Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended October 28, 2017

29, 2022

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from            to            


Commission File Number: 1-9595


 bbylogoa07seca17.jpg

Picture 1

BEST BUY CO., INC.

(Exact name of registrant as specified in its charter)

Minnesota

41-0907483

Minnesota41-0907483

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

7601 Penn Avenue South

Richfield, Minnesota

55423

(Address of principal executive offices)

(Zip Code)

(612) 291-1000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, $0.10 par value per share

BBY

New York Stock Exchange

Indicate by check mark whether the registrantregistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, (as defined” and “emerging growth company” in Rule 12b-2 of the Exchange Act).

Act.

Large Accelerated Filer

Accelerated Filer 

Non-accelerated Filer 

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨

Smaller Reporting Company 

Smaller reporting company ¨

Emerging growth company ¨

Growth Company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes ¨ No x

The registrant had 292,326,497221,264,454 shares of common stock outstanding as of November 28, 2017.December 2, 2022.





BEST BUY CO., INC.

FORM 10-Q FOR THE QUARTER ENDED OCTOBER 28, 2017

29, 2022

TABLE OF CONTENTS

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2


PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

Item 1.    Financial Statements

Condensed ConsolidatedConsolidated Balance Sheets

$ in millions, except per share and share amounts (unaudited)

October 29, 2022

January 29, 2022

October 30, 2021

Assets

Current assets

Cash and cash equivalents

$

932 

$

2,936 

$

3,465 

Receivables, net

1,050 

1,042 

1,016 

Merchandise inventories

7,294 

5,965 

8,553 

Other current assets

646 

596 

486 

Total current assets

9,922 

10,539 

13,520 

Property and equipment, net

2,373 

2,250 

2,256 

Operating lease assets

2,799 

2,654 

2,688 

Goodwill

1,383 

1,384 

986 

Other assets

544 

677 

652 

Total assets

$

17,021 

$

17,504 

$

20,102 

Liabilities and equity

Current liabilities

Accounts payable

$

7,056 

$

6,803 

$

8,405 

Unredeemed gift card liabilities

273 

316 

306 

Deferred revenue

1,080 

1,103 

977 

Accrued compensation and related expenses

363 

845 

703 

Accrued liabilities

744 

946 

895 

Current portion of operating lease liabilities

638 

648 

645 

Current portion of long-term debt

16 

13 

15 

Total current liabilities

10,170 

10,674 

11,946 

Long-term operating lease liabilities

2,216 

2,061 

2,102 

Long-term debt

1,142 

1,216 

1,223 

Long-term liabilities

500 

533 

553 

Contingencies (Note 11)

 

 

 

Equity

Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding - none

-

-

-

Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 225.2 million, 227.4 million and 243.8 million shares, respectively

22 

23 

24 

Additional paid-in capital

61 

-

-

Retained earnings

2,597 

2,668 

3,917 

Accumulated other comprehensive income

313 

329 

337 

Total equity

2,993 

3,020 

4,278 

Total liabilities and equity

$

17,021 

$

17,504 

$

20,102 

 October 28, 2017 January 28, 2017 October 29, 2016
Assets 
  
  
Current assets     
Cash and cash equivalents$1,103
 $2,240
 $1,341
Short-term investments2,237
 1,681
 1,777
Receivables, net971
 1,347
 1,174
Merchandise inventories6,663
 4,864
 6,331
Other current assets431
 384
 398
Total current assets11,405
 10,516
 11,021
Property and equipment, net2,352
 2,293
 2,298
Goodwill425
 425
 425
Other assets603
 622
 798
Total assets$14,785
 $13,856
 $14,542
      
Liabilities and equity     
Current liabilities 
  
  
Accounts payable$6,587
 $4,984
 $6,233
Unredeemed gift card liabilities375
 427
 377
Deferred revenue426
 418
 380
Accrued compensation and related expenses331
 358
 308
Accrued liabilities808
 865
 782
Accrued income taxes80
 26
 43
Current portion of long-term debt545
 44
 43
Total current liabilities9,152
 7,122
 8,166
Long-term liabilities697
 704
 791
Long-term debt784
 1,321
 1,324
Equity 
  
  
Preferred stock, $1.00 par value: Authorized — 400,000 shares; Issued and outstanding — none
 
 
Common stock, $0.10 par value: Authorized — 1.0 billion shares; Issued and outstanding — 296,000,000, 311,000,000 and 313,000,000 shares, respectively30
 31
 31
Retained earnings3,818
 4,399
 3,953
Accumulated other comprehensive income304
 279
 277
Total equity4,152
 4,709
 4,261
Total liabilities and equity$14,785
 $13,856
 $14,542

NOTE: The Consolidated Balance Sheet as of January 28, 2017,29, 2022, has been condensed from the audited consolidated financial statements.


See Notes to Condensed Consolidated Financial Statements.Statements.



3


Condensed Consolidated Statements of Earnings

$ and shares in millions, except per share amounts (unaudited)

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Revenue

$

10,587 

$

11,910 

$

31,563 

$

35,396 

Cost of sales

8,255 

9,108 

24,591 

27,069 

Gross profit

2,332 

2,802 

6,972 

8,327 

Selling, general and administrative expenses

1,941 

2,133 

5,713 

6,130 

Restructuring charges

26 

(1)

61 

(39)

Operating income

365 

670 

1,198 

2,236 

Other income (expense):

Investment income and other

Interest expense

(10)

(7)

(23)

(19)

Earnings before income tax expense and equity in income (loss) of affiliates

359 

664 

1,177 

2,224 

Income tax expense

84 

166 

252 

402 

Equity in income (loss) of affiliates

(1)

Net earnings

$

277 

$

499 

$

924 

$

1,828 

Basic earnings per share

$

1.23 

$

2.02 

$

4.09 

$

7.31 

Diluted earnings per share

$

1.22 

$

2.00 

$

4.07 

$

7.23 

Weighted-average common shares outstanding:

Basic

225.5 

246.4 

225.9 

249.9 

Diluted

226.2 

249.1 

226.9 

252.9 

 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Revenue$9,320
 $8,945
 $26,788
 $25,921
Cost of goods sold7,040
 6,742
 20,333
 19,511
Gross profit2,280
 2,203
 6,455
 6,410
Selling, general and administrative expenses1,932
 1,890
 5,484
 5,407
Restructuring charges(2) 1
 
 30
Operating income350
 312
 971
 973
Other income (expense) 
  
    
Gain on sale of investments
 
 
 2
Investment income and other12
 8
 30
 22
Interest expense(20) (16) (57) (54)
Earnings from continuing operations before income tax expense342
 304
 944
 943
Income tax expense104
 112
 309
 343
Net earnings from continuing operations238
 192
 635
 600
Gain from discontinued operations (Note 2), net of tax expense of $0, $0, $0 and $7, respectively1
 2
 1
 21
Net earnings$239
 $194
 $636
 $621
        
Basic earnings per share 
  
    
Continuing operations$0.80
 $0.61
 $2.09
 $1.87
Discontinued operations
 
 
 0.07
Basic earnings per share$0.80
 $0.61
 $2.09
 $1.94
        
Diluted earnings per share       
Continuing operations$0.78
 $0.60
 $2.05
 $1.85
Discontinued operations
 0.01
 
 0.07
Diluted earnings per share$0.78
 $0.61
 $2.05
 $1.92
        
Dividends declared per common share$0.34
 $0.28
 $1.02
 $1.29
        
Weighted-average common shares outstanding 
  
    
Basic299.1
 316.2
 304.1
 320.2
Diluted305.4
 320.0
 310.6
 323.6

See Notes to Condensed Consolidated Financial Statements.



4


Condensed Consolidated Statements of Comprehensive Income

$ in millions (unaudited)

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Net earnings

$

277 

$

499 

$

924 

$

1,828 

Foreign currency translation adjustments, net of tax

(15)

(16)

Comprehensive income

$

262 

$

501 

$

908 

$

1,837 

 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Net earnings$239
 $194
 $636
 $621
Foreign currency translation adjustments(17) (19) 25
 6
Comprehensive income$222
 $175
 $661
 $627

See Notes to Condensed Consolidated Financial Statements.



5



Condensed

Condensed Consolidated Statements of Cash Flows

$ in millions (unaudited)

Nine Months Ended

October 29, 2022

October 30, 2021

Operating activities

Net earnings

$

924 

$

1,828 

Adjustments to reconcile net earnings to total cash provided by (used in) operating activities:

Depreciation and amortization

679 

644 

Restructuring charges

61 

(39)

Stock-based compensation

98 

105 

Deferred income taxes

10 

(16)

Other, net

Changes in operating assets and liabilities, net of acquired assets and liabilities:

Receivables

(14)

43 

Merchandise inventories

(1,365)

(2,924)

Other assets

(1)

(12)

Accounts payable

224 

1,387 

Income taxes

28 

(172)

Other liabilities

(761)

214 

Total cash provided by (used in) operating activities

(108)

1,061 

Investing activities

Additions to property and equipment

(696)

(548)

Purchases of investments

(46)

(221)

Sales of investments

64 

Other, net

(2)

Total cash used in investing activities

(736)

(707)

Financing activities

Repurchase of common stock

(465)

(1,728)

Issuance of common stock

15 

28 

Dividends paid

(595)

(522)

Repayments of debt

(13)

(123)

Other, net

-

(2)

Total cash used in financing activities

(1,058)

(2,347)

Effect of exchange rate changes on cash and cash equivalents

(10)

Decrease in cash, cash equivalents and restricted cash

(1,912)

(1,987)

Cash, cash equivalents and restricted cash at beginning of period

3,205 

5,625 

Cash, cash equivalents and restricted cash at end of period

$

1,293 

$

3,638 

 Nine Months Ended
 October 28, 2017 October 29, 2016
Operating activities   
Net earnings$636
 $621
Adjustments to reconcile net earnings to total cash provided by operating activities:   
Depreciation500
 491
Restructuring charges
 30
Stock-based compensation97
 82
Deferred income taxes4
 28
Other, net(5) (22)
Changes in operating assets and liabilities:   
Receivables413
 79
Merchandise inventories(1,811) (1,369)
Other assets(36) (18)
Accounts payable1,530
 1,801
Other liabilities(187) (192)
Income taxes62
 (124)
Total cash provided by operating activities1,203
 1,407
    
Investing activities 
  
Additions to property and equipment(489) (445)
Purchases of investments(4,047) (2,149)
Sales of investments3,518
 1,685
Proceeds from property disposition2
 56
Other, net
 5
Total cash used in investing activities(1,016) (848)
    
Financing activities 
  
Repurchase of common stock(1,138) (472)
Repayments of debt(31) (384)
Dividends paid(310) (417)
Issuance of common stock145
 66
Other, net(1) 8
Total cash used in financing activities(1,335) (1,199)
Effect of exchange rate changes on cash15
 13
Decrease in cash, cash equivalents and restricted cash(1,133) (627)
Cash, cash equivalents and restricted cash at beginning of period2,433
 2,161
Cash, cash equivalents and restricted cash at end of period$1,300
 $1,534

See Notes to Condensed Consolidated Financial Statements.


Condensed Consolidated Statements of ChangeChanges in Shareholders' Equity

$ and shares in millions, except per share amounts (unaudited)

Common Shares

Common Stock

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

Total

Balances at July 30, 2022

225.1 

$

22 

$

20 

$

2,522 

$

328 

$

2,892 

Net earnings, three months ended October 29, 2022

-

-

-

277 

-

277 

Other comprehensive loss:

Foreign currency translation adjustments, net of tax

-

-

-

-

(15)

(15)

Stock-based compensation

-

-

33 

-

-

33 

Issuance of common stock

0.1 

-

-

-

Common stock dividends, $0.88 per share

-

-

(202)

-

(199)

Balances at October 29, 2022

225.2 

$

22 

$

61 

$

2,597 

$

313 

$

2,993 

Balances at January 29, 2022

227.4 

$

23 

$

-

$

2,668 

$

329 

$

3,020 

Net earnings, nine months ended October 29, 2022

-

-

-

924 

-

924 

Other comprehensive loss:

Foreign currency translation adjustments, net of tax

-

-

-

-

(16)

(16)

Stock-based compensation

-

-

98 

-

-

98 

Issuance of common stock

2.4 

-

15 

-

-

15 

Common stock dividends, $2.64 per share

-

-

10 

(606)

-

(596)

Repurchase of common stock

(4.6)

(1)

(62)

(389)

-

(452)

Balances at October 29, 2022

225.2 

$

22 

$

61 

$

2,597 

$

313 

$

2,993 

Balances at July 31, 2021

247.3 

$

25 

$

-

$

3,975 

$

335 

$

4,335 

Net earnings, three months ended October 30, 2021

-

-

-

499 

-

499 

Other comprehensive income:

Foreign currency translation adjustments, net of tax

-

-

-

-

Stock-based compensation

-

-

34 

-

-

34 

Issuance of common stock

0.2 

-

-

-

Common stock dividends, $0.70 per share

-

-

(175)

-

(172)

Repurchase of common stock

(3.7)

(1)

(43)

(382)

-

(426)

Balances at October 30, 2021

243.8 

$

24 

$

-

$

3,917 

$

337 

$

4,278 

Balances at January 30, 2021

256.9 

$

26 

$

-

$

4,233 

$

328 

$

4,587 

Net earnings, nine months ended October 30, 2021

-

-

-

1,828 

-

1,828 

Other comprehensive income:

Foreign currency translation adjustments, net of tax

-

-

-

-

Stock-based compensation

-

-

105 

-

-

105 

Issuance of common stock

2.7 

-

28 

-

-

28 

Common stock dividends, $2.10 per share

-

-

11 

(533)

-

(522)

Repurchase of common stock

(15.8)

(2)

(144)

(1,611)

-

(1,757)

Balances at October 30, 2021

243.8 

$

24 

$

-

$

3,917 

$

337 

$

4,278 

 
Common
Shares
 
Common
Stock
 Prepaid Share Repurchase 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 Total
Balances at January 28, 2017311
 $31
 $
 $
 $4,399
 $279
 $4,709
Adoption of ASU 2016-09
 
 
 10
 (12) 
 (2)
Net earnings, nine months ended October 28, 2017
 
 
 
 636
 
 636
Other comprehensive income, net of tax             
Foreign currency translation adjustments
 
 
 
 
 25
 25
Stock-based compensation
 
 
 97
 
 
 97
Restricted stock vested and stock options exercised7
 1
 
 137
 
 
 138
Issuance of common stock under employee stock purchase plan
 
 
 7
 
 
 7
Common stock dividends, $1.02 per share
 
 
 
 (311) 
 (311)
Repurchase of common stock(22) (2) 
 (251) (894) 
 (1,147)
Balances at October 28, 2017296
 $30
 $
 $
 $3,818
 $304
 $4,152
              
Balances at January 30, 2016324
 $32
 $(55) $
 $4,130
 $271
 $4,378
Net earnings, nine months ended October 29, 2016
 
 
 
 621
 
 621
Other comprehensive income, net of tax:             
Foreign currency translation adjustments
 
 
 
 
 6
 6
Stock-based compensation
 
 
 82
 
 
 82
Restricted stock vested and stock options exercised5
 1
 
 59
 
 
 60
Settlement of accelerated share repurchase
 
 55
 
 
 
 55
Issuance of common stock under employee stock purchase plan
 
 
 7
 
 
 7
Tax loss from stock options exercised, restricted stock vesting and employee stock purchase plan
 
 
 (3) 
 
 (3)
Common stock dividends, $1.29 per share
 
 
 
 (417) 
 (417)
Repurchase of common stock(16) (2) 
 (145) (381) 
 (528)
Balances at October 29, 2016313
 $31
 $
 $
 $3,953
 $277
 $4,261

See Notes to Condensed Consolidated Financial Statements.


Notes to Condensed Consolidated Financial Statements

(unaudited)


1.Basis of Presentation

1.Basis of Presentation

Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in these Notes to Condensed Consolidated Financial Statements refers to Best Buy Co., Inc. and, as applicable, its consolidated subsidiaries.

In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary for a fair presentation as prescribed by accounting principles generally accepted in the United StatesU.S. (“GAAP”). All adjustments were comprised of normal recurring adjustments, except as noted in these Notes to Condensed Consolidated Financial Statements.


Historically, we have generated a higherlarge proportion of our revenue and earnings in the fiscal fourth fiscal quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico.season. Due to the seasonal nature of our business, interim results are not necessarily indicative of results for the entire fiscal year. The interim financial statements and the related notes included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017.29, 2022. The first nine months of fiscal 20182023 and fiscal 20172022 included 39 weeks.


In order to align our fiscal reporting periods and comply with statutory filing requirements, we consolidate the financial results of our Mexico operations on a one-month lag. Our policy is to accelerate recording the effect of events occurring in the lag period that significantly affect our condensed consolidated financial statements. No such events were identified for the reported periods.

In preparing the accompanying condensed consolidated financial statements, we evaluated the period from October 29, 2017,2022, through the date the financial statements were issued for material subsequent events requiring recognition or disclosure. No such events were identified for this period.


Unadopted Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers. The new guidance establishes a single comprehensive model for entities to use in accounting for revenuereported periods.

Total Cash, Cash Equivalents and supersedes most current revenue recognition guidance. It introduces a five-step process for revenue recognition that focuses on transfer of control, as opposed to transfer of riskRestricted Cash

Cash, cash equivalents and rewards under current guidance. It also requires significantly expanded disclosures regarding revenues.


Basedrestricted cash reported on our analysis thus far, we believe the impact of adopting the new guidance will be immaterial to our annual and interim financial statements. The primary impacts we have identified thus far are:

Minor changesCondensed Consolidated Balance Sheets are reconciled to the timing of recognition of revenues related to gift cards and loyalty programs;
Changes to certain immaterial revenues that are currently reportedtotal shown on a gross basis, to be reported on a net basis (with no change in timing of recognition) with consequently no impacts to earnings; and
The balance sheet presentation of our sales returns reserve, which will be shown as a separate asset and liability versus the current net presentation.

In addition, we expect adoption to lead to increased footnote disclosures, particularly with regard to revenue related balance sheet accounts and revenue by channel and category. We also expect the adoption and consequent changes to our procedures and methodologies to require adjustments to our internal controls over financial reporting.

As interpretations of the new rules continue to evolve, we will continue to monitor developments and expect to finalize our conclusions in the fourth quarter of fiscal 2018. We plan to adopt this standard in the first quarter of our fiscal 2019. Providing we ultimately conclude that the impacts of adoption are immaterial, we would expect to use the modified retrospective method. Under this method, we would recognize the cumulative effect of the changes in retained earnings at the date of adoption, but would not restate prior periods.

In February 2016, the FASB issued ASU 2016-02, Leases. The new guidance was issued to increase transparency and comparability among companies by requiring most leases to be included on the balance sheet and by expanding disclosure

requirements. Based on the effective dates, we expect to adopt the new guidance in the first quarter of fiscal 2020 using the modified retrospective method. While we expect adoption to lead to a material increase in the assets and liabilities recorded on our balance sheet and an increase to our footnote disclosures related to leases, we are still evaluating the impact on our consolidated statement of earnings. We also expect that adoption of the new standard will require changes to our internal controls over financial reporting.

Adopted Accounting Pronouncements

In the first quarter of fiscal 2018, we adopted the following ASUs:

ASU 2015-11, Inventory: Simplifying the Measurement of Inventory. The adoption did not have a material impact on our results of operations, cash flows or financial position.

ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. Excess tax benefits and tax deficiencies are now recognized in our provision for income taxes as a discrete event rather than as a component of stockholders’ equity. In addition, we elected to account for forfeitures as they occur. The cumulative effect of this policy change amounted to $12 million, net of tax, and was recorded as a reduction to our retained earnings opening balance. Finally, we elected to present the Condensed Consolidated Statements of Cash Flows on a retrospective transition method, and prior periods have been adjusted to present excess tax benefits as cash flows from operating activities.

ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, and ASU 2016-18, Statement of Cash Flows: Restricted Cash. The retrospective adoption increased our beginning and ending cash balance within our statement of cash flows. The adoption had no other material impacts to our cash flow statement and had no impact on our results of operations or financial position.

The following table reconciles the Condensed Consolidated Statement of Cash Flows line items impacted by the adoption of these standards at October 29, 2016:
 October 29, 2016 Reported ASU 2016-09 Adjustment ASU 2016-15 Adjustment ASU 2016-18 Adjustment October 29, 2016 Adjusted
Operating activities         
Other, net$(34) $12
 $
 $
 $(22)
Changes in operating assets and liabilities:         
Receivables80
 
 (1) 
 79
Merchandise inventories(1,370) 
 1
 
 (1,369)
Total cash provided by operating activities1,395
 12
 
 
 1,407
          
Investing activities         
Change in restricted assets(8) 
 
 8
 
Total cash used in investing activities(856) 
 
 8
 (848)
          
Financing activities         
Other, net20
 (12) 
 
 8
Total cash used in financing activities(1,187) (12) 
 
 (1,199)
          
Decrease in cash, cash equivalents and restricted cash(635) 
 
 8
 (627)
Cash, cash equivalents and restricted cash at beginning of period1,976
 
 
 185
 2,161
Cash, cash equivalents and restricted cash at end of period$1,341
 $
 $
 $193
 $1,534


Total Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheet to the total shownfollows ($ in the Condensed Consolidated Statement of Cash Flows:millions):

October 29, 2022

January 29, 2022

October 30, 2021

Cash and cash equivalents

$

932 

$

2,936 

$

3,465 

Restricted cash included in Other current assets

361 

269 

173 

Total cash, cash equivalents and restricted cash

$

1,293 

$

3,205 

$

3,638 

 October 28, 2017 January 28, 2017 October 29, 2016
Cash and cash equivalents$1,103
 $2,240
 $1,341
Restricted cash included in Other current assets197
 193
 193
Total cash, cash equivalents and restricted cash$1,300
 $2,433
 $1,534

Amounts included in restricted cash are pledged as collateral orprimarily restricted to use for general liability insuranceproduct protection plans provided under our Best Buy Totaltech membership offering and workers' compensation insurance.


2.Discontinued Operations

Discontinued operations are primarily comprised of Jiangsu Five Star Appliance Co., Limited ("Five Star") within our International segment. In February 2015, we completed the sale of Five Star. Following the sale, we continued to hold as available for sale one retail property in Shanghai, China. In May 2016, we completed the sale of the property and recognized a gain. The gain on sale of the property is included in Other, net within the operating activities section of the Condensed Consolidated Statements of Cash Flows.

The aggregate financial results of discontinued operationsself-insurance liabilities.

2. Restructuring

Restructuring charges were as follows ($ in millions):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Fiscal 2023 Resource Optimization Initiative

$

25 

$

-

$

59 

$

-

Mexico Exit and Strategic Realignment(1)

(1)

(45)

Total

$

26 

$

(1)

$

61 

$

(45)

(1)Includes ($6) million related to inventory markdowns recorded in Cost of Sales on our Condensed Consolidated Statements of Earnings for the nine months ended October 30, 2021.

Fiscal 2023 Resource Optimization Initiative

In light of ongoing changes in business trends, during the second quarter of fiscal 2023, we commenced an enterprise-wide initiative to better align our spending with critical strategies and operations, as well as to optimize our cost structure. Charges incurred for the periods presented are primarily comprised of employee termination benefits within our Domestic segment. We currently expect to incur additional charges through the remainder of fiscal 2023, primarily within our Domestic segment, of approximately $15 million to $30 million related to this initiative.

All charges incurred related to this plan were from continuing operations and were presented within Restructuring charges on our Condensed Consolidated Statements of Earnings.


 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Gain from discontinued operations before income tax expense$1
 $2
 $1
 $28
Income tax expense
 
 
 7
Net gain from discontinued operations$1
 $2
 $1
 $21

Restructuring accrual activity within our Domestic segment related to the fiscal 2023 resource optimization initiative described above was as follows ($ in millions):


3.

Fair Value Measurements

Termination Benefits

Balance at January 29, 2022

$

-

Charges

62 

Cash payments

(28)

Adjustments(1)

(3)

Balance at October 29, 2022

$

31 

(1)Represents higher-than-expected employee retention.

Mexico Exit and Strategic Realignment

In the third quarter of fiscal 2021, we made the decision to exit our operations in Mexico and began taking other actions to more broadly align our organizational structure in support of our strategy.

Charges incurred in our International segment primarily related to our decision to exit our operations in Mexico. All of our former stores in Mexico were closed as of the first quarter of fiscal 2022.

Charges incurred in our Domestic segment primarily related to actions taken to align our organizational structure in support of our strategy. During the nine months ended October 30, 2021, we recorded a $44 million credit primarily due to a reduction in expected termination benefits resulting from adjustments to previously planned organizational changes and higher-than-expected employee retention.

All charges incurred related to this plan were from continuing operations and were presented as follows ($ in millions):

Statement of

Three Months Ended October 30, 2021

Nine Months Ended October 30, 2021

Earnings Location

Domestic

International

Total

Domestic

International

Total

Inventory markdowns

Cost of sales

$

-

$

-

$

-

$

-

$

(6)

$

(6)

Asset impairments

Restructuring charges

-

(1)

(1)

-

Termination benefits

Restructuring charges

-

-

-

(44)

(1)

(45)

$

-

$

(1)

$

(1)

$

(44)

$

(1)

$

(45)

Statement of

Cumulative Amount as of October 29, 2022

Earnings Location

Domestic

International

Total

Inventory markdowns

Cost of sales

$

-

$

17 

$

17 

Asset impairments(1)

Restructuring charges

10 

63 

73 

Termination benefits

Restructuring charges

83 

20 

103 

Currency translation adjustment

Restructuring charges

-

39 

39 

Other(2)

Restructuring charges

-

$

93 

$

145 

$

238 

(1)Remaining net carrying value approximates fair value and was immaterial as of October 29, 2022.

(2)Other charges are primarily comprised of contract termination costs.

We do not expect to incur material future restructuring charges related to the exit from Mexico or strategic realignment initiatives described above, and no material liability remains as of October 29, 2022.

3. Goodwill and Intangible Assets

Goodwill

Goodwill balances by reportable segment were as follows ($ in millions):

October 29, 2022

January 29, 2022

October 30, 2021

Gross Carrying Amount

Cumulative Impairment

Gross Carrying Amount

Cumulative Impairment

Gross Carrying Amount

Cumulative Impairment

Domestic

$

1,450 

$

(67)

$

1,451 

$

(67)

$

1,053 

$

(67)

International

608 

(608)

608 

(608)

608 

(608)

Total

$

2,058 

$

(675)

$

2,059 

$

(675)

$

1,661 

$

(675)

No impairment charges were recorded during the periods presented.

Definite-Lived Intangible Assets

We have definite-lived intangible assets that are recorded within Other assets on our Condensed Consolidated Balance Sheets as follows ($ in millions):

October 29, 2022

January 29, 2022

October 30, 2021

Weighted-Average

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount

Accumulated
Amortization

Useful Life Remaining as of October 29, 2022 (in years)

Customer relationships

$

360 

$

222 

$

360 

$

180 

$

339 

$

165 

8.0

Tradenames

108 

52 

108 

38 

81 

34 

5.4

Developed technology

64 

48 

64 

39 

56 

36 

2.6

Total

$

532 

$

322 

$

532 

$

257 

$

476 

$

235 

6.9 

Amortization expense was as follows ($ in millions):

Statement of

Three Months Ended

Nine Months Ended

Earnings Location

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Amortization expense

SG&A

$

21 

$

20 

$

65 

$

60 

Amortization expense expected to be recognized in future periods is as follows ($ in millions):

Amortization Expense

Remainder of fiscal 2023

$

21 

Fiscal 2024

61 

Fiscal 2025

21 

Fiscal 2026

21 

Fiscal 2027

18 

Fiscal 2028

12 

Thereafter

56 

4. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price)measurements are reported in the principal or most advantageous market for the asset or liability in an orderly transaction between market participantsone of three levels based on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:

lowest level of significant input used: Level 1 — Unadjusted (unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.
markets); Level 2 — Significant other observable (observable market inputs, available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:
Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in non-active markets;
Inputs other than quoted prices that are observable for the asset or liability;1); and
Inputs that are derived principally from or corroborated by other observable market data.
Level 3 — Significant unobservable (unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.
Assets and Liabilities Measured atdata).

Recurring Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following table sets forth our financialMeasurements

Financial assets and liabilities that were accounted for at fair value on a recurring basis at October 28, 2017, January 28, 2017, and October 29, 2016, by level within the fair value hierarchywere as determined by the valuation techniques we used to determine the fair valuefollows ($ in millions):

Fair Value at

Balance Sheet Location(1)

Fair Value Hierarchy

October 29, 2022

January 29, 2022

October 30, 2021

Assets

Money market funds(2)

Cash and cash equivalents

Level 1

$

76 

$

548 

$

313 

Time deposits(3)

Cash and cash equivalents

Level 2

25 

278 

625 

Money market funds(2)

Other current assets

Level 1

176 

-

-

Marketable securities that fund deferred compensation(4)

Other assets

Level 1

44 

54 

54 

Interest rate swap derivative instruments(5)

Other assets

Level 2

-

50 

58 

Liabilities

Interest rate swap derivative instruments(5)

Long-term liabilities

Level 2

27 

-

-

 
 Fair Value Hierarchy
 Fair Value at
  October 28, 2017 January 28, 2017 October 29, 2016
ASSETS   
  
  
Cash and cash equivalents   
  
  
Money market fundsLevel 1 $84
 $290
 $97
Time depositsLevel 2 
 15
 11
Short-term investments       
Commercial paperLevel 2 588
 349
 250
Time depositsLevel 2 1,649
 1,332
 1,527
Other current assets   
    
Money market fundsLevel 1 8
 7
 3
Commercial paperLevel 2 60
 60
 60
Foreign currency derivative instrumentsLevel 2 5
 2
 5
Interest rate swap derivative instrumentsLevel 2 3
 
 
Time depositsLevel 2 100
 100
 100
Other assets       
Marketable securities that fund deferred compensationLevel 1 98
 96
 96
Interest rate swap derivative instrumentsLevel 2 
 13
 13
        
LIABILITIES   
  
  
Accrued liabilities   
  
  
Foreign currency derivative instrumentsLevel 2 5
 3
 3
Long-term liabilities       
Interest rate swap derivative instrumentsLevel 2 3
 
 

There were no transfers between levels during the periods presented. During the third quarter

(1)Balance sheet location is determined by length to maturity at date of fiscal 2017, our remaining investments in auction rate securities ("ARS"), which were classified as Level 3, were calledpurchase.

(2)Valued at par, which resulted in proceeds of $2 million and no realized gain or loss. Other than as described, there were no changes in the beginning and ending balances of items measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) for the periods presented.


The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Money market funds. Our money market fund investments were measured at fair value as they trade in an active market using quoted market prices and, therefore, were classified as Level 1.
Time deposits. Our time deposits are balances held with banking institutions that cannot be withdrawn for specified terms without a penalty. Time deposits are heldin active markets at period end.

(3)Valued at face value plus accrued interest at period end, which approximates fair value,value.

(4)Valued using the performance of mutual funds that trade with sufficient frequency and are classified as Level 2.


Commercial paper. Our investments in commercial paper were measured using inputs based upon quoted prices for similar instruments in active markets and, therefore, were classified as Level 2.
Foreign currency derivative instruments. Comprised primarily of foreign currency forward contracts and foreign currency swap contracts, our foreign currency derivative instruments were measured at fair valuevolume to obtain pricing information on an ongoing basis.

(5)Valued using readily observable market inputs, such as quotations on forward foreign exchange points and foreign interest rates. Our foreign currency derivative instruments were classified as Level 2 as theseinputs. These instruments are custom, over-the-counter contracts with various bank counterparties that are not traded inon an active market.


Interest rate swap derivative instruments. Our interest rate swap contracts were measured at fair value using readily observable inputs, such as the LIBOR interest rate. Our interest rate swap derivative instruments were classified as Level 2

as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market.

Marketable securities that fund deferred compensation. The assets that fund our deferred compensation consist of investments in mutual funds. These investments were classified as Level 1 as the shares of these mutual funds trade with sufficient frequency and volume to enable us to obtain pricing information on an ongoing basis.
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis

Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to our tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on our Condensed Consolidated Balance Sheets. For these assets, we do not periodically adjust carrying value to fair value, except in the event of impairment. When we determine that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded within Selling, general and administrative expenses and Restructuring charges in our Condensed Consolidated Statements of Earnings See Note 5, Derivative Instruments, for non-restructuring and restructuring charges, respectively.

The following table summarizes the fair value remeasurements for property and equipment impairments recorded during the three and nine months ended October 28, 2017, and October 29, 2016 ($ in millions):
 Impairments 
Remaining Net Carrying Value(1)
 Three Months Ended Nine Months Ended    
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Property and equipment (non-restructuring)$2
 $8
 $8
 $16
 $
 $
Property and equipment (restructuring)(2)

 1
 
 8
 
 
Total$2
 $9
 $8
 $24
 $
 $
(1)Remaining net carrying value approximates fair value. Because assets subject to long-lived asset impairment are not measured at fair value on a recurring basis, certain fair value measurements presented in the table may reflect values at earlier measurement dates and may no longer represent the fair values at October 28, 2017, and October 29, 2016.
(2)
See Note 5, Restructuring Charges, for additional information.

All of the fair value remeasurements included in the table above were based on significant unobservable inputs (Level 3). Fixed asset fair values were derived using a discounted cash flow ("DCF") model to estimate the present value of net cash flows that the asset or asset group was expected to generate. The key inputs to the DCF model generally included our forecasts of net cash generated from revenue, expenses and other significant cash outflows, such as capital expenditures, as well as an appropriate discount rate. In the case of assets for which the impairment was the result of restructuring activities, no future cash flows have been assumed as the assets will cease to be used and expected sale values are nominal.

additional information.

Fair Value of Financial Instruments


Our financial instruments, other than those presented in the disclosures above, include cash, receivables, other investments, accounts payable, other payables and long-term debt.

The fair values of cash, restricted cash, receivables, accounts payable, short-term debt and other payables approximated their carrying values because of the short-term nature of these instruments. If these instruments were measured at fair value in the financial statements, they would be classified as Level 1 in the fair value hierarchy. Fair values for other investmentsinstruments held at cost are not readily available, but we estimate that the carrying values for these investments approximate their fair value. See Note 6, Debt, for information about the fair value of our long-term debt.


4.Goodwill and Intangible Assets
The following table provides the carrying values of goodwill and indefinite-lived tradenames for the Domestic segment ($ in millions):values.

 October 28, 2017 January 28, 2017 October 29, 2016
Goodwill$425
 $425
 $425
Intangible assets included in Other assets18
 18
 18


The following table provides the gross

Long-term debt is presented at carrying amount of goodwill and cumulative goodwill impairment ($ in millions):

 October 28, 2017 January 28, 2017 October 29, 2016
 
Gross Carrying
Amount
 
Cumulative
Impairment
 
Gross Carrying
Amount
 
Cumulative
Impairment
 
Gross Carrying
Amount
 
Cumulative
Impairment
Goodwill$1,100
 $675
 $1,100
 $675
 $1,100
 $675

5.Restructuring Charges

Charges incurred in the three and nine months ended October 28, 2017, and October 29, 2016, for our restructuring activities were as follows ($ in millions):
 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Renew Blue Phase 2$
 $1
 $
 $26
Canadian brand consolidation(2) (2) (3) (1)
Renew Blue(1)

 1
 3
 4
Other restructuring activities(2)

 1
 
 1
Total restructuring charges$(2) $1
 $
 $30
(1)Represents activity related to our remaining vacant space liability, primarily in our International segment, for our Renew Blue restructuring program, which began in the fourth quarter of fiscal 2013. We may continue to incur immaterial adjustments to the liability for changes in sublease assumptions or potential lease buyouts. In addition, lease payments for vacated stores will continue until leases expire or are terminated. The remaining vacant space liability was $11 million at October 28, 2017.
(2)Represents activity related to our remaining vacant space liability for U.S. large-format store closures in fiscal 2013. We may continue to incur immaterial adjustments to the liability for changes in sublease assumptions or potential lease buyouts. In addition, lease payments for vacated stores will continue until leases expire or are terminated. The remaining vacant space liability was $7 million at October 28, 2017.

Renew Blue Phase 2

In the first quarter of fiscal 2017, we took several strategic actions to eliminate and simplify certain components of our operations and restructure certain field and corporate teams as part of our Renew Blue Phase 2 plan. No charges were incurred in the three and nine months ended October 28, 2017. We incurred charges of $1 million and $26 million related to Phase 2 of the plan during the three and nine months ended October 29, 2016, respectively. The charges incurred consisted of employee termination benefits and property and equipment impairments. All restructuring charges related to this plan are from continuing operations and are presented in Restructuring charges invalue on our Condensed Consolidated Statements of Earnings.

The composition of the restructuring charges we incurred for Renew Blue Phase 2 during the three and nine months ended October 28, 2017, and October 29, 2016, as well as, the cumulative amount incurred through October 28, 2017, was as follows ($ in millions):
 Domestic
 Three Months Ended Nine Months Ended Cumulative Amount
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016 October 28, 2017
Property and equipment impairments$
 $1
 $
 $8
 $8
Termination benefits
 
 
 18
 18
Total restructuring charges$
 $1
 $
 $26
 $26


As ofOctober 28, 2017, and January 28, 2017, there was no restructuring accrual balance. The restructuring accrual activity related to termination benefits was as follows for the nine months ended October 29, 2016 ($ in millions):
 
Termination
Benefits
Balances at January 30, 2016$
Charges19
Cash payments(16)
Adjustments(1)
(2)
Balances at October 29, 2016$1
(1)Adjustments to termination benefits represent changes in retention assumptions.

Canadian Brand Consolidation

In the first quarter of fiscal 2016, we consolidated the Future Shop and Best Buy stores and websites in Canada under the Best Buy brand. This resulted in the permanent closure of 66 Future Shop stores and the conversion of the remaining 65 Future Shop stores to the Best Buy brand. All restructuring charges related to this plan are from continuing operations and are presented in Restructuring charges inBalance Sheets. If our Condensed Consolidated Statements of Earnings.

The composition of total restructuring charges we incurred for the Canadian brand consolidation in the three and nine months ended October 28, 2017, and October 29, 2016, as well as, the cumulative amount incurred through October 28, 2017, was as follows ($ in millions):
 International
 Three Months Ended Nine Months Ended Cumulative Amount
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016 October 28, 2017
Inventory write-downs$
 $
 $
 $
 $3
Property and equipment impairments
 
 
 
 30
Tradename impairment
 
 
 
 40
Termination benefits
 
 
 
 25
Facility closure and other costs(2) (2) (3) (1) 102
Total restructuring charges$(2) $(2) $(3) $(1) $200

The following tables summarize our restructuring accrual activity during the nine months ended October 28, 2017, and October 29, 2016, related to termination benefits and facility closure and other costs associated with the Canadian brand consolidation ($ in millions):
 
Termination
Benefits
 
Facility
Closure and
Other Costs
 Total
Balances at January 28, 2017$
 $34
 $34
Cash payments
 (14) (14)
Adjustments(1)

 (3) (3)
Changes in foreign currency exchange rates
 1
 1
Balances at October 28, 2017$
 $18
 $18
      
Balances at January 30, 2016$2
 $64
 $66
Charges
 1
 1
Cash payments(2) (29) (31)
Adjustments(1)

 (2) (2)
Changes in foreign currency exchange rates
 3
 3
Balances at October 29, 2016$
 $37
 $37
(1)Adjustments to facility closure and other costs represent changes in sublease assumptions.

6.    Debt

Long-term debt consisted of the following ($ in millions):
 October 28, 2017 January 28, 2017 October 29, 2016
2018 Notes$500
 $500
 $500
2021 Notes650
 650
 650
Interest rate swap valuation adjustments
 13
 13
Subtotal1,150
 1,163
 1,163
Debt discounts and issuance costs(3) (5) (5)
Financing lease obligations158
 177
 180
Capital lease obligations24
 30
 29
Total long-term debt1,329
 1,365
 1,367
Less: current portion545
 44
 43
Total long-term debt, less current portion$784
 $1,321
 $1,324

Our 2018 Notes, due August 1, 2018, are classified within our Current portion of long-term debt as of October 28, 2017. The fair value of total long-term debt, excluding debt discounts and issuance costs and financing and capital lease obligations, approximated $1,219 million, $1,240 million and $1,260 million at October 28, 2017, January 28, 2017, and October 29, 2016, respectively, based primarily on the market prices quoted from external sources, compared with carrying values of $1,150 million, $1,163 million and $1,163 million, respectively. If long-term debt was measuredwere recorded at fair value, in the financial statements, it would be classified primarily as Level 2 in the fair value hierarchy.

See Note 5, Debt, Long-term debt balances were as follows ($ in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, for additional information regarding the terms of ourmillions):

October 29, 2022

January 29, 2022

October 30, 2021

Fair Value

Carrying Value

Fair Value

Carrying Value

Fair Value

Carrying Value

Long-term debt(1)

$

925 

$

1,123 

$

1,205 

$

1,200 

$

1,257 

$

1,208 

(1)Excluded debt facilities, debt instrumentsdiscounts, issuance costs and otherfinance lease obligations.


7.Derivative Instruments

5. Derivative Instruments

We manage our economic and transaction exposure to certain risks through the use of foreign currency and interest rate swap derivative instruments. Our objective in holding derivatives is to reduce the volatility of net earnings, cash flows and net asset value associated with changes in foreign currency exchange rates and interest rates. We do not hold derivative instruments for trading or speculative purposes. We have no derivatives that have credit risk-related contingent features, and we mitigate our credit risk by engaging with major financial institutions as our counterparties.


We record all derivative instruments on our Condensed Consolidated Balance Sheets at fair value and evaluate hedge effectiveness prospectively and retrospectively when electing to apply hedge accounting. We formally document all hedging relations at inception for derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transaction. In addition, we have derivatives which are not designated as hedging instruments.

Net Investment Hedges

We useusing foreign exchange forward contracts to hedge against the effect of Canadian dollar exchange rate fluctuations on a portion of our net investment in our Canadian operations. The contracts have terms up to 12 months. For a net investment hedge, we recognize changes in the fair value of the derivative as a component of foreign currency translation within other comprehensive income to offset a portion of the change in translated value of the net investment being hedged, until the investment is sold or liquidated. We limit recognition in net earnings of amounts previously recorded in other comprehensive income to circumstances such as complete or substantially complete liquidation of the net investment in the hedged foreign operation. We report the ineffective portion of the gain or loss, if any, in net earnings.

Interest Rate Swaps

We use "receive fixed-rate, pay variable-rate"operations and by using interest rate swaps to mitigate the effect of interest rate fluctuations on our 2018 Notes and our 2021 Notes. Our interest rate swap contracts are considered perfect hedges because the critical terms and notional amounts match those$500 million principal amount of our fixed-rate debt being hedged and are, therefore, accounted as fair value hedges using the

shortcut method. Under the shortcut method,notes due October 1, 2028 (“2028 Notes”). In addition, we recognize the change in the fair value of the derivatives with an offsetting change to the carrying value of the debt. Accordingly, there is no impact on our Condensed Consolidated Statements of Earnings from the fair value of the derivatives.

Derivatives Not Designated as Hedging Instruments

We use foreign currency forward contracts not designated as hedging instruments to manage the impact of fluctuations in foreign currency exchange rates relative to recognized receivable and payable balances denominated in non-functional currencies and on certain forecast inventory purchases denominated in non-functional currencies. The contracts generally have terms of up to 12 months. These

Our derivative instruments are not designated as hedging relationships,net investment hedges and therefore, we record gains and lossesinterest rate swaps are recorded on these contracts directly to net earnings.


Summary of Derivative Balances

The following table presents theour Condensed Consolidated Balance Sheets at fair value. See Note 4, Fair Value Measurements, for gross fair values forof our outstanding derivative instruments and the corresponding classification at October 28, 2017, January 28, 2017, and October 29, 2016fair value classifications.

Notional amounts of our derivative instruments were as follows ($ in millions):

Contract Type

October 29, 2022

January 29, 2022

October 30, 2021

Derivatives designated as net investment hedges

$

118 

$

155 

$

125 

Derivatives designated as interest rate swaps

500 

500 

500 

No hedge designation (foreign exchange contracts)

112 

68 

106 

Total

$

730 

$

723 

$

731 

 October 28, 2017 January 28, 2017 October 29, 2016
 Assets Liabilities Assets Liabilities Assets Liabilities
Derivatives designated as net investment hedges(1)
$3
 $5
 $2
 $2
 $4
 $3
Derivatives designated as interest rate swaps(2)
3
 3
 13
 
 13
 
No hedge designation (foreign exchange forward contracts)(1)
2
 
 
 1
 1
 
Total$8
 $8
 $15
 $3
 $18
 $3
(1)The fair value is recorded in Other current assets or Accrued liabilities.
(2)As of October 28, 2017, the fair value of the interest rate swaps related to our 2018 Notes is recorded in Other current assets or Accrued liabilities, while the interest rate swaps related to our 2021 Notes is recorded in Other assets or Long-term liabilities. For all previous periods, the fair value is recorded in Other assets or Long-term liabilities.

The following table presents the effects

Effects of derivative instruments by contract type on other comprehensive income ("OCI") andour derivatives on our Condensed Consolidated Statements of Earnings for the three and nine months ended October 28, 2017, and October 29, 2016were as follows ($ in millions):

Gain (Loss) Recognized

Three Months Ended

Nine Months Ended

Statement of Earnings Location

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Interest rate swap contracts

Interest expense

$

(45)

$

(21)

$

(76)

$

(33)

Adjustments to carrying value of long-term debt

Interest expense

45 

21 

76 

33 

Total

$

-

$

-

$

-

$

-

 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Derivatives designated as net investment hedges       
Pre-tax gain (loss) recognized in OCI$8
 $6
 $(3) $(10)
        
Derivatives designated as interest rate swaps       
Gain (loss) recognized within Interest expense       
Interest rate swap gain$16
 $14
 $13
 $12
Long-term debt loss(16) (14) (13) (12)
Net impact$
 $
 $
 $
        
No hedge designation (foreign exchange forward contracts)      
Gain (loss) recognized within Selling, general and administrative expenses$2
 $1
 $(1) $(2)

6. Debt

Short-Term Debt

U.S. Revolving Credit Facility

We have a $1.25 billion, five year senior unsecured revolving credit facility agreement (the “Five-Year Facility Agreement”) with a syndicate of banks. The following table presentsFive-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in May 2026. There were no borrowings outstanding under the notional amountsFive-Year Facility Agreement as of our derivative instruments at October 28, 2017, January 28, 2017, and October 29, 20162022, January 29, 2022, or October 30, 2021.

Long-Term Debt

Long-term debt consisted of the following ($ in millions):

October 29, 2022

January 29, 2022

October 30, 2021

Notes, 4.45%, due October 1, 2028

$

500 

$

500 

$

500 

Notes, 1.95%, due October 1, 2030

650 

650 

650 

Interest rate swap valuation adjustments

(27)

50 

58 

Subtotal

1,123 

1,200 

1,208 

Debt discounts and issuance costs

(9)

(11)

(11)

Finance lease obligations

44 

40 

41 

Total long-term debt

1,158 

1,229 

1,238 

Less current portion

16 

13 

15 

Total long-term debt, less current portion

$

1,142 

$

1,216 

$

1,223 

See Note 4, Fair Value Measurements, for the fair value of long-term debt.

 October 28, 2017 January 28, 2017 October 29, 2016
Derivatives designated as net investment hedges$240
 $205
 $203
Derivatives designated as interest rate swaps1,150
 750
 750
No hedge designation (foreign exchange forward contracts)64
 43
 59
Total$1,454
 $998
 $1,012

7. Revenue

We generate substantially all of our revenue from contracts with customers for the sale of products and services. Contract balances primarily consist of receivables and liabilities related to product merchandise not yet delivered to customers, unfulfilled membership benefits and services not yet completed, unredeemed gift cards and options that provide a material right to customers, such as our customer loyalty programs. Contract balances were as follows ($ in millions):

October 29, 2022

January 29, 2022

October 30, 2021

Receivables, net(1)

$

654 

$

591 

$

638 

Short-term contract liabilities included in:

Unredeemed gift card liabilities

273 

316 

306 

Deferred revenue

1,080 

1,103 

977 

Accrued liabilities

77 

83 

88 


8.Earnings per Share

(1)Receivables are recorded net of allowances for doubtful accounts of $20 million, $31 million and $24 million as of October 29, 2022, January 29, 2022, and October 30, 2021, respectively.

During the first nine months of fiscal 2023 and fiscal 2022, $1,251 million and $1,001 million of revenue was recognized, respectively, that was included in the contract liabilities at the beginning of the respective periods.

See Note 12, Segments, for information on our revenue by reportable segment and product category.

8. Earnings per Share

We compute our basic earnings per share based on the weighted-average number of common shares outstanding and our diluted earnings per share based on the weighted-average number of common shares outstanding adjusted by the number of additional shares that would have been outstanding had potentially dilutive common shares been issued. Potentially dilutive securities include stock options, nonvested share awards and shares issuable under our employee stock purchase plan. Nonvested market-based share awards and nonvested performance-based share awards are included in the average diluted shares outstanding for each period, if established market or performance criteria have been met at the end of the respective periods.


The following table presents a reconciliation

Reconciliations of the numerators and denominators of basic and diluted earnings per share from continuing operations for the threeand nine months ended October 28, 2017, and October 29, 2016were as follows ($ and shares in millions, except per share amounts):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Numerator

Net earnings

$

277 

$

499 

$

924 

$

1,828 

Denominator

Weighted-average common shares outstanding

225.5 

246.4 

225.9 

249.9 

Dilutive effect of stock compensation plan awards

0.7 

2.7 

1.0 

3.0 

Weighted-average common shares outstanding, assuming dilution

226.2 

249.1 

226.9 

252.9 

Potential shares which were anti-dilutive and excluded from weighted-average share computations

2.3 

-

2.3 

-

Basic earnings per share

$

1.23 

$

2.02 

$

4.09 

$

7.31 

Diluted earnings per share

$

1.22 

$

2.00 

$

4.07 

$

7.23 

 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Numerator 
  
    
Net earnings from continuing operations$238
 $192
 $635
 $600
        
Denominator       
Weighted-average common shares outstanding299.1
 316.2
 304.1
 320.2
Dilutive effect of stock compensation plan awards6.3
 3.8
 6.5
 3.4
Weighted-average common shares outstanding, assuming dilution305.4
 320.0
 310.6
 323.6
        
Net earnings per share from continuing operations       
Basic$0.80
 $0.61
 $2.09
 $1.87
Diluted$0.78
 $0.60
 $2.05
 $1.85

The computation

9. Repurchase of weighted-average common shares outstanding, assuming dilution, excluded options to purchase zero shares and 6.3 million shares of common stock for the three months ended OctoberCommon Stock

On February 28, 2017, and October 29, 2016, respectively, and options to purchase zero shares and 6.9 million shares of common stock for the nine months ended October 28, 2017, and October 29, 2016, respectively. These amounts were excluded as the options’ exercise prices were greater than the average market price of2022, our common stock for the periods presented, and, therefore, the effect would be anti-dilutive (i.e., including such options would result in higher earnings per share).



9.Comprehensive Income
The following tables provide a reconciliation of the components of accumulated other comprehensive income, net of tax, attributable to Best Buy Co., Inc. for the three and nine months ended October 28, 2017, and October 29, 2016 ($ in millions):
 Foreign Currency Translation
Balances at July 29, 2017$321
Foreign currency translation adjustments(17)
Balances at October 28, 2017$304
  
Balances at January 28, 2017$279
Foreign currency translation adjustments25
Balances at October 28, 2017$304
  
Balances at July 30, 2016$296
Foreign currency translation adjustments(19)
Balances at October 29, 2016$277
  
Balances at January 30, 2016$271
Foreign currency translation adjustments6
Balances at October 29, 2016$277

The gains and losses on our net investment hedges, which are included in foreign currency translation adjustments, were not material for the periods presented. There is generally no tax impact related to foreign currency translation adjustments, as the earnings are considered permanently reinvested.

10.Repurchase of Common Stock

Our Board of Directors authorizedapproved a new $5.0 billion share repurchase program, in February 2017. The program, which became effective on February 27, 2017, terminated and replaced athe $5.0 billion share repurchase program authorized by our Board of Directors in June 2011.on February 16, 2021. There is no expiration date governing the period over which we can make ourrepurchase shares under this authorization. Share repurchases resumed in fiscal November 2023 after pausing during the second quarter of fiscal 2023. We expect to spend approximately $1 billion in share repurchases under the February 2017 $5.0 billion share repurchase program.

The following table presents informationin fiscal 2023.

Information regarding the shares we repurchased during the threeand nine months ended October 28, 2017, and October 29, 2016retired was as follows ($ and shares in millions, except per share amounts):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Total cost of shares repurchased

$

-

$

426 

$

452

$

1,757

Average price per share

$

-

$

115.94 

$

96.83

$

111.33

Number of shares repurchased

-

3.7 

4.6

15.8

 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Total cost of shares repurchased       
Open market(1)
$366
 $206
 $1,147
 $483
Settlement of January 2016 ASR(2)

 
 
 45
Total$366
 $206
 $1,147
 $528
        
Average price per share       
Open market$57.14
 $37.67
 $52.35
 $33.52
Settlement of January 2016 ASR(2)
$
 $
 $
 $28.55
Average$57.14
 $37.67
 $52.35
 $33.03
        
Number of shares repurchased and retired       
Open market(1)
6.4
 5.5
 21.9
 14.4
Settlement of January 2016 ASR(2)

 
 
 1.6
Total6.4
 5.5
 21.9
 16.0
(1)As of October 28, 2017, $17 million, or 0.3 million shares, in trades remained unsettled. As of October 29, 2016, $11 million, or 0.3 million shares, in trades remained unsettled. The liability for unsettled trades is included in Accrued liabilities in the Condensed Consolidated Balance Sheets.

(2)
See Note 7, Shareholders' Equity, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, for additional information regarding the January 2016 ASR.

Approximately 3.9

As of October 29, 2022, $4.7 billion shares remained available for additional purchases underof the February 2017$5.0 billion share repurchase program as of October 28, 2017.authorization was available. Between the end of the third quarter of fiscal 20182023 on October 29, 2022, and November 30, 2017,December 2, 2022, we repurchased an incremental 4.54.4 million shares of our common stock at a cost of $256$322 million. Repurchased shares

10. Income Taxes

Unrecognized Tax Benefits

Our income tax returns are retiredroutinely examined by domestic and constitute authorized but unissued shares.


11.Segments
Our chief operating decision maker ("CODM") isforeign tax authorities. During the second quarter of fiscal 2022, we reduced our Chief Executive Officer. Our business is organized into two segments: Domestic (which is comprisedunrecognized tax benefits by $101 million relating to multi-jurisdiction, multi-year, non-cash benefits from the resolution of certain discrete tax matters, all operations withinof which resulted in a tax benefit.

Inflation Reduction Act of 2022

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases and its districts and territories) and International (which is comprised of all operations within Canada and Mexico). Our CODM has ultimate responsibility for enterprise decisions. Our CODM determines, in particular, resource allocation for, and monitors performanceseveral tax incentives to promote clean energy. Based on our current analysis of the provisions, we do not believe this legislation will have a material impact on our consolidated enterprise, the Domestic segment and the International segment. The Domestic segment managers and International segment managers have responsibility for operating decisions, allocating resources and assessing performance within their respective segments. Our CODM relies on internal management reporting that analyzes enterprise results to the net earnings level and segment results to the operating income level.


We aggregate our Canada and Mexico businesses into one International operating segment. Our Domestic and International operating segments also represent our reportable segments. The accounting policies of the segments are the same as those described in Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017.

Revenue by reportable segment was as follows ($ in millions):
 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Domestic$8,491
 $8,192
 $24,675
 $23,910
International829
 753
 2,113
 2,011
Total revenue$9,320
 $8,945
 $26,788
 $25,921

Operating income by reportable segment and the reconciliation to earnings from continuing operations before income tax expense were as follows ($ in millions):
 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Domestic$345
 $298
 $959
 $959
International5
 14
 12
 14
Total operating income350
 312
 971
 973
Other income (expense)       
Gain on sale of investments
 
 
 2
Investment income and other12
 8
 30
 22
Interest expense(20) (16) (57) (54)
Earnings from continuing operations before income tax expense$342
 $304
 $944
 $943
Assets by reportable segment were as follows ($ in millions):
 October 28, 2017 January 28, 2017 October 29, 2016
Domestic$13,140
 $12,496
 $13,115
International1,645
 1,360
 1,427
Total assets$14,785
 $13,856
 $14,542


12.Contingencies

financial statements.

11. Contingencies

We are involved in a number of legal proceedings. Where appropriate, we have made accruals with respect to these matters, which are reflected inon our Condensed Consolidated Financial Statements. However, there are cases where liability is not probable or the amount cannot be reasonably estimated and, therefore, accruals have not been made. We provide disclosure of matters where we believe it is reasonably possible the impact may be material to our Condensed Consolidated Financial Statements.


Securities Actions
In February 2011, a purported class action lawsuit captioned, IBEW Local 98 Pension Fund, individually

12. Segments

Reportable segment and on behalf of all others similarly situated v. Best Buy Co., Inc., et al.,product category revenue information was filed against us and certain of our executive officersas follows ($ in the U.S. District Court for the District of Minnesota. This federal court action alleges, among other things, that wemillions):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Revenue by reportable segment

Domestic

$

9,800 

$

10,985 

$

29,263 

$

32,837 

International

787 

925 

2,300 

2,559 

Total revenue

$

10,587 

$

11,910 

$

31,563 

$

35,396 

Revenue by product category

Domestic:

Computing and Mobile Phones

$

4,337 

$

4,901 

$

12,586 

$

14,460 

Consumer Electronics

2,889 

3,346 

8,630 

9,964 

Appliances

1,469 

1,628 

4,717 

4,864 

Entertainment

500 

527 

1,581 

1,755 

Services

533 

541 

1,538 

1,667 

Other

72 

42 

211 

127 

Total Domestic revenue

$

9,800 

$

10,985 

$

29,263 

$

32,837 

International:

Computing and Mobile Phones

$

389 

$

462 

$

1,060 

$

1,230 

Consumer Electronics

220 

253 

657 

720 

Appliances

74 

87 

249 

260 

Entertainment

46 

54 

154 

176 

Services

43 

54 

134 

128 

Other

15 

15 

46 

45 

Total International revenue

$

787 

$

925 

$

2,300 

$

2,559 

Operating income by reportable segment and the officers namedreconciliation to consolidated earnings before income tax expense and equity in the complaint violated Sections 10(b) and 20Aincome (loss) of the Exchange Act and Rule 10b-5 under the Exchange Actaffiliates was as follows ($ in connection with press releases and other statements relating to our fiscal 2011 earnings guidance that had been made available to the public. Additionally,millions):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Domestic

$

332 

$

609 

$

1,104 

$

2,100 

International

33 

61 

94 

136 

Total operating income

365 

670 

1,198 

2,236 

Other income (expense):

Investment income and other

Interest expense

(10)

(7)

(23)

(19)

Earnings before income tax expense and equity in income (loss) of affiliates

$

359 

$

664 

$

1,177 

$

2,224 

Assets by reportable segment were as follows ($ in March 2011, a similar purported class action was filed by a single shareholder, Rene LeBlanc, against us and certain of our executive officers in the same court. In July 2011, after consolidation of the IBEW Local 98 Pension Fund and Rene LeBlanc actions, a consolidated complaint captioned, IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al., was filed and served. We filed a motion to dismiss the consolidated complaint in September 2011, and in March 2012, subsequent to the end of fiscal 2012, the court issued a decision dismissing the action with prejudice. In April 2012, the plaintiffs filed a motion to alter or amend the court's decision on our motion to dismiss. In October 2012, the court granted plaintiff's motion to alter or amend the court's decision on our motion to dismiss in part by vacating such decision and giving plaintiff leave to file an amended complaint, which plaintiff did in October 2012. We filed a motion to dismiss the amended complaint in November 2012 and all responsive pleadings were filed in December 2012. A hearing was held on April 26, 2013. On August 5, 2013, the court issued an order granting our motion to dismiss in part and, contrary to its March 2012 order, denying the motion to dismiss in part, holding that certain of the statements alleged to have been made were not forward-looking statements and therefore were not subject to the “safe-harbor” provisions of the Private Securities Litigation Reform Act. Plaintiffs moved to certify the purported class. By Order filed August 6, 2014, the court certified a class of persons or entities who acquired Best Buy common stock between 10:00 a.m. EDT on September 14, 2010, and December 13, 2010, and who were damaged by the alleged violations of law. The 8th Circuit Court of Appeals granted our request for interlocutory appeal. On April 12, 2016, the 8th Circuit held the trial court misapplied the law and reversed the class certification order. IBEW petitioned the 8th Circuit for a rehearing en banc, which was denied on June 1, 2016. In October 2016, IBEW advised the trial court it will not seek review by the Supreme Court. On June 23, 2017, the trial court denied plaintiff's request to file a new Motion for Class Certification. On October 30, 2017, plaintiffs filed with the trial court a motion for leave to file a second amended class action complaint which Best Buy opposed in a filing on November 6, 2017. That motion is pending. We continue to believe that the remaining individual plaintiff's allegations are without merit and intend to vigorously defend our company in this matter.millions):

October 29, 2022

January 29, 2022

October 30, 2021

Domestic

$

15,695 

$

16,016 

$

18,518 

International

1,326 

1,488 

1,584 

Total assets

$

17,021 

$

17,504 

$

20,102 

In June 2011, a purported shareholder derivative action captioned, Salvatore M. Talluto, Derivatively and on Behalf of Best Buy Co., Inc. v. Richard M. Schulze, et al., as Defendants and Best Buy Co., Inc. as Nominal Defendant, was filed against both present and former members of our Board of Directors serving during the relevant periods in fiscal 2011 and us as a nominal defendant in the U.S. District Court for the State of Minnesota. The lawsuit alleges that the director defendants breached their fiduciary duty, among other claims, including violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, in failing to correct public misrepresentations and material misstatements and/or omissions regarding our fiscal 2011 earnings projections and, for certain directors, selling stock while in possession of material adverse non-public information. Additionally, in July 2011, a similar purported class action was filed by a single shareholder, Daniel Himmel, against us and certain of our executive officers in the same court. In November 2011, the respective lawsuits of Salvatore M. Talluto and Daniel Himmel were consolidated into a new action captioned, In Re: Best Buy Co., Inc. Shareholder Derivative Litigation, and a stay ordered pending the close of discovery in the consolidated IBEW Local 98 Pension Fund v. Best Buy Co., Inc., et al. case. Additionally, in June 2015, a similar purported class action was filed by a single shareholder, Khuong Tran, derivatively on behalf of Best Buy Co., Inc. against us and certain of our executive officers and directors in the same court. The Khuong Tran lawsuit has also been stayed pending the close of discovery in IBEW.

The plaintiffs in the above securities actions seek damages, including interest, equitable relief and reimbursement of the costs and expenses they incurred in the lawsuits. As stated above, we believe the allegations in the above securities actions are without merit, and we intend to defend these actions vigorously. Based on our assessment of the facts underlying the claims in the above securities actions, their respective procedural litigation history and the degree to which we intend to defend our company in these matters, the amount or range of reasonably possible losses, if any, cannot be estimated.


Other Legal Proceedings
We are involved in various other legal proceedings arising in the normal course of conducting business. For such legal proceedings, we have accrued an amount that reflects the aggregate liability deemed probable and estimable, but this amount is not material to our consolidated financial position, results of operations or cash flows. Because of the preliminary nature of many of these proceedings, the difficulty in ascertaining the applicable facts relating to many of these proceedings, the variable treatment of claims made in many of these proceedings and the difficulty of predicting the settlement value of many of these proceedings, we are not able to estimate an amount or range of any reasonably possible additional losses. However, based upon our historical experience, the resolution of these proceedings is not expected to have a material effect on our consolidated financial position, results of operations or cash flows.



Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, the use of the terms “Best Buy,” “we,” “us” and “our” in the following refers to Best Buy Co., Inc. and its consolidated subsidiaries. Any references to our website addresses do not constitute incorporation by reference of the information contained on the websites.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Unless otherwise noted, transactions and other factors significantly impacting our financial condition, results of operations and liquidity are discussed in order of magnitude. Our MD&A is presented in the following sections:


Overview
Business Strategy Update
Best Buy 2020: Building the New Blue
Results of Operations
Liquidity and Capital Resources
Off-Balance-Sheet Arrangements and Contractual Obligations
Significant Accounting Policies and Estimates
New Accounting Pronouncements
Safe Harbor Statement Under the Private Securities Litigation Reform Act

Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 28, 201729, 2022 (including the information presented therein under Risk Factors), as well as our other reports on Forms 10-Q and 8-K and other publicly available information. All amounts herein are unaudited.

Overview


We are a leading providerdriven 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 products, services and solutions. We offer these products and servicesa human touch to customers whomeet our customers’ everyday needs, whether they come to us online, visit our stores engage with Geek Squad agents or use our websites or mobile applications. invite us into their homes.

We have operations in the U.S., Canada and Mexico. We operate two reportable segments: Domestic and International. The Domestic segment is comprised of our operations in all operations withinstates, districts and territories of the U.S. and its districtsour Best Buy Health business. All of our former stores in Mexico were closed as of the end of the first quarter of fiscal 2022, and territories. Theour International segment is now comprised of all our operations in Canada and Mexico.


Canada.

Our fiscal year ends on the Saturday nearest the end of January. Fiscal 2018 will include 53 weeks with the additional week included in the fourth quarter and fiscal 2017 included 52 weeks. Our business, like that of many retailers, is seasonal. A higherlarge proportion of our revenue and earnings is generated in the fiscal fourth fiscal quarter, which includes the majority of the holiday shopping season in the U.S., Canada and Mexico ("Holiday").


season.

Comparable Sales


Throughout this MD&A, we refer to comparable sales. OurComparable sales is a metric used by management to evaluate the performance of our existing stores, websites and call centers by measuring the change in net sales for a particular period over the comparable prior-period of equivalent length. Comparable sales calculation comparesincludes revenue from stores, websites and call centers operating for at least 14 full months, as well as revenue related to certain othermonths. Revenue from online sales is included in comparable sales channels forand represents sales initiated on a particular periodwebsite or app, regardless of whether customers choose to the corresponding periodpick up product in the prior year. Relocated stores, as well as remodeled, expanded and downsized stores closed more than 14 days, are excludedstore, curbside, at an alternative pick-up location or take delivery direct to their homes. Revenue from the comparable sales calculation until at least 14 full months after reopening. Acquisitions areacquisitions is included in the comparable sales calculation beginning with the first full quarter following the first anniversary of the date of the acquisition. The calculationComparable sales also includes credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable. Revenue from stores closed more than 14 days, including but not limited to relocated, remodeled, expanded and downsized stores, or stores impacted by natural disasters, is excluded from comparable sales until at least 14 full months after reopening. Comparable sales excludes the impact of revenue from discontinued operations and the effect of fluctuations in foreign currency exchange rates (applicable to our International segment only). All periods presented apply this methodology consistently.

On November 2, 2021, we acquired all outstanding shares of Current Health Ltd. (“Current Health”). On November 4, 2021, we acquired all outstanding shares of Two Peaks, LLC d/b/a Yardbird Furniture (“Yardbird”). Consistent with our comparable sales policy, the results of Current Health and Yardbird are excluded from our comparable sales calculation until the first quarter of fiscal 2024.

We believe comparable sales is a meaningful supplemental metric for investors to evaluate revenue performance resulting from growth in existing stores, websites and call centers versus the portion resulting from opening new stores or closing existing stores. The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as other retailers'retailers’ methods.

The Canadian brand consolidation, which included the permanent closure of 66 Future Shop stores, the conversion of 65 Future Shop stores to Best Buy stores and the elimination of the Future Shop website, had a material impact on a year-over-year basis on the remaining Canadian retail stores and the website. As such, from the first quarter of fiscal 2016 through the third quarter of fiscal 2017, all Canadian store and website revenue was removed from the comparable sales base and the International segment no longer had a comparable sales metric. Therefore, Consolidated comparable sales for the first quarter of fiscal 2016 through the third quarter of fiscal 2017 equaled the Domestic segment comparable sales. Beginning in the fourth quarter of fiscal 2017, we resumed reporting International comparable sales and, as such, Consolidated comparable sales are once again equal to the aggregation of Domestic and International comparable sales.

Non-GAAP Financial Measures


This MD&A includes financial information prepared in accordance with accounting principles generally accepted in the United States ("GAAP"U.S. (“GAAP”), as well as certain adjusted or non-GAAP financial measures, such as constant currency, non-GAAP operating income, non-GAAP effective tax rate non-GAAP net earnings from continuing operations,and non-GAAP diluted earnings per share ("EPS"(“EPS”) from continuing operations and non-GAAP debt to earnings before interest, income taxes, depreciation, amortization and rent ("EBITDAR") ratio.. We believe that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide moreadditional useful information to assist investors infor evaluating current period performance and in assessing future performance. For these reasons, our internal management reporting, also includesincluding budgets and forecasts, and financial targets used for short-term incentives are based on non-GAAP financial measures. Generally, our non-GAAP financial measures include adjustments for items such as restructuring charges, goodwill and intangible impairments, andprice-fixing settlements, gains orand losses on investments.certain investments, intangible asset amortization, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when we believe thisdoing so provides greater clarity to management and our investors. We provide reconciliations of the most comparable financial measures presented in accordance with GAAP to presented non-GAAP financial measures that enable investors to understand the adjustments made in arriving at the non-GAAP financial measures and to evaluate performance using the same metrics as management. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, GAAP financial measures. We strongly encourage investors and shareholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. Non-GAAP financial measures as presented herein may not be comparable tocalculated differently from similarly titled measures used by other companies.


companies, thereby limiting their usefulness for comparative purposes.

In our discussions of the operating results of our Consolidatedconsolidated business and our International segment, we sometimes refer to the impact of changes in foreign currency exchange rates or the impact of foreign currency exchange rate fluctuations, which are references to the differences between the foreign currency exchange rates we use to convert the International segment’s operating results from local currencies into U.S. dollars for reporting purposes. We also may use the term "constant currency",“constant currency,” which represents results adjusted to exclude foreign currency impacts. We calculate those impacts as the difference between the current period results translated using the current period currency exchange rates and using the comparable prior period currency exchange rates. We believe the disclosure of revenue changes in constant currency provides useful supplementary information to investors in light of significant fluctuations in currency rates and our inability to report comparable store sales for the International segment from the first quarter of fiscal 2016 through the third quarter of fiscal 2017 as a result of the Canadian brand consolidation.


Beginning in the first quarter of fiscal 2018, we no longer exclude non-restructuring property and equipment impairment charges from our non-GAAP financial metrics. When we began to execute our Renew Blue transformation in the fourth quarter of fiscal 2013, we adopted a change to non-GAAP reporting to exclude non-restructuring property and equipment impairment charges from our non-GAAP results. From that point, through the fourth quarter of fiscal 2017, we believed that reporting non-GAAP results that excluded these charges provided a supplemental view of our ongoing performance that was useful and relevant to our investors. Now that Renew Blue has ended and Best Buy 2020: Building The New Blue has officially launched, we believe it is no longer necessary to adjust for non-restructuring property and equipment impairments in our non-GAAP reporting. We believe that future such impairments will predominantly be immaterial and incurred in the ordinary scope of ongoing operations. Accordingly, commencing in the first quarter of fiscal 2018, we no longer adjust for non-restructuring property and equipment impairments. Impacted prior period non-GAAP financial measures have been recast to conform with this presentation.

rates.

Refer to the Non-GAAP Financial Measures section below for the detailed reconciliationreconciliations of items that impacted theimpacting non-GAAP operating income, non-GAAP effective tax rate non-GAAP net earnings from continuing operations and non-GAAP diluted EPS from continuing operations in the presented periods.


Refer to the Other Financial Measures section below for the detailed reconciliation of items that impacted the non-GAAP debt to EBITDAR ratio. Management believes this ratio is an important indicator

Business Strategy Update

We believe one of our creditworthiness. Furthermore, we believe that our non-GAAP debt to EBITDAR ratiogreatest strengths is important for understanding our financial position and provides meaningful additional information about our ability to service our long-term debtadapt to rapidly changing and other fixed obligations andchallenging environments, whether due to fund our future growth.changes in technology, macroeconomic trends or a pandemic. We also believe our non-GAAP debt to EBITDAR ratio is relevant because it enables investors to compare our indebtedness toare currently operating in a challenging consumer electronics industry. As previously stated, we assumed that of retailers who own, rather than lease, their stores. Our decision to own or lease real estate is based on an assessment of our financial liquidity, our capital structure, our desire to own or to lease the location, the owner’s desire to own or to lease the location and the alternative that resultssales in the highest returnconsumer electronics industry would be lower this year following two years of elevated growth driven by unusually strong demand for technology products and services and fueled partly by stimulus dollars during the pandemic. In addition, we expected to see some impact on our shareholders.


Business Strategy Update

Inbusiness as customers broadly shifted their spending back into experience areas, such as travel and entertainment. These impacts are being compounded by a changing macro environment where consumers are dealing with sustained and record high levels of inflation in some of the most fundamental parts of their daily lives, like food, fuel and lodging.

Throughout the third quarter of fiscal 2018,2023, we were committed to balancing our Consolidated revenue increased 4.2%near-term response to $9.3 billion with Consolidated comparable sales growth of 4.4% comparedcurrent conditions and managing well what is in our control, while also advancing our strategic initiatives and investing in areas important for our long-term growth. This includes managing our inventory levels and actively assessing further actions to last year. Diluted earnings per share increased 30.0% to $0.78 compared to $0.60 last year.



These results included the negative impact of two significant factors. First, despite what we previously characterized as moderate expectations for mobile phone launches in the quarter, revenue in the mobile category was materially lower than expected. This was due to the fact that a major new phone did not launch until November, which is the first month ofevolve our fourth fiscal quarter. This resulted in significant softness in sales of existing mobile phone models in October as customers delayed their purchases. We estimate the related revenue impact in the quarter was more than $100 million. Second, we felt the impact of the natural disasters in south Texas, Florida, Puerto Ricooperating model, manage profitability and Mexico. We estimate the negative impact to our Consolidated comparable sales was 15 to 20 basis points, and that with the related costs, including insurance deductibles, repairs and employee-related pay, our earnings were negatively impacted by approximately $0.03.
Despite these two factors, the results we reported were within the earnings guidance we shared in August. In our most recent Annual Report, we announced the launch ofiterate on our growth strategy, Best Buy 2020: Building the New Blue. Our Consolidated revenue growth rate was 3.3% for the nine months ended October 28, 2017, comparedinitiatives. We have proactively managed our inventory levels and believe they continue to the same period in the prior year. We believereflect a healthy and evolving mix of products that technology innovation is fueling demand and that our strategy is resonating with our customers. While we are investing in key initiatives and capabilities, in the first nine months of fiscal 2018 we increased diluted earnings per share year-over-year and have returned capitalenables us to our shareholders through dividends and continued share repurchases.

Looking aheadpositively react to Holiday, our teams across all functions are ready and keen to take care of our customers--online, in our stores or in the customer’s home. There are a number of great new products across many categories, including smart home, phones, gaming and tech toys. We believe we have a compelling promotional calendar with strong brand messaging.ever-changing consumer needs. We are again this year offering free shipping with no minimum purchase. We are also offering a range of new capabilities, includingplanning for lower store payroll expenses and reducing spending in discretionary areas by increasing our new in-home advisor program, now available nation-wide, an updated gift centerrigor around backfilling corporate roles, capital expenditures and same-day shipping in 40 cities.

Best Buy 2020: Building the New Blue

We believe there are opportunities in this next chapter to develop deeper and stickier relationships with our customers and to build a strong, vibrant, growing company with significant competitive advantages. We are committed to building a company that can thrive in both today’s and tomorrow’s environment.

As we discussed at our Investor Day in September 2017, Best Buy 2020 is designed to take advantage of key growth opportunities by expanding what we sell and evolving how we sell.

The work we are doing in the smart home space is a great example of how we are expanding what we sell. We plan to build on our position in the smart home market by continuing to expand our curated assortment, demonstrating new technology solutions in a meaningful way and expanding in the solutions and services part of the market. We believe needs-based demonstrations and experiential merchandising are critical, and we have a unique capability to showcase the products, both online and in-store.travel. In this spirit, as we approach Holiday, all of our stores have enhanced smart home departments. In addition, 700 stores have new Alexa and Google experiences developed in collaboration with Amazon and Google, and 450 stores have a Best Buy Smart Home powered by Vivint home automation and security offering. To complement all of this, we have added an incremental 1,500 dedicated smart home store employees to help our customers identify which smart home solution would work best for them.

As we discussed at our Investor Day, as a natural offshoot of our smart home focus, we are testing opportunities to leverage technology to help the rapidly growing segment of aging seniors stay in their homes as long as possible. We are piloting a service called Assured Living, that uses a non-invasive set of smart home connectors and sensors to help adult children remotely check in on the health and safety of their aging parents. Aging parents also benefit from the increased automation in their home, such as connected door locks and smart lighting. While early in our test program, we are piloting the opportunity in the Twin Cities of Minneapolis and St. Paul and in the Denver market.

As it relates to supporting customers, we are also focused on expanding what we sell. We believe that customers’ support needs are not limited to a specific product; the need now is to have all of their technology working together to improve and simplify their lives as promised. Total Tech Support is a new Geek Squad offering that provides support for all of a customer’s technology, no matter where or when they bought it. This support is available to customers 24/7 via online, in-store and phone, and includes significant discounts if in-home services are needed. In September, we expanded the pilot to just over 200 stores across 10 cities in the U.S.

Meanwhile, we are evolving how we sell to focus not only on selling products but also on solving customers’ underlying needs. We see opportunities in our ability to continue to improve the customer experience within and across channels. Almost all of our customers currently use both the store and the online channel, and they have different expectations of what the channels should do for them depending on their mindset. As an example, customers often use the online channel when they are more

certain about their purchase and the store channel when they are less certain. In our online channel, we have made a great deal of progress and have driven innovation. In the third quarter of fiscal 2018, we reported Domestic online sales of $1.1 billion, or 12.7% of our total Domestic revenue, with comparable sales of 22.3% compared to last year. We have also significantly improved the in-store experience, as evidenced by increased NPS scores and our revenue growth.

Going forward, we see continued opportunity in examining how customers use the various channels in their shopping journeys and designing and linking experiences across channels. Ultimately, this makes it easier for customers to start their shopping process online and complete it in the store or vice versa. We are using this approach to more effectively address customer needs in areas where we have significant potential for growth, particularly appliances and mobile phones. In appliances, for example, where a significant portion of sales are the result of broken appliances that need to be replaced, we are making it clear to customers searching online which appliances are available real time at their local store for those customers who would like to replace very quickly. In mobile, we are enhancing the online experience to smooth pre-orders and streamline phone choice, allowing customers to do most of the work online before they pick up their phone in-store for activation. We are also improving the in-store experience to make the various carrier pricing options more clear, reducing the time it takes to activate a phone and using text alerts for clarity on the timing of activation.

We are also focused on building our in-home channel. To that end, in September, we expanded our In-Home Advisor program to all major U.S. markets with 300 advisors. These in-home advisors are professional sales consultants with broad product knowledge who have completed an extensive five week training program. They provide free consultations and serve as the single point of contact for customers covering all technology needs across all vendors. We are pleased with the results of the program so far. In fact, we are planning to expand the number of advisors to 375 by early next year based on initial demand.

To deliver on our strategy, we are investing in a range of enablers. We have built a great set of assets over the past several years. We are expanding on these assets by investing in key capabilities and tools. For example, we are making technology investments in enterprise customer relationship management, a services platform and knowledge management tools. We are investing in our supply chain to build for volume, choice, speed and efficiencies that will help us offset the normal volume-based increases in expense. For example, during the third quarter of fiscal 2018, we opened a new distribution center in Compton, California, just in time for the busy holiday season.

As we have begun work on some of these investments, this is resulting in higher capital and operating expenses this year. This is going to be a multi-year journey, which is why we are committed to creating efficiencies to help fund investments and offset ongoing pressures in the business. After reducing cost by $1.4 billion in the past five years, our current target, established in the second quarter of fiscal 2018, is $600 million in additional annualized2023, we commenced an enterprise-wide restructuring initiative to better align our spending with critical strategies and operations, as well as to optimize our cost reductions and gross profit optimizationstructure.

At the same time, strategically, we are positioning ourselves to be completed by the end of fiscal 2021. During the third quarter of fiscal 2018, we achieved $50 million towards our new goal, for a total thus far of $100 million.


In summary, we delivered strong top and bottom line resultsleader in the third quarter despitefuture of retailing. We continue to see a customer that is increasingly in control and expects seamless experiences across all touchpoints. As such, we believe it is paramount that we continue to invest in the pressure from the later phone launchareas that will be important for our future growth, including our in-store experience, digital experiences and the multiple natural disasters. We believe we have also made significant progress againsttools, our Best Buy 2020Totaltech membership and Best Buy Health.

We remain confident in our strategy and excited about our future. We fundamentally believe that technology is more important than ever in our everyday lives, and as a result of the past few years, consumers have even more technology devices in their homes that will need to position us well for long-term value creation. Additionally,be updated, upgraded and supported over time. As our vendor partners continue to innovate and the world becomes increasingly more digital in the nine months ended October 28, 2017,all aspects, we returned approximately $1.5 billionwill be there to help customers in cash to our shareholders through both dividendsstores, online, virtually and stock repurchases. We plan to spend approximately $2.0 billion on share repurchases this fiscal year, aheaddirectly in their homes.


Results of Operations


In order to align our fiscal reporting periods and comply with statutory filing requirements, we consolidate the financial results of our Mexico operations on a one-month lag. Consistent with such consolidation, the financial and non-financial information presented in our MD&A relative to these operations is also presented on a lag. Our policy is to accelerate the recording of events occurring in the lag period that significantly affect our

Consolidated Results

Selected consolidated financial statements. No such events were identified for the periods presented.



Consolidated Performance Summary

The following table presents selected consolidated financial data was as follows ($ in millions, except per share amounts):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Revenue

$

10,587 

$

11,910 

$

31,563 

$

35,396 

Revenue % change

(11.1)

%

0.5 

%

(10.8)

%

16.7 

%

Comparable sales % change

(10.4)

%

1.6 

%

(10.2)

%

17.5 

%

Gross profit

$

2,332 

$

2,802 

$

6,972 

$

8,327 

Gross profit as a % of revenue(1)

22.0 

%

23.5 

%

22.1 

%

23.5 

%

SG&A

$

1,941 

$

2,133 

$

5,713 

$

6,130 

SG&A as a % of revenue(1)

18.3 

%

17.9 

%

18.1 

%

17.3 

%

Restructuring charges

$

26 

$

(1)

$

61 

$

(39)

Operating income

$

365 

$

670 

$

1,198 

$

2,236 

Operating income as a % of revenue

3.4 

%

5.6 

%

3.8 

%

6.3 

%

Net earnings

$

277 

$

499 

$

924 

$

1,828 

Diluted earnings per share

$

1.22 

$

2.00 

$

4.07 

$

7.23 

 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Revenue$9,320
 $8,945
 $26,788
 $25,921
Revenue % growth4.2% 1.4% 3.3% 0.1%
Comparable sales % gain(1)
4.4% 1.8% 3.8% 0.8%
Gross profit$2,280
 $2,203
 $6,455
 $6,410
Gross profit as a % of revenue(2)
24.5% 24.6% 24.1% 24.7%
SG&A$1,932
 $1,890
 $5,484
 $5,407
SG&A as a % of revenue(2)
20.7% 21.1% 20.5% 20.9%
Restructuring charges$(2) $1
 $
 $30
Operating income$350
 $312
 $971
 $973
Operating income as a % of revenue3.8% 3.5% 3.6% 3.8%
Net earnings from continuing operations$238
 $192
 $635
 $600
Earnings from discontinued operations, net of tax$1
 $2
 $1
 $21
Net earnings$239
 $194
 $636
 $621
Diluted earnings per share from continuing operations$0.78
 $0.60
 $2.05
 $1.85
Diluted earnings per share$0.78
 $0.61
 $2.05
 $1.92
(1)
Due to the Canadian brand consolidation impact on our International segment comparable

(1)Because retailers vary in how they record costs of operating their supply chain between cost of sales metric, Consolidated comparable sales for the three and nine months ended October 29, 2016, equal the Domestic segment comparable sales. Refer to the Overview section within this Item 2. MD&A for more information.

(2)
Because retailers vary in how they record costs of operating their supply chain between cost of goods sold and SG&A, our gross profit rate and SG&A rate may not be comparable to other retailers’ corresponding rates. For additional information regarding costs classified in cost of goods sold and SG&A, refer to Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017.

The components of the 4.2% and 3.3% revenue increase for the three and nine months ended October 28, 2017 were as follows:
 Three Months Ended Nine Months Ended
 October 28, 2017 October 28, 2017
Comparable sales impact4.2 % 3.7 %
Non-comparable sales impact(1)
(0.4)% (0.5)%
Foreign currency exchange rate fluctuation impact0.4 % 0.1 %
Total revenue increase4.2 % 3.3 %
(1)Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit sharing benefits, certain credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable.

The gross profit rate decreased slightlyand SG&A rate may not be comparable to other retailers’ corresponding rates. For additional information regarding costs classified in cost of sales and SG&A, refer to Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2022.

In the third quarter of fiscal 2018 compared to the third quarter of fiscal 2017, driven by our International segment. The gross profit rate decrease in theand first nine months of fiscal 2018 was2023, we generated $10.6 billion and $31.6 billion in revenue and our comparable sales decreased 10.4% and 10.2%, respectively, as we lapped strong comparable sales over the past two years, which were driven by the timing of government stimulus payments, temporary store closures due to the COVID-19 pandemic and heightened demand for stay-at-home focused purchases. In addition, we faced macroeconomic pressures in the current year, including high inflation, that have resulted in overall softness in customer demand within the consumer electronics industry.

Revenue, gross profit rate, SG&A and operating income rate changes in the third quarter and first nine months of fiscal 2023 were primarily driven by our Domestic segment. For further discussion of each segment’s gross profit rate changes, see Segment Performance Summary, below.


The SG&A rate

Income Tax Expense

Income tax expense decreased in the third quarter of fiscal 2018 compared2023, primarily due to the third quarter of fiscal 2017, driven by our Domestic segment. The SG&A ratea decrease in the first nine months of fiscal 2018 comparedpre-tax earnings. Our effective tax rate (“ETR”) decreased to the first nine months of fiscal 2017 was also driven by our Domestic segment. For further discussion of each segment’s SG&A rate changes, see Segment Performance Summary below.


Our operating income rate increased23.6% in the third quarter of fiscal 20182023 compared to 25.1% in the third quarter of fiscal 2017, driven by lower SG&A rates2022, primarily due to the recognition of losses and certain deferred tax assets for which tax benefits were previously not recognized, as well as an increase in our Domestic segment. Our operating income ratethe tax benefit from federal tax credits.

Income tax expense decreased in the first nine months of fiscal 2018 compared to the first nine months of fiscal 2017. This decrease in operating income was2023, primarily due to thea decrease in our Domestic segment gross profit rate,pre-tax earnings, partially offset by a decrease in our Domestic segment SG&A rate and a decrease in our


Domestic segment restructuring charges. For further discussion of each segment's operating income, see Segment Performance Summary below.

Income Tax Expense

Income tax expense decreased to $104 million in the third quarter of fiscal 2018 compared to $112 million in the prior-year period, primarily as a result of the recognition of excess tax benefits related to stock-based compensation and the resolution of certain discrete tax matters in the current year, partially offset by an increase in pre-tax earnings.matters. Our effective income tax rate in the third quarter of fiscal 2018 was 30.4% comparedETR increased to a rate of 36.7% in the third quarter of fiscal 2017. The decrease in the effective income tax rate was primarily due to the recognition of excess tax benefits related to stock-based compensation and the resolution of certain tax matters in the current year period.

Income tax expense decreased to $309 million21.4% in the first nine months of fiscal 20182023 compared to $343 million in the prior-year period, primarily as a result of the recognition of excess tax benefits related to stock-based compensation and the resolution of certain tax matters in the current year period. Our effective income tax rate for the first nine months of fiscal 2018 was 32.7%, compared to a rate of 36.4%18.1% in the first nine months of fiscal 2017. The decrease in the effective income tax rate was2022, primarily due to the recognition of excess tax benefits related to stock-based compensation and theprior-year resolution of certain discrete tax matters and a decrease in the tax benefit from stock-based compensation, partially offset by the impact of lower pre-tax earnings in the current year period.

year. Refer to Note 10, Income Taxes, of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

Our tax provision for interim periods is determined using an estimate of our annual effective tax rate,ETR, adjusted for discrete items, if any, that are taken into account in the relevant period. We update our estimate of the annual effective tax rateETR each quarter and we make a cumulative adjustment if our estimated tax rate changes. Our quarterly tax provision and our quarterly estimate of our annual effective tax rateETR are subject to variation due to several factors, including our ability to accurately forecast our pre-tax and taxable income and loss by jurisdiction, tax audit developments, recognition of excess tax benefits or deficiencies related to stock-based compensation, foreign currency gains (losses), changes in laws or regulations, and expenses or losses for which tax benefits are not recognized. Our effective tax rateETR can be more or less volatile based on the amount of pre-tax income.earnings. For example, the impact of discrete items and non-deductible losses on our effective tax rateETR is greater when our pre-tax earnings are lower.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, implements a 15% minimum tax on book income is lower.


In addition,of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. Based on our current analysis of the provisions, we do not believe this legislation will have a material impact on our consolidated effective tax rate is impacted by the statutory income tax rates applicable to eachfinancial statements.



Segment Performance Summary


Domestic


The following table presents selected Segment

Selected financial data for the Domestic segment was as follows ($ in millions):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Revenue

$

9,800 

$

10,985 

$

29,263 

$

32,837 

Revenue % change

(10.8)

%

1.2 

%

(10.9)

%

17.7 

%

Comparable sales % change(1)

(10.5)

%

2.0 

%

(10.6)

%

18.3 

%

Gross profit

$

2,148 

$

2,571 

$

6,427 

$

7,703 

Gross profit as a % of revenue

21.9 

%

23.4 

%

22.0 

%

23.5 

%

SG&A

$

1,791 

$

1,962 

$

5,264 

$

5,647 

SG&A as a % of revenue

18.3 

%

17.9 

%

18.0 

%

17.2 

%

Restructuring charges

$

25 

$

-

$

59 

$

(44)

Operating income

$

332 

$

609 

$

1,104 

$

2,100 

Operating income as a % of revenue

3.4 

%

5.5 

%

3.8 

%

6.4 

%

Selected Online Revenue Data

Total online revenue

$

3,037 

$

3,436 

$

9,070 

$

10,518 

Online revenue as a % of total segment revenue

31.0 

%

31.3 

%

31.0 

%

32.0 

%

Comparable online sales % change(1)

(11.6)

%

(10.1)

%

(13.8)

%

(12.5) 

%

 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Revenue$8,491
 $8,192
 $24,675
 $23,910
Revenue % growth3.6% 1.3% 3.2% 0.2%
Comparable sales % gain(1)
4.5% 1.8% 3.8% 0.8%
Gross profit$2,096
 $2,020
 $5,952
 $5,901
Gross profit as a % of revenue24.7% 24.7% 24.1% 24.7%
SG&A$1,751
 $1,720
 $4,993
 $4,915
SG&A as a % of revenue20.6% 21.0% 20.2% 20.6%
Restructuring charges$
 $2
 $
 $27
Operating income$345
 $298
 $959
 $959
Operating income as a % of revenue4.1% 3.6% 3.9% 4.0%
        
Selected Online Revenue Data       
Total online revenue$1,077
 $881
 $3,191
 $2,548
Online revenue as a % of total segment revenue12.7% 10.8% 12.9% 10.7%
Comparable online sales % gain(1)
22.3% 24.1% 25.3% 23.9%
(1)Comparable online sales is included in the comparable sales calculation.

(1)Online sales are included in the comparable sales calculation.

The components of the 3.6% and 3.2%decrease in revenue increase for the three and nine months ended October 28, 2017 were as follows:

 Three Months Ended Nine Months Ended
 October 28, 2017 October 28, 2017
Comparable sales impact4.3 % 3.6 %
Non-comparable sales impact(1)
(0.7)% (0.4)%
Total revenue increase3.6 % 3.2 %
(1)Non-comparable sales reflects the impact of net store opening and closing activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit sharing benefits, certain credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable.

The increase in the third quarter of fiscal 2018 Domestic segment revenue was driven by comparable sales growth of 4.5%, partially offset by the loss of revenue from Best Buy and Best Buy Mobile store closures. Domestic segment online revenue of $1.1 billion increased 22.3% on a comparable basis, primarily due to higher conversion rates and higher average order values.

The increase in the first nine months of fiscal 2018 Domestic segment revenue2023 was primarily driven by comparable sales growthdeclines across most of 3.8%, partially offset by the loss of revenue from Best Buyour product categories, particularly computing and Best Buy Mobile store closures. Domestic segment onlinehome theater. Online revenue of $3.2$3.0 billion increased 25.3%and $9.1 billion in the third quarter and first nine months of fiscal 2023 decreased 11.6% and 13.8% on a comparable basis, respectively. These decreases in revenue were primarily due to higher conversion rates and increased traffic.

The following table reconciles the number of reasons described within the Consolidated Results section, above.

Domestic segment stores open at the beginning and end of the third quarters of fiscal 20182023 and 2017:fiscal 2022 were as follows:

Fiscal 2023

Fiscal 2022

Total Stores at Beginning of Third Quarter

Stores Opened

Stores Closed

Total Stores at End of Third Quarter

Total Stores at Beginning of Third Quarter

Stores Opened

Stores Closed

Total Stores at End of Third Quarter

Best Buy

930 

-

(5)

925 

947 

-

(9)

938 

Outlet Centers

18 

-

19 

15 

-

16 

Pacific Sales

21 

-

-

21 

21 

-

-

21 

Yardbird

13 

-

14 

-

-

-

-

Total

982 

(5)

979 

983 

(9)

975 

 2018 2017
 Total Stores at Beginning of Third Quarter Stores Opened Stores Closed Total Stores at End of Third Quarter Total Stores at Beginning of Third Quarter Stores Opened Stores Closed Total Stores at End of Third Quarter
Best Buy1,024
 
 (16) 1,008
 1,035
 
 (9) 1,026
Best Buy Mobile292
 
 (5) 287
 334
 
 (3) 331
Pacific Sales28
 
 
 28
 28
 
 
 28
Total Domestic segment stores1,344
 
 (21) 1,323
 1,397
 
 (12) 1,385


We continuously monitor store performance.performance as part of a market-driven, omnichannel strategy. As we approach the expiration date of our store leases, we evaluate various options for each location, including whether a store should remain open.


The following table presents We currently expect to increase the number of Outlet Centers to approximately 30 by the end of fiscal 2024.

Domestic segment revenue mix percentages and comparable sales percentage changes by revenue category in the third quarterswere as follows:

Revenue Mix

Comparable Sales

Three Months Ended

Three Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Computing and Mobile Phones

44 

%

45 

%

(11.4)

%

(2.4)

%

Consumer Electronics

30 

%

30 

%

(12.8)

%

5.5 

%

Appliances

15 

%

15 

%

(9.6)

%

10.9 

%

Entertainment

%

%

(4.6)

%

4.1 

%

Services

%

%

(0.9)

%

(5.6)

%

Other

%

-

%

39.8 

%

N/A

Total

100 

%

100 

%

(10.5)

%

2.0 

%

 Revenue Mix Comparable Sales
 Three Months Ended Three Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Consumer Electronics31% 31% 3.5% 4.9 %
Computing and Mobile Phones48% 49% 3.5% 1.6 %
Entertainment6% 6% 4.1% (9.4)%
Appliances10% 9% 13.5% 3.0 %
Services5% 5% 3.2% (1.8)%
Other% % n/a
 n/a
Total100% 100% 4.5% 1.8 %

The following is a description of the notable

Notable comparable sales changes in our Domestic segment by revenue category:


Consumer Electronics: Comparable sales gain was driven primarily by smart home, home theater and portable audio, partially offset by declines in digital imaging and health & fitness products.
category were as follows:

Computing and Mobile Phones: Comparable The 11.4% comparable sales gaindecline was driven primarily by computing, wearablestablets and mobile phones.

Entertainment: Comparable

Consumer Electronics: The 12.8% comparable sales gaindecline was driven primarily by home theater.

Appliances: The 9.6% comparable sales decline was driven primarily by large appliances.

Entertainment: The 4.6% comparable sales decline was driven primarily by gaming hardware and drones.

Appliances: Comparablesoftware.

Services:The 0.9% comparable sales gaindecline was driven primarily by large and small appliances.

Services: Comparable sales gain was driven primarily by continued growth inthe launch of our warranty business and higher installation and delivery services.

The third quarter of fiscal 2018Best Buy Totaltech membership offering that includes benefits that were previously stand-alone revenue-generating services, such as warranty.

Our gross profit rate of our Domestic segment was flat. Improved margin rates were offset by the $25 million periodic profit share revenue related to our service plan portfolio earneddecreased in the third quarter of fiscal 2017. The profit-share revenue included in2023, primarily due to lower product margin rates, including increased promotions, lower services margin rates, driven by the incremental customer benefits and associated costs from our non-comparable sales relatesBest Buy Totaltech membership offering compared to our extended warranty protection plans that are managedprevious Total Tech Support offer, and higher supply chain costs. These decreases were partially offset by a third party underwriter. We may be eligible to receivehigher profit-sharing payments, depending on the performance of the portfolio. When performance of the portfolio is strongrevenue from our private label and the claims cost to the third party underwriter declines, we are entitled to share in the excess premiums.


Theco-branded credit card arrangement.

Our gross profit rate of our Domestic segment decreased in the first nine months of fiscal 20182023, primarily due to lower services margin rates, driven by the $183 million in non-recurring cathode ray tube ("CRT") settlement proceeds recorded in the first quarter of fiscal 2017, which wasincremental customer benefits and associated costs from our Best Buy Totaltech membership offering compared to our previous Total Tech Support offer, lower product margin rates, including increased promotions, and higher supply chain costs. These decreases were partially offset by improved margin rates across multiple categories.


Thehigher profit-sharing revenue from our private label and co-branded credit card arrangement.

Our SG&A decreased in the third quarter of fiscal 2018 SG&A rate of our Domestic segment decreased primarily due to sales leverage, noting that expenses increased due to increases in growth investments, higher advertising expenses and higher variable costs due to increased revenue.


The SG&A rate of our Domestic segment decreased in the first nine months of fiscal 20182023, primarily due to leverage on our increased revenuelower incentive compensation expense of approximately $100 million and $365 million, respectively, compared to prior-year periods and decreased store payroll expenses. We currently expect to be below required financial thresholds for short-term incentive compensation performance metrics in the $22 millioncurrent year while lapping short-term incentive payments near maximum levels in non-recurring CRT settlement legal feesthe prior year.

The restructuring charges incurred in the firstthird quarter of fiscal 2017.


Our Domestic segment restructuring charges in theand first nine months of fiscal 20172023 primarily related to our Renew Blue Phase 2, which had no activityemployee termination benefits related to an enterprise-wide restructuring initiative that commenced in the same periodsecond quarter of fiscal 2018.2023 to better align our spending with critical strategies and operations, as well as to optimize our cost structure. Refer to Note 5, 2, Restructuring Charges, in, of the Notes to the Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

Our operating income rates decreased in the third quarter of fiscal 2018 Domestic segment operating income rate increased due to a lower SG&A rate.


Our Domestic segment operating income rate slightly decreased in theand first nine months of fiscal 20182023, primarily due to the net $161 million non-recurring CRT settlement recordedunfavorable gross profit rates and decreased leverage from lower sales volume on our fixed expenses, which resulted in the first quarter of fiscal 2017, partially offset by lower restructuring charges, improved gross margin rates across multiple categories and lowerunfavorable SG&A rates.


International


The following table presents selected Segment

Selected financial data for the International segment was as follows ($ in millions):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Revenue

$

787 

$

925 

$

2,300 

$

2,559 

Revenue % change

(14.9)

%

(7.8)

%

(10.1)

%

5.2 

%

Comparable sales % change

(9.3)

%

(3.0)

%

(5.2)

%

7.7 

%

Gross profit

$

184 

$

231 

$

545 

$

624 

Gross profit as a % of revenue

23.4 

%

25.0 

%

23.7 

%

24.4 

%

SG&A

$

150 

$

171 

$

449 

$

483 

SG&A as a % of revenue

19.1 

%

18.5 

%

19.5 

%

18.9 

%

Restructuring charges

$

$

(1)

$

$

Operating income

$

33 

$

61 

$

94 

$

136 

Operating income as a % of revenue

4.2 

%

6.6 

%

4.1 

%

5.3 

%

 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Revenue$829
 $753
 $2,113
 $2,011
Revenue % growth (decline)10.1% 3.3% 5.1% (1.8)%
Comparable sales % gain(1)
3.8% n/a
 4.2% n/a
Gross profit$184
 $183
 $503
 $509
Gross profit as a % of revenue22.2% 24.3% 23.8% 25.3 %
SG&A$181
 $170
 $491
 $492
SG&A as a % of revenue21.8% 22.6% 23.2% 24.5 %
Restructuring charges$(2) $(1) $
 $3
Operating income$5
 $14
 $12
 $14
Operating income as a % of revenue0.6% 1.9% 0.6% 0.7 %
(1)
Due to the Canadian brand consolidation impact on our International segment comparable sales metric, we did not report an International segment comparable sales metric for the three or nine months ended October 29, 2016. Refer to the Overview section within this Item 2. MD&A for more information.

The components of the 10.1% and 5.1%decreases in revenue increase for the three and nine months ended October 28, 2017 were as follows:

 Three Months Ended Nine Months Ended
 October 28, 2017 October 28, 2017
Comparable sales impact3.7% 4.0%
Non-comparable sales impact(1)
1.1% 0.3%
Foreign currency exchange rate fluctuation impact5.3% 0.8%
Total revenue increase10.1% 5.1%
(1)Non-comparable sales reflects the impact of net store opening and closing activity, including the Canadian brand consolidation activity, as well as the impact of revenue streams not included within our comparable sales calculation, such as profit sharing benefits, certain credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers.

The increase in the third quarter of fiscal 2018 International segment revenue was driven by the positive impact of foreign currency exchange rate fluctuations primarily related to Canada and comparable sales growth of 3.8% due to growth in both Canada and Mexico.

The increase in the first nine months of fiscal 2018 International segment revenue was2023 were primarily driven by Canada due to comparable sales growthdeclines of 4.2% due to growth in both Canada9.3% and Mexico5.2%, respectively, and the positivenegative impact offrom unfavorable foreign currency exchange rate fluctuations related to Canada, which was partially offset by a $13 million decrease in our periodic profit share in Canada. The profit-share revenue included in our non-comparable sales relates to our extended warranty protection plans that are managed by a third party underwriter. The arrangements for our Canadian profit-share are similar to the terms described in the Domesticrates.

International segment section above.



The following table reconciles the number of International stores open at the beginning and end of the third quarters of fiscal 20182023 and 2017:fiscal 2022 were as follows:

Fiscal 2023

Fiscal 2022

Total Stores at Beginning of Third Quarter

Stores Opened

Stores Closed

Total Stores at End of Third Quarter

Total Stores at Beginning of Third Quarter

Stores Opened

Stores Closed

Total Stores at End of Third Quarter

Canada

Best Buy

127 

-

-

127 

129 

-

-

129 

Best Buy Mobile

33 

-

-

33 

33 

-

-

33 

Total

160 

-

-

160 

162 

-

-

162 

 2018 2017
 Total Stores at Beginning of Third Quarter Stores Opened Stores Closed Total Stores at End of Third Quarter Total Stores at Beginning of Third Quarter Stores Opened Stores Closed Total Stores at End of Third Quarter
Canada               
Best Buy134
 
 
 134
 135
 
 
 135
Best Buy Mobile53
 
 (1) 52
 54
 
 (1) 53
Mexico               
Best Buy22
 1
 
 23
 18
 
 
 18
Best Buy Express5
 
 
 5
 6
 
 (1) 5
Total International segment stores214
 1
 (1) 214
 213
 
 (2) 211

The following table presents the

International segment'ssegment revenue mix percentages and comparable sales percentage changes by revenue category in the third quarters of fiscal 2018 and 2017:were as follows:

Revenue Mix

Comparable Sales

Three Months Ended

Three Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Computing and Mobile Phones

49 

%

50 

%

(9.9)

%

(6.7)

%

Consumer Electronics

28 

%

27 

%

(7.4)

%

(0.8)

%

Appliances

%

%

(10.2)

%

(1.8)

%

Entertainment

%

%

(8.4)

%

15.0 

%

Services

%

%

(15.2)

%

(2.2)

%

Other

%

%

3.6 

%

17.0 

%

Total

100 

%

100 

%

(9.3)

%

(3.0)

%

 Revenue Mix Comparable Sales
 Three Months Ended Three Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 
October 29, 2016(1)
Consumer Electronics27% 28% 4.5 % n/a
Computing and Mobile Phones52% 54% 0.6 % n/a
Entertainment6% 6% 7.8 % n/a
Appliances8% 5% 49.0 % n/a
Services5% 6% (15.1)% n/a
Other2% 1% n/a
 n/a
Total100% 100% 3.8 % n/a
(1)Due to the Canadian brand consolidation impact on our International segment comparable sales metric, we did not report an International segment comparable sales metric for the three months ended October 29, 2016. Refer to the Overview section within this Item 2. MD&A for more information.

The following is a description of the notable

Notable comparable sales changes in our International segment by revenue category:


Consumer Electronics: Comparable sales gain was driven primarily by smart home and portable audio, partially offset by declines in digital imaging.
category were as follows:

Computing and Mobile Phones: Comparable The 9.9% comparable sales gaindecline was driven primarily by computing and wearables, partially offset by declines in tablets.

Entertainment: Comparable sales gain was driven primarily by gaming hardware and drones.
Appliances: Comparable sales gain was driven primarily by large and small appliances.
Services: Comparable

Consumer Electronics: The 7.4% comparable sales decline was driven primarily by technical support, partially offsethome theater.

Appliances: The 10.2% comparable sales decline was driven by gainslarge and small appliances.

Entertainment: The 8.4% comparable sales decline was driven primarily by gaming and virtual reality.

Services: The 15.2% comparable sales decline was driven primarily by warranty services.

Other: The 3.6% comparable sales growth was driven primarily by sporting goods.

The decrease in installation.


Theour gross profit rate in the third quarter of fiscal 20182023 was primarily driven by lower product margin rates and higher supply chain costs. In the first nine months of fiscal 2023, the decrease in our gross profit rate of our International segment decreased due to lower sales in the higher-margin services category in Canadawas primarily driven by the launch of Canada's Total Tech Support offer,lower product margin rates, higher supply chain costs and a long-term recurring revenue model.

The gross profit rate of our International segment decreased$6 million benefit in the first nine months of fiscal 2018 primarily due2022 associated with more-favorable-than-expected inventory markdowns related to a $13 million decreaseour decision to exit operations in our periodic profit share revenue in Canada as described above and lower salesMexico.

Our SG&A decreased in the higher-margin services category primarily driven by the launch of Canada's Total Tech Support offer.


The third quarter of fiscal 2018 SG&A rate of our International segment decreased primarily due to leverage on our increased revenue.

Our International segment SG&A rate decrease in theand first nine months of fiscal 2018 was driven2023, primarily bydue to lower payrollincentive compensation expense and benefits and administrative costs.

the favorable impact of foreign currency exchange rates.

Our operating income rates decreased in the third quarter of fiscal 2018 International segment operating income rate decreased due to a lower gross profit rate driven by lower sales in Canada in the higher-margin services category, partially offset by a lower SG&A rate due to leverage on our increased revenue.


Our International segment operating income rate decreased in theand first nine months of fiscal 20182023, primarily due to a lowerthe unfavorable gross profit rate, partially offset by arates and decreased leverage from lower sales volume on our fixed expenses, which resulted in unfavorable SG&A rate.

rates.

Consolidated Non-GAAP Financial Measures


The following table reconciles consolidated

Reconciliations of operating income, effective tax rate net earnings and diluted earnings per share ("EPS") from continuing operations for the periods presentedEPS (GAAP financial measures) to non-GAAP operating income, non-GAAP effective tax rate non-GAAP net earnings and non-GAAP diluted earnings per share from continuing operations for the periods presentedEPS (non-GAAP financial measures) were as follows ($ in millions, except per share amounts):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Operating income

$

365 

$

670 

$

1,198 

$

2,236 

% of revenue

3.4 

%

5.6 

%

3.8 

%

6.3 

%

Intangible asset amortization(1)

21 

20 

65 

60 

Acquisition-related transaction costs(1)

-

-

Restructuring charges(2)

26 

(1)

61 

(39)

Restructuring - inventory markdowns(3)

-

-

-

(6)

Non-GAAP operating income

$

412 

$

694 

$

1,324 

$

2,256 

% of revenue

3.9 

%

5.8 

%

4.2 

%

6.4 

%

Effective tax rate

23.6 

%

25.1 

%

21.4 

%

18.1 

%

Intangible asset amortization(1)

0.1 

%

(0.1)

%

0.2 

%

0.1 

%

Restructuring charges(2)

0.1 

%

-

%

0.1 

%

(0.1)

%

Non-GAAP effective tax rate

23.8 

%

25.0 

%

21.7 

%

18.1 

%

Diluted EPS

$

1.22 

$

2.00 

$

4.07 

$

7.23 

Intangible asset amortization(1)

0.10 

0.08 

0.29 

0.24 

Acquisition-related transaction costs(1)

-

0.02 

-

0.02 

Restructuring charges(2)

0.11 

-

0.27 

(0.15)

Restructuring - inventory markdowns(3)

-

-

-

(0.03)

Income tax impact of non-GAAP adjustments(4)

(0.05)

(0.02)

(0.14)

(0.02)

Non-GAAP diluted EPS

$

1.38 

$

2.08 

$

4.49 

$

7.29 

 Three Months Ended Nine Months Ended
 October 28, 2017 
October 29, 2016(1)
 October 28, 2017 
October 29, 2016(1)
Operating income$350
 $312
 $971
 $973
Net CRT/LCD settlements(2)

 
 
 (161)
Other Canadian brand consolidation charges - SG&A(3)

 
 
 1
Restructuring charges(4)
(2) 1
 
 30
Non-GAAP operating income$348
 $313
 $971
 $843
        
Income tax expense$104
 $112
 $309
 $343
 Effective tax rate30.4% 36.7% 32.7% 36.4%
Income tax impact of non-GAAP adjustments(5)

 
 2
 (49)
Non-GAAP income tax expense$104
 $112
 $311
 $294
 Non-GAAP effective tax rate30.4% 36.6% 32.8% 36.3%
        
Net earnings from continuing operations$238
 $192
 $635
 $600
Net CRT/LCD settlements(2)

 
 
 (161)
Other Canadian brand consolidation charges - SG&A(3)

 
 
 1
Restructuring charges(4)
(2) 1
 
 30
(Gain) loss on investments, net(6)
1
 
 6
 (2)
Income tax impact of non-GAAP adjustments(5)

 
 (2) 49
Non-GAAP net earnings from continuing operations$237
 $193
 $639
 $517
        
Diluted EPS from continuing operations$0.78
 $0.60
 $2.05
 $1.85
Per share impact of net CRT/LCD settlements(2)

 
 
 (0.50)
Per share impact of other Canadian brand consolidation charges - SG&A(3)

 
 
 0.01
Per share impact of restructuring charges(4)

 
 
 0.09
Per share impact of (gain) loss on investments, net (6)

 
 0.02
 (0.01)
Per share income tax impact of non-GAAP adjustments(5)

 
 (0.01) 0.16
Non-GAAP diluted EPS from continuing operations$0.78
 $0.60
 $2.06
 $1.60
(1)
Beginning in the first quarter of fiscal 2018, we no longer exclude non-restructuring property and equipment impairment charges from

(1)Represents charges associated with acquisitions, including: (1) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and developed technology; and (2) acquisition-related transaction and due diligence costs, primarily comprised of professional fees.

(2)Represents charges primarily related to employee termination benefits in the Domestic segment for the periods ended October 29, 2022, associated with an enterprise-wide initiative that commenced in the second quarter of fiscal 2023 to better align our spending with critical strategies and operations, as well as to optimize our cost structure. Represents adjustments to previously planned organizational changes and higher-than-expected retention rates in the Domestic segment, and charges and subsequent adjustments associated with the exit from operations in Mexico in the International segment for the periods ended October 30, 2021.

(3)Represents inventory markdown adjustments recorded within cost of sales associated with the exit from operations in Mexico.

(4)The non-GAAP adjustments primarily relate to the U.S. and Mexico. As such, the income tax charge is calculated using the statutory tax rate of 24.5% for all U.S. non-GAAP items for all periods presented. There is no income tax charge for Mexico non-GAAP items, as there was no tax benefit recognized on these expenses in the calculation of GAAP income tax expense.

Our non-GAAP financial measures. To ensure our financial results are comparable, we have recast the prior period balance to conform to this presentation. Refer to the Overview section within this MD&A for more information.

(2)
Represents CRT and LCD litigation settlements reached, net of related legal fees and costs. Settlements related to products purchased and sold in prior fiscal years. For the nine months ended October 29, 2016, the entire balance related to the United States. Refer to Note 12, Contingencies and Commitments, within the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, for further information.
(3)Represents charges related to the Canadian brand consolidation initiated in the first quarter of fiscal 2016, primarily due to retention bonuses and other store-related costs that were a direct result of the consolidation but did not qualify as restructuring charges.
(4)
Refer to Note 5, Restructuring Charges, in the Notes to Condensed Consolidated Financial Statements for additional information regarding the nature of these charges. For the three months ended October 28, 2017, the entire balance related to Canada. For the three months ended October 29, 2016, a charge of $2 million related to the United States and a benefit of $1 million related to Canada. For the nine months ended October 29, 2016, $27 million related to the United States and $3 million related to Canada.
(5)Income tax impact of non-GAAP adjustments is the summation of the calculated income tax charge related to each non-GAAP non-income tax adjustment. The non-GAAP adjustments relate primarily to adjustments in the United States and Canada. As such, the income tax charge is calculated using the statutory tax rates of 38.0% for the United States and 26.6% for Canada, applied to the non-GAAP adjustments of each country.

(6)Represents Gain on sale of investments and investment impairments included in Investment income and other within the Condensed Consolidated Statement of Earnings.

Non-GAAP operating income was 3.7%rate decreased in the third quarter and 3.5%first nine months of revenue for the three months ended October 28, 2017, and October 29, 2016, respectively. This increase wasfiscal 2023, primarily driven by a lower non-GAAP SG&A rate driven by sales leverage partially offset by a slightlyour Domestic segment’s lower gross profit rate.

Non-GAAP operating income was 3.6% and 3.3% of revenue for the nine months ended October 28, 2017, and October 29, 2016, respectively. This increase was driven by an increase in our non-GAAP gross profit rate driven by improved merchandise margin rates and adecreased leverage from lower non-GAAP SG&A rate driven by leveragesales volume on our increased revenue.

The third quarter of fiscal 2018fixed expenses, which resulted in unfavorable SG&A rates.

Our non-GAAP effective tax rate decreased fromin the prior year periodthird quarter of fiscal 2023, primarily due to the recognition of excesslosses and certain deferred tax assets for which tax benefits related to stock-based compensation and the resolution of certain tax matterswere previously not recognized, as well as an increase in the current year period.


Thetax benefit from federal tax credits. Our non-GAAP effective tax rate forincreased in the first nine months of fiscal 2018 decreased from the prior year period2023, primarily due to the recognition of excess tax benefits related to stock-based compensation and theprior-year resolution of certain discrete tax matters and a decrease in the tax benefit from stock-based compensation, partially offset by the impact of lower pre-tax earnings in the current year period.

Foryear. Refer to Note 10, Income Taxes, of the threeNotes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q for additional information.

Our non-GAAP diluted EPS decreased in the third quarter and first nine months ended October 28, 2017,of fiscal 2023, primarily driven by the increasedecreases in non-GAAP operating income and the decrease in the non-GAAP effective tax rate drove the increase in both non-GAAP net earnings from continuing operations and non-GAAP diluted EPS from continuing operations. Non-GAAP diluted EPS from continuing operations also increased due to lower diluted weighted-average common shares outstanding driven by our share repurchases. Refer to the Share Repurchases and Dividends section below for additional details.



income.

Liquidity and Capital Resources


Summary

We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level of investment neededrequired to support our business strategies, the performance of our business, capital expenditures, credit facilities, and short-term borrowing arrangements and working capital management. CapitalWe modify our approach to managing these variables as changes in our operating environment arise. For example, capital expenditures and share repurchases

are componentsa component of our cash flow and capital management strategy, which, to a large extent, we can adjust in response to economic and other changes in our business environment. We have a disciplined approach to capital allocation, which focuses on investing in key priorities that support our Best Buy 2020: Building the New Blue strategies.strategy.

Cash and cash equivalents were as follows ($ in millions):

October 29, 2022

January 29, 2022

October 30, 2021

Cash and cash equivalents

$

932 

$

2,936 

$

3,465 


The following table summarizes ourdecrease in cash and cash equivalents from January 29, 2022, was primarily due to lower inventory turnover and short-term investments balances at October 28, 2017, January 28, 2017,the timing and October 29, 2016 ($volume of inventory purchases and payments, capital expenditures, dividend payments, share repurchases and higher incentive compensation payments in millions):

 October 28, 2017 January 28, 2017 October 29, 2016
Cash and cash equivalents$1,103
 $2,240
 $1,341
Short-term investments2,237
 1,681
 1,777
Total cash, cash equivalents and short-term investments$3,340
 $3,921
 $3,118

Existingfiscal 2023 as a result of strong fiscal 2022 results, partially offset by earnings.

The decrease in cash and cash equivalents and short-term investments as well as cash generated from operations were sufficientOctober 30, 2021, was primarily due to fund share repurchases, capital expenditures, dividend payments, acquisitions and dividends duringhigher incentive compensation payments in fiscal 2023 as a result of strong fiscal 2022 results, partially offset by earnings.

Cash Flows

Cash flows were as follows ($ in millions):

Nine Months Ended

October 29, 2022

October 30, 2021

Total cash provided by (used in):

Operating activities

$

(108)

$

1,061 

Investing activities

(736)

(707)

Financing activities

(1,058)

(2,347)

Effect of exchange rate changes on cash

(10)

Decrease in cash, cash equivalents and restricted cash

$

(1,912)

$

(1,987)

Operating Activities

The increase in cash used in operating activities in the first nine months of fiscal 2018 without the need to utilize our credit facilities or other debt arrangements.



Cash Flows
The following table summarizes our cash flows from total operations for the first nine months of fiscal 2018 and 2017 ($ in millions):
 Nine Months Ended
 October 28, 2017 
October 29, 2016(1)
Total cash provided by (used in):   
Operating activities$1,203
 $1,407
Investing activities(1,016) (848)
Financing activities(1,335) (1,199)
Effect of exchange rate changes on cash15
 13
Decrease in cash, cash equivalents and restricted cash$(1,133) $(627)
(1)
Represents cash flows as of October 29, 2016, recast to present our retrospective adoption of accounting guidance related to the presentation of the cash flow statement. Refer to Note 1, Basis of Presentation, of the Notes to Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q.
Operating activities
The decrease in cash provided by operating activities2023 was primarily due to changesdriven by lower earnings in working capital associated with the timing of inventory receiptscurrent-year period and higher incentive compensation payments as well as the timinga result of advertising payments. Duringstrong fiscal 2017, we generally purchased inventory later in the Holiday season than in the prior year causing more payments to occur during the first quarter of fiscal 2018. This was2022 results, partially offset by changes in receivables driven by higher revenues at the endtiming and volume of fiscal 2017 than the prior yearinventory purchases and the subsequent timingpayments.


Investing activities

Activities

The increase in cash used in investing activities in the first nine months of fiscal 2023 was primarily duedriven by increased capital spending for initiatives to support our business, partially offset by a decrease in purchases of short-term investments and cash received in fiscal 2017 for the sale of a retail property in Shanghai, China related to the Five Star disposition. Refer to Note 2, Discontinued Operations, in the Notes to Condensed Consolidated Financial Statements for additional information regarding the nature of the sale.


investments.

Financing activities

Activities

The increasedecrease in cash used in financing activities in the first nine months of fiscal 2023 was due to increased share repurchases, which was due to an increase in our share price and number of shares repurchased, and an increase in our regular quarterly dividend rate. On March 1, 2017, we announced our intent to increase our share repurchases to $3.0 billion over the next two years compared to the $1.0 billion over two years that had been announced in February 2016. We also increased our regular quarterly dividend from $0.28 per share to $0.34 per share. This was substantially offset by repayment of our 2016 Notes and payment of a special dividend in fiscal 2017 and proceeds from option exercises in fiscal 2018primarily driven by the increasedlower share price.


repurchases.

Sources of Liquidity


Funds generated by operating activities, available cash and cash equivalents, short-term investments, our credit facilities and other debt arrangements are our most significant sources of liquidity. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures, share repurchases, dividends and strategic initiatives, share repurchases and dividends.including business combinations. However, in the event our liquidity is insufficient, we may be required to limit our spending. There can be no assurance that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our existing credit facilities or obtain additional financing, if necessary, on favorable terms.


We have a $1.25 billion, five-yearfive year senior unsecured revolving credit facility agreement (the "Five-Year“Five-Year Facility Agreement"Agreement”) with a syndicate of banks thatbanks. The Five-Year Facility Agreement permits borrowings of up to $1.25 billion and expires in June 2021. At October 28, 2017, we hadMay 2026. There were no borrowings outstanding under the Five-Year Facility Agreement. Refer to Note 5, Debt, in the Notes to Consolidated Financial Statements includedAgreement as of October 29, 2022, January 29, 2022, or October 30, 2021.

Our credit ratings and outlook as of December 2, 2022, remained unchanged from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, for further information on our Five-Year Facility Agreement.


Our ability to access our revolving credit facility under the Five-Year Facility Agreement is subject to our compliance with the terms29, 2022, and conditions of the facility, including financial covenants. The financial covenants require us to maintain certain financial ratios. At October 28, 2017, we were in compliance with all such financial covenants. If an event of default were to occur with respect to any of our other debt, it would likely constitute an event of default under our facilities as well.


Our credit ratings and outlooks at November 28, 2017, are summarized below. In fiscal 2018, Standard & Poor's Rating Services affirmed its long-term credit rating of BBB- and changed its outlook from Stable to Positive; Moody's Investors Service, Inc. affirmed its long-term credit rating of Baa1 with a Stable outlook; and Fitch Ratings Limited affirmed its long-term credit rating of BBB- and changed its outlook from Stable to Positive below.

Rating Agency

Rating

Outlook

Rating AgencyRatingOutlook

Standard & Poor's

BBB-

Positive

BBB+

Stable

Moody's

Baa1

Stable
Fitch

A3

BBB-

Positive

Stable


Credit rating agencies review their ratings periodically, and, therefore, the credit rating assigned to us by each agency may be subject to revision at any time. Accordingly, we are not able to predict whether our current credit ratings will remain as disclosed above. Factors that can affect our credit ratings include changes in our operating performance, the economic environment, conditions in the retail and consumer electronics industries, our financial position and changes in our business strategy. If further changes in our credit ratings were to occur, they could impact, among other things, interest costs for certain of our credit facilities, our future borrowing costs, access to capital markets, vendor financing terms and future storenew-store leasing costs.


Restricted Cash

Our liquidity is also affected by restricted cash balances that are pledged as collateral orprimarily restricted to use for general liability insurancecover product protection plans provided under our Best Buy Totaltech membership offering and workers’ compensation insurance.self-insurance liabilities. Restricted cash, and cash equivalents related to our continuing operations, which areis included in Other current assets remained consistent at $197on our Condensed Consolidated Balance Sheets, was $361 million, $193$269 million and $193$173 million at October 28, 2017,29, 2022, January 28, 2017,29, 2022, and October 30, 2021, respectively. The increases in restricted cash from January 29, 2016, respectively.


2022, and October 30, 2021, were primarily due to the national launch of our Best Buy Totaltech membership offering in October 2021 and growth in the membership base, partially offset by a decrease in restricted cash for self-insurance liabilities.

Debt and Capital


As of October 28, 2017,29, 2022, we havehad $500 million principal amount of notes due AugustOctober 1, 2018 (the "2018 Notes")2028, and $650 million principal amount of notes due March 15, 2021 (the "2021 Notes").October 1, 2030. Refer to Note 5, 6, Debt, of the Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q, and Note 8, Debt, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017,29, 2022, for furtheradditional information about our 2018 Notesoutstanding debt.

Share Repurchases and 2021 Notes. As we approach the due date for the 2018 Notes in the second quarter of fiscal 2019, we will continue to evaluate whether to fund the repayment through existing cash resources or issuance of new debt.


Share Repurchases
Dividends

We repurchase our common stock and pay dividends pursuant to programs approved by our Board of Directors ("Board"(“Board”). The payment of cash dividends is also subject to customary legal and contractual restrictions. Our long-term capital allocation strategy is to first fund operations and investments in growth and then return excess cash over time to shareholders through dividends and share repurchases while maintaining investment gradeinvestment-grade credit metrics.


On March 1, 2017, we announced our intent to repurchase $3.0 billion of shares over the next two years. In order to execute this plan,February 28, 2022, our Board approved a new $5.0 billion share repurchase program, in February 2017. Thiswhich replaced the $5.0 billion share repurchase program supersedes the previous $5.0 billion authorization dated June 2011.authorized on February 16, 2021. There is no expiration date governing the period over which we can repurchase shares under this authorization. Share repurchases resumed in fiscal November 2023 after pausing during the February 2017 share repurchase program.second quarter of fiscal 2023. We planexpect to spend approximately $2.0$1 billion onin share repurchases in fiscal 2018, versus our original expectation2023.

Share repurchase and dividend activity was as follows ($ and shares in millions, except per share amounts):

Three Months Ended

Nine Months Ended

October 29, 2022

October 30, 2021

October 29, 2022

October 30, 2021

Total cost of shares repurchased

$

-

$

426 

$

452 

$

1,757 

Average price per share

$

-

$

115.94 

$

96.83 

$

111.33 

Number of shares repurchased

-

3.7 

4.6 

15.8 

Regular quarterly cash dividend per share

$

0.88 

$

0.70 

$

2.64 

$

2.10 

Cash dividends declared and paid

$

198 

$

172 

$

595 

$

522 

The total cost of shares repurchased decreased in the February 2017 share repurchase program asthird quarter and first nine months of October 28, 2017. fiscal 2023, primarily due to decreases in the volume of repurchases. Cash dividends declared and paid increased in the third quarter and first nine months of fiscal 2023, primarily due to increases in the regular quarterly cash dividend per share.

Between the end of the third quarter of fiscal 20182023 on October 29, 2022, and November 30, 2017,December 2, 2022, we repurchased an incremental 4.54.4 million shares of our common stock at a cost of $256$322 million. Repurchased shares are retired and constitute authorized but unissued shares.


The following table presents our share repurchase history for the three and nine months ended October 28, 2017, and October 29, 2016 (in millions except per share amounts):
 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 
October 29, 2016(1)
Total cost of shares repurchased$366
 $206
 $1,147
 $528
Average price per share$57.14
 $37.67
 $52.35
 $33.03
Number of shares repurchased and retired6.4
 5.5
 21.9
 16.0

(1)
Includes the settlement of an accelerated share repurchase contract. Refer to Note 7, Shareholders' Equity, in the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017, for further information on this contract.
The cost of shares repurchased in the three and nine months ended October 28, 2017, increased compared to the same periods in the prior year largely due to an increase in our share price, but also included an increase in the number of shares repurchased. The increases reflect our announced intent to increase our share repurchases to $3.0 billion over the next two years compared with the $1.0 billion over two years that had been announced in February 2016.

Dividends

In fiscal 2004, our Board initiated the payment of a regular quarterly cash dividend on common stock. A quarterly cash dividend has been paid in each subsequent quarter. The payment of cash dividends is subject to customary legal restrictions. The following table presents our dividend activity for the three and nine months ended October 28, 2017, and October 29, 2016 (in millions, except per share amounts):
 Three Months Ended Nine Months Ended
 October 28, 2017 October 29, 2016 October 28, 2017 October 29, 2016
Regular quarterly cash dividends per share$0.34
 $0.28
 $1.02
 $0.84
Special cash dividends per share (1)

 
 
 0.45
Total cash dividends per share$0.34
 $0.28
 $1.02
 $1.29
        
Cash dividends declared and paid$102
 $89
 $310
 $417
(1)Special cash dividends are authorized by our Board and issued upon their discretion. Dividends paid in fiscal 2017 related to the net after-tax proceeds from certain legal settlements and asset disposals.

The increase in cash dividends declared and paid for the three months ended October 28, 2017, compared to the same period in the prior year was the result of a 21% increase in the regular quarterly dividend rate in fiscal 2018 compared to fiscal 2017. This was somewhat offset by fewer shares due to the return of capital to shareholders through share repurchases.

The decline in cash dividends declared and paid for the nine months ended October 28, 2017, compared to the same period in the prior year was the result of the lack of a special dividend in fiscal 2018 and fewer shares due to share repurchases. This was somewhat offset by the increase in the regular quarterly dividend rate.

Other Financial Measures

Our current ratio, calculated as current assets divided by current liabilities, was 1.2 at the end1.0 as of the third quarterOctober 29, 2022, and January 29, 2022, and 1.1 as of fiscal 2018, compared to 1.5 at the end of fiscal 2017October 30, 2021. The decrease from October 30, 2021, was primarily driven by lower cash and 1.3 at the end of the third quarter of fiscal 2017. The third quarter of fiscal 2018 declined from the end of fiscal 2017 due primarily to the reclassification of our 2018 Notes to current liabilities and a decline in receivables attributed to higher sales at the end of fiscal 2017.

cash equivalents.

Our debt to earnings ratio, calculated as total debt (including current portion) divided by net earnings ratio was 1.1 atover the endtrailing twelve months increased to 0.7 as of the third quarter of fiscal 2018,October 29, 2022, compared to 1.1 at the end0.5 as of fiscal 2017January 29, 2022, and 1.3 at the end of the third quarter of fiscal 2017. The decrease at the end of the third quarter of fiscal 2018 compared to the end of the third quarter of fiscal 2017 wasOctober 30, 2021, primarily due to an increase inlower net earnings.


Our non-GAAP debt to EBITDAR ratio, which includes capitalized operating lease obligations in its calculation, remained unchanged at 1.6 for all periods presented below.

Our non-GAAP debt to EBITDAR ratio is calculated as follows:
Non-GAAP debt to EBITDAR =Non-GAAP debt
Non-GAAP EBITDAR
The most directly comparable GAAP financial measure to our non-GAAP debt to EBITDAR ratio is our debt to net earnings ratio, which excludes capitalized operating lease obligations from debt in the numerator of the calculation and does not adjust net earnings in the denominator of the calculation.


The following table presents a reconciliation of our debt to net earnings ratio and our non-GAAP debt to EBITDAR ratio for continuing operations ($ in millions):
 
October 28, 2017(1)
 
January 28, 2017(1)
 
October 29, 2016(1)
Debt (including current portion)$1,329
 $1,365
 $1,367
Capitalized operating lease obligations (5 times rental expense)(2)
3,910
 3,872
 3,834
Non-GAAP debt$5,239
 $5,237
 $5,201
      
Net earnings from continuing operations$1,242
 $1,207
 $1,077
Other income (expense) (including interest expense, net)35
 38
 51
Income tax expense575
 609
 616
Depreciation and amortization expense663
 654
 654
Rental expense782
 774
 767
Restructuring charges(3)
9
 39
 42
Non-GAAP EBITDAR$3,306
 $3,321
 $3,207
      
Debt to net earnings ratio1.1
 1.1
 1.3
Non-GAAP debt to EBITDAR ratio1.6
 1.6
 1.6
(1)Debt is reflected as of the balance sheet dates for each of the respective fiscal periods, while net earnings from continuing operations and the other components of non-GAAP EBITDAR represent activity for the 12-months ended as of each of the respective dates.
(2)The multiple of five times annual rent expense in the calculation of our capitalized operating lease obligations is the multiple used for the retail sector by one of the nationally recognized credit rating agencies that rate our creditworthiness, and we consider it to be an appropriate multiple for our lease portfolio.
(3)
Refer to Note 5, Restructuring Charges, in the Notes to Condensed Consolidated Financial Statements for additional information regarding the nature of these charges. Previously, we also added back non-restructuring property and equipment impairment charges to our non-GAAP EBITDAR. However, beginning in the first quarter of fiscal 2018, we no longer exclude non-restructuring property and equipment impairment charges from our non-GAAP financial measures. To ensure our financial results are comparable, we have recast the prior period balances to conform to this presentation. Refer to the Overview section within this Item 2. MD&A for more information.

Off-Balance-Sheet Arrangements and Contractual Obligations

Our liquidity is not dependent on the use of off-balance-sheet financing arrangements other than in connection with our operating leases and our $1.25 billion in undrawn capacity on our credit facilities atFive-Year Facility Agreement as of October 28, 2017,29, 2022, which, if drawn upon, would be included as Short-termin either short-term or long-term debt inon our Condensed Consolidated Balance Sheets.

There has been no material change in our contractual obligations other than in the ordinary course of business since the end of fiscal 2017.2022. See our Annual Report on Form 10-K for the fiscal year ended January 28, 2017,29, 2022, for additional information regarding our off-balance-sheet arrangements and contractual obligations.


Significant Accounting Policies and Estimates

We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements, included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017. We discussand our critical accounting estimates in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017. In the first quarter of fiscal 2018, we adopted accounting policy changes related to stock-based compensation and inventory valuation, as described in Note 1, Basis of Presentation, of the Notes to Condensed Consolidated Financial Statements in our Quarterly Report on Form 10-Q for the quarter ended April 29, 2017.2022. There have been no other significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2017.


2022.

New Accounting Pronouncements

For a description of new applicable

We do not expect any recently issued accounting pronouncements see Note 1, Basis of Presentation, of the Notes to Condensed Consolidated Financial Statements of this Quarterly Reporthave a material effect on Form 10-Q.



our financial statements.

Safe Harbor Statement Under the Private Securities Litigation Reform Act


Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. With the exception of historical information, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements and may be identified by the use of words such as "anticipate," "assume," "believe," "estimate," "expect," "guidance," "intend," "outlook," "plan," "project"“anticipate,” “assume,” “believe,” “estimate,” “expect,” “guidance,” “intend,” “outlook,” “plan,” “project” and other words and terms of similar meaning. Such statements reflect our current views and estimates with respect to future market conditions, company performance and financial results, operational investments, business prospects, our operating model, new strategies and growth initiatives, the competitive environment, consumer behavior and other events. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the potential results discussed in such forward-looking statements. Readers should review Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended January 28, 2017,29, 2022, for a description of important factors that could cause our actual results to differ materially from those contemplated by the forward-looking statements made in this Quarterly Report on Form 10-Q. Among the factors that could cause actual results and outcomes to differ materially from those contained in such forward-looking statements are the following: macro-economic conditions (including fluctuationslevels of consumer confidence; macroeconomic pressures in housing prices and jobless rates), financial and commodity market conditionsthe markets in which we operate (including but not limited to the credit, equity,effects of COVID-19; increased inflation rates; fluctuations in foreign currency exchange rates; increased levels of inventory loss

due to organized crime, petty theft or otherwise; fluctuations in housing prices, energy markets, and energy markets),jobless rates and those related to the conflict in Ukraine); supply chain issues; any material disruption in our relationship with or the services of third-party vendors, risks related to our exclusive brand products and risks associated with vendors that source products outside of the U.S.; the duration and scope of the COVID-19 pandemic and its resurgences and the impact on demand for our products and services; catastrophic events, health crises and pandemics; susceptibility of our products to technological advancements, product life cycles and launches; conditions in the industries and categories in which we operate,operate; changes in consumer preferences, or confidence,spending and debt; competition (including from multi-channel retailers, e-commerce business, technology service providers, traditional store-based retailers, vendors and mobile network carriers); our ability to attract and retain qualified employees; changes in consumer spendingmarket compensation rates; our expansion strategies; our focus on services as a strategic priority; our reliance on key vendors and debt levels, themobile network carriers (including product availability); our ability to maintain positive brand perception and recognition; our company transformation; our mix of products and services offered for sale inservices; our physical stores and online, product availability,ability to effectively manage strategic ventures, alliances or acquisitions; our ability to effectively manage our real estate portfolio; trade restrictions or changes in the costs of imports competitive initiatives(including existing or new tariffs or duties and changes in the amount of competitors (including pricing actions and promotional activities), strategic and business decisions ofany such tariffs or duties); our vendors (including actions that could impact promotional support, product margin and/or supply), the success of new product launches, the impact of pricing investments and promotional activity, weather, natural or man-made disasters, attacksreliance on our data systems,information technology systems; our dependence on internet and telecommunications access and capabilities; our ability to prevent or reacteffectively respond to a disaster recovery situation,cyber-attack, privacy or security breach; product safety and quality concerns; changes to labor or employment laws or regulations; risks arising from statutory, regulatory and legal developments (including tax statutes and regulations); risks arising from our international activities (including those related to the conflict in lawUkraine or regulations,fluctuations in foreign currency exchange rates); failure to effectively manage our costs; our dependence on cash flows and net earnings generated during the fourth fiscal quarter; pricing investments and promotional activity; economic or regulatory developments that might affect our ability to provide attractive promotional financing; constraints in the capital markets; changes in tax rates, changes in taxable income in each jurisdiction, tax audit developments and resolution of other discrete tax matters,to our vendor credit terms; changes in our stock pricecredit ratings; and the impact on excess tax benefitsgeneral economic uncertainty in key global markets and worsening of global economic conditions or deficiencies related to stock-based compensation, our ability to manage our property portfolio, the impactlow levels of labor markets, our ability to retain qualified employees and management, failure to achieve anticipated expense and cost reductions, disruptions in our supply chain, the costs of procuring goods we sell, failure to achieve anticipated revenue and profitability increases from operational and restructuring changes (including investments in our multi-channel capabilities), inability to secure or maintain favorable vendor terms, failure to accurately predict the duration over which we will incur costs, development of new businesses, failure to complete or achieve anticipated benefits of announced transactions and our ability to protect information relating to our employees and customers.economic growth. We caution that the foregoing list of important factors is not complete. Any forward-looking statements speak only as of the date they are made and we assume no obligation to update any forward-looking statement that we may make.


Item 3.Quantitative and Qualitative Disclosures About Market Risk

Item 3.Quantitative and Qualitative Disclosures About Market Risk

As disclosed in our Annual Report on Form 10-K for the fiscal 2017,year ended January 29, 2022, in addition to the risks inherent in our operations, we are exposed to certain market risks.


Interest Rate Risk


We are exposed to changes in short-term market interest rates and these changes in rates will impact our net interest expense. Our cash, cash equivalents and short-term investmentsrestricted cash generate interest income that will vary based on changes in short-term interest rates. In addition, we have swapped a portion of our fixed-rate debt to a floating-ratefloating rate such that the interest rate expense on this debt will vary with short-term interest rates. Refer to Note 5, Debt, and Note 6, Derivative Instruments, in1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended January 28, 2017,29, 2022, for further information regarding our interest rate swaps.


As of October 28, 2017,29, 2022, we had $3.3$1.3 billion of cash, cash equivalents and short-term investmentsrestricted cash and $1.2$0.5 billion of debt that has been swapped to floating rate. Therefore, we hadrate, and therefore the net cash and short-term investments of $2.1 billion generating income, which isbalance exposed to interest rate changes. changes was $0.8 billion. As of October 28, 2017,29, 2022, a 50 basis50-basis point increase in short-term interest rates would leadhave led to an estimated $11$4 million reduction in net interest expense, and conversely a 50 basis50-basis point decrease in short-term interest rates would leadhave led to an estimated $11$4 million increase in net interest expense.


expense.

Foreign Currency Exchange Rate Risk

We have market risk arising from changes in foreign currency exchange rates related to operations in our International segment operations. On a limited basis, we utilize foreign exchange forward contractssegment. Refer to manage foreign currency exposureNote 1, Summary of Significant Accounting Policies, of the Notes to certain forecast inventory purchases, recognized receivable and payable balances and our investmentConsolidated Financial Statements included in our Canadian operations. Our primary


objective in holding derivatives is to reduceAnnual Report on Form 10-K for the volatilityfiscal year ended January 29, 2022, for additional information regarding these instruments.

In the third quarter and first nine months of net earnings and cash flows, as well as net asset value associated with changes infiscal 2023, foreign currency exchange rates. Our foreign currency risk management strategy includes both hedging instruments and derivatives that are not designated as hedging instruments, which generally have terms of up to 12 months. The aggregate notional amount related to our foreign exchange forward contracts outstanding at October 28, 2017, was $304 million. The net fair value recorded on our Condensed Consolidated Balance Sheets at October 28, 2017, related to our foreign exchange forward contracts was zero. The amount recorded in our Condensed Consolidated Statements of Earnings from continuing operations related to all contracts settled and outstanding was a gain of $2 million forrate fluctuations were primarily driven by the three months ended October 28, 2017, and a loss of $1 million for the nine months ended October 28, 2017.


The weaknessstrength of the U.S. dollar compared to the Canadian dollar and Mexican peso compared to the prior-year period, which had a positivenegative overall impact on our revenue as thesethis foreign currenciescurrency revenue translated into moreless U.S. dollars. We estimate that foreign currency exchange rate fluctuations had a net favorablean unfavorable impact of $40 million on our revenue of approximately $44 million and $1$84 million in the third quarter and first nine months of fiscal 2023, respectively. The impact of foreign exchange rate fluctuations on our net earnings forin the three months ended October 28, 2017,third quarter and a net favorable impact of $17 million on our revenue and $1 million on our net earnings for thefirst nine months ended October 28, 2017.

of fiscal 2023 was not significant.

Item 4.Controls and Procedures

Item 4.Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’sU.S. Securities and Exchange Commission’s (“SEC”) rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), to allow timely decisions regarding required disclosure. We have established a Disclosure Committee, consisting of certain members of management, to assist in this evaluation. The Disclosure Committee meets on a regular quarterly basis and otherwise as needed.more often if necessary.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act), at October 28, 2017.29, 2022. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at October 28, 2017,29, 2022, our disclosure controls and procedures were effective.

There waswere no changechanges in internal control over financial reporting during the fiscal quarter ended October 28, 2017,29, 2022, that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.


PART II — OTHER INFORMATION


Item 1.Legal Proceedings

Item 1.Legal Proceedings

For a description ofinformation about our legal proceedings, see Note 12, 11, Contingencies, of the Notes to Condensed Consolidated Financial Statements, ofincluded in this Quarterly Report on Form 10-Q.

Item 6.Exhibits


Item 2.

3.1

Unregistered Sales of Equity Securities

Amended and Use of Proceeds


(c) Stock Repurchases

The following table presents information regarding our repurchases of common stock during the third quarter of fiscal 2018:
Fiscal Period Total Number of Shares Purchased Average Price Paid per Share 
Total Number of Shares Purchased as Part of Publicly Announced Program(1)
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program(1)
July 30, 2017 through August 26, 2017 1,891,131
 $60.50
 1,891,131
 $4,143,000,000
August 27, 2017 through September 30, 2017 1,831,093
 $55.16
 1,831,093
 $4,042,000,000
October 1, 2017 through October 28, 2017 2,680,203
 $56.13
 2,680,203
 $3,891,000,000
Total 6,402,427
 $57.14
 6,402,427
  
(1)
Pursuant to a $5.0 billion share repurchase program that was authorized by our Board in February 2017. There is no expiration date governing the period over which we can repurchase shares under the February 2017 share repurchase program. For additional information see Note 10, Repurchase of Common Stock, Notes to Condensed Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q.

Item 6.Exhibits

3.2

31.1

31.2

32.1

32.2

101

101

The following financial information from our Quarterly Report on Form 10-Q for the third quarter of fiscal 2018,2023, filed with the SEC on December 1, 2017,6, 2022, formatted in Inline Extensible Business Reporting Language (XBRL)(“iXBRL”): (i) the Condensed Consolidated Balance Sheets atas of October 28, 2017,29, 2022, January 28, 2017,29, 2022, and October 29, 2016,30, 2021, (ii) the Condensed Consolidated Statements of Earnings for the three and nine months ended October 28, 2017,29, 2022, and October 29, 2016,30, 2021, (iii) the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended October 28, 2017,29, 2022, and October 29, 2016,30, 2021, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended October 28, 2017,29, 2022, and October 29, 2016,30, 2021, (v) the Condensed Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended October 28, 2017,29, 2022, and October 29, 2016,30, 2021, and (vi) the Notes to Condensed Consolidated Financial Statements.

_

(1)

104

The certifications in Exhibit 32.1 and Exhibit 32.2 to thiscover page from our Quarterly Report on Form 10-Q shall not be deemed “filed” for purposesthe third quarter of Section 18 offiscal 2023, filed with the Securities Exchange Act of 1934,SEC on December 6, 2022, formatted in iXBRL (included as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.Exhibit 101).


(1)The certifications in Exhibit 32.1 and Exhibit 32.2 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

Pursuant to Item 601(b)(4)(iii) of Regulation S-K under the Securities Act of 1933, as amended, the registrant has not filed as exhibits to this Quarterly Report on Form 10-Q certain instruments with respect to long-term debt under which the amount of securities authorized does not exceed 10% of the total assets of the registrant. The registrant hereby agrees to furnish copies of all such instruments to the SEC upon request.


SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BEST BUY CO., INC.

(Registrant)

Date: December 1, 20176, 2022

By:

/s/ HUBERT JOLY
Hubert Joly
Chairman and Chief Executive Officer
Date: December 1, 2017By:

/s/ CORIE BARRY

Corie Barry

Chief Executive Officer

Date: December 6, 2022

By:

/s/ MATTHEW BILUNAS

Matthew Bilunas

Chief Financial Officer

Date: December 1, 20176, 2022

By:

/s/ MATHEW R. WATSON

Mathew R. Watson

Senior Vice President, Finance – Controller and Chief Accounting Officer



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