportion of our revenue and earnings is generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season.

Working Capital

We fund our business operations through a combination of available cash and cash equivalents and cash flows generated from operations. In addition, our revolving credit facilities are available for additional working capital needs, for general corporate purposes, investments and growth opportunities. Our working capital needs typically increase in the months leading up to the holiday shopping season as we purchase inventory in advance of expected sales.

Competition

Our competitors are primarily multi-channel retailers, e-commerce businesses, technology service providers, traditional store-based retailers, vendors and mobile network carriers who offer their products and services directly to customers. We believe our ability to help customers online, in our stores and in their homes, and to connect technology product and solutions with customer needs, provides us key competitive advantages. Some of our competitors have lower cost operating structures and seek to compete for sales primarily on price. We carefully monitor pricing offered by other retailers and service providers, as maintaining price competitiveness is one of our ongoing priorities. In addition, we have price-matching policies that allow customers to request that we match a price offered by certain retail stores and online operators. In order to allow this, we are focused on maintaining efficient operations and leveraging the economies of scale available to us through our global vendor partnerships. We believe our dedicated and knowledgeable people; our integrated online, retail and in-home assets; our broad and curated product assortment; our strong vendor partnerships; our service and support offerings designed to solve real customer needs; our unique ability to showcase technology in distinct store formats and our supply chain are important ways in which we maintain our competitive advantage.

Environmental and Social

As we pursue our purpose to enrich lives through technology, we are committed to having a positive impact on the world, the environment and the communities in which we operate through interactions with all of our stakeholders, including our customers, employees, vendor partners and shareholders.

The Nominating, Corporate Governance and Public Policy Committee of our Board of Directors (“Board”) advises and oversees management regarding the effectiveness and risks of our environmental, social and governance strategy, programs and initiatives, including environmental goals and progress, social responsibility programs, and initiatives and public policy positions and advocacy.

Environmental

We aspire to drive forward the circular economy and we are committed to conserving natural resources, reducing waste in our operations, offering products that help our customers live more sustainably and transitioning to renewable energy sources. As of the end of fiscal 2023, we have invested in five solar fields, helping to accelerate the progress towards our carbon reduction goals.

We intend to reduce the use of natural resources in our operations as demonstrated by the following goals, which we believe can be managed within our normal operating budget without significant incremental spending:

Reduce carbon emissions 75% by 2030 (over a 2009 baseline) and become carbon neutral by 2040. We continue to reduce our carbon emissions and plan to achieve this goal by investing in energy efficiency improvements, deploying small-scale onsite and utility-scale renewable energy systems, electrifying our fleet and neutralizing residual emissions.

Reduce water consumption 15% by 2025 (over a 2019 baseline). By monitoring our water consumption across our business, and identifying actions that lessen our dependence on water, we continue to reduce our water usage.

Achieve zero-waste certification at additional distribution center locations. To continue reducing our impact on the environment, we are working toward building a more sustainable supply chain and expanding our Total Resource Use and Efficiency zero-waste certification efforts across our warehousing operations.

We aim to help our customers reduce their impact on the environment as well. Through the sale of ENERGY STAR® products, we expect to help our customers reduce carbon emissions 20% by 2030 (over a 2017 baseline), which we estimate will save our customers collectively at least $5 billion on utility bills.

We support the circular economy by keeping consumer products in use for as long as possible through our repair and trade-in services. Finally, we put materials back into the manufacturing process when products reach the end of their lives through our electronics and appliance recycling program. We have collected more than 2.7 billion pounds of electronics and appliances for recycling since 2009, including more than 183 million pounds in fiscal 2023. We remain committed to maintaining this program to collect even more in the years ahead.

Social

Human Rights and Responsible Sourcing

We are committed to respecting and advancing human rights through our alignment with the United Nations Guiding Principles on Business and Human Rights. Further, across all the products and services we procure, we seek to enhance our partnership with suppliers and create value for all stakeholders through our Responsible Sourcing Program. We are active members of the Responsible Business Alliance, which allows us to partner with many of the brands we sell, including Apple, Intel, Microsoft and Samsung. Collectively, we embrace a common Supplier Code of Conduct and audit methodology that seeks to improve working and environmental conditions in the supply chain.

Community Impact

The Best Buy Foundation is working to build brighter futures for teens from disinvested communities. The Best Buy Foundation currently supports a network of 52 Best Buy Teen Tech Center^® locations and has a goal of supporting 100 locations by 2025. Through the Best Buy Teen Tech Centers and a suite of supporting programs, teens are able to prepare for careers of the future through access to:

cutting-edge technology and related training;

post-secondary guidance for college prep and technical programs;

mentors who inspire new passions and possibilities;

social and emotional support,including mental health resources; and

paid internship and career exploration opportunities that put learning into practice.‎

Human Capital Management

We believe in the power of our people. Our culture is built on the belief that engaged and committed employees – supported by opportunities to learn, grow, innovate and explore – can lead to extraordinary outcomes. At the end of fiscal 2023, we employed more than 90,000 employees in the U.S. and Canada, comprised of approximately 58% full-time employees, 32% part-time employees and 10% seasonal/occasional employees.

Diversity, Equity and Inclusion

We are creating a more inclusive future, both inside our company and in our communities. In fiscal 2021, we set employee diversity goals to be attained by 2025, and we are pleased to report the following achievements in fiscal 2023:

filled 37% of new, salaried corporate positions with Black, Indigenous and People of Color (“BIPOC”) employees, compared to our goal to fill one of three positions; and

filled 25% of new, salaried field positions with female employees, compared to our goal to fill one of three positions.

We are committed to creating a stronger community of diverse suppliers to help increase BIPOC representation in the tech industry. We continue making progress on our commitment to spend at least $1.2 billion with BIPOC and diverse businesses by 2025. In addition, we are investing up to $10 million with Brown Venture Group, a venture capital firm that focuses exclusively on Black, Latino and Indigenous technology startups in emerging technologies.

For our communities, we continue making progress on our commitment to spend $44 million by 2025 to expand college preparation and career opportunities for BIPOC students, including adding scholarships for Historically Black Colleges and University students and increasing scholarship funding for Best Buy Teen Tech Center youth.

The Compensation and Human Resources Committee of our Board supports the development of an inclusive and diverse culture through oversight of our human resources policies and program. The Nominating, Corporate Governance and Public Policy Committee of our Board recommends criteria for the selection of individuals to be considered as candidates for election to the Board, which includes diversity considerations.

Training and Development

Personal growth is at the heart of our people strategy, and we believe investing in training, upskilling and reskilling programs will produce long-lasting benefits to the organization by creating a more productive, engaged and adaptable workforce. In fiscal 2023, each of our U.S. employees spent an average of at least 44 hours on training and development.

We made the following enhancements to our training and development program in fiscal 2023:

expanded our leadership development program to all field and corporate leaders and directors across the enterprise with a focus on adaptability, the ability to work effectively with others and create a culture of belonging, the ability to apply reason and learning experiences into one’s role, and the ability to understand and thrive in a digital economy;

launched a program with an artificial intelligence platform to proactively plan for future workforce roles, creating new learning and career paths;

provided LinkedIn Learning to full-time employees for continuous learning in leadership and functional skills; and

created a new onboarding training program for all new employees to create a consistent experience that starts their unique learning path specific for their job.

Employee Benefits

We strive to help our employees live happy, healthy and productive lives that balances work and home.

Our benefits aim to support employees’ overall well-being. In fiscal 2023, we elevated caregiver support for employees with a focus on disabilities and neurodivergence through a partnership with Joshin.

Additionally, we continued our focus on:

caregiver support benefits that enable employees to receive personalized help in a time of great need through Wellthy, a program that helps employees with emergency housing, healthcare, substance abuse, complex eldercare issues and other moments of crisis;

pay continuation (paid leave) and caregiver pay so employees can care for themselves and their loved ones;

maternity leave that provides qualifying employees up to 10 weeks at 100% pay;

Included Health – a new benefit providing support for employees with a focus on LGBTQ+ needs that connect members to affirming and clinically competent providers, and one-on-one support with a care coordinator;

access to physical and mental health virtual visits;

emergency assistance through the HOPE Fund – Helping Our People in Emergencies – in equal partnership with the Richard M. Schultze Family Foundation, provides employees in hardship situations an opportunity to receive up to $2,500 in financial assistance;

mental health, including our commitment to raise awareness about mental health, equipping employees with training to notice issues in themselves or others, and then find help; and

tuition assistance, including the expansion of our partnership schools giving eligible employees the opportunity to earn a degree with no out-of-pocket costs.

The Compensation and Human Resources Committee of our Board oversees risks related to our human capital management through its regular review of our practices, policies and programs, which includes overall employee wellness and engagement in these areas, employee benefit plan compliance, leadership succession planning and wage, retention and hiring programs.

For more information on environmental and social matters, as well as human capital management, please see Best Buy’s Fiscal 2023 Environmental, Social and Governance Report, including a Task Force for Climate Related Financial Disclosures index, expected to be published in June 2023, at https://corporate.bestbuy.com/sustainability. This website and the report are not part of this annual report and are not incorporated by reference herein.

Available Information

We are subject to the reporting requirements of the Exchange Act and its rules and regulations. The Exchange Act requires us to file reports, proxy statements and other information with the U.S. Securities and Exchange Commission (“SEC”). We make available, free of charge on our website, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file these documents with, or furnish them to, the SEC. These documents are posted on our website at https://investors.bestbuy.com. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC at https://sec.gov.

We also make available, free of charge on our website, our Amended and Restated Articles of Incorporation, Amended and Restated By-laws, the Corporate Governance Principles of our Board and our Code of Business Ethics adopted by our Board, as well as the charters of all of our Board's committees: Audit Committee; Compensation and Human Resources Committee; Finance and Investment Policy Committee; and Nominating, Corporate Governance and Public Policy Committee. These documents are posted on our website at https://investors.bestbuy.com.

Copies of any of the above-referenced documents will also be made available, free of charge, upon written request to Best Buy Co., Inc. Investor Relations Department at 7601 Penn Avenue South, Richfield, MN 55423-3645.

Website and Social Media Disclosure

We disclose information to the public concerning Best Buy, Best Buy’s products, content and services and other items through our websites in order to achieve broad, non-exclusionary distribution of information to the public. Some of the information distributed through this channel may be considered material information. Investors and others are encouraged to review the information we make public in the locations below.* This list may be updated from time to time.

For information concerning Best Buy and its products, content and services, please visit: https://bestbuy.com.

For information provided to the investment community, including news releases, events and presentations, and filings with the SEC, please visit: https://investors.bestbuy.com.

For the latest information from Best Buy, including press releases, please visit: https://corporate.bestbuy.com/archive/.

* These corporate websites, and the contents thereof, are not incorporated by reference into this Periodic Report on Form 10-K nor deemed filed with the SEC.

BBY - Best Buy Co., Inc.