Best Buy Co., Inc.

And ladies and gentlemen, please stand by. And ladies and gentlemen, thank you for standing by. Welcome to Best Buy's Q2 fiscal 2021 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. At that time, if you have a question, you'll need to press star 1 on your phone. If you choose to be taken out of the queue, please press star 2. As a reminder, this call is being recorded for playback and will be available by approximately 11 a.m. Eastern time today. If you need assistance on the call at any time, please press star zero, and an operator will assist you. I would now like to turn the conference over to Molly O'Brien, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Joining me on the call today are Corey Berry, our CEO, Matt Palunas, our CFO, and Mike Mohan, our President and COO. During the call today, we will be discussing both GAAP and non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and an explanation of why these non-GAAP financial measures are useful can be found in this morning's earnings release, which is available on our website, investors.bestbuy.com. Some of the statements we will make today are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may address a financial condition business initiatives, growth plans, investments, and expected performance of the company and are subject to risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Please refer to the company's current earnings release and our most recent 10-K for more information on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this call. I will now turn the call over to Cori.

Good morning, everyone, and thank you for joining us. Today we are reporting strong quarterly results, and we are encouraged to see the customer demand for our products and services and proud of the amazing execution of our teams through these unprecedented times. However, we have not lost sight of the fact that people continue to suffer, and we extend our sympathy to all those who have lost someone to this virus are sick with COVID-19, or are facing financial hardship as a result of the pandemic. From the very start of this crisis, we have been focused on guiding the business with two goals in mind. First, ensuring the health and safety of our customers and employees while protecting the employee experience as much as possible. And second, making certain we come out of this moment a strong, innovative company. The results we're reporting today would not be possible without the effort and energy of our frontline employees working in our stores, supply chain facilities, and customers homes. I want to thank all our employees for their tremendous commitment to our customers and for living our purpose to enrich lives through technology. They are navigating not only the impacts of the pandemic, but also fires, hurricanes, and civil unrest. Their willingness, even enthusiasm, to continually adapt as we manage through the evolving environment has been extraordinary. For our second quarter, we are reporting revenue of $9.9 billion, which is growth of approximately 4% from the second quarter of last year. Our Q2 non-GAAP earnings per share were $1.71 compared to $1.08 last year. that our stores were open by appointment only for the first six weeks of the quarter. Products that help people work, learn, connect, and cook at home, like computing, appliances, and tablets, were the biggest drivers of our sales growth. Trends across most categories improved materially throughout the quarter as we opened our stores for shopping, especially categories like large appliances and home theater that benefit from more experiential shopping. We also saw very strong digital demand for some of our newer categories, such as digital health and fitness, at-home fitness equipment, sustainable living, outdoor activities, and camping equipment. While still relatively small categories from a revenue standpoint, they are extremely relevant in today's environment and highlight our ability to leverage our digital-first mindset, supported by our expertise around curation and supply chain. Throughout the quarter, we experienced inventory constraints in a number of categories, which did moderate our sales growth. While we expected product constraints as we entered the quarter, the stronger than anticipated demand as we opened our stores for shopping resulted in more constrained product availability than we expected. Turning to profitability, our Q2 non-GAAP operating income rate of 5.9% expanded almost 200 basis points from last year, due to materially lower SG&A expense. The lower SG&A is a direct result of balanced but prudent decisions to lower costs in response to the uncertainty of the pandemic and our evolving operating model. That level of lower SG&A, for the most part, is not sustainable as we add labor hours in our stores, reinstate short-term incentive plans, and increase advertising spend. Matt will provide more detail later but we expect Q3 SG&A expense to be more in line with last year's third quarter. I would like to take a moment to recap the evolution of our store operating model. We ended Q1 in a curbside-only model with no in-store customer shopping. At the beginning of Q2, we started welcoming customers back into our stores by offering an in-store consultation service to customers by appointment only. On June 15th, we began allowing customers to shop without and across the U.S. And as of June 22nd, almost all of our... At that time, approximately half of the 51,000 associates who had been furloughed in April returned. We also resumed our in-home sales consultations, adding to the other in-home services we provide like delivery, installation, and repair we had previously resumed back in May. as we reopened our stores to customers who clearly value and want an in-store shopping experience. Prior to reopening, we were retaining approximately 92% of Q2. Then, in the last year, sales grew 16% compared to the same period last year.