Ladies and gentlemen, thank you for standing by. Welcome to the Best Buy's Second 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. [Operator Instructions] As a reminder, this call is being recorded for playback and will be available by approximately 1:00 p.m. Eastern Time today. [Operator Instructions] I will now turn the conference call over to Mollie O'Brien, Vice President of Investor Relations.

Thank you, and good morning, everyone. Joining me on the call today are Corie Barry, our CEO; and Matt Bilunas, 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 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 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 current 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 Corie.

Good morning, everyone, and thank you so much for joining us. Today we are reporting better-than-expected Q2 financial results. Our comparable sales came in at the high end of our guidance and profitability was better than expected. These results continue to demonstrate our strong operational execution as we balance our reaction to the current industry sales pressure with our ongoing strategic investments. As expected, our year-over-year comparable sales performance improved from the 10% decline we reported last quarter. For the second quarter, comparable sales were down 6.2%. We expanded our Q2 gross profit rate 110 basis points from last year due to better product margins and profitability improvements in our membership program. We kept our SG&A expenses flat while absorbing higher incentive compensation expenses than we recorded last year. Our industry continues to experience lower consumer demand due to the pandemic pull-forward of tech purchases and the shift back into services spend outside the home like travel and entertainment. In addition, of course, persistent inflation has impacted spending decisions for a substantial part of the population. I continue to be incredibly proud of the way our teams are managing the business today and preparing for our future in light of the industry pressure and ongoing uncertain macro conditions. We strategically managed our promotional plan and we're price-competitive in an environment where consumers are very deal focused and the level of industry promotions and discounts were above last year and often and above pre-pandemic fiscal '20. In the first half of the year, our purchasing, customer behavior has remained relatively consistent in terms of demographics and the percent of purchases categorized as premium. Our inventory at the end of the quarter was down compared to last year in line with our sales decline as the team continues to manage inventory strategically…

Good morning, everyone. Let me start by sharing details on our second quarter results. Enterprise revenue of $9.6 billion declined 6.2% on a comparable basis. Our non-GAAP operating income rates of 3.8% declined 30 basis points compared to last year. Non-GAAP SG&A dollars were essentially flat to last year and increased approximately 140 basis points as a percentage of revenue. Partially offsetting the higher SG&A rate was 110 basis-point improvement in our gross profit rate. Compared to last year, our non-GAAP-diluted earnings per share of $1.22 decreased $0.32 or 21%, with approximately half of the decrease due to a higher effective tax rate. When viewing our performance versus our expectations entering the quarter, our revenue was at the high end of the range we provided. Our non-GAAP operating income exceeded our expectations due to a higher gross profit rate driven by a number of areas including lower cost to serve our membership offerings, higher profit-sharing revenue from our private-label credit card arrangement, and lower supply-chain costs. Next, I will walk through the details on our second-quarter results compared to last year. From an Enterprise comparable sales phasing perspective, June's decline of approximately 5% was our best performing month on a year-over-year basis with May and July both down approximately 7%. As we've started Q3, our estimated comparable sales decline in the first four weeks of August was approximately 6%. In our Domestic segment, revenue decreased 7.1% to $8.9 million driven by a comparable sales decline of 6.3%. From a category standpoint, the largest contributors to the comparable sales decline in the quarter were appliances, home theater, computing, and mobile phones, which were partially offset by growth in gaming. From an organic perspective, consistent with the past several quarters, our overall blended average selling price declined in the low-single digits as…

[Operator Instructions] And your first question comes from the line of Scot Ciccarelli from Truist. Your line is open.

Scot Ciccarelli. Good morning, guys. Corie, you mentioned some of the newer technology kind of waiting in the wings with AI and stuff. Can you give the group, any kind of flavor for some of the technologies like generically that you guys are thinking about that could potentially drive improvement in sales trends?

Yes, maybe in this, we were talking about computing specifically, and maybe I'll give just a little bit more color there. I mean I think what we're seeing broadly is that computing innovations and the refresh cycles are getting shorter and they are accelerating and we continue to see people using all of their devices more often and far more like a computing processing intensive. And these are really specific activities and you can see both whether you're using it at home, and you're seeing a lot more streaming, or whether using it at work and you're starting to want to leverage some of these more advanced technologies. Obviously, like, for example, Microsoft pre-pandemic focused on dual screen and that was kind of something we had talked about for a while, but they quickly pivoted some of their developments within their Windows OS to address consumer productivity where all of us, we're kind of struggling to make sure we're as productive as possible on multiple devices, a lot of that enhancement went into productivity and I think the emergence of AI is at the heart of many of these innovations. I think in this case, in this example, it centers around the Windows copilot on Windows 11, which brings ChatGPT and AI innovations in the cloud applications within that Windows Office Suite within PowerPoint, Outlook, Excel. And I think what we're expecting will happen and I alluded to it on the call is obviously you're going to have likely at some points here different generation of technology that's going to have more intensively leverage the capabilities that are necessary to run these AI models. I think that's one example. We talk about this often, Scot. It's hard for us always to know exactly what that new horizon of technology is going to be, but this is one that probably has some of the broadest implications for all of our collective productivity.

Yes, understood. And then thank you for that. And then the second question is the expectation for slight improvement in comp despite a little bit more difficult comparison. Is that really driven by you have more events in the third quarter than the second quarter as we revert to pre-pandemic kind of behavior?

No, I think for Q4 specifically, I think as we think about improvement of trends for Q3 and then in Q4, I think we are obviously encouraged by a little bit by back to school. Back to school has been slightly better than we expected as we get into Q3. When you think about Q3 compared to FY '20, it actually has slightly higher growth than what we saw in -- expecting slightly higher growth in Q3 compared to Q2. Q3 compared to '20 has a little bit more holiday sales pulled in. So we are expecting that to continue compared to where pre-pandemic was, but maybe not to the same extent of pull-forward that we've seen in the last few years, so I think we're encouraged by the trends as we leave Q2 if you think about what happened in Q2, we actually saw some stabilization in our business, we saw actually laptop units turned to flat in Q2 in terms of that business and TV units were flat, and so I think there is optimism around how -- what we might expect for the back-half and more specifically Q4 but Q3 we're likely still seeing similar levels to what we saw in Q2.

Got it. Thanks, guys.

Thank you.

And your next question comes from the line of Greg Melich from Evercore ISI. Your line is open.

Thanks. I wanted to start on the top-line, that sort of improvement in trends and I love an update on what credit as the penetration and also you mentioned that that was a tailwind, becoming a headwind. Could you frame that a little bit more as to what percentage of gross profit it is or something like that?

Yes. I think for the -- on the credit side specifically, first, we've talked about the credit card portfolio is 1.4 of our domestic sales. 1.4%, so it's pretty similar to what we had said last time. I think overall what we've been seeing for the last number of years is a tailwind for the credit card portfolio of profit share. It certainly -- it came in a little better than we expected in Q2. We are seeing net credit losses normalize to where they were pre-pandemic. I think the thing we're watching for which is based on the state of consumer do this net credit-losses actually turned to higher than they used to be, which would create pressure on the profit share. And in the back half of this year, we are expecting it to be a slight pressure compared to the first part of the year being a benefit for us, but neutral for the year. So it's really that net credit losses is one aspect we're watching, especially as we get into next year. And we think about what the state of the consumer does look like as we get into next year and increasing levels of debt. So still an amazing book and partnership for us in terms of what it does for our consumers and offering a great way to pay for product. It actually also has a very loyal consumer. So we're really happy with the party, just the reality of what we've been trying to normalize a bit, if you will, from the last few years. I think to the improving trends, I think Q3 we're expecting to be a pretty similar, maybe slightly better comp than we saw in Q2. Like I said earlier, back to school is a little better than we expected, but it's running a little longer and little later into the season. And then as you look to Q4, while we are expecting the year-over-year comps improved to at the bottom of the range of minus 3 or the top slightly positive and it still does represent the fact that against FY '20, anywhere from down 7% to down 3% on the high end. So, yes, we believe the year-over-year trend should improve based on a number of the things that Corie mentioned, it still does represent a more stabilization of our consumers. As you look into the back half, the way to think about a more normalized volume that we had pre-pandemic.

Got it. And then my follow-up is on SG&A specifically. I know you expect it delever for the year. You mentioned the incentive comp up $185 million, was that for the full year or in the back half?

That would be for the full year. Yes, that's for the full year.

And that's more back-half weighted, presumably?

It's pretty even throughout the year.

Okay. And then in terms of leveraging payroll that 100 bps was in the second quarter, was there something about the second quarter that gave you an unusual amounts of hourly payroll leverage, or should we expect that going forward?

No, I think for the year, we expect store payroll to be relatively flat on a percentage of sales basis for the whole year. It has been pretty consistent across, but has been pretty consistent across the quarters, and we would expect it to be pretty consistent in the back half of the year as well.

And, Greg, just to make sure we're clear that 100 basis points as versus FY '20. So that's more than like structural change that we've seen over the last four-ish years.

Thank you. Appreciate that. Well, good luck, everyone.

Thank you.

Thank you.

Your next question comes from the line of Seth Sigman from Barclays. Your line is open.

Hi, good morning, everyone. I just wanted to follow up on that credit point. So neutral for the year, negative in the second half of the year slightly. Can you just size up for us what normal means if that continues into next year? I think your disclosure is that, it's up 50 basis points or so since fiscal 2020, so does normal mean that fully reversed is how do we think about that?

Yes. I think my reference to normal. Thanks for the question is more related to net credit losses as a percentage to the book. So we haven't given that number. I won't give it today, but what we're seeing now is a more normal rate compared to FY '20. What we're watching for is it does that rate increase compared to where it used to be and certainly it's already higher than it has been the last few years when the net credit losses were very low rate. And that is just more to do with just the state of the consumer. So right now we still see a relatively good consumer to the extent that they are still continuing to make tradeoff decisions weighing a little bit more pressure on their personal finances that could less to go up into next year. That's the consideration. We will certainly, as we think about next year, we're not guiding next year, but we're thinking about next year, that could be one of the pressures we face as we think about ROI rate just in terms of where does the net credit losses go.

Okay, thank you for that. Just any other perspective on credit availability today if that's impacting demand in any way? And maybe just put that in context of some of the trends that you may be seeing across consumer cohorts or markets, obviously, you talked about some of the bright spots you've seen in recent months here and what you're expecting for the rest of the year. I'm just trying to think about some of the incremental consumer headwinds ahead whether that is student loans or credit availability? Just any other context around some of the consumer behavior you may be seeing where that's coming from?

Yes, right now as it relates specifically to the card, we aren't seeing massive change in credit availability. We're continuing to see and we've said before, about 25% of our business is done on the card. We're continuing to see those trends. And what are the nice things about our card is as I mentioned it in the prepared remarks, but I want to emphasize that you can either choose points or you can choose 0% financing and so it's actually it's an offering that is widely accepted and appreciated, especially against the backdrop so the consumer can decide what's more relevant for them. So like Matt said, we're seeing more of a normalization in some of those key metrics. But in general, it remains an incredibly efficient asset for us in partnership, obviously in the profit share structure that we have.

Great. Thanks, guys.

Yes.

Your next question comes from the line of Liz Suzuki from Bank of America. Your line is open.

Great, thank you. Just a question on appliances, which looked like they were particularly weak this quarter and some other big-box retailers that sell appliances have talked about an increase in vendor-funded incentives and promotions. Have you seen the same behavior from your vendor partners as they try to respond to slower demand and did vendor funding funded promotions have an impact on margins this quarter?

Yes, broadly speaking, we are seeing an increase in vendor-funded promotions across all of our categories and I think appliances would be part of that. I think as we noted in our gross profit rate improvement in Q2, a lot of that was coming from our product margin rates being better year-over-year. Part of that, we're seeing an uptick in the vendor-supported promotions that we are running. So yes, it is a more promotional environment year-over-year and in some cases, certainly more than it was in FY '20, but it hasn't manifested in lower product margins for us. We are seeing both not just us, our vendors wanting to engage in promotional activity to drive and stimulate demand.

Great, thank you. And just on the flip side of some of the categories that were particularly strong. Can you just go into a little more detail on what was successful and like the entertainment and services categories and where you see that going in the next couple of quarters?

Well, on the entertainment side of things, that really is reflective of gaming and particularly gaming hardware, which had a much more stable supply this year than what we saw last year, so, we feel like that's a nice indicator as we're heading into the back half of the year. We mentioned that. And on the services side, that really is mainly reflective of our membership offering and now starting to kind of annualize that higher, larger cohorts of members.

Great, thank you.

Thank you.

Thank you.

Your next question comes from the line of Michael Lasser from UBS. Your line is open.

Good morning, thanks a lot for taking my question. Matt, you alluded to operating margin pressure in the next fiscal year. So on a similar level of revenue for Best Buy, call it 2024 versus where it was in 2019, what would be the company's operating margin rate in light of the pressure that it's experienced from investments in health care and some of the impact of the rise in e-commerce penetration for the business and all the actions that the company has taken to try and preserve the profitability in light of those pressures? And what levers can be pulled from here in order to improve the operating margin rate over time, especially as things like credit income continue to decline?

Yes, thanks for the question, Michael. What I just to clarify when I was referring to specifically was potential pressure on the credit card profit share as we look into next year, but I wasn't trying to characterize was like overall allied pressure for next year. But to get to your broad question there, I think, as you can appreciate, we're not going to guide next year. But that being said, if for example, our sales were flat next year as some of the indicators would suggest it would be our expectation or our goal to at least hold LOI rate flat if not drive a little bit of expansion. Like I said, there were few factors here. The first being that credit card. It's been a tailwind for us. And like I said, it could turn to some pressure. The second more tactical one is as we enter into next year, we always reset incentive compensation this year. We have a certain amount of that next year, but we reset the one that does sometimes create a little bit of rate pressure, but broadly speaking, if you think about next year and the years outward, a lot of the other drivers are going to be things like the industry -- level of industry growth. So the extent that the industry can grow and does grow, we expect to grow with it. And that does create SG&A leverage as our cost structure today is probably more indicative of a sales number that's higher than what we set. But we've talked about this year being a benefit for us, both the membership and the health initiatives the rate has been improving, so similar to our Investor Day, a while back we would expect those initiatives to continue to improve in terms of rate, as we look forward from here on out. So into next year and in the years after both membership and health will continue to help drive a year-over-year improvement. We also obviously always trying to have a cost takeout initiatives to help mitigate pressures that we face and just help us invest in the right places. But again, like I said, the profit share could become a pressure from an NCL. The other thing to note in terms of the profit share is this potential regulatory changes around late fees. Now, it's too early to know whether those do or don't count, but that's another item to note. And lastly, I don't think I had mentioned this. We're still in a consumer environment where it's a little uneven and steady and so I think as we think about going forward, a lot of it will depend -- the industry growth will depend upon that consumer and where they choose to spend their money, but I think like I said, our goal would be to at least maintain a flat rate, if not grow a little bit, if we have flat sales, for example.

Thank you very much. My follow-up question is, there is an interesting dynamic that you're referring to on your call, which is the promotional environment in some cases is higher or more intense than it was in 2019, but you're getting more vendor funding than you were getting at least relative to last year. So A, how much is your vendor funding up or down relative to 2019, and B, what does this overall promotional environment suggest about the profit pool for selling consumer electronics in the United States in Best Buy's share of that overall profit pool? Thank you very much.

So, question one, overall vendor trading up for now. We're not going to say total amounts of vendor funding, but you can imagine, at any given point in time our vendors like us are trying to think in a very omnichannel way how best can we both stimulate demand and complete excellent customer experiences. When we kind of like look all in at everything our vendors do with us, we feel confident that we have at least as much if not more like total funding in partnership with our vendors, but of course they're going to use different pockets depending on the environment that we fit in. I think on your profit pool question, Michael, what's interesting is our vendors and we've said this for a long time. Our vendors are as interested as we are in stimulating consumer demand. Sometimes that means they lean highly into innovation and trying to drive replacement cycles and trying to drive that incremental demand through innovation. Sometimes that means we partner closely together in how we show up in stores, whether that's physically or in labor, and then sometimes that means, we will partner together in highly promotional or value-oriented periods to make sure, collectively, we are putting our best foot forward and it goes back to some of what I ended my comments with. There is a larger installed base of consumer electronics out there. And this is not static equipment we all have. This is equipment that whether or not you want to upgrade it, sometimes just wears out and breaks. And this is our unique place in this consumer electronics industry. In partnership with our vendors, we are arguably the best to commercializing that new technology or bringing kind of this total story agnostic just carrying about the customer to life and I think what you're seeing is this in this period right now, our ability to help drive value in partnership with our customers is really highlighted.

Thank you very much, and good luck.

Thank you.

Thank you.

Your next question comes from the line of Kate McShane from Goldman Sachs. Your line is open.

Hi, good morning. Thanks for taking our questions. We wanted to ask a little bit more about the membership strategy, which is now in three tiers. Can you talk about how the profitability differs when compared to your previous program of Total Tech Support and does this profitability improve as the program scales and ramps?

Sure. Yes, I think the changes we've made to the membership program have had a positive impact on our OI rate this year. I think we've talked about it being at least 25 basis points for the year. It's coming from a few different areas. The first area, I would say is the changes we've made to the My Best Buy program, the free membership where we move points away from that program, which is solely on the credit card that helps drive some improvement in rate. The cumulative growth in the members is also a place where that actually helps improve our margin rates as well. So the growth in the annual membership fees does drive some of the improvement as well. Lastly, the changes we've made to the Total Tech program and turned into my Best Buy Total, it does lower the cost to fulfill and helps to drive an improved gross margin rate as well. So those are the collection that drive the at least 25 basis points. And then Corie can speak to any sort of strategic things around the membership team.

I think what's most important is that at any given point in time, what the team I would argue has done a magnificent job doing is balancing acquisition, retention, and engagement. And while to Matt's point, cost to serve as part of our considerations. What we want are not just to acquire a bunch of members but to make sure they are incredibly engaged and to make sure we retain them over time. And so while the profitability impact is part of what we're looking at, the bigger question we are actually looking at is, what is that combination of acquisition, retention, and engagement that drives what we talked about, which is more sticky customers that bring a larger share of wallet and help keep Best Buy relevant over time.

Thank you. And then a follow-up question was just around market share. We wondered if you've been seeing any kind of meaningful change here, whether it would be sequentially or just in any specific categories?

So the good news is, overall, we feel very strongly about our position in the industry and we talked about it already a bit. We are confident in our relationship with our vendors and grateful for their partnership and I think we continue to be excited to keep investing in our strategy from a position of strength. We've said before, there is not a great single source for market share, both because we have a large portfolio of services. Also because we are always evolving new categories, but from what we can see in some of the more established categories, we have at least held our share in Q2 and we believe that's been true really the first half of the year. So no major trajectory change. We feel like we're positioned well and obviously, the team will continue to work with our vendor partners and ensure that we have that great valuable assortment for our customers.

Thank you.

And your next question comes from the line of Brad Thomas from KeyBanc Capital Markets. Your line is open.

Hi, good morning. Thanks for taking my question. I was hoping we could talk a little bit more about kind of inflation, deflation. And what you've been seeing of late, and how you're thinking about that in the back half of the year, particularly given the inflationary world that we've all been living in, but this backdrop of consumer electronics that has historically have been deflationary? Thanks.

Sure. I think broadly speaking, let's start with the categories. I think what we said from a product perspective, we certainly have seen a little bit inflation over the years. But what we're now seeing actually is more promotionality on a year-over-year basis in some cases compared to FY '20, so from category product perspective, I think we're kind of beyond past the inflation aspects that there isn't some cost of good increase, but generally speaking, the prices have gone up. So I think that hasn't changed too much outside like sometimes more promotionality is dropping that price on a year-over-year basis. I think for inflation in other areas in terms of cost, there are things that are historically have always had a little inflation there, probably it will continue to go up. Wages is an area where we always expect to have a little inflation, marketing also is a place where you see some pretty consistent inflation over the years. Supply chain is the more notable one that I think we're seeing a lot of inflation over the years and now it's starting to subside a little bit. Supply-chain has a number of different areas, one of them being the ocean side of supply-chain. That's the smallest cost that we have and that's an area where inflation actually has come down. Ground transportation or domestic transportation actually is an area where we are still seeing a higher level of inflation based on the wages that have the wage pressures and just the volume that's increased. The warehousing side of supply-chain is also an area where we've seen inflation and would probably expect to continue to see some. We also have wage inflation on the warehousing side, but also just we've expanded our footprint because our large products have grown in terms of the mix of our categories that we did it to add space. So broadly speaking, there are some areas where we probably continue to see inflation and some areas that will abate a little bit as you get into next year and years out.

Brad, explicitly I want to highlight. We started talking about this category becoming promotional again in the fall of 2021. And so this is a category very different than some of what you're hearing and I'll just use an example like a number, where you're starting to see that pullback. That is not the case here, but structurally, we have seen ASPs increase. So to your point about this is generally seen as a deflationary category. We spent some time talking on the last call about the fact that actually over time, it is not necessarily deflationary because every single new Rev of products carries with it a new and different price tag. So actually, over the longer period, when we look back to FY '20, we have seen structural increases in ASP, but that is due more to our premium mix and it's do more to having got more high ASP products like appliances and home theater. And so, I just want to make sure I'm explicit in saying this is a bit of a different category on the pricing side of things. Matt did an exceptional job on some of the costing side of things, but we're in a different place than many other industries and categories.

That's really helpful. Thanks. Thank you both. And if I could squeeze in one follow-up here around the topic of shrink. Corie, you mentioned some of the new displays you have that have been helpful. But can you just help to put into context the success that you're seeing in this tough environment given that there are so many retailers calling out challenges on shrink right now?

Yes. I will start with our number one priority is and always has been the safety of our customers and our employees. And I need to be clear that in certain parts of the country in certain stores do that attempt that whether it's breaking in or whether it's larger-scale just grabbing and running out that those are real and we are definitely seeing an increase. However, we did not call-out material impacts to the business as a result of shrink pressure. And as we think about the way we think about shrink is overarching everything we call shrink as a percent of revenue, right, because you're kind of trying to gauge it versus the volume and in total, our shrink as a percent of our revenue is within 10 basis-points of pre pandemic fiscal '20 now, I give our teams all the credit in the world around us, and one of the things that's a little bit different here at Best Buy is given the high-ticket nature of what we sell, we've been addressing shrink aggressively for honestly many-many years. It's really embedded in the culture and think about some of the things that are different for us, we have front door asset protection in our stores and likely often more floor coverage as well because we just have more employees in our stores and they just do an exceptional job of washing out over our stores, we usually just have one entrants in our stores, we tend to have less self-checkout. We have a very-high digital penetration at 33%, so that's a little bit different. We also have to spend a lot of time on online side, which is a different kind of definition upstream. And so we just have structurally. I think a little bit different and honestly have been investing really heavily in this space over-time. I'm trying to really hard in our buildings, protect our employees and assets. And then as I mentioned, now going into the next realm of technology solutions that are trying to protect the customer experience and make it still seamless for the customer to get everything they want, and at the same time, create the safest possible environment.

Very helpful. Thank you, Corie.

And your final question comes from the line of Brian Nagel from Oppenheimer. Your line is open.

Hi, good morning. Thank you for taking my questions.

Good morning.

My first question. I think it's a bit of a follow-up to Keith's question just with respect to memberships. So Corie, you spent a lot of time on the call today. Just talking about the ongoing enhancements of membership and you've given some of the nearer-term financial targets, but I guess the question I want to ask is, as we step-back and clearly the big focus for Best Buy. In your minds, what do we play what I don't want to say necessarily say dream the dream, but intermediate longer-term opportunity with membership either providing a financial standpoint more quantifiable or just from an overall consumer engagement standpoint.

Yes. I'm going to talk from a consumer engagement lens. The thesis of membership has been consistent since the beginning is to drive customer engagement and increase share of wallet in consumer electronics, that is the end game that we're trying to accomplish, all the more important in an environment where we have plenty of data that says consumers are a little less brand loyal than they've ever been, and so it becomes even more important for us to both create and then maintain this deep relationship with our customers. What we've learned across and I said it before, but ahead again across acquisition, retention, and engagement, what we've learned is different customers value and different cohorts of customers value different qualities in our membership program. And so that's why the tiers of Free, Plus and Total they will appeal to either in the free case, someone who just really wants the convenience of free shipping on everything. On the Total - or on the Plus aspect, excuse me, that's someone who loves convenience and a great value, right, they're going to get the promotions. They're going to get early access and we get 60-day return windows. And then on the total. I want all of that plus. I really value the support aspect of what we deal and the most important output of all of those at the end-of-the-day is that we can see customers who both stay engaged with us and we can see that repeat business, and we can see that increase in share of wallet meeting every time they think about making a purchase in consumer electronics, they just come to us because it's so easy why do you go anywhere else. So that structurally, is what you're trying to build to. Over time, you both want the program itself to be efficient, you wanted to be a reasonable cost of acquisition, but over time, you also want a customer who is shopping with more frequency and ultimately spending more with Best Buy.

No, that's very helpful. I appreciate that. And then my follow-up question different topic. We talked about the sale, the expected sales trajectory through the balance of the fiscal year with the expectation that sales will continue to solidify improved maybe work towards that flatline. But you also did call out. I think it was in the prepared comments. The risk of it - if you will is the challenge of this resumption of student loan payments. So, it's obvious topic is starting to get air time. The question. I have is I mean, to what extent you look closely at this. How are you sizing and if you are sizing that potential risk to your sales trajectory here in the near-term.

Yes, thank you. I think it's clearly something we're trying to assess and what we effectively believe we've tried to size that in our guide for the back-half of the year. So it's clearly there are a number of different factors influencing the consumer right now shift to spend the services, their increasing use of credit card, but they're still spending money. So I think it's certainly an impact for us. I think if you look at our demographics, we potentially could be more slightly exposed, but at the same time, we have a demographic that actually has a higher income, who can more afford, increase in the number of student debt payments. So it's something we certainly tried to factor into the back-half for sure, but it's not the only factor that's happening.

You bet. Thank you, Brian. We appreciate the questions and overarchingly thank you to everyone who took the time to be with us today. And before we close the call. I want to make sure we acknowledge the wildfires in Maui, but also the wildfires, we've seen in Canada. And those bracing for a hurricane in Florida. Our hearts genuinely go out to those impacted and we are doing all we can to support our employees in all of those impacted areas. Thank you so much for joining us today.

That concludes today's Best Buy's second quarter fiscal 2024 earnings conference call. Thank you all for joining, and I hope everyone has a great day.