Best Buy Co., Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Best Buys Third Quarter Fiscal 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. At this time, if you have a question, you will need to press star 1 on your phone. If you choose to be taken out of the queue, please press star 1 again. As a reminder, this call is being recorded for playback and will be available by approximately 1 p.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'll now turn the conference call over to Molly O'Brien, Vice President of Investor Relations.

Thank you and good morning, everyone. Joining me on the call today are Corey Berry, our CEO, and Matt Ballounis, our CFO. 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 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 the 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 and subsequent 10-Qs 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. For the third quarter, we are reporting better-than-expected profitability on slightly softer-than-expected revenue. Specifically, we are reporting a comparable sales decline of 6.9%. which is slightly below our outlook for the quarter as consumer demand softened through the quarter. At the same time, we expanded our Q3 gross profit rate 90 basis points from last year due to profitability improvements in our membership program and better product margins. We also lowered our SG&A expense compared to last year as we tightly controlled expenses and adjusted our labor expense rate with sales fluctuations. During the quarter, we grew our paid membership base and drove meaningful improvements in customer satisfaction scores across many of our service offerings, including in-home delivery, in-store services, and remote support. Our Q3 results demonstrate our ongoing strong operational execution as we navigate through the sales pressure our industry has been experiencing for the past several quarters. The sales pressure is due to many factors, including the pandemic pull-forward of tech purchases, the shift back into services outside the home, like travel and entertainment, and inflation. In the more recent macro environment, consumer demand has been even more uneven and difficult to predict. Based on the sales trends in Q3 and so far in November, we believe it is prudent to lower our revenue outlook for Q4. But despite the lowered sales outlook, the midpoint of our annual EPS guidance is now slightly higher than the midpoint of our original guidance as we entered the year. I want to thank our associates for their resilience and relentless focus on our customers. I continue to be so very proud of the way our teams are managing the business today and preparing for our future. Now I would like to provide more color on our Q3 performance and holiday plans before passing the call off to Matt for the financial details on the quarter and our outlook. We continue to strategically manage our promotional plan and we're price competitive in an environment where consumers are very deal focused and making spend trade-offs right for their budget. Consumers are looking for value, and from an industry themes perspective, we are seeing some trade-down in the television category, but not as much trade-down in other categories. As a result, and as expected, the level of industry promotions and discounts were above last year and pre-pandemic fiscal 20.