Fiscal 2019 Annual Report

Dear Fellow Shareholders:

On April 15, we announced an evolution of leadership roles at Best Buy. At our annual

shareholder meeting on June 11, I will transition to the newly created role of executive

chairman of the board, and Ms. Corie Barry, our current chief financial and strategic

transformation officer, will become the fifth CEO in Best Buy’s 53-year history. Also

elevated to a broader role will be Mike Mohan, who moves from being our domestic chief

operating officer to the company’s president and chief operating officer.

In this context, I want to share with you my pride in what we have accomplished in the

last seven years, my confidence in the future and my excitement about my new role as

executive chairman of the board.

Before I do this, let me say a few words about the evolution of leadership roles at the

company we recently announced.

First, I am very proud of the seamless transition we have decided to implement, as it

reflects positively on our momentum as well as our focus on executive development and

succession planning. It is clearly designed to ensure strategic and leadership continuity. I

am grateful to the members of our Board of Directors for their diligence and care in

overseeing this critical process. In many ways, I believe their work on this transition was

world class and can stand as a model for effective CEO transitions.

The choice of timing of a CEO transition is probably more of an art than a science. I

personally felt it was the right time for me to trigger this leadership transition for several

reasons.

First, I felt we had achieved what I had hoped to accomplish when I joined the company

in 2012. As you will see below, I am proud of what we have delivered for our customers,

employees, vendors, shareholders and communities.

Second, I felt we had built the depth and breadth of talent necessary to carry Best Buy

into the future. Last September, we put in place a new leadership organization by

elevating Corie and Mike to new roles with greater responsibilities. In the time since, I

have been impressed by the effectiveness of our team and these leaders.

Third, with a clear and exciting purpose to enrich lives through technology, we set out

two years ago to implement a strategy focused on addressing key human needs in

entertainment, productivity, communication, food, security and health and wellness. I

am pleased to report that we have essentially achieved our fiscal 2021 revenue and non-

GAAP operating income targets two years ahead of plan. While we still have a lot to do

from a transformation standpoint, it is clear we are on the right path.

Fourth, we have announced plans to host a meeting with the investment community

later this year. I thought it was important that the leaders who stand in front of this

important audience and lay out our road map for the future be the team that is

responsible for carrying that strategy forward.

Proud of our accomplishments

I am extremely proud of what we have achieved collectively since I joined the company

in September 2012, a time when we were facing a range of challenges. We have made

progress on multiple fronts in ways that have positively impacted all of our stakeholders.

We reconnected with our customers in a meaningful way through a set of key decisions

aimed at improving the experience for people no matter how they chose to engage with

Best Buy. We took price off the table with a price-match policy and have made significant

investments in our online and in-store shopping experiences — and our customers have

noticed. In fact, our Net Promoter Score has increased more than 1,500 basis points

since 2012, and we have more than doubled our U.S. online sales to $6.5 billion and 17%

of revenue.

As a part of our growth strategy, we launched our In-Home Advisor program, which

provides free in-home technology consultations. During fiscal 2019, we expanded to

more than 500 advisors, and they made, collectively, more than 175,000 visits to

customers’ homes, where they are able to address customer needs in a more human and

effective fashion, unlocking latent, incremental demand.

Moving even more boldly into the home, last summer we launched our Total Tech

Support program, which provides 24/7 support for all of a customer’s technology

regardless of when and where they bought it. At the end of fiscal 2019, we had more

than one million members in this program.

Our work in the health space is another example of our intention to deepen our

relationships with consumers by addressing their key human needs. Late last year, we

formed Best Buy Health and acquired GreatCall, a leading connected health services

provider for aging consumers, in order to accelerate our strategy to help seniors live

longer in their homes with the help of technology. The integration of GreatCall into our

business has met, if not exceeded, our expectations.

Our success with our customers is driven by the enthusiasm and talent of our

employees. Over the past several years, we have invested in our workforce in a number

of ways, including by providing enhanced employee training that has won praise and

awards for its quality. In addition, we repurposed some of the savings from last year’s

corporate tax reform to fund one-time bonuses for employees, as well as expand

employee benefits to include paid caregiver leave, expanded mental health benefits,

paid time off for part-time employees and backup childcare.

More broadly, we have also worked hard to instill a culture built on purposeful leadership.

Put simply, purposeful leadership recognizes that all companies are human organizations

composed of individuals working together for a collective purpose and that “magic”

happens if you can connect what drives individual employees and the purpose of the

company in an authentic fashion.

As a result of these and many other actions, our employee engagement scores have

improved and employee turnover rates in our stores are at record lows.

We continue to partner with our vendors (i.e., the world’s foremost technology

companies) to help them commercialize their technology. Over the last seven years, our

vendors have invested with us to improve the customer experience through stores-

within-stores and other unique vendor experiences. We ended fiscal 2019 with more

than 5,000 of these experiences across our U.S. stores.

We also have created significant shareholder value, improved our profitability and

returned capital to shareholders.

We have generated five consecutive years of comparable sales growth and increased

our non-GAAP operating income rate by more than 100 basis points to 4.6%.* Our

commitment to reduce costs and drive efficiencies is a crucial factor in our improved

financials. In fact, in the past seven years we have achieved $1.9 billion in cost savings

and efficiencies that have helped us fund investments and offset pressures in the

business.

Our non-GAAP return on invested capital now stands at 25.8%, up from 10.5% in fiscal

2013, indicating that our formula of investments in our future, revenue growth and cost

takeout is producing attractive returns.*

We have generated substantial free cash flow, which has allowed us to continue to

reinvest in our business and return capital to shareholders through dividend payments

and share buybacks.

Our capital allocation strategy is to fund operations and investments in growth, including

potential acquisitions, and then return excess free cash flow over time to shareholders

through dividends and share repurchases. We continue to target a non-GAAP dividend

payout ratio between 35% and 45%.*

In the past seven years, we have returned more than $8 billion to shareholders through a

combination of share repurchases and dividends. Since the end of fiscal 2013, our total

shareholder return is 335%, compared to 104% for the S&P 500.

At the core of our turnaround and growth strategy was the decision to operate the

company with the belief that we will do well by doing good. Specifically, we seek to be a

responsible corporate citizen in our interactions with all of our stakeholders, including

our customers, employees, vendors, shareholders, communities and the environment.

As it relates to our impact on the communities in which we work and live, and the planet

more broadly, we have focused on three initiatives.

• Teen Tech Centers expansion: I am proud to say that, in cooperation with our

partners, we are well on our way toward creating a national network of 60 Best

Buy Teen Tech Centers as part of our broader effort to train hundreds of

thousands of underserved teens each year for the tech-related jobs of our modern

economy.

• Carbon footprint reduction: We are determined to do our part in addressing global

climate change and have pledged to reduce our carbon footprint by 60% (over a

2009 baseline) by 2020. We are currently at 51% and expect to meet our pledge.

• Recycling: We operate the largest consumer electronics recycling program in the

country and are well on our way toward meeting our goal of recycling two billion

pounds of electronics by 2020.

All of this work has been recognized through a number of awards this year. The most

notable was being named No. 1 on Barron’s annual 100 Most Sustainable Companies list,

which is based on 200 data points, including community engagement, human rights, carbon

emissions, business ethics and more.

Confident in our future

As we look ahead, there are several reasons why we are excited about the future of Best

Buy.

We are excited by the opportunities related to technology innovation that have the

potential to drive customer demand over the next several years. These come in three

shapes: expanded penetration of existing technology, introduction of new technology in

existing categories and expansion of consumer technologies in new areas.

Notably, we see opportunities in existing categories like home theater, related to the

increasing penetration of large screen sizes, 4K and OLED, and the introduction of new

technologies, such as 8K. In mobile, we will be actively participating in the rise of 5G,

which has the potential to unlock very interesting use cases over the next several years.

In computing, the interest in gaming continues to accelerate, and the performance

necessary for this is driving innovation across both hardware and accessories. We see

significant opportunities in smart home technology. Notably, the U.S. retail market size of

“internet of things” connected hardware is forecasted to triple by 2025. This growth is

buoyed by products like connected cameras which are expected to grow from 18%

penetration of U.S. homes in 2018 to more than 50% by 2022, according to a recent

report from Activate. We also believe that digital health is an exciting area with enormous

opportunity from the use of technology to help customers with their health, fitness and

sleep, among others things, across multiple age groups, from babies to seniors. As an

illustration of the opportunity, the number of digital health exhibitors at the Consumer

Electronics Show in January was up almost 25% versus last year.

The next reason we are excited about the opportunities ahead of us is that we believe

that the purpose driving our strategy is extremely relevant. Our purpose is to enrich lives

through technology by addressing key customer needs in areas such as entertainment,

productivity, communication, food, security and health and wellness. We are

encouraged by the steps we have taken in this direction and see the potential from

expanding this focus to build deeper, lasting customer relationships.

In parallel to this, we continue to be excited by the potential for further cost-reduction

opportunities that can help us fund the investments in our strategy and offset pressures

in the business. During fiscal 2019, we achieved $265 million in annualized cost

reductions and efficiencies, bringing the cumulative total to $500 million since the

second quarter of fiscal 2018. This is towards our fiscal 2021 goal of $600 million. Since

the launch of Renew Blue in 2012, we have taken out $1.9 billion of costs.

Finally, we continue to be excited by the power of our incredibly talented people, who

are engaged, customer-oriented and aligned with our purpose and strategy. Not only

have we built a broad and deep talent pool, but we have also built a strong culture which

is based on a handful of powerful beliefs. We believe that:

1. Work can be an instrument for doing good things in the world.

2. A company is a human organization – a group of individuals working together in

pursuit of a goal, not a soul-less body.

3. The purpose of a corporation is to contribute to the common good, by having a

positive impact on its customers, employees, vendors, shareholders and the

communities in which it operates. A business is more than for profit. It is about

doing well by doing good.

4. “Magic” happens if you can connect what drives the individuals working at the

company to the purpose of the company. More broadly, we believe that great

things happen at companies where the individuals who work there can feel a

sense of purpose, develop personal connections, have autonomy, develop a

certain mastery and feel they are in a growth environment.

5. Work is not about attempting to achieve perfection, but about human

connections. We believe performance and growth come from accepting and

embracing our imperfections and vulnerabilities.

6. Leadership is not about power, fame, glory or money. Leadership is about

purposeful, authentic, human service.

***

Altogether, this gives us the sense that now is the time to play offense — to play to win —

and accelerate our transformation, both from a customer and revenue standpoint and

from an efficiency standpoint.

Looking forward to my new role

As the executive chairman, I will focus on a couple of areas, with the overriding goal to

continue to ensure the success of the company.

First, I will continue to chair our board. Our board is a fantastic resource for our

leadership team, and it plays a critical role in shaping and supporting our strategy and,

more broadly, the future of Best Buy. Our board has evolved over the last seven years,

with approximately 85% of directors new since 2012. As a company, we believe that

diversity is crucial to our business, our employees, our customers and our shareholders.

In support of this belief, the board has sought director candidates who not only had the

skill sets to support our current and future strategies, such as health technology, but

were also diverse. As a result, our current board is comprised of six women and six men

with a diverse mix of skill sets and ethnicities. Notably, when our new CEO joins the

board in June, it will become majority female!

Second, I will do whatever I can to support Corie and the management team in the

context of the CEO transition. To that end, I will provide advice and support on topics

ranging from strategy and M&A to capability building and leadership development. In

addition, and at the direction of the new CEO, I will continue to be focused on helping

the company in the areas of government relations and public affairs.

***

In conclusion, we are energized by our results, our momentum and our opportunities. It

is an exciting and momentous time for our company.

On a personal level, I want to thank you, our shareholders, for your support over the past

seven years. Likewise, I want to thank my colleagues for our collaboration and their

friendship. Working together, we turned around and then grew this wonderful company,

and it has been the honor of my professional lifetime to work with all of you. The

company is in good hands with our new leadership, and I am confident that the journey

we began in 2012 will continue well into the years ahead.

Respectfully,

Hubert Joly, Chairman and CEO

Best Buy Co., Inc.

* Please refer to the last three pages of the company’s fiscal 2019 Annual Report for (a)

definitions and reconciliations of “GAAP to non-GAAP” and “non-GAAP return on

invested capital”, (b) information about forward looking non-GAAP financial measures,

and (c) information about the forward-looking statements in this letter. Note that fiscal

2018 had an extra week, which we estimate was approximately $760 million in revenue

and approximately $0.20 of non-GAAP diluted EPS. When removing the extra week from

fiscal 2018, our fiscal 2019 non-GAAP operating income rate expanded approximately 10

basis points and our non-GAAP diluted EPS increased approximately 26% on a year-over-

year basis.

FY131,2 FY142 FY152 FY162 FY172 FY18 FY19 Enterprise – Continuing Operations Operating income as a % of revenue 0.9% 2.8% 3.6% 3.5% 4.7% 4.4% 4.4%

Restructuring charges 1.0% 0.4% 0.0% 0.5% 0.1% 0.0% 0.1% Goodwill impairment 1.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Intangible asset amortization3 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1%

Net CRT/LCD settlements4 0.0% (0.6%) 0.0% (0.2%) (0.4%) 0.0% 0.0%

Tax reform-related item – employee bonus5 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% Non-GAAP operating income as a % of revenue 3.4% 2.7% 3.6% 3.8% 4.4% 4.6% 4.6%

*Note – percentages may not foot due to rounding

Enterprise – Continuing Operations FY131,2 FY142 FY152 FY162 FY172 FY18 FY19 Diluted EPS (0.16)$ $ 2.00 $ 3.53 $ 2.30 $ 3.74 $ 3.26 $ 5.20

Restructuring charges 1.24 0.43 0.01 0.58 0.12 0.03 0.16

Goodwill impairment 1.80 – – – – – –

Intangible asset amortization3 – – – – – – 0.08

Acquisition-related transaction costs3 – – – – – – 0.05

Net CRT/LCD settlements4 – (0.66) – (0.22) (0.50) – –

(Gain) loss on investments, net – (0.06) (0.03) 0.01 (0.01) 0.02 (0.04)

Best Buy Europe sale6 – 0.05 – – – – –

Europe legal entity reorganization7 – – (1.00) – – – –

Other Canada brand consolidation charges – SG&A8 – – – 0.02 0.01 – –

Restructuring charges – COGS – – – 0.01 – – –

Tax reform-related item – employee bonus5 – – – – – 0.26 0.02

Tax reform-related item – charitable contribution5 – – – – – 0.07 –

Tax reform – repatriation tax5 – – – – – 0.68 (0.07)

Tax reform – deferred tax rate change5 – – – – – 0.24 (0.02)

Income tax impact of non-GAAP adjustments9 (0.43) 0.12 0.01 (0.03) 0.15 (0.14) (0.06) Non-GAAP diluted EPS $ 2.45 $ 1.88 $ 2.52 $ 2.67 $ 3.51 $ 4.42 $ 5.32

Best Buy Co., Inc. Non-GAAP Reconciliation

($ in millions, except per share amounts) (Unaudited and subject to reclassification)

The following information provides reconciliations of the most comparable financial measures from continuing operations calculated and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”) to presented non-GAAP financial measures. The company believes that non-GAAP financial measures, when reviewed in conjunction with GAAP financial measures, can provide more information to assist investors in evaluating current period performance and in assessing future performance. For these reasons, internal management reporting also includes non-GAAP measures. Generally, presented non-GAAP measures include adjustments for items such as restructuring charges, goodwill impairments, gains and losses on investments, certain acquisition-related costs and the tax effect of all such items. In addition, certain other items may be excluded from non-GAAP financial measures when the company believes this provides greater clarity to management and investors. These non-GAAP financial measures should be considered in addition to, and not superior to or as a substitute for, the GAAP financial measures presented in the company's earnings releases, financial statements and other publicly filed reports. Non-GAAP measures as presented herein may not be comparable to similarly titled measures used by other companies.

The following tables reconcile operating income and diluted earnings per share ("EPS") for the periods presented for continuing operations (GAAP financial measures) to non-GAAP operating income and non-GAAP diluted EPS for continuing operations (non-GAAP financial measures) for the periods presented.

(1) FY13 represents the recast 12-months ended February 2, 2013, which included 53 weeks. (2) In Q1 FY18, the company stopped excluding non-restructuring property and equipment impairment charges from its non-GAAP financial measures. To ensure its financial results are comparable, the company has recast prior periods to reflect the previously excluded impairments now being included in non-GAAP SG&A. (3) Represents charges associated with the acquisition of GreatCall, including (1) the non-cash amortization of definite-lived intangible assets, including customer relationships, tradenames and technology, and (2) acquisition-related transaction costs primarily comprised of professional fees. (4) Represents cathode ray tube ("CRT") and LCD litigation settlements reached, net of related legal fees and costs. Settlements related to products purchased and sold in prior fiscal years. (5) Represents charges and subsequent adjustments resulting from the Tax Cuts and Jobs Act of 2017 (“tax reform”) enacted into law in Q4 FY18, including amounts associated with a deemed repatriation tax and the revaluation of deferred tax assets and liabilities, as well as tax reform-related items the company announced in response to future tax savings created by tax reform, including a one-time bonus for certain employees and a one-time contribution to the Best Buy Foundation. (6) Represents the tax impact of the Best Buy Europe sale and resulting required tax allocation between continuing and discontinued operations. (7) Represents the acceleration of a non-cash tax benefit as a result of reorganizing certain European legal entities to simplify our overall structure. (8) Represents charges related to the Canadian brand consolidation initiated in the Q1 FY16, primarily due to retention bonuses and other store-related costs that were a direct result of the consolidation but did not qualify as restructuring charges. (9) Represents the summation of the calculated income tax charge related to each non-GAAP non-income tax adjustment. The non-GAAP adjustments relate primarily to adjustments in the United States, Canada and Europe and as such, the income tax charge is calculated using the statutory tax rates of each country in effect during the period of the related non-GAAP adjustment.

February 2, 20131

February 1, 20141

January 31, 20151

January 30, 20161

January 28, 20171

February 3, 20181

February 2, 20191

Net earnings including noncontrolling interests (233)$ 523$ 1,235$ 897$ 1,228$ 1,000$ 1,464$ Total assets 16,551 14,174 14,819 13,995 13,638 13,558 12,994 ROA (1.4%) 3.7% 8.3% 6.4% 9.0% 7.4% 11.3%

February 2, 20131

February 1, 20141

January 31, 20151

January 30, 20161

January 28, 20171

February 3, 20181

February 2, 20191

Net Operating Profit After Taxes (NOPAT) Operating income – continuing operations 391$ 1,144$ 1,450$ 1,375$ 1,854$ 1,843$ 1,900$ Operating income (loss) – discontinued operations (236) (210) (19) 90 27 1 – Total operating income 155 934 1,431 1,465 1,881 1,844 1,900

Add: Operating lease interest2 352 310 275 240 232 235 227 Add: Non-GAAP operating income adjustments3 1,288 115 23 130 (147) 110 88 Add: Investment income 50 53 35 15 34 49 49 Add: Net earnings (loss) attributable to noncontrolling interest

(16) 9 (2) – – – –

Less: Income taxes4 (686) (531) (660) (697) (750) (810) (560) Non-GAAP NOPAT 1,143$ 890$ 1,102$ 1,153$ 1,250$ 1,428$ 1,704$

Average Invested Capital Total assets 16,551$ 14,174$ 14,819$ 13,995$ 13,638$ 13,558$ 12,994$

Less: Excess cash5 (554) (1,564) (2,922) (3,068) (2,995) (2,969) (1,633) Add: Capitalized operating lease obligations2 5,862 5,173 4,583 3,995 3,872 3,914 3,790

Total liabilities (12,485) (10,453) (10,188) (9,365) (9,210) (9,406) (9,763) Exclude: Debt6 2,140 1,674 1,635 1,648 1,373 1,346 1,226 Less: Noncontrolling interest (627) (160) (4) – – –

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