Best Buy : Letter to Shareholders

A message from

Corie Barry, CEO

Dear fellow shareholders:

This past year challenged us all in ways we could not have anticipated. In my view, Best Buy rose to those challenges brilliantly - using the safety and care of our customers and employees as guideposts - as we made our way through an often chaotic and an ever-changing landscape.

Businesses are typically measured by their financial performance and, in that regard, FY21 was an unqualified success. But even more significantly, last year brought home the fundamental truth that our purpose as a company - to enrich lives through technology - has deep and enduring value. Whether you suddenly needed to work and learn from home, or entertain and feed your family from home, we were there to serve you.

In each of these circumstances, more people began using technology than ever before and more people than ever before relied on Best Buy for that tech and the services that so often accompany it. The fact is, we have always been there for our customers, and that was never more true than in the year that just passed. Simply put, the way in which we served millions of Americans in their time of greatest need was the best possible affirmation of our right to exist - and flourish - as a company.

And so, what I've come to truly understand is that a company's financial story is often only a part of the narrative. It tells us how well a given business does financially, but often leaves out much of the story at a human level. This letter is devoted to that part of the story.

From the day in March 2020 that it became clear our lives would forever be divided between

pre- and post-pandemic, the leadership team and I focused on how we could keep our employees and customers safe while continuing to serve our friends and neighbors at a time when they needed us most. We took dramatic steps in that direction, the most notable of which was voluntarily closing our stores to customers and moving entirely to an online business fulfilling orders via delivery or curbside pickup. We had not done curbside at scale before, but we were able to transition the entire chain to the model in just 48 hours. This decision was quickly followed with the temporary suspension of in-home delivery and installation.

All of this occurred against the backdrop of state and city regulations that primarily designated us "essential" and actually allowed us to continue in-store operations. We have been asked many times by investors why we chose to move from a retailer with nearly 1,000 stores to what essentially became, overnight, an online business. The answer is simple: We knew that the measure of safety for the Blue Shirt who comes to work every day was not whether we thought she was safe, it was whether she believed she was safe. By that standard, we did not think we could look our customer-facing employees in the eye and ask them to show up for work until we knew more about the virus that we all faced.

Through incredibly hard work enabled by several years of strategic investments, we were well-equipped to take the actions we did because of how we had innovated over several years to create a powerful, flexible supply chain. This allowed us to build a new shopping model - one that took us entirely online virtually overnight - so that we could keep our customers and employees safe.

Likewise, for a company that is customer obsessed, we knew the ways in which customers viewed brands would be affected by how those brands responded to their need to feel safe. In fact, our research has shown that "brand love" and corresponding customer loyalty has evolved to now include a feeling of safety as one of its primary characteristics. In our first customer survey - and in many since - we scored in the high 90s when we ask how safe customers feel shopping at Best Buy.

In short, we felt that by taking this kind of action, and many others that followed, we would be keeping our customers safe and strengthening our connection with them for the long term. That connection started by being there for people in their time of greatest need, as school and work moved online and our desire to be entertained and eat at home became universal. The act of providing the technology products, advice and services our customers needed, and doing so with safety top of mind, made our customers grateful and all of us at Best Buy very proud. It also, of course, led to last year's results.

Our pride grew as we took additional steps. We paid employees to not come to work when they thought they were exposed to COVID-19, paid all store employees for a full month after we temporarily closed stores, paid hourly appreciation pay for those on the front lines, and established hardship funds to help any employee in need. Enhanced mental health offerings, improved child care and caregiver benefits, and a starting minimum wage hike to $15 an hour soon followed. We also established three separate employee funds, in partnership with our founder Dick Schulze, designed to help employees facing economic hardship as a result of COVID-19 and the broader economic downturn.

Because we are a purpose-driven company, even in times of crisis, we also looked outward to the communities and people we serve. We increased our commitment to building a network of Best Buy Teen Tech Centers for underserved teens in communities all across the country. This commitment was reinforced by a $40 million donation from the company to the Best Buy Foundation, so we can expand to 100 Teen Tech Centers serving 30,000 teens annually by 2025.

In response to the murder of George Floyd in our backyard, we made a very public pledge to "do better" as a company in response to racial inequity and injustice. This effort included the creation

of a sizable scholarship fund targeted toward Historically Black Colleges and Universities as well as a hiring commitment geared toward far greater racial diversity in our corporate headquarters and much better gender diversity among our field colleagues. Finally, we designated Juneteenth

a paid company holiday for the first time and gave all employees time off to vote in last year's presidential election.

Each of these decisions represents the collective view of the entire Best Buy Senior Leadership Team. It was also the view of outside experts, including Barron's magazine. For the second time in three years (2019 and 2021), we were designated the "most sustainable company in America"by the third-party experts Barron's employs. As notably, we were also named the best public company in America in responding to the COVID-19 crisis. If you would like to read more about our broad ESG work, please visit our corporate website.

The Barron's award reaffirms what I said at the beginning of this letter: In my view, Best Buy rose to the challenges of 2020 brilliantly - using the safety and care of our customers and employees as guideposts - as we made our way through an often chaotic and ever-changing landscape. We did it as we do everything, as a team of passionate, hardworking individuals whose collective purpose is to enrich lives through technology and do so with unparalleled safety and care.

As we look to the future, though much still remains unknown, we do know that Americans are increasingly engaged with technology as a primary way of enriching their lives. This is occurring in the traditional ways, of course, but also in ways that have not historically been associated with consumer electronics. These include home fitness and health, outdoor living and entertainment, and connecting with each other in ways we could never have dreamed at the beginning of last year. To make possible each of these evolutions in human behavior, we have more tools than ever at

"Best Buy rose to the challenges of 2020 brilliantly

• using the safety and care of our customers and employees as guideposts - as we made our way through an often chaotic and ever-changing landscape."

Corie Barry, CEO

our disposal, including a powerful store network and equally powerful digital presence, our Geek Squad Agents and in-home consultants, as well as the ability to help customers in any way they choose, including in stores, at home, online, via chat and by phone. In addition, our health business benefits not just from our deep expertise in a growing array of health-related technology devices but our industry-leading "caring centers" that are able to address the emotional and physical well-being of elderly Americans.

Just as we did before the world changed, we continue investing in the tools, abilities and resources necessary not just to respond to what lies ahead but to help shape it. With that in mind, I have shared publicly what I believe are three permanent implications of the pandemic, each of which has shaped and even accelerated our strategic priorities. They are:

• Customer shopping behavior is permanently changed, having become more digital and putting the customer entirely in control of how they want to shop.
• Our workforce will evolve to meet these new customer demands while providing even more flexible work options for the employees themselves.

• Technology is even more crucial in our lives, and we play a vital - if not central - role in bringing that technology to life for all our stakeholders.

As I'm sure you can tell, I am delighted about the opportunities for Best Buy that lie ahead. They are, as always, inextricably linked to the opportunities society, itself, faces. Our lives are deeply intertwined with technology in ways that offer freedom, emotional connection and physical well-being, each of which speak to our unique purpose as a company and the feelings of pride and excitement we all feel as employees of Best Buy.

I would like to thank all my colleagues for what they accomplished this past year and thank you, our shareholders, for your continued support, confidence and partnership.

Respectfully,

Corie Barry, CEO

Best Buy Co., Inc.

Highlights

$ in millions, except per share amounts

Fiscal Year	2021	2020	2019	2018(1)	2017
Earnings Data
Revenue	$47,262	$43,638	$42,879	$42,151	$39,403‌
Comparable sales growth(2)	9.7%	2.1%	4.8%	5.6%	0.3%
Operating income rate	5.1%	4.6%	4.4%	4.4%	4.7%
Non-GAAP operating income rate(3)	5.8%	4.9%	4.6%	4.6%	4.4%
Diluted net earnings per share	$6.84	$5.75	$5.20	$3.26	$3.81
Non-GAAP diluted net earnings per share(3)	$7.91	$6.07	$5.32	$4.42	$3.51

Other Financial Measures

Year-end cash and cash equivalents		$5,494	$2,229
Cash provided by operating activities		$4,927	$2,565
Capital expenditures		$713	$743
Cash provided by operating activities less capital expenditures	$4,214	$1,822
Return on assets(4)		9.8%	9.7%
Non-GAAP return on investment(3)		29.1%	22.4%
Shareholder Metrics
Repurchases of common stock		$312	$1,003
Cash dividends declared and paid per share		$2.20	$2.00
Common stock price:
High		$124.89	$91.83
Low		$48.11	$58.07
Other Metrics
Domestic comparable online sales growth(5)		144.4%	17.0%
Domestic online revenue as a % of Domestic segment revenue	43.1%	19.0%
Number of stores at year-end:
Domestic(6)		991	1,009
International		168	222
Total		1,159	1,231
Comparable sales(2)	Non-GAAP operating income rate(3)
9.7%

$1,980	$1,101	$2,240
$2,408	$2,141	$ 2,557
$819	$688	$580
$1,589	$1,453	$1,977
11.1%	7.0%	8.7%
22.3%	20.7%	18.8%
$1,505	$2,004	$698
$1.80	$1.36	$1.57‌
$84.37	$78.59	$49.40‌
$47.72	$41.67	$26.10
10.5%	21.8%	20.8%
16.6%	15.5%	13.4%
1,026	1,298	1,369‌
212	216	212
1,238	1,514	1,581

Non-GAAP diluted EPS(3)

	5.6%	4.8%
			2.1%
0.3%
FY17	FY18	FY19	FY20	FY21

			4.9%	5.8%
4.4%	4.6%	4.6%
FY17	FY18	FY19	FY20	FY21

				$7.91
	$4.42	$5.32	$6.07
$3.51
FY17	FY18	FY19	FY20	FY21

1. Fiscal 2018 included 53 weeks. All other periods presented included 52 weeks.
2. In fiscal 2020, the company refined its methodology for calculating comparable sales. It now reflects certain revenue streams previously excluded from the company's comparable sales calculation, such as credit card revenue, gift card breakage, commercial sales and sales of merchandise to wholesalers and dealers, as applicable. The impact of adopting these changes is immaterial to all periods presented, and therefore prior-period comparable sales disclosures have not been recast.
3. Refer to the last three pages of the company's Fiscal 2021 Annual Report for reconciliations of GAAP to non-GAAP financial measures.
4. Represents net earnings divided by average total assets.
5. Comparable online sales are included in the comparable sales calculation.
6. Includes Best Buy Outlet Centers for all fiscal years presented.