Item 1A. Risk Factors.
Described below are certain risks we believe apply to our business and the industry in which we operate. The risks are categorized using the following headings: external, strategic, operational, regulatory, compliance and legal, and financial and market. Each of the following risk factors should be carefully considered in conjunction with other information provided in this Annual Report on Form 10-K and in our other public disclosures. The risks described below highlight potential events, trends or other circumstances that could adversely affect our business, financial condition, results of operations, cash flows, liquidity or access to sources of financing and, consequently, the market value of our common stock and debt instruments. These risks could cause our future results to differ materially from historical results and from guidance we may provide regarding our expectations of future financial performance. The risks described below are not an exhaustive list of all the risks we face. There may be others that we have not identified or that we have deemed to be immaterial. All forward-looking statements made by us or on our behalf are qualified by the risks described below.
External Risks
Macroeconomic pressures may adversely affect consumer spending and our financial results.
To varying degrees, our products and services are sensitive to changes in macroeconomic conditions. Consumer demand for the products and services that we offer could be, or could continue to be, affected by a number of factors, including: real GDP growth, inflation, recession, consumer confidence, employment levels, effects of government closures, cost of living, uncertainty over the availability of government benefits, tax rates, availability of consumer financing, interest rates, housing market conditions, foreign currency exchange rates, the price of oil, gas and other commodities and other macroeconomic trends. Additionally, the impact of these factors could be compounded with respect to discretionary purchases of consumer electronics.
These macroeconomic conditions impact consumer behavior and spending in various ways, including:
• whether consumers make a purchase;
• how frequently consumers upgrade or replace their devices;
• consumers' choice of brand, model or price-point; and
• consumers' appetite for complementary services (for example, My Best Buy Plus™ or My Best Buy Total™ membership).
Any decrease in consumer demand due to macroeconomic conditions may negatively impact our financial results.
We are subject to specific pressures that may increase our product prices, including high consumer demand, inflation, governmental actions (e.g., tariffs) and supply chain disruptions. Additionally, price increases in the products we purchase for resale may require us to adjust our sales prices. Our ability to increase prices to offset these pressures might be limited, requiring us to absorb these increases within our margins. Increases in the cost of living may also put pressure on our ability to offer competitive compensation and other employer-provided benefits and may adversely affect our financial results. Any economic factors or circumstances resulting in higher costs for transportation, labor, insurance, healthcare or commodities can increase our operating, selling, general and administrative costs and otherwise materially adversely affect our financial results.
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Geopolitical pressures may adversely impact our supply chain, the cost of our products or revenues and financial results.
Geopolitical tensions, both domestic and international, including issues related to trade routes, political instability and divisiveness, the potential implementation of more restrictive trade policies, tariff increases and/or volatility, the realignment of alliances or the renegotiation of existing trade agreements could continue to have a material adverse impact on our business.
While we directly import approximately 1% to 3% of our overall assortment, our global supply chain for consumer electronics is heavily reliant on vendor imports from foreign countries (including products sourced from China, Mexico and Southeast Asia). Consequently, our financial results are highly sensitive to changes in trade policies, tariffs and cross-border logistics. The scope, timing, and implementation of these policies remains uncertain and may result in new or modified tariff regimes, additional regulatory requirements, or further trade friction with U.S. trading partners. The uncertainty caused by ongoing tariff volatility creates challenges for planning inventory, pricing and supply chain strategies, which could continue to impact our cost structure, supply chain stability and overall financial results.
Ongoing or emerging conflicts, including those in the Middle East, Ukraine and the South China Sea, may continue to impact fuel prices, inflation, the global supply chain, cybersecurity and other macroeconomic conditions, which may further adversely affect global economic growth, consumer confidence and demand for our products and services. For example, any further deterioration of relations between Taiwan and China, the resulting actions taken, the response of the international community and other factors affecting trade with China or political or economic conditions in Taiwan could disrupt the manufacturing and distribution of products or hardware components in the region, such as semiconductors and television panels sourced from Taiwan or the broader array of products sourced from China. Additionally, conflict in the Middle East, and the resulting disruption of transit through the Persian Gulf and the Strait of Hormuz, continues to disrupt global supply chain flows and impact fuel prices. Furthermore, these conflicts or other international policies and efforts may impact, or continue to impact, our critical international trade routes, such as the Panama Canal, the Red Sea and the Suez Canal. Such may increase shipping times or costs, which could affect our operations and financial results.
Geopolitical tensions may provoke further retaliatory actions by our trading partners that may increase costs, disrupt our supply chain and/or impact our business operations. China maintains significant control over the majority of rare earth elements, which are essential elements in many electronic devices. Should China reinstate its export ban on rare earth elements or take other actions that restrict U.S. supply of these minerals, it would impact both the consumer electronics we sell and our business’s underlying technological infrastructure.
One or more of these factors could have a material adverse effect on our supply chain, the cost of our products or our revenues and financial results.
Catastrophic events could adversely affect our operating results.
Catastrophic events, including those driven or intensified by climate change, pose a growing risk to our operating results and financial performance. The frequency and severity of natural disasters or extreme weather events (such as storms, blizzards, extreme temperatures, earthquakes, hurricanes, floods, fires and droughts) are increasing in many of our key markets, particularly in our three largest states by total sales (California, Texas and Florida). We may experience other catastrophic events beyond natural disasters, including pandemics, civil unrest, power loss, telecommunications failures, software and hardware malfunctions, terrorism (including related cyber threats) and other acts of violence. Additionally, the locations where we do business could continue to be the subject of unrest and national attention, which impacts our ability to operate. The effects of these events may be amplified should multiple events occur simultaneously, such as a natural during a pandemic.
Such events may prevent our workforce and/or customers from reaching our stores and properties, disrupt segments of our supply chain and distribution network or impact critical third-party services. These disruptions may impact our ability to procure goods or services necessary for operating our business and may affect our information technology systems, limiting our ability to transact with customers and fulfill orders.
Catastrophic events could result in significant physical damage to, or closure of, our facilities. They may also necessitate preventative investments in our facilities and infrastructure. Moreover, insufficient infrastructure investment may increase the risk that large-scale disruptive events could impact our critical infrastructure, potentially having a material adverse impact on our operations and financial performance. As a consequence of these catastrophic events, we may experience interruptions to our operations or losses of property, equipment and/or inventory, which could adversely affect our revenue and profitability.
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Many of the products we sell are highly susceptible to technological advancement, product life-cycle fluctuations and changes in consumer preferences.
We operate in a highly and increasingly dynamic industry sector fueled by constant technological innovation, advancement and disruption, including the rapid integration of artificial intelligence (“AI”) into consumer products. These factors manifest in a variety of ways: the emergence of new products and categories, the rapid maturation of categories, cannibalization of categories, changing price points, and product replacement and upgrade cycles.
This rapid pace of change can be hard to predict and manage. If we fail to interpret, predict and react to these changes in a timely and effective manner, the consequences may include, but are not limited to:
• failure to offer, or inability to secure an adequate supply of, the products and services that our customers want;
• excess inventory, which may require heavy discounting, liquidation or storage;
• delays in adapting our merchandising, marketing or supply chain capabilities to accommodate changes in product trends; and
• damage to our brand and reputation.
Vendors may also fail to adequately invest in new technology, design, production or distribution facilities and may reduce their customer incentives, advertising and promotional activities or change their pricing policies.
These and other similar factors could have a material adverse impact on our revenue and profitability.
Strategic Risks
We face strong competition from multi-channel retailers, e-commerce businesses, technology service providers, traditional store-based retailers, vendors and mobile network carriers, which directly affects our revenue and profitability.
We constantly strive to offer consumers the best value in a highly competitive retail sector. We compete against many local, regional, national and international retailers (both online and brick and mortar), as well as against some of our vendors and mobile network carriers that are leveraging their own direct-to-customer channels to market and sell products.
Shoppers are increasingly price-conscious when making discretionary purchases. At the same time, online and multi-channel retailers are prioritizing fast, low-cost delivery options, including curbside pickup and guaranteed shipping times. Because our strategy is based on offering superior levels of customer service and a full range of complementary services, our cost structure may be higher than some of our competitors, creating additional margin pressure. Failure to manage these factors effectively while offering competitive delivery options could negatively impact our profit margins and the demand for our products.
Our ability to remain competitive also depends on effectively maintaining and growing our customer base and accurately forecasting their spending levels. An inability to drive traffic to physical and digital channels or to maintain brand relevance with target audiences could pose both an operational and financial risk. Additionally, failure to consistently meet customer expectations across stores, in-home services and online platforms could negatively impact our financial performance. Inability to quickly adapt to changes in customer behavior (e.g., AI-driven search, AI shopping bots) could have an adverse impact our financial results.
Competition is becoming increasingly diverse, including through the expansion of retail media networks, such as our retail media network, Best Buy Ads, which competes for brand marketing spend and advertiser attention. Additionally, as our Best Buy Marketplace platform expands, where third-party sellers can sell products on our platform, we face the added challenge of competing not only with external sellers but also with third-party sellers on our own platform.
Further, as our competitors develop and expand their strategic use of AI, our operations and profitability could be adversely impacted if we fail to execute or maintain our own focused AI strategy that drives technological advancement and innovation. Diverse competition may also arise from new entrants into the markets we serve, including unexpected players who could more aggressively leverage technologies such as AI and platform integrations. As these and related competitive factors evolve and progress, we may experience material adverse pressure on our revenue and profitability.
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If we fail to attract, retain and engage qualified employees, our operations and profitability may be negatively impacted. In addition, changes in market compensation rates could adversely affect our profitability.
Our performance is highly dependent on attracting, retaining and engaging appropriately qualified employees in our stores, service centers, distribution centers, field and corporate offices. Our strategy of offering high-quality services and assistance for our customers requires a highly trained and engaged workforce, which is reliant on the creation and maintenance of a positive culture that is attractive to all qualified employees and beneficial relationships between employees and the enterprise. The turnover rate in the retail sector is relatively high, creating an ongoing need to recruit and train new employees. Our ability to maintain sufficient numbers of qualified employees depends on a number of factors, such as employee engagement, our reputation, our ability to train and develop our employees, our ability to connect with and promote available talent pools, our development and maintenance of employee-desired policies and practices, unemployment rates, competition from other employers, availability of qualified personnel and our ability to offer appropriate compensation and benefit packages.
Additionally, increasingly prevalent legal and regulatory restrictions on the terms or enforceability of non-competition, employee non-solicitation, confidentiality and similar restrictive covenant clauses could make it more difficult to retain qualified personnel. Further, our policies and practices may be affected by, or require changes in response to, evolving legal and regulatory restrictions on policies related to employee engagement, which may further impact our ability to retain and engage qualified employees.
We operate in a competitive labor market, and there is a risk that market increases in compensation and employer-provided benefits could have a material adverse effect on our profitability. We may be subject to continued market pressure to increase employee hourly wage rates and employer-provided benefits, especially as the cost of living increases. In addition, prolonged external stressors (e.g., from violence, political unrest or customer behavior) may affect the mental wellbeing of employees and lead to fatigue, reduced engagement and/or attrition.
Failure to recruit or retain qualified employees may impair our efficiency and effectiveness and our ability to pursue growth opportunities. In addition, significant turnover of our executive team or other employees in key positions with specific knowledge relating to our operations and industry may negatively impact our operations and financial results and potentially have cascading effects on our employees.
Our focus on services exposes us to certain risks that could have a material adverse impact on our revenue, profitability and reputation.
We offer a full range of services that complement our product offerings, including consultation, delivery, health-related services, installation, memberships, repair, set-up, technical support and warranty-related services. The strategy and execution of our service offerings are subject to incremental risks, such as:
• a sustained increase in consumer desire to purchase product offerings online and through mobile applications, impacting our ability to sell ancillary services;
• unpredictable extended warranty failure rates and related expenses;
• margin pressure from membership offerings;
• pressure from lower-cost competitors that could erode the value proposition of our premium services;
• the continual need to maintain and upgrade the technology infrastructure supporting our services;
• increased labor expenses and challenges in forecasting staffing needs, as well as pressure on traditional labor models to meet evolving customer expectations;
• bad actors posing as Geek Squad and/or customer care;
• potential claims liability due to employees traveling in company vehicles and/or working in customer homes;
• errors or omissions in the fulfillment of services;
• customer devices in our possession and the related responsibility for the security of those devices and the privacy of the data they hold;
• the potential impact on in-home services of inclement weather, health and safety concerns and catastrophic events;
• growing dependence on third parties (e.g., reduced control over subcontractor regulatory compliance and adherence to our standards, liability for third parties working on our behalf); and
• non-compliance with new and existing laws and regulations applicable to these services.
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Our reliance on key vendors and mobile network carriers subjects us to various risks and uncertainties which could affect our revenue and profitability.
While we source products we sell from a wide variety of domestic and international vendors, a significant portion of our merchandise comes from a relatively small group of key suppliers. In fiscal 2026, our 20 largest suppliers accounted for approximately 80% of the merchandise we purchased, with five suppliers – Apple, Samsung, HP, LG and Sony – representing approximately 55% of total merchandise purchased. Our contracts with vendors generally do not require them to continue supplying us with merchandise. Our profitability depends on securing acceptable terms with our vendors for, among other things, the price of merchandise we purchase from them, funding for various forms of promotional programs, payment terms, allocations of merchandise, development of compelling assortments of products, data sharing terms, operation of vendor-focused shopping experiences within our stores and terms covering returns and factory warranties. While we believe we offer capabilities that these vendors value and depend upon to varying degrees, our vendors may be able to leverage their competitive advantages — for example, their own stores or online channels, their financial strength, the strength of their brands with customers or their relationships with other retailers — to our detriment. In addition, vendors may decide to limit or allowing us to offer certain categories, focus their marketing efforts on alternative channels or make changes to our financial or other terms. Further, our flexibility to modify selling prices is limited due to digital technology that consumers to compare prices on a real-time basis, a that is further amplified by the increasing use of AI-driven tools and shopping platforms.
Globally, the cost and availability of memory components have been, and may continue to be, affected by industry-wide supply constraints. While we work with vendors to adjust product and pricing strategies, these actions may not fully offset higher costs and inventory constraints, which may impact our margins and financial performance.
We are also dependent on a small number of mobile carriers to allow us to offer mobile devices with carrier connections. The competitive strategies utilized by mobile network carriers can have a material impact on our business, especially with ongoing consolidation in the mobile industry. For example, if carriers change the structure of contracts, upgrade terms, qualification requirements, monthly fee plans, cancellation fees or service levels, the volume of upgrades and new contracts we sign with customers may be reduced, adversely affecting our revenue and profitability. In addition, our carriers may also serve customers through their own stores, websites, mobile applications and call centers or through other competing retail channels.
Demand for the products and services we sell could decline if we fail to maintain positive brand perception and recognition.
We operate a portfolio of brands with a commitment to customer service and innovation. We believe that recognition and the reputation of our company and our brands are key to our success. Operational factors, such as failure to deliver high quality services, offer competitive pricing, or meet delivery promises could damage our reputation. As we grow certain areas of the business (including Best Buy Marketplace, where there is a risk that third-party sellers, products, partners and services may fail to meet customer expectations), our reputation may be negatively affected.
External factors, such as negative public remarks or accusations, heightened violence and crime in or around our stores, or our failure to meet enhanced, and sometimes conflicting, expectations on corporate response to sensitive topics (including the use of AI), could also be damaging. Further, these risks, along with others, may be compounded by a polarized political climate and social activism directed at companies.
Third parties may commit fraud (e.g., AI-driven fraud or impersonation of Geek Squad agents) while using our brand without our permission, possibly harming brand perception or reputation.
The ubiquity of social media means that customer feedback and other information about our company, which may include fictitious information, are shared with a broad audience in a manner that is easily accessible and rapidly disseminated. Damage to the perception or reputation of our brands could result in, among other things, declines in revenues and customer loyalty (including as a result of any boycotts), decreases in gift card and service plan sales, lower employee retention and productivity and vendor relationship issues, all of which could materially adversely affect our revenue and profitability.
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Failure to effectively identify, manage and execute enterprise-wide strategies could have a negative impact on our business.
We may pursue new strategic initiatives, including business relationships, acquisitions, and/or adding or expanding revenue streams, including Best Buy Ads and Best Buy Marketplace. Assessing the viability of new or existing strategies is typically subject to uncertainty, and the success of such strategies can be adversely affected by many factors, including, for example, our ability to:
• identify or appropriately evaluate the risks in our diligence assessments;
• define or communicate strategies to sufficiently mobilize and align resources in support of strategic priorities;
• manage aggressive launch schedules and simultaneous execution of strategies within our current capabilities, resources or risk appetite;
• ensure alignment and mobilization of resources across a diverse and distributed employee population;
• execute certain aspects of our strategy within state, local, federal and/or non-U.S. jurisdiction regulations;
• manage regulatory and other risks if we choose to enter new jurisdictions, including international jurisdictions;
• manage tax risks associated with new strategies and revenue streams, including tax compliance and the impact of unsettled and evolving tax laws and regulations;
• effectively manage specific risks associated with Best Buy Marketplace, including compliance with laws and regulations relating to anti-money laundering, bank account and accounting requirements and unsettled and evolving laws around liability exposure;
• curate and refine our product assortment or offerings to meet customer expectations;
• integrate aspects of potential strategies into our existing business, such as new product or service offerings or information technology systems;
• generate growth from new or emerging strategies;
• accurately predict customer demand, meet customer expectations or generate forecasted revenue or profitability;
• maintain appropriate internal controls over financial reporting;
• accurately forecast financial performance, given the potential for unforeseen changes in the business environment;
• modernize technology platforms to support strategic initiatives, operations, compliance, and retail demands;
• generate expected synergies, such as cost reductions and other benefits; and
• manage potential adverse impacts on relationships with employees, vendors and other key partners of our existing business.
If our new or emerging strategies are unsuccessful, our reputation could be negatively impacted. Additionally, liquidity and profitability could be materially adversely affected, and we may be required to recognize material impairments to goodwill and other assets acquired or elect to discontinue certain areas of the business. For example, we recorded impairment charges related to our decision to exit a component of our Best Buy Health business in fiscal 2026. Our strategies may also divert our financial resources and management’s attention from other important areas of our business.
Failure to effectively manage our infrastructure, real estate portfolio and market segmentation strategy may negatively impact our business.
Managing our real estate portfolio effectively is critical to our omnichannel strategy. Failure to identify and secure suitable store and other facility locations, negotiate appropriate terms related to our real estate portfolio, or respond appropriately to any unforeseen changes could impair our ability to compete successfully and maintain profitability. In addition, any of the following factors could impact our long-term real estate strategy:
• our ability to adjust store operating models to adapt to changing consumer patterns;
• the location and appropriate number of stores, supply chain and other facilities in our portfolio;
• the products and services we offer at each store;
• the local competitive positioning, trade area demographics and economic factors for each of our stores;
• the primary term lease commitment and long-term lease option coverage for each store; and
• our ability to meet the evolving physical upgrades and maintenance needs of stores, facilities, and supply chain infrastructure necessary to support any changes to our strategy.
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Operational Risks
Interruptions and other factors affecting our supply chain may adversely affect our business.
Our supply chain assets are a critical part of our operations, particularly considering industry trends and initiatives, such as ship-from-store and the emphasis on fast delivery when purchasing online. We depend on our vendors’ abilities to deliver products to us at the right location, at the right time and in the right quantities. We also depend on third parties for the operation of certain aspects of our supply chain network. The continuing growth of online purchases for delivery increases our exposure to these risks. The factors that could adversely affect our operations or cause interruptions to our delivery capabilities include, but are not limited to:
• our ability to maintain and upgrade the technology infrastructure supporting our retail and supply chain operations;
• the risk to our employees, customers and inventory arising from burglaries or robberies in transit, at our stores or at our other facilities;
• our third parties’ ability to meet our standards or commitments;
• our ability to meet growing supply chain capacity needs (e.g., fulfillment as a service, Best Buy Marketplace returns and recalls); and
• the consolidation, business failures and heightened political scrutiny associated with the transportation and distribution sectors.
These risks are compounded for small parcel home deliveries, as we are dependent on a relatively small number of carriers with the scope and capacity required by our business.
Additionally, global supply chain impacts, similar to previous disruptions in the Red Sea and Panama Canal, could lead to increases in transportation costs or hinder third parties’ abilities to meet our demand for product volumes and timing, including:
• unionization, labor strikes, slow-downs, competitive job markets and labor shortages impacting ports or any other aspect of our supply chain;
• geopolitical affairs, including tariffs and other measures that impact the price or availability of transporting our products;
• natural disasters and climate events; and
• diseases, pandemics, outbreaks and other health-related concerns.
It is important that we maintain optimal levels of inventory in each store and distribution center and respond rapidly to shifting demands. Any disruption to our supply chain network, including for any of the reasons above, could damage our revenue and profitability. If we fail to manage these risks effectively, we could experience a material adverse impact on our reputation, revenue and profitability.
We utilize third-party vendors for certain aspects of our operations, and any material disruption in our relationships or their services may have an adverse impact on our business.
We engage key third-party business partners to support various functions of our business, including delivery and installation, customer warranty, information technology, web hosting and cloud-based services, customer loyalty programs, promotional financing and customer loyalty credit cards, gift cards, technical support, transportation, insurance programs and human resource operations. A rising dependency on critical partners (e.g., software as a service (“SaaS”), advertising, shipping) may lead to limited leverage to manage cost escalation or contractual terms and could negatively impact our operations. Any material disruption in our relationships with key third-party business partners or any disruption in the services or systems provided or managed by third parties could impact our revenues and cost structure and hinder our operations, particularly if a disruption occurs during peak revenue periods.
We are subject to risks related to the products we sell, including those products sold on our Best Buy Marketplace platform and products under our exclusive brand labels (Best Buy Essentials, Insignia, Lively, Rocketfish and Yardbird brands) that could affect our operating results.
If the products we sell fail to meet, or are alleged to fail to meet, applicable safety standards or our customers’ expectations regarding safety and quality, we could be exposed to increased legal risk and damage to our reputation. Failure to take appropriate actions in relation to product-related issues (e.g., product recalls) could lead to violations of laws and regulations and leave us susceptible to government enforcement actions or private litigation. Recalls of products, particularly when combined with lack of available alternatives or difficulty in sourcing sufficient volumes of replacement products, could also have a material adverse impact on our revenue and profitability.
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Our ability to find qualified vendors who can supply products that meet our internal standards of quality and safety in a timely and efficient manner can be difficult, especially with respect to goods sourced from outside the U.S. Risks such as political or economic instability, cross-border trade restrictions or tariffs, merchandise quality issues, product safety concerns, work stoppages, human rights violations, port delays, foreign currency exchange rate fluctuations, transportation capacity and costs, inflation, civil unrest, natural disasters, outbreaks of pandemics and other factors relating to foreign trade are beyond our control. These and other related issues could have a material adverse impact on our financial results.
Because we have greater responsibility for products under our exclusive brand labels, recalls or safety issues involving these products may present heightened risks compared to branded goods, including:
• exposure and responsibility to consumers for warranty replacements and repairs as well as product liability claims (including bodily injury or death) and government-enforced actions, some of which may require us to take significant actions, such as recalling products;
• inventory obsolescence as we do not generally have return-to-vendor rights;
• disruptions in manufacturing or logistics due to inconsistent and unanticipated order patterns;
• our inability to develop long-term relationships with key manufacturers;
• claims by technology or other intellectual property owners if we inadvertently infringe upon their patents or other intellectual property rights or if we fail to pay royalties owed on our exclusive brand products;
• inability to obtain or adequately protect patents and other intellectual property rights on our exclusive brand products or manufacturing processes; and
• failure to maintain consistent quality, availability and competitive pricing, which could have a material adverse impact on the demand for exclusive brand products and the profits we are able to generate from them.
Most of our exclusive brand products are manufactured by contract manufacturers in China, Mexico and Southeast Asia, which may limit our ability to do the following:
• seek recourse from manufacturers may be limited in foreign jurisdictions;
• conform in a timely manner to new rules or interpretations of developing and often-changing labor and environmental laws for the manufacturing of products in foreign countries; and
• source alternatives quickly enough to avoid interruptions in product supply due to disruptions, such as trade disputes or excessive tariffs.
Our expanding Best Buy Marketplace, including our existing Canadian platform and our recently launched U.S. platform, could present additional risks. Should the third-party products sold on our Best Buy Marketplace fail to meet quality, safety or regulatory standards, it could erode customer trust and damage our reputation. Moreover, unsettled laws regarding retailer responsibility for product liability and intellectual property claims related to third-party products sold on marketplace platforms compound our marketplace risk.
We rely heavily on our information technology systems for key business processes. Any failure or interruption in these systems could have a material adverse impact on our business.
The effective and efficient operation of our business is dependent on our information technology systems and those of our information technology service providers. We rely heavily on these information technology systems to manage all key aspects of our business, including demand forecasting, purchasing, supply chain management, transaction processing, fulfillment of products and services (including, for example, our urgent response and care center services provided by Best Buy Health), staff planning and deployment, financial management, reporting and forecasting and safeguarding critical and sensitive information.
Our information technology systems and those of our partners are subject to damage or interruption from several potential sources including:
• power outages, computer and telecommunications failures;
• catastrophic events (such as grid failures, fires, tornadoes, earthquakes and hurricanes);
• computer viruses, worms or other malicious computer programs;
• denial-of-service attacks, security incidents (through cyber-attacks and other malicious actions, including ransomware and social-engineering attacks);
• malicious attacks by foreign governments, criminals or other non-state actors;
• configuration or usage errors;
• unforeseen traffic levels;
• loss of inability to access or process critical data; and
• other technical difficulties or events outside of our control.
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These risks may be made more salient or may be compounded by a variety of factors, including:
• delays in modernizing these services and technology platforms;
• increasing demand and expectation for data hygiene and availability, both from internal and external partners;
• criticality of our online interactions and sales;
• continued hybrid or full-time remote working arrangements for many employees;
• increasing use of SaaS, platform as a service and infrastructure as a service providers;
• leveraging of new AI technologies in key business processes; and
• use of AI by threat actors to engage in automated, targeted and coordinated attacks of systems.
While we have adopted, and continue to enhance, business continuity and disaster recovery plans and strategies, there is no guarantee that such plans and strategies will be effective, which in turn could interrupt the functionality of our information technology systems or those of third parties. For example, as threat actor use of adversarial AI technology increases, vulnerabilities may be identified and exploited at a more rapid pace, which will make maintaining our system integrity more challenging.
If we fail to secure these systems against attacks, or fail to effectively configure, upgrade and maintain our hardware, software, network, and system infrastructure and improve the efficiency, resiliency and capacity of our systems, it could cause system interruptions and delays and hinder our ability to accept and fulfill customer orders, provide customer service and/or perform other necessary business functions. Any interruption could have a material adverse impact on our revenue and operations, cause us to incur material costs and/or adversely affect our reputation.
Failure to prevent or effectively respond to a breach of the security or privacy of our customer, employee, vendor or company information could expose us to substantial costs and reputational damage, as well as litigation and enforcement actions.
Our business involves the collection, use, sharing and retention of personal information (including payment card information and protected health information) and confidential business information. We share personal and confidential information with suppliers and other third parties and use third-party technology and systems that process and transmit information for a variety of activities.
We have been the target of attempted cyber-attacks and other security threats, and we may be subject to breaches of our information technology systems. While we engage in significant cybersecurity and data-protection efforts, criminal activity (such as cyberattacks), lapses in our controls, impersonation of individuals with proper access controls, or the intentional or negligent actions of employees, business associates or third parties may undermine our cybersecurity and privacy measures. As a result, unauthorized parties may obtain access to our data systems and misappropriate company, employee, third-party or customer information, authorized parties may use or share personal information in an inappropriate manner, or bad actors may otherwise seek to extract financial gain based on access to, or possession of, company, employee, customer or vendor information. Furthermore, because the methods used to obtain access change frequently and may not be immediately detected, and given the potentially nature of emerging technologies, we may be to anticipate such attacks or promptly and effectively respond to them.
The integration of AI into our operations introduces cybersecurity and privacy risks (including unauthorized or misuse of AI tools) and could lead to potential unauthorized access, use, acquisition, release, disclosure, alteration or destruction of personal or confidential information or challenge the stability of our platforms. Further, evolving consumer behaviors, such as shopping through AI-driven services, introduces growing complexity and heightened cybersecurity and privacy risks. These trends increase the complexity of bot mitigation strategies, requiring organizations to maintain robust cybersecurity controls while ensuring discoverability within agentic services and AI-powered search environments. This dual challenge amplifies our exposure to potential data privacy breaches, automated exploitation, and integrity risks in digital ecosystems.
Sensitive customer data may also be present on customer-owned devices entrusted to us for service and repair. Vulnerable code on products sold or serviced, including our exclusive brands, may also result in a compromise of customer privacy or security. If our efforts to protect against such compromises and reasonably ensure appropriate handling of customer data on devices we manufacture, sell or service are not effective, we may incur potential liability and damage to our customer relationships.
Increasing costs associated with information security and privacy, such as increased investment in technology and qualified staff, costs of compliance, costs resulting from fraud or criminal activity and costs of cyber and privacy insurance, could cause our business and results of operations to suffer materially. In addition, any compromise of our data security may materially increase the costs we incur to protect against such breaches and could subject us to additional legal risk. Any compromise of our customer information or other confidential information could have a material adverse impact on our reputation and/or our relationships with our customers and partners, which may in turn have a negative impact on our revenue and may expose us to material costs, penalties and claims.
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Additionally, newly applicable and potential new or significantly revised state, provincial and federal laws and regulations in the jurisdictions in which we do business are expanding (and may further expand) our obligations to protect and honor the privacy and security of personal information, imposing new restrictions on the collection, use, sharing and retention of data and requiring additional implementation resources, all of which create incremental risk arising from a potential breach or compliance failure. The proliferation of new and updated privacy laws and regulations, including the rise of extreme data minimization legislation, has the potential to limit our ability to collect, use or share personal information and thus hinder our strategic and marketing efforts (e.g., Best Buy Ads and Best Buy’s own efforts to communicate with consumers). We could be subject to heightened regulatory investigations, penalties and fines if a cybersecurity event or privacy violation is related to data or sensitive personal information that is regulated by laws such as, for example, the Health Insurance Portability and Accountability Act (HIPAA), the Personal Information Protection and Electronic Documents Act (PIPEDA), or the California Consumer Privacy Act (CCPA).
Regulatory, Compliance and Legal Risks
We are subject to statutory, regulatory and legal developments that could have a material adverse impact on our business.
Regulatory activity affecting the retail sector is dynamic, posing the potential risk of fines and additional operating costs associated with compliance. Additionally, defending against lawsuits and other proceedings may involve significant expense and divert management’s attention and resources from other matters. Some of the most significant compliance and litigation risks we face include, but are not limited to:
• the difficulty of complying with sometimes conflicting statutes, regulations and executive orders in local, national and international jurisdictions;
• the potential for incremental costs related to compliance with new or existing environmental legislation or international agreements affecting greenhouse gas emissions, electronics recycling, water usage or product materials;
• the challenges of ensuring compliance with applicable product laws and regulations, including laws and regulations related to product safety, product transport and product disposal, as well as laws and regulations related to the products sold by us or by Best Buy Marketplace sellers and the products we contract to manufacture;
• increased legal and regulatory exposure resulting from new and expanding business areas (e.g., Best Buy Marketplace and Best Buy Ads), especially the potential impact of the unsettled legal landscape relating to third-party marketplaces and retail media networks;
• the impact of evolving regulations governing data privacy and security, including limitations on the collection, use or sharing of information, consumer rights to access, delete or limit/opt-out of the use of information, and litigation arising from new private rights of action;
• the potential lingering residual obligations due to the divestment of certain health-related services in fiscal 2026;
• the impact of other new or changing statutes and regulations that may require changes to our compliance programs and attendant costs of those programs;
• the challenges of ensuring compliance with applicable labor and employment laws, including: laws governing the organization of unions and related rules that affect the nature of labor relations, which are frequently modified by the National Labor Relations Board; laws that impact the relationship between the company and independent contractors and the classification of employees and independent contractors; laws regarding non-discrimination and related issues; and wage and hour laws, such as minimum wage, sick time scheduling, paid leave and non-compete covenants;
• the challenges arising from regulatory lags in addressing and adapting to rapid AI advancements;
• the impact of litigation and dispute resolution, including class-action lawsuits involving consumers, shareholders and labor and employment matters, mass arbitration, pricing claims, and potential changes to arbitration rules that could increase costs; and
• the impact of regulatory and legislative uncertainty, such as changing U.S., state or other countries’ tax laws and regulations or evolving interpretations of existing tax laws, shifting federal policies, and an increasingly fragmented patchwork of federal and state regulations.
Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to cybersecurity, corporate responsibility and sustainability matters.
We are subject to changing rules and regulations promulgated by several governmental and self-regulatory organizations, including the SEC, the New York Stock Exchange, the Financial Accounting Standards Board and various states. These rules and regulations continue to evolve, demanding increased attention and vigilance for compliance. In addition, regulators, customers, investors, employees and other stakeholders are increasingly focusing on cybersecurity, CR&S matters and related disclosures, with some expressing or pursuing opposing views with respect to related initiatives. We could face adverse financial or reputational impacts if we are perceived as misaligned with these differing perspectives or agendas. As a result of these changing rules, regulations and stakeholder expectations, there has been, and will likely continue to be, an increase in general and administrative expenses and an increase in management time and attention spent complying with or meeting such regulations and expectations.
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We may also communicate certain initiatives and goals regarding sustainability, responsible sourcing, social investments and other related matters in our SEC filings or in other public disclosures. These initiatives and goals within the scope of CR&S could be difficult and expensive to implement, the technologies needed to implement them may not be cost-effective and may not advance at a sufficient pace and we could be criticized for the accuracy, adequacy or completeness of the disclosures. Further, statements about our initiatives and goals and progress toward those goals may be based on measurement standards that are still developing, internal controls and processes that continue to evolve and assumptions that are subject to change in the future. In addition, we could be criticized or face legal action, including shareholder suits, customer boycotts or governmental scrutiny, for the scope or nature of such initiatives or goals, or for any revisions to these goals. Any issues with our CR&S-related reporting, processes or goals, such as incomplete or inaccurate information, to timely with respect to our goals, or misalignment with our stakeholders’ expectations, could impact our reputation, business, financial performance or growth.
Our international activities are subject to many of the same risks as described above, as well as to risks associated with the legislative, judicial, regulatory, political, economic and cultural factors specific to the countries or regions in which we operate.
We have wholly-owned legal entities registered in various foreign countries, including Bermuda, Canada, China, India, Luxembourg, the Republic of Mauritius, the United Kingdom and Vietnam. Additionally, most of our exclusive brand products are manufactured by contract manufacturers based in China, Mexico and Southeast Asia. During fiscal 2026, our International segment generated approximately 8% of our consolidated revenue. In addition to the risk factors identified throughout, our international operations could be impacted by additional risks, including:
• political conditions, diplomatic relationships and alliances and geopolitical events, including war and terrorism;
• economic conditions, including monetary and fiscal policies and tax rules, as well as foreign exchange rate risk;
• rules governing international trade and potential changes to trade policies or trade agreements and ownership of foreign entities;
• government-imposed travel restrictions or warnings and differing responses of governmental authorities to pandemics and other global events;
• cultural differences that we may be unable to anticipate or respond to appropriately;
• different rules or practices regarding employee relations, including the existence of works councils or unions;
• difficulties in enforcing intellectual property rights; and
• difficulties encountered in exerting appropriate management oversight to operations in remote locations.
These factors could significantly disrupt our international operations, impact our return on investment or necessitate adjustments to our international strategy, including modifying or exiting our operations in certain locations. As a result, we may experience material adverse effects to our revenue and profitability and could incur material impairments and other exit costs.
Financial and Market Risks
Failure to meet any financial performance guidance or other forward-looking statements we may provide to the public could result in a decline in our stock price.
We may provide public guidance on our expected financial results or other forward-looking information for future periods. When we provide guidance, we believe that this guidance provides investors and analysts with a better understanding of management’s expectations for the future and is useful to our existing and potential shareholders, but such guidance is comprised of forward-looking statements subject to the risks and uncertainties described in this report and in our other public filings and public statements. Our actual results may not be in line with guidance we have provided. We may not be able to accurately forecast our growth rate and profitability. We base our expense levels and investment plans on sales estimates. A significant portion of our expenses and investments are fixed, and we may not be able to adjust our spending quickly enough if our sales are less than expected. Our revenue growth may not be predictable or sustainable, and our percentage growth rates may decrease. Our revenue and profitability depend on the continued growth of demand for the products and services offered by us, and our business is affected by general economic and business conditions worldwide. If our financial results for a particular period do not meet any guidance we provide or the expectations of market participants, or if we reduce any guidance for future periods, the market price of our common stock may .
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Failure to effectively manage our costs could have a material adverse effect on our profitability.
As discussed above, our revenues are susceptible to volatility from various sources, which can lead to periods of flat or declining revenues. However, some of our operating costs are fixed and/or are subject to multi-year contracts. Some elements of our costs may be higher than our competitors’ because of, for example, our extended retail footprint and structure, our hourly pay structure, our differentiated service offerings or our level of customer service. Accordingly, our ongoing drive to reduce costs and increase efficiency represents a strategic imperative. Failure to successfully manage our costs could have a material adverse impact on our profitability and curtail our ability to fund our growth or other critical initiatives.
We are highly dependent on the cash flows and net earnings we generate during our fiscal fourth quarter, which includes the majority of the holiday shopping season.
A large proportion of our revenue and earnings is generated in the fiscal fourth quarter, which includes the majority of the holiday shopping season. In addition, the holiday shopping season also incorporates many other unpredictable factors, such as the level of competitive promotional activity, new product release activity and customer buying patterns, which makes it difficult to forecast and react to these factors quickly. Unexpected events or developments, such as pandemics, natural or man-made disasters, changes in consumer demand and spending, economic factors, product sourcing issues, AI developments, cyber-attacks, failure or interruption of management information systems, or disruptions in services or systems provided or managed by third-party vendors could significantly disrupt our operations, especially during the fiscal fourth quarter. As a result of these factors, our fiscal fourth quarter and annual results could be adversely affected.
Economic, regulatory and other developments could adversely affect our ability to offer attractive promotional financing to our customers and adversely affect the profits we generate from these programs.
In partnership with third parties, we offer promotional financing as well as credit cards issued by third-party banks that manage and directly extend credit to our customers. Customers choosing promotional financing can receive extended payment terms and low- or no-interest financing on qualifying purchases. We believe our financing programs generate incremental revenue from customers who prefer the financing terms to other available forms of payment or otherwise need access to financing in order to make purchases. Approximately 25% of our fiscal 2026 Domestic segment revenue was transacted using one of the company’s branded cards. In addition, we earn profit-share income and share in any losses from some of our banking partners based on the performance of the programs. Profit-sharing revenue from our credit card arrangement approximated 1.2% of Domestic segment revenue in fiscal 2026. The income or loss we earn in this regard is subject to numerous factors, including the volume and value of transactions, the terms of promotional financing offers, bad debt rates, credit card delinquency rates, interest rates, the regulatory and competitive environment and expenses of operating the program. Adverse changes to any of these factors could impair our ability to offer these programs to customers and reduce customer purchases and our ability to earn income from sharing in the profits of the programs.
Constraints in the banking and capital markets or our vendor credit terms may have a material adverse impact on our liquidity.
We need sufficient sources of liquidity to fund our working capital requirements, service our outstanding indebtedness and finance business opportunities. Without sufficient liquidity, we could be forced to curtail our operations, or we may not be able to pursue business opportunities. The principal sources of our liquidity are funds generated from operating activities, available cash and cash equivalents, short-term investments, credit facilities, other debt arrangements and trade payables. Our liquidity could be materially adversely impacted if our vendors reduce payment terms and/or impose tighter credit limits. If our sources of liquidity do not satisfy our requirements, we may need to seek additional financing. We typically hold material balances of cash, cash equivalents and/or short-term investments and are therefore reliant on banks and other financial institutions to safeguard and allow ready access to these assets. Our future liquidity will depend on a variety of factors, such as economic and market conditions, the regulatory environment and financial stability of banks and other financial institutions, the availability of credit, our credit ratings and our reputation with potential lenders. These factors could have a material effect on our costs of borrowing and our ability to pursue business and our ability to meet our obligations as they become due.
Changes in our credit ratings may limit our access to capital and materially increase our borrowing costs.
Any future downgrades to our credit ratings and outlook could negatively impact the perception of our credit risk and thus our access to capital markets, borrowing costs, vendor terms and lease terms. Our credit ratings are based upon information furnished by us or obtained by a rating agency from its own sources and are subject to revision, suspension or withdrawal by one or more rating agencies at any time. Rating agencies may change the ratings assigned to us due to developments that are beyond our control, including the introduction of new rating practices and methodologies.
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