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SEC filingRevenue grew 1.6% in Q2 FY26 to $9.44B, driven by comparable sales gains, but operating income fell 34% due to $114M restructuring charges.
For the second quarter (Q2) of fiscal 2026 ended August 2, 2025, Best Buy generated revenue of $9.44 billion, a 1.6% increase compared to $9.29 billion in Q2 of fiscal 2025. This growth was primarily driven by comparable sales growth of 1.6%, fueled by strong performance in gaming, computing, and mobile phones, partially offset by declines in home theater, appliances, and tablets. Gross profit increased marginally to $2.19 billion, but gross margin contracted 30 basis points to 23.2%, mainly due to lower product margin rates.
Selling, general and administrative (SG&A) expense rose to $1.83 billion from $1.81 billion, maintaining a relatively stable rate of 19.4% of revenue. The most significant impact on profitability came from restructuring charges, which surged to $114 million in Q2 FY26 from a credit of $7 million in the prior year period. These charges were primarily associated with a new labor and store optimization restructuring initiative. Consequently, operating income fell sharply to $251 million (2.7% of revenue) from $383 million (4.1% of revenue) a year earlier. Net earnings declined to $186 million, and diluted earnings per share (EPS) dropped to $0.87 from $1.34, with restructuring charges contributing a $0.54 per share negative impact.
For the first six months of fiscal 2026, revenue was $18.21 billion (up 0.4% YoY), operating income was $470 million (down 32.4% YoY), and diluted EPS was $1.82 (down 26.3% YoY). The six-month results included $223 million in restructuring charges.
The Domestic segment, representing the vast majority of revenue, reported Q2 revenue of $8.70 billion, up 0.9% YoY, with comparable sales growth of 1.1%. Growth was led by computing, mobile phones, and entertainment (gaming), while appliances, home theater, and tablets declined. Online revenue reached $2.86 billion, or 32.8% of segment sales, and grew 5.1% on a comparable basis. Domestic adjusted SG&A increased due to higher compensation, a lapped favorable legal settlement of approximately $10 million, and higher technology expenses. Adjusted operating income rate fell to 4.0% from 4.2% due to an unfavorable gross profit rate.
The International segment (Canada) posted a strong 11.3% revenue increase to $740 million, driven by 7.6% comparable sales growth in gaming, computing, and mobile phones, and contributions from new Best Buy Express locations. Despite revenue growth, International gross profit rate declined notably to 21.8% from 23.9% due to lower product margin rates. Adjusted SG&A remained relatively stable, resulting in adjusted operating income of $18 million (2.4% of revenue) compared to $17 million (2.6% of revenue) in the prior year.
Best Buy acknowledged ongoing significant uncertainty regarding tariffs, which could affect product costs and customer demand. The company estimates that approximately 30-35% of products it purchases are reliant on vendor imports from China, lower than the 55% previously disclosed. Management continues to seek mitigation strategies with vendors. Best Buy also guided that it expects to reduce its traditional Domestic Best Buy store count by approximately 5 to 10 stores in the normal course of operations in fiscal 2026, in addition to closing select non-traditional store locations as part of the restructuring initiative commenced in Q2. No specific quantitative guidance for future periods was provided in this MD&A section.
As of August 2, 2025, Best Buy held $1,456M in cash and cash equivalents, and total restricted cash (included in other current assets) of $257M, bringing total cash, cash equivalents, and restricted cash to $1,713M. Total debt stood at $1,174M, consisting of $500M 4.45% notes due 2028, $650M 1.95% notes due 2030, finance lease obligations of $30M, and net debt discounts/issuance costs of ($6M). The company has a $1.25B revolving credit facility expiring April 2030, with no borrowings outstanding. Shareholders' equity was $2,716M, down from $2,808M at fiscal year-end due to dividends and buybacks.
No material purchase commitments were disclosed in the Notes. Deferred revenue (contract liabilities) totaled $1,102M ($889M current + $213M long-term), with $853M recognized during the first six months. Unredeemed gift card liabilities were $230M. The supply chain financing program liability was $872M, included in accounts payable.
During the six months, Best Buy repurchased 2.5M shares for $167M (average $66.03 per share), with $3.1B remaining under the $5.0B authorization. Dividends totaled $403M ($0.95 per share quarterly, up from $0.94). Capital expenditures were $341M (1.87% of revenue), primarily in the Domestic segment ($311M). Debt levels remained stable; no new debt was issued or repaid.
Best Buy operates two segments: Domestic and International. In Q2 FY2026 (three months ended August 2, 2025), Domestic revenue was $8,698M (92% of total), up 0.9% YoY, with adjusted operating income of $351M (4.0% margin). International revenue was $740M (8% of total), up 11.3% YoY, with adjusted operating income of $18M (2.4% margin). Key product categories: Computing and Mobile Phones (41% of Domestic revenue), Consumer Electronics (27%), and Appliances (12%). Restructuring charges of $114M (net benefit of ($7M) in prior year) impacted reported operating income.
Operating cash flow (CFO) of $783 million declined from $817 million in the prior year period, despite net earnings dropping to $388 million from $537 million. The decrease in earnings was partially offset by higher non-cash adjustments: depreciation and amortization of $422 million (vs. $437 million), restructuring charges of $223 million (vs. $8 million), and stock-based compensation of $75 million (vs. $74 million).
Key working capital headwinds included a $717 million inventory build (vs. $761 million) and a $286 million decrease in other liabilities. Accounts payable provided $693 million (vs. $904 million), indicating some vendor payment slowdown. Income taxes paid reduced cash by $167 million (vs. $183 million).
CapEx intensity (capex/CFO) rose to 43.5% from 41.0%, reflecting higher spending. Total capital returns—dividends ($403M) and share repurchases ($165M)—amounted to $568 million, exceeding CFO by $215 million, implying reliance on balance sheet cash or debt for funding. Note the large restructuring charges ($223M) depress reported earnings but are added back as non-cash in operating cash flow. Free cash flow is not directly disclosed but can be approximated as CFO minus capex = $442 million, which still falls short of total capital returns.