Best Buy Co. · Risk factors

Prior heading: Macroeconomic pressures, including, but not limited to, the current geopolitical climate, may adversely affect consumer spending and our financial results.

To varying degrees, our products and services are sensitive to changes in macroeconomic conditions conditions. Consumer demand for the products and services that impact consumer spending. As a result, consumers may we offer could be affected by a number of factors, including: real GDP growth, inflation, recession, consumer confidence, employment levels, cost of living, 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 many various ways, including, for example: including: whether or not they make a purchase; their choice of brand, model or price-point; how frequently they upgrade or replace their devices; devices; their choice of brand, model or price-point; and their appetite for complementary services (for example, My Best Buy Plus™ or My Best Buy Total™ membership). Real GDP growth, inflation (including wage inflation), consumer confidence, phasing out of public-health-emergency supports, employment levels, oil prices, interest, tax and foreign currency exchange rates, availability of consumer financing, housing market conditions, limitations on a government’s ability to borrow and/or spend capital, cost of living (e.g., food, fuel), any recession (and resulting corresponding declines Any decrease in consumer sentiment) and other macroeconomic trends can adversely affect consumer demand for the products and services that we offer. In addition due to general levels of inflation, we macroeconomic conditions may negatively impact our financial results. We are also subject to risks of specific inflationary pressures on that may increase our product prices due to, for example, prices, including high consumer demand demand, inflation, tariffs and supply chain disruptions. We Additionally, price increases in the products we purchase for resale may be unable require us to increase adjust our sales prices. Our ability to increase prices sufficiently to offset these pressures. Geopolitical issues around the world and how pressures might be limited, requiring us to absorb these increases within our markets are positioned can margins. Increases in the cost of living may also impact macroeconomic conditions and could have a material adverse impact put pressure on our financial results. These issues include, but are not limited to, the following: The conflict in Ukraine has exacerbated global geopolitical tensions, and may continue ability to significantly impact fuel prices, inflation, the global supply chain, cybersecurity offer competitive compensation and other macroeconomic conditions, which employer-provided benefits and may further adversely affect global economic growth, consumer confidence and demand for our products and services. Russia is a significant global producer of both fuel and raw materials used in certain products we sell, including nickel, aluminum and copper. Disruptions in the markets for those inputs, or other inputs produced by Russia, whether due to sanctions, market pressure to avoid purchasing inputs from Russia or otherwise, could increase overall material costs for many of the products we sell. We cannot predict the extent or duration of sanctions in response to the conflict in Ukraine, nor can we predict the effects of legislative or other governmental actions or regulatory scrutiny of Russia, its allies or other countries with which Russia has significant trade or financial ties, including China. 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 results. Any economic conditions in Taiwan could disrupt the manufacturing of products or hardware components in the region, such as semiconductors and television panels sourced from Taiwan factors or the broader array of products sourced from China. The Israel-Hamas War has heightened geopolitical tensions in the Middle East region. Additionally, attacks on cargo ships circumstances resulting in the Red Sea, catalyzed by the Israel-Hamas War, have disrupted Red Sea shipping lanes and may continue to disrupt global trade flows and impact shipping capacity. One higher transportation, labor, insurance costs, healthcare costs or more of these factors could have a material adverse effect on commodity prices can increase our supply chain, the cost of our products or our revenues sales and operating, selling, general and administrative expenses and otherwise materially adversely affect our financial results.

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Prior heading: Catastrophic events, including the effects of climate change, could adversely affect our operating results.

The risk or and actual occurrence of various catastrophic events could have a material adverse effect on our financial performance. Events that affect our properties, supply chain, partners, workforce or customers may consist of, or be caused by, for example: natural disasters or extreme weather events (such as storms, blizzards, extreme temperatures, earthquakes, hurricanes, floods, fires and droughts), including those related to, or exacerbated by, climate change; diseases or pandemics; power loss, telecommunications failures, or software or and hardware malfunctions; or and terrorism (including related cyber threats), civil unrest, violent acts or other conflicts. In recent years, we observed an increase in the The number and severity of certain catastrophic events is increasing in many of our markets. Such events can adversely affect our workforce and prevent employees and customers from reaching our stores and properties. Additionally, heightened social unrest and violence and crime in or around our stores, customer homes or businesses where we are performing services may further jeopardize the safety and security of our workforce and customers. Catastrophic events can also disrupt or disable portions of our supply chain, distribution network and third-party business operations that services, and may impact our ability to procure goods or services required for business operations at the quantities and levels we require. Finally, such operating our business. Such events can also affect our information technology systems, resulting in disruption to various aspects of our operations, including our ability to transact with customers and fulfill orders. The adverse effects of any such catastrophic event would be exacerbated if experienced at the same time as another unexpected and adverse event, such as a pandemic. Three of our largest states by total sales (California, Texas and Florida) are areas where particularly vulnerable to natural disasters and extreme weather conditions have been, and could continue to be, more prevalent. conditions. Natural disasters and climate-related events in those states these states, and other areas where our sales and operations are concentrated concentrated, could result in significant physical damage to to, or closure of of, our stores, distribution centers facilities and may require upgrades to our facilities and infrastructure. Additionally, heightened violence and crime in or other facilities. Further, current events associated with social injustice around our stores, customer homes or inequality, along with businesses where we are performing services may further jeopardize the ensuing safety and security of our workforce and customers as well as the general operation of our stores. Further, social activism, tension unrest/tension, and any related potential for violence, may impact our workforce, customers, properties and the communities where we operate. If our customers and customers, employees and shareholders do not perceive our response to be appropriate or adequate for a particular region or for our company as a whole, adequate, we could suffer damage to our reputation and brand, which could adversely affect our business. business. As a consequence of these or other catastrophic events, we may experience interruption interruptions to our operations or losses of property, equipment and/or inventory, which could adversely affect our revenue and profitability.

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Prior heading: 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, highly and increasingly dynamic industry sector fueled by constant technological innovation and disruption, including most recently by the proliferation of artificial intelligence (“AI”) technologies. 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 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 offer, or inability to secure an adequate supply of, the products and services that our customers want; excess inventory, which may require heavy discounting or liquidation; inability to secure adequate access to brands or products for which consumer demand exceeds supply; 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.

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Prior heading: 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.

While we constantly strive to offer consumers the best value, the retail sector is highly competitive. Price is of great importance to most customers, and price transparency and comparability continues to increase. Digital technology enables consumers to compare prices on a real-time basis, putting additional pressure on us to maintain competitive prices. We compete with 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 market their products directly to consumers. Competition is becoming increasingly diverse, including in the advertising revenue space and with the proliferation of marketplace platforms offering products at increasingly lower prices. Diverse competition may also result arise from new entrants into the markets we serve, including unforeseen unexpected players that may be able to who could more aggressively leverage technologies (for example such as AI and platform integrations). integrations. The retail sector continues to experience increased sales initiated online and using mobile applications, as well as online sales for both in-store or curbside pick-up. Online and multi-channel retailers continue to focus on delivery services, with customers increasingly seeking faster, guaranteed delivery times and low-cost or free shipping. Our ability to offer competitive delivery times and delivery costs depends on many factors and our failure to successfully manage these factors and offer competitive delivery options could negatively impact the demand for our products and our profit margins. Because our business strategy is based on offering superior levels of customer service and a full range of services to complement the products we offer, our cost structure might be higher than some of our competitors, and this, in conjunction with price transparency, could put pressure on our margins. margins. 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 enabling technology advancement and innovation. As these and related competitive factors evolve, we may experience material adverse pressure on our revenue and profitability.

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Prior heading: 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. 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 high, and there is an ongoing need to recruit and train new employees. Factors that affect our ability to maintain sufficient numbers of qualified employees include, for example, 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 employer-desired policies and practices, unemployment rates, competition from other employers, availability of qualified personnel and our ability to offer appropriate compensation and benefit packages. Our policies and practices may be affected by, or require changes in response to, legal and regulatory restrictions on policies related to inclusion and belonging, employee engagement and climate change, which may further impact our ability to retain and engage qualified employees. 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. operations and financial results. 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 also be subject to continued market pressure to increase employee hourly wage rates and increased cost pressure on employer-provided benefits. Our need to implement corresponding adjustments within our labor model and compensation and benefit packages could have a material adverse impact on the profitability of our business. 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.

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Prior heading: Our strategy to expand into new products and services (including health technology, services and logistics) brings new business, financial and regulatory risks.

We are introducing new products and services, particularly in In the health sector, into new market areas. As these are new technologies we offer a range of products and services, including, for example, Personal Emergency Response (PERS) and Remote Patient Monitoring (RPM) technology and services. As we refine existing offerings and introduce new markets, the first product offerings, we must navigate a complex, dynamic regulatory and service iterations technological environment, which may require further invention subject us to additional operational, financial and refinement. reputational risks. Our customers may not like our new value propositions. These offerings may present persistent technology and regulatory challenges propositions, and we may be subject to claims if customers of these offerings experience service disruptions, failures or other issues. These and other related issues could have a material adverse impact on our financial results issues. Our health sector offerings and reputation. This expanded risk increases the complexity of our business and places significant responsibility on our management, employees, operations, systems, technical expertise, financial resources and internal financial and regulatory control and reporting functions. Our emerging initiatives may subject customers we serve bring us to into scope for many significant laws or regulations. For example: We navigate a regulated medical device environment, regulatory requirements, including oversight those enforced by various government and regulatory agencies including, but not limited to, the U.S. Food and Drug Administration (“FDA”). We participate in government healthcare programs including, but not limited to, (FDA), the Centers for Medicaid as a provider of Personal Emergency Response System (“PERS”) devices and services. Sales of Lively mobile phones Medicaid Services (CMS), State Medicaid Agencies and service plans subjects us to regulation as a telecommunications provider, including the Federal Communications Commission (“FCC”) oversight. The (FCC). Additionally, the collection, storage, use and disclosure of personal information, information subjects us to privacy and security requirements. Notably, portions of the health business are subject to requirements, such as the Health Insurance Portability and Accountability Act (“HIPAA”) and certain of Current Health’s international operations are subject to (HIPAA), the UK’s United Kingdom’s General Data Protection Regulation (“GDPR,” (GDPR, as retained in UK law). State United Kingdom law) and numerous state data privacy laws are also rapidly changing, such as Washington’s new My Health, My Data Act with a private right of action, raising new considerations and challenges. Non-compliance laws. The risk accompanied with conditions imposed by regulatory authorities related to any of operating in the above activities health sector may lead to a range of consequences, including, but not limited to, customer complaints, individual consumer claims or class actions, product recalls, temporary bans on products, stoppages at production facilities, orders to stop providing services, remediation costs, corrective action plans, fines, penalties, regulatory enforcement actions, potential loss of business and impairment of our ability to continue participation in government healthcare programs, any of which programs. These and other related issues could adversely affect have a material adverse impact on our operations, financial results and reputation.

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Prior heading: 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, design, installation, memberships, protection plans, repair, set-up, technical support and health, safety and caregiving monitoring and support. Designing, marketing The strategy and executing these services is execution of our service offerings are subject to incremental risks. These risks could include, for example: sustained increase in consumer desire to purchase product offerings online and through mobile applications, impacting our ability to sell ancillary services; increased labor expense inability to fulfill sustain and operate a technology infrastructure sufficient to support our customer promises; increased services growth; ongoing pressure on margins from our Best Buy membership offerings, and the risk that increased volumes will not fully compensate for lower margins, or for loss of revenue margins; increased labor expenses and profit from revenue streams that are now included as benefits; inability to accurately forecast staffing levels to meet customer needs and demands; pressure on traditional labor models to meet the evolving landscape of offerings and customer needs; use of third-party services responsibility for third parties that fail to meet our standards or fail to comply with applicable labor and independent contractor regulations, leading to potential regulations; increased reputational damage and liability risk; risk of bad actors posing as Geek Squad and/or customer care; increased risk of errors or omissions in the fulfillment of services; unpredictable extended warranty failure rates and related expenses; employees in transit using company vehicles to visit customer locations and employees being present in customer homes, which may increase our scope of liability; the potential for increased scope of liability relating to managed services offerings; offerings provided by third parties on our behalf; employees having access to customer devices, including the information held on those devices, which may increase increases our risk given the responsibility for the security of those devices and the privacy of the data they hold; operational failures arising from growing demands on existing technological infrastructure; the engagement of third parties to assist with aspects of construction and installation and the potential responsibility for their actions; hold while in our possession; the risk that in-home services could be more adversely impacted by inclement weather, health and safety concerns and catastrophic events; and increased risk of non-compliance with new laws and regulations applicable to these services.

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Prior heading: Our reliance on key vendors and mobile network carriers subjects us to various risks and uncertainties which could affect our revenue and profitability.

We source the products we sell from a wide variety of domestic and international vendors. In fiscal 2024, 2025, our 20 largest suppliers accounted for approximately 80% of the merchandise we purchased, with five suppliers – Apple, Samsung, HP, Sony and LG - representing approximately 55% of total merchandise purchased. We generally do not have long-term written contracts with our vendors that would require them to continue supplying us with merchandise. 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, 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 commercial disadvantage. The potential adverse impact of these factors can be amplified by price transparency  which can limit our flexibility to modify selling prices  and a highly competitive retail environment. Generally, our ability — to negotiate favorable terms with our vendors is more difficult with vendors when our purchases represent a smaller proportion of their total revenues and/or when there is less competition for those products. detriment. In addition, vendors may decide to limit or cease allowing us to offer certain categories, focus their marketing efforts on alternative channels or make unfavorable changes to our financial or other terms. terms. Further, our flexibility to modify selling prices is limited due to digital technology that enables consumers to compare prices on a real-time basis. 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.

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Prior heading: Failure to effectively manage strategic ventures, alliances or acquisitions could have a negative impact on our business.

We may decide to enter into pursue new joint strategic ventures, partnerships, alliances including business relationships, acquisitions, and expanding or acquisitions with third parties (collectively, “new ventures”). adding revenue streams, including our retail media network, known as Best Buy Ads, and our marketplace platforms, where third-party sellers can sell their own products on Best Buy’s platform (“Marketplace”) (collectively “Strategic Ventures”). Assessing the viability of new ventures Strategic Ventures is typically subject to significant uncertainty, and the success of such new ventures Strategic Ventures can be adversely affected by many factors, including, for example: different and incremental business and other failure to identify or appropriately evaluate the risks of the new venture not identified Strategic Ventures in our diligence assessments; failure state or local regulations that may limit our ability to attract, motivate and retain key employees of the new venture; uncertainty execute certain aspects of forecasting financial performance; our Strategic Ventures; failure to integrate aspects of the new venture Strategic Ventures into our existing business, such as new product or service offerings or information technology systems; failure to accurately predict customer demand, or generate forecasted revenue or profitability; failure to maintain appropriate internal controls over financial reporting; uncertainty of accurately forecasting financial performance, including the impact of unforeseen changes in the business environment of Strategic Ventures, including, for example, the continuity of government funding for certain in-home care programs; failure to generate expected synergies, such as cost reductions; unforeseen changes in the business environment of the new venture; disputes or strategic differences with key employees or reductions and other third-party participants in the new venture; benefits; and adverse impacts on relationships with employees, vendors and other key partners of our existing business or the new venture. Strategic Ventures. If our new or emerging strategic ventures Strategic Ventures are unsuccessful, our liquidity and profitability could be materially adversely affected, and we may be required to recognize material impairments to goodwill and other assets acquired. New ventures For example, we recorded a pre-tax, non-cash goodwill impairment charge of $475 million related to our Best Buy Health reporting unit, as described further in the Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in fiscal 2025. Strategic Ventures may also divert our financial resources and management’s attention from other important areas of our business.

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Prior heading: Failure to effectively manage our real estate portfolio may negatively impact our operating results.

Effective management of our real estate portfolio is critical to our omnichannel strategy. Failure to identify and secure suitable locations for our stores and other facilities facilities, failure to negotiate appropriate terms related to our real estate portfolio, or failure to react appropriately should any unforeseen changes arise, could impair our ability to compete successfully and our profitability. Most of our properties are leased under multi-year contracts. As such, it is essential that we effectively evaluate a range Any of factors that may influence the success of following factors could impact our long-term real estate strategy. Such factors include, for example: changing patterns of customer consumption and behavior, particularly in light of an evolving omnichannel environment; strategy: our ability to adjust store operating models to adapt to these changing patterns; the location and appropriate number of stores, supply chain and other facilities in our portfolio; the interior layout, format and size of our stores; the products and services we offer at each store; the local competitive positioning, trade area demographics and economic factors for each of our stores; stores; and the primary term lease commitment and long-term lease option coverage for each store; and the occupancy cost of our stores relative to market rents. If we fail to effectively evaluate these factors or negotiate appropriate terms, or if unforeseen changes arise, the consequences could include, for example: closing stores and abandoning the related assets, while retaining the financial commitments of the leases; incurring significant costs to remodel or transform our stores; operating stores, supply chain or service locations that no longer meet the needs of our business; and bearing excessive lease expenses. These consequences could have a material adverse impact on our profitability, cash flows and liquidity. For leased property, the financial impact of exiting a location can vary greatly depending on, among other factors, the terms of the lease, the condition of the local real estate market, demand for the specific property, our ability to fulfill our maintenance and repair obligations, our relationship with the landlord and the availability of potential sub-lease tenants. It is difficult for us to influence some of these factors and the costs of exiting a property can be significant. In addition to rent, we are typically responsible for taxes, insurance and common area maintenance charges for vacant properties until the lease commitment expires or is terminated. Similarly, when we enter into a contract with a tenant to sub-lease property, we usually retain our obligations as the master lessee. This leaves us at risk for any remaining liability in the event of default by the sub-lease tenant.store.

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Prior heading: Interruptions and other factors affecting our stores and supply chain, including in-bound deliveries from our vendors, may adversely affect our business.

Our stores and 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. 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. The continuing growth of online purchases for delivery increases our exposure to these risks. The factors that can adversely affect these aspects of our operations or cause interruptions to our delivery capabilities include, but are not limited to: interruptions operational failures from growing demand on existing technological infrastructure; risk to our delivery capabilities; employees, customers and inventory arising from burglaries or robberies in transit, at our stores or other facilities; failure of third parties to meet our standards or commitments; disruptions to our systems commitments; and the need to implement new systems; limitations consolidation or business failures in capacity; global the transportation and distribution sectors. Additionally, global supply chain impacts that impacts, similar to previous disruptions in the Red Sea and Panama Canal, could lead to increases in transportation costs or hinder third parties’ ability abilities to meet our demand for product volumes and timing; increased levels of inventory loss due to organized crime, theft or damage; risk to our employees and customers arising from burglary or robbery from our stores or other facilities; consolidation or business failures in the transportation and distribution sectors; labor timing, including: unionization, labor strikes, slow-downs, labor shortages or unionization, including as a result of an increasingly competitive job market, affecting our stores or markets and labor shortages impacting ports or any other aspect of our supply chain; geopolitical affairs, including tariffs; natural disasters and climate events; and diseases, pandemics, outbreaks and other health-related concerns; and increasing transportation costs, including increases related to geopolitical, labor actions and environmental events (for example, droughts impacting Panama Canal shipping capacity). 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, or inefficiency in, to our supply chain network, whether due to geopolitical conflicts or catastrophic events, including for any of the reasons above, could damage our revenue and profitability. The risks associated with our dependence on third parties are greater for small parcel home deliveries because of the relatively small number of carriers with the scope and capacity required by our business. The continuing growth of online purchases for delivery increases our exposure to these risks. If we fail to manage these risks effectively, we could experience a material adverse impact on our reputation, revenue and profitability.

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Prior heading: Our exclusive brands products are subject to several additional product, supply chain and legal risks that could affect our operating results.

Sales of our exclusive brands products, which include If the Best Buy Essentials, Dynex, Insignia, Modal, Platinum, Rocketfish, Yardbird products we sell fail to meet, or are alleged to fail to meet, applicable safety standards or our customers’ expectations regarding safety and Lively brands, represent an important component of 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 (for example, product offerings 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. Most of these profitability. Our ability to find qualified vendors who can supply products are manufactured by contract manufacturers that meet our internal standards of quality and safety in China a timely and Southeast Asia. This arrangement exposes us efficient manner can be difficult, especially with respect to goods sourced from outside the following additional potential risks, which 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 effect impact on our operating results: we financial results. We have greater exposure to product-related risks in our exclusive brand category, including: exposure and responsibility to consumers for warranty replacements and repairs as a result of exclusive brands product defects, and our recourse to contract manufacturers for such warranty liabilities may be limited in foreign jurisdictions; we may be subject to regulatory compliance and/or well as product liability claims relating to personal injury, death (including bodily injury or property damage caused by exclusive brands products, death), some of which may require us to take significant actions, such as product recalls; we may experience disruptions inventory obsolescence as we do not generally have return-to-vendor rights; disruptions in manufacturing or logistics in the future due to inconsistent and unanticipated order patterns, our patterns; our inability to develop long-term relationships with key manufacturers, diseases or pandemics, ongoing and unforeseen natural disasters or geopolitical crises; we may not be able to locate manufacturers that meet our internal standards, whether for new exclusive brands products or for migration of the manufacturing of products from an existing manufacturer; we may be subject to a greater risk of inventory obsolescence as we do not generally have return-to-vendor rights; we are subject to developing and often-changing labor and environmental laws for the manufacturing of products in foreign countries, and we may be unable to conform to new rules or interpretations in a timely manner; we may be subject to claims 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 brands brand products; our operations may be disrupted by trade disputes or excessive tariffs, including any future trade disputes or future phases of trade negotiations with China and we may not be able to source alternatives quickly enough to avoid interruptions in product supply; and we may be unable inability to obtain or adequately protect patents and other intellectual property rights on our exclusive brands brand products or manufacturing processes. Maintaining processes; and failure to maintain consistent quality, availability and competitive pricing of our exclusive brands products helps us build and maintain customer loyalty, generate revenue and achieve acceptable margins. Failure to maintain these factors pricing, which could have a significant material adverse impact on the demand for exclusive brands brand products and the profits we are able to generate from them.them. Most of our exclusive brand products are manufactured by contract manufacturers in China, Mexico and Southeast Asia. This arrangement exposes us to the following additional potential risks: inability to seek recourse from manufacturers may be limited in foreign jurisdictions; inability to 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 inability to source alternatives quickly enough to avoid interruptions in product supply due to disruptions, such as trade disputes or excessive tariffs. Our expanding third-party Marketplace, including our existing Canadian platform and our soon-to-launch U.S. platform, could present additional risks. Should the products sold on our 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.

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Prior heading: We rely heavily on our information technology systems for our 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 vendors. We rely heavily on these information technology systems to manage all key aspects of our business, including demand forecasting, purchasing, supply chain management, point-of-sale processing, services fulfillment (including, for example, our Urgent Response service 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 power outages, computer and telecommunications failures, computer viruses, worms, other malicious computer programs, denial-of-service attacks, security breaches (through cyber-attacks and other malicious actions, including ransomware and phishing attacks), the implementation of AI technologies, catastrophic events (such as fires, tornadoes, earthquakes and hurricanes) and configuration or usage errors by our employees. 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 could interrupt the functionality of our information technology systems or those of third parties. The failure or interruption of these information systems, data centers, cloud platforms or their backup systems could significantly disrupt our business and cause higher costs and lost revenues and could threaten our ability to remain in operation. As we continue to migrate more systems to the cloud, expand our use of software as a service (SaaS) providers, we may face additional risks that may compromise our security or disrupt our business capabilities, including ensuring the proper configuration, configuration and dependencies on our service providers’ cybersecurity practices. Further, as our online interactions and sales have increased and have become critical to our growth, and as many employees now use hybrid or full-time remote-working arrangements, the unknowns risk of operating more workloads in the cloud, securing systems in any interruption of our information technology system capabilities is heightened, as well as the cloud and risk that customer demand exceeds the types capacity of cloud-based services we leverage.our online operations. Any such interruption or capacity constraint could result in a deterioration of our ability to process online sales, provide customer service or perform other necessary business functions.

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Prior heading: We face a heightened risk of cybersecurity attacks or data security incidents and are more dependent on internet and telecommunications access and capabilities.

We utilize complex information technology platforms to operate our websites and mobile applications. 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 and resiliency of our systems, it could cause system interruptions and delays. Disruptions to these services, such as those caused by unforeseen traffic levels, malicious attacks by foreign governments, criminals or other non-state actors, other technical difficulties or events outside of our control, such as natural disasters, power or telecommunications failures or loss of critical data, could prevent us from accepting and fulfilling customer orders for products or services, which could cause us to forgo material revenues, have an adverse impact on our revenue, incur material costs and could adversely affect our reputation. Further, as our online interactions and sales have increased and have become critical to our growth, and as many employees now use hybrid or full-time remote-working arrangements, the risk of any interruption of our information technology system capabilities reputation. If a cybersecurity event is heightened, as well as the risk related to data that customer demand exceeds the capacity of our online operations. Any is regulated, such interruption as under HIPAA, GDPR or capacity constraint could result California Consumer Privacy Act, in a deterioration of our ability addition to process online sales, provide customer service or perform other necessary the direct business functions. risks noted, we could be subject to additional regulatory investigations, penalties and fines. The integration of AI into our operations increases cybersecurity and privacy risks (including unauthorized or misuse of AI tools) and could lead to potential unauthorized access, misuse, acquisition, release, disclosure, alteration or destruction of company and customer data or other confidential or proprietary information and challenge the stability of our platforms. Further, threat actors may leverage AI to engage in automated, targeted and coordinated attacks of our systems.

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Prior heading: We are subject to statutory, regulatory and legal developments that could have a material adverse impact on our business.

Our statutory, regulatory The laws and legal environments regulations with which we must comply expose us to complex compliance and litigation risks that could have a material adverse effect on our operations. 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 and regulations in local, national or and international jurisdictions; the potential for unexpected incremental costs related to compliance with new or existing environmental legislation or international agreements affecting energy, carbon energy transition, greenhouse gas emissions, electronics recycling and water or product materials; the challenges of ensuring compliance with applicable product compliance laws and regulations, including laws and regulations with respect related to both product safety, product transport and product disposal, as well as laws and regulations related to the products we sell sold by us or by our third-party Marketplace sellers and the products we contract to manufacture, including laws and regulations related to product safety and product transport; manufacture; the financial, operational and business impact of evolving regulations governing data privacy and security, including limitations on the collection, use or sharing of information; information, consumer rights to access, delete or limit/opt-out of the use of information; or information, and litigation arising from new private rights of action; the impact of other new or changing statutes and regulations including, related to, but not limited to, financial reform; National Labor Relations Board rule changes; healthcare reform; contracted worker labor laws; finance, healthcare, corporate governance matters; escheatment rules; rules governing matters, escheatment, pricing, anti-money laundering, content, distribution, copyright, mobile communications, AI deployment or usage, electronic device certification or payment services; and/or services, or other future legislation that could affect how we operate and execute our strategies as well as or alter our expense structure; 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 diversity, equity and inclusion, inclusion and belonging, discrimination and related issues; and laws that impact minimum wage, sick time, paid leave, non-compete covenants and scheduling requirements; the impact of litigation, including class-action lawsuits involving consumers and consumers, shareholders and labor and employment matters; the possibility of a federal ban on arbitration clauses in consumer and/or or employee contracts, which could increase costs of dispute resolution; and resolution; the impact of changes in the federal executive and legislative branches on the development, or changes in, laws, regulations and policies, such as economic, fiscal, tax, retail, labor and social policies. The impact of geopolitical tensions, including the potential implementation of more restrictive trade policies, higher tariffs or the renegotiation of existing trade agreements in the U.S. or countries where we sell our products and services or procure products, could have a material adverse effect on our business. In particular, political or trade disputes, or future phases of trade negotiations with China could lead to the imposition of tariffs or other trade actions that could adversely affect our supply chain and our business and could require us to take action to mitigate those effects. Further, the impact of potential changes in U.S., state or other countries’ tax laws and regulations or evolving interpretations of existing laws; and the impact of changes in the federal government on laws, could adversely affect our financial condition regulations and results policies; and the potential for an increasing patchwork of operations. state regulations. Regulatory activity that affects affecting the retail sector has grown increased in recent years, increasing raising the 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. Concern over climate change may result in new or additional legal, legislative and regulatory requirements to reduce or mitigate the effects of climate change on the environment, which could result in future tax, compliance, transportation and utility cost increases. Our own climate change-oriented initiatives, such as our attempts to increase energy efficiency during store construction and remodeling, could also increase our costs. In addition, changes to the environment, both long-term and short-term, may affect consumer shopping behavior in a way that negatively impacts our revenue, revenue mix and profitability.matters.

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Prior heading: Our business is subject to evolving corporate governance and public disclosure regulations and expectations, including with respect to cybersecurity and corporate responsibility and sustainability matters, that could expose us to numerous risks.

We are subject to changing rules and regulations promulgated by several governmental and self-regulatory organizations, including the SEC, the New York Stock Exchange and Exchange, the Financial Accounting Standards Board. Board and various states. These rules and regulations continue to evolve in scope and complexity, with many new requirements emerging in response to laws enacted by Congress, evolve, demanding increased attention and vigilance for compliance. In addition, regulators, customers, investors, employees and other stakeholders are increasingly focusing on cybersecurity and corporate responsibility and sustainability (“CRS”) CR&S matters and related disclosures. At the same time, regulators have increasingly expressed or pursued opposing views with respect to environmental, social and governance initiatives. These opposing views may also be adopted by our customers, investors, employees and other stakeholders. As a result of these changing rules, regulations and stakeholder expectations have resulted in, expectations, there has been, and are will likely to continue to result in, increased be, an increase in general and administrative expenses and increased an increase in management time and attention spent complying with or meeting such regulations and expectations. For example, developing and acting on initiatives within the scope of CRS, and collecting, measuring and reporting CRS-related information and metrics can be costly, difficult and time-consuming and are subject to evolving reporting standards, including the SEC’s final climate-related reporting requirements issued in March 2024 and similar proposals by other international regulatory bodies. We may also communicate certain initiatives and goals regarding environmental matters, diversity, 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 CRS 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 disclosure. 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 suits brought by shareholders, for the scope or nature of such initiatives or goals, or for any revisions to these goals. If Any issues with our CRS-related data, CR&S-related reporting, processes and reporting are incomplete or inaccurate, goals, such as incomplete or if we fail inaccurate information, failure to achieve timely progress with respect to our goals on a timely basis, goals, or at all, misalignment with our stakeholders’ expectations, could negatively impact our reputation, business, financial performance and growth could be adversely affected.or growth.

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Prior heading: 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 operate retail locations in Canada, Current Health operates in the UK, and most of our exclusive brands products are manufactured by contract manufacturers based in Southeast Asia. We also have, or expect to have during fiscal 2026, wholly-owned legal entities registered in various other foreign countries, including Bermuda, Canada, China, Hong Kong, India, Luxembourg, the Republic of Mauritius and Mauritius, the UK. 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 2024, 2025, our International segment’s operations segment generated approximately 8% of our consolidated revenue. In general, the risk factors identified above also have relevance to our International international operations. Our International international operations expose us to additional risks, including those such as risks related to, for example: to: political conditions 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 international operations and have a material adverse effect on our revenue and profitability and could lead us to incur material impairments and other exit costs.

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