0000764478-25-000057
SEC filingRevenue grew 2.4% in Q3 FY26 driven by computing and gaming, but operating income fell due to $171M in goodwill impairments at Best Buy Health.
In the third quarter of fiscal 2026 (ended November 1, 2025), Best Buy reported consolidated revenue of $9.672 billion, a 2.4% increase compared to $9.445 billion in the same period last year. Comparable sales grew 2.7%, driven by a mix of new technology innovation, omni-channel customer experience, and strong vendor partnerships. Growth was led by computing, gaming, and mobile phones, partially offset by declines in home theater, appliances, and drones.
Gross profit increased to $2.248 billion (23.2% of revenue) from $2.217 billion (23.5% of revenue) in the prior year, with the gross margin rate declining 30 basis points due to lower product margin rates and an unfavorable sales mix, partially offset by rate improvement in services.
Operating income fell sharply to $198 million (2.0% of revenue) from $350 million (3.7% of revenue) in Q3 FY25, a decline of 43.4%. The primary driver was $171 million in goodwill and intangible asset impairments related to Best Buy Health, triggered by a change in its customer base and downward revisions to revenue and margin projections due to pressures in the Medicaid and Medicare Advantage markets. Restructuring charges were a net benefit of $5 million in the quarter (reversal of prior charges), compared to $4 million in expense last year.
Net earnings decreased to $140 million from $273 million, and diluted EPS fell to $0.66 from $1.26. However, on an adjusted basis (excluding impairments, restructuring, and amortization), adjusted diluted EPS rose to $1.40 from $1.26, driven by higher adjusted operating income. The adjusted effective tax rate increased to 24.6% from 23.8%, primarily due to decreased tax benefits from green energy incentives.
Domestic Segment: Revenue grew 2.1% to $8.878 billion, with comparable sales up 2.4%. Online revenue reached $2.823 billion (31.8% of segment revenue), up 3.5% on a comparable basis. By category, computing and mobile phones (49% of mix) grew 7.6%, entertainment (6% of mix) surged 14.0% driven by gaming, while consumer electronics (26% of mix) declined 2.9% and appliances (11% of mix) fell 8.4%. Adjusted SG&A decreased slightly to $1.707 billion (19.2% of revenue) from $1.711 billion (19.7% of revenue), reflecting lower Best Buy Health expenses largely offset by higher incentive compensation. Adjusted operating income rose to $360 million (4.1% of revenue) from $338 million (3.9% of revenue), driven by sales leverage on SG&A.
International Segment (Canada): Revenue increased 6.1% to $794 million, with comparable sales up 6.3%. Growth was led by computing and mobile phones (9.2% comparable sales growth) and entertainment (11.3%), partially offset by a 4.1% decline in appliances. Revenue also benefited from Best Buy Express locations opened after Q2 FY25, partially offset by negative foreign exchange impacts. Adjusted SG&A decreased to $153 million (19.3% of revenue) from $155 million (20.7% of revenue), driven by favorable FX. Adjusted operating income more than doubled to $28 million (3.5% of revenue) from $13 million (1.7% of revenue), reflecting higher sales volumes and SG&A leverage.
Management did not provide specific quantitative guidance for future periods in this MD&A. However, the filing notes that the company expects to reduce its traditional Domestic Best Buy store count by 5 stores in fiscal 2026, with additional closures of non-traditional locations expected in fiscal 2027 as part of the restructuring initiative. The restructuring charges in the first nine months of fiscal 2026 totaled $218 million, primarily related to labor and store optimization and Best Buy Health restructuring. The company continues to focus on omni-channel customer experience, vendor partnerships, and technology innovation as growth drivers. The significant impairment at Best Buy Health signals ongoing challenges in that segment, particularly related to Medicaid and Medicare Advantage market pressures.
Cash and cash equivalents totaled $923M as of November 1, 2025, down from $1.578B at year-end but up from $643M a year ago. Total debt stood at $1.165B, consisting of $500M 2028 Notes, $650M 2030 Notes, adjustments, and finance leases. Shareholders' equity was $2.653B, primarily driven by retained earnings of $2.306B. Inventory increased to $7.993B, reflecting seasonal build for the holiday quarter. Deferred revenue (current and long-term) was $1.062B, with additional unredeemed gift card liabilities of $231M.
No traditional purchase commitments were disclosed. However, the company has a supply chain financing program with an outstanding liability of $1.091B as of November 1, 2025, representing accounts payable settled early. This is not a contractual obligation but a financing arrangement. Other commitments such as operating leases are reflected on the balance sheet ($2.838B operating lease assets, $2.928B total lease liabilities).
Share repurchases totaled $201M in the first nine months, repurchasing 3.0M shares at an average price of $67.28. Authorization remaining: $3.1B. Dividends paid amounted to $602M ($2.85 per share year-to-date), with a quarterly dividend of $0.95 per share. Debt activity was minimal; $10M repaid, no new issuance. Capital expenditures were $529M, representing 1.9% of revenue, primarily in the Domestic segment ($469M).
Two reportable segments: Domestic and International. Domestic revenue for Q3 FY2026 was $8.878B (91.8% of total), up 2.1% YoY, with adjusted operating income of $360M (4.1% margin). International revenue was $794M, up 6.2% YoY, with adjusted operating income of $28M (3.5% margin). Revenue categories within Domestic: Computing and Mobile Phones led at $4.368B, followed by Consumer Electronics $2.351B, Appliances $965M, Entertainment $543M, Services $591M, and Other $60M. Goodwill impairment of $118M was recorded in Domestic for Best Buy Health.