Ladies and gentlemen, thank you for standing by. Welcome to Best Buy's Second Quarter Fiscal '26 Earnings Conference Call. [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, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Joining me on the call today are Corie Barry, our CEO; Matt Bilunas, our CFO and -- Chief Financial and Strategy Officer; and Jason Bonfig, our Chief Customer Product and Fulfillment Officer. 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 recent Form 10-K and subsequent Form 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. And now I will turn the call over to Corie.

Good morning, everyone, and thank you for joining us. I want to, and I think it's important to start by acknowledging the horrific shooting that occurred at the Annunciation Church and Elementary School in Minneapolis yesterday morning, just a short distance from our corporate headquarters. Our hearts break for the young life lost and their families who are grieving and our thoughts are with the victims, their loved ones and our community, as we process this unimaginable tragedy. And with a deep breath, we will now turn to earnings. Today, we are very pleased to report better-than-expected results for the second quarter. On revenue of $9.4 billion, we delivered an adjusted operating income rate of 3.9% and adjusted earnings per share of $1.28. We delivered comparable sales growth of 1.6%, our highest in 3 years. This was driven by a mix of new technology innovation, our relentless focus on a seamless omnichannel customer experience and our strong vendor partnerships. We grew sales in several product categories, including gaming, computing, mobile phones, wearables and headphones. This growth was partially offset by declines in the home theater, appliance, tablet and drone categories. We reported higher-than-expected growth in gaming, largely due to our successful Switch 2 release. We saw strong results, not only in console sales, but also the related peripherals and software. We provided our customers with a smooth experience from the preorder process all the way to getting the console in their hands at midnight on launch day and subsequent post-launch inventory drops. There was a lot of customer and employee enthusiasm for our June 5 midnight opening and every store had lines of excited customers waiting to get in. I will add that in addition to Switch 2 growth, we also saw growth in other types of handheld gaming as…

Good morning. Let me start with an overview of how our second quarter performed versus the expectations we shared with you last quarter. Enterprise comparable sales growth of 1.6% exceeded our outlook of being slightly down to last year. Our adjusted operating income rate of 3.9% was 30 basis points better than expected, which was largely driven by SG&A leverage from the stronger sales. Our gross profit rate declined 30 basis points to last year versus an outlook of being approximately flat. This was primarily driven by a higher mix of sales coming from lower-margin categories such as gaming and computing. I will now talk about our second quarter results versus last year. Enterprise revenue of $9.4 billion increased 1.6% versus last year. Our adjusted operating income rate decreased 20 basis points compared to last year. And our adjusted diluted earnings per share decreased 4% to $1.28. By month, our Enterprise comparable sales were down approximately 1% in May before increasing to almost 3% in both June and July. These results included lapping last year's strong tablet performance in May as well as the successful launch of the Switch 2 in June. In our Domestic segment, revenue increased 0.9% to $8.7 billion, driven by comparable sales growth of 1.1%. From a category standpoint, the largest contributor to comparable sales growth were gaming, computing and mobile phones, which were partially offset by declines in home theater, appliances, tablets and drones. International revenue of $740 million increased 11.3% versus last year, which was primarily driven by comparable sales growth of 7.6% and revenue from Best Buy Express locations that opened in Canada after the second quarter of fiscal '25. From a category standpoint, consistent with our domestic segment, the largest drivers of comparable sales growth were gaming, computing and mobile phones. Our…

[Operator Instructions] Your first question comes from Seth Sigman with Barclays.

I wanted to focus on market share this quarter and around some of the bigger events that you mentioned I think last quarter, you highlighted some weakness in Q1, but I realize there's different seasonal dynamics in Q1. So just curious how that played out this quarter. And then I have a follow-up.

So we say it every time and I'm going to say it again, there is no great single source of share information for our categories. But that being said, as we try to cobble together all the different sources that we have, we do feel better about our share position this quarter. We feel like we had some good momentum here in Q2 and at least felt like we had flattish share overall. And obviously, to your point, we feel like share is a long game conversation for us. It has some variability quarter-to-quarter. But what we're trying to do. And I think you can see it in the prepared remarks, is really position ourselves on our front foot across categories and especially in those places where we think we can really differentiate like gaming and computing.

And then if you could just bridge us to the third quarter comps being similar to Q2. Q2 obviously had the Switch launch. If we look at Q2 comps, excluding the entertainment category, I would say that the rest of the business would have been down low-single digits, so is it that the switch benefit continues? Or are there other drivers that we should be thinking about?

Yes. Let me start with first. As we entered August, we talked about we're still seeing momentum as we enter the third quarter, we're seeing a very strong response to our back-to-school sales events. And as we said, the quarter-to-date comps are up low-single digits as we exist here in August. I think going from Q2 to Q3, I think, yes, the Switch launch did provide a boost to the second quarter results. But as we noted, there was a significant iPad launch last year in May that we also had to comp, which goes the other way. As you get into Q3, you continue to see growth from gaming, albeit not as much as you saw in Q2, and then you continue to see -- you see a better performance coming through in the mobile computing category, which includes iPad. So continued growth in computing, better performance on iPads, continued growth in mobile phones. And then net of that gets you to a comp that's similar to what was in Q2.

The next question comes from Kate McShane with Goldman Sachs.

Vendor support has been a distinguishing part of your story for a long time with vendor labor and exclusive. And it sounds like at least on the labor side, you are seeing vendors leaning in more, is up 20%. So I wondered if you can maybe talk to that just what changes are being made there? And are you baking in any kind of sales lift from this increased investment?

So let me start with, we are incredibly thankful to our vendors for their partnership on so many vectors. And we do feel very good about our relationships, and we work with them in a very omni-channel way just like our business. If I just take a big step back, overall, the level of invested support from our vendors has been growing. And as you noted, part of that is labor, but it is actually across the assets that we have. And I think as I said in the prepared remarks, this is a really important part of our story. It's highly relevant traffic both to stores but also digitally unique expert sales and service and then the physical space, the ability to really showcase what these products can do in a unique way that can help our vendor partners run across the assortment of what they do in any given space. And so I think it's not only they're investing in labor, they're investing in some of the updates and upgrades consistently to those physical spaces. They are also, in some cases, investing in training our associates. So it's not just you throw labor in there. It's how do you keep that labor really fresh and really specialized. And then there are lots of other unique ways they're partnering with us. Best Buy ads, membership, the app and online presence. You can see some of those vendor shops replicated in our digital experiences, supply chain and fulfillment where we have our partners program and we fulfill for them, reverse logistics or we take care of that trade in, recycling. I mean, these are all the aspects that our amazing merchant team sit down and negotiate with vendors. And I think it's a very unique set of assets that we bring to the table in these conversations.

The next question comes from Chris Horvers with JPMorgan.

I was just curious how you're thinking about the risks around the consumer in terms of what you've seen the reaction from tariff price increases in the July and August time frame, is elasticity surprising you in either direction? And then as you think about the go forward, is that quarter-to-date low-single digit close to that, is it 3%? And are you simply just being prudent around the potential for deeper valleys in between events?

So on that whole tariff discussion, I'm just going to kind of take 1 step back and start with our customers because our #1 focus is being there for our customers. And I'm really proud of the way both our teams and our vendor partners have been navigating tariffs even as it's been changing. And our approach, as it always is, is to deliver the right product assortments to match our customer needs and budgets while we partner with the vendors to navigate these conditions. Q2, as we said, was basically in line with our expectations and not material to our financial results. And I think there's a couple of reminders here. We had talked last time about the mitigation strategies that we're using in partnership with our vendors. Everything from manufacturing flexibility, cost negotiations, country diversification, assortment adjustments and then ultimately, only where absolutely necessary adjusting price and I think at this moment, it's important to also remind you, we only directly import 2% to 3% of what we sell. So that means as it relates to tariffs, some vendors are clearly communicating cost increases. Some are adjusting promotions. Some are planning to potentially increase prices with new product introductions, which always happens in our space, and some are just not increasing them at all given these are very, very global supply chains. And so I think what we saw in Q2 is what we expected, those strategies, when they're all put together, are ensuring that those cost increases are much, much less than the overall effective rate of the tariffs because we're able to put so many of those other mitigation strategies into play.

Yes. And in terms of Q3, I think, as we talked about in August, we're in that low-single-digit range, seeing a good performance from back-to-school. We're also very cognizant as you get into September and the last part of September and October, the events start to slow down in the buildup to holiday. So you oftentimes see a slowdown in business a little bit into October as people are waiting for those holiday deals to come. So our guide would reflect the fact that we're starting the quarter strong. We feel good about the momentum, but also recognizes that sometimes there is a little bit of slowdown as you head into the deeper holiday season.

Understood. And then as it relates to the Switch 2 if you look back to the last launch, the strength really persisted in that category and actually, the fourth quarter was pretty close to the comp, the entertainment category comp pretty close to what it comped on the launch period. How are you actually planning that? As you do get into the fourth quarter, obviously, entertainment does go up in the mix and so would comps -- would you expect some comp acceleration in the fourth quarter? And just 1 clarification. You mentioned you expect sales to trend to the high end of your guidance? Is there any -- does that also translate to earnings?

Yes. So maybe I'll start with the last part of that question. We are saying we are trending towards the higher end of our sales guidance. Clearly, to the extent we can drive a better operating income performance based on those higher sales, we will continue to try to do that, but we have not changed the OI rate guide for the year so far. In terms of gaming and what I would say is we are planning to see gaming growth in Q3. And as you get into Q4, clearly, we're planning that based on the knowledge of availability of the Switch 2 console. We do -- gaming is always a big part of a holiday sales performance. So clearly, there is some level of expectations. And I think the team's ability to deliver on a really strong launch in Q2 in that event and just how we show up in the store and online does give us comfort and confidence in our ability to get the product we need to deliver on the sales expectations that we have. So clearly, gaming is always big in Q4. So we'll see, but if you do apply the Q3 guide, it kind of infers that the Q4 guide is pretty similar to what we're going to see in Q3.

And then specific to the gaming category, we're obviously very pleased with our performance in Q2 and what happened with Switch. We did have really strong momentum from a market share perspective in gaming heading into that, which we're proud of, but we're also proud of the fact that accessories and software, we performed very well in those 2 areas in addition to it. The other part that is sometimes missed is it's not just Switch 2, gaming in total is strong for us. So handheld gaming not including Switch, things that have either the Windows operating system or the Steam operating system also grew at a pretty significant rate in Q2 as well. And we think that there's a lot of momentum on all those things included. So obviously, Switch will continue to have great demand all the way through the rest of the year into Q4. And then there's also some new products launching that our partnerships between Microsoft and ASUS that will also bring demand in total. So we're excited about our total gaming portfolio, and we feel well positioned to take advantage of that for the rest of the year.

The next question comes from Steve Forbes of Guggenheim.

Corie, Matt, I wanted to focus on the post Labor Day promotional calendar. And the thought here is we're hearing the potential for change in frequency of promotional events, maybe less about change in depth of those promotional events. So just love to get your thoughts on how the depth and frequency of events are slated for this year relative to last year and sort of how that impacts your ability to forecast the business, given your comments around how the consumer is more attracted to those events.

I think one of the team's strength is the ability to very carefully plan out, especially as it relates to the back half, a compelling promotional calendar. And like any year, you're going to find those right moments where you think the consumer is going to be most open to those promotional events, and then you're going to plan across your assortment. And it goes back to something that actually I should have said in earlier tariff answer. This is a really promotional category. And that means all of us are -- in partnership with vendors, all of us are working to stimulate demand from our consumers and all of us are working to position at the right time. In general, we have seen both breadth and depth of promotions higher than last year. And we assume that will continue, and that is reflected in the guide that we gave. And we are going to try to find those right moments to ensure we are competitive like Black Friday in July, which was quite successful for us. so that we are showing up and we are resonating with our customers.

And then maybe following up on that, right? So breadth and depth higher than last year. I think given the tariff pressures in net terms, I think there was a lot of conversations within the expert networks over the past 3 months about just sharing of the cost and maybe an increased percentage of share being pushed down to the retail community. I guess I'd love to just hear your thoughts on just control over gross margin, right, as we approach that holiday selling season?

So, look, all of us are working in partnership, especially in this category to be there for our customers and drive demand. And that is priority one for everyone together. We are going to go into the level of detail of talking about exactly who shares what. But of course, I'm going to say that it varies by vendor, and it varies by product category. And as I said before, when we have been seeing increased costs, it is materially lower than the overall effective rate. And that's because every vendor is taking their own approach to how they think about navigating this backdrop. Like I said, some have already communicated cost increases. You can see that in some of the older gaming platforms as an example. Some are adjusting promotions. Some are planning cost increases with new launches. Some are balancing this across the whole global supply chain and maybe not adjusting costs here in the U.S. And so for us, this is just a -- this is frankly what our vendors do all the time. This is making sure that we have the broadest assortment, opening price point to more premium. That is an advantage that we have as an only consumer electronics retailer. So that whatever the budget is of the person walking in the door, we've got something that matches that budget. And so far, I think we've been able to do that.

Next question comes from Michael Lasser with UBS Financial.

Best Buy has long talked about the profit pool associated with core consumer electronics retail, not really growing and Best Buy was either going to have to harvest a greater share of the profit pool or serve other categories, such that it was able to drive growth in the overall enterprise. How are you looking at this now, especially in light of the challenges that have been realized by serving healthcare and home furnishings and the prospect that increasingly your competitors could push down the overall core profit pool to harvest profit in other ways and through other streams?

Yes. Thanks for the question, Michael. I think what you'll see in our prepared remarks, we focused a lot on our strategies. And there has been a lot of dynamic shift over the last number of years in CE. One of those shifts has been a proliferation of third-party sellers in a lot of our categories. And you're seeing us now launch a marketplace to help us strength in some of those places where unit share has been harder to capture because so much of that is being delivered from a third-party marketplace. So as we try to ensure or stabilize our base within CE, that is an important aspect as we go forward, and we believe that's going to help us on an aspect of solidifying categories that have shifted in that direction. We're also working on growing our ad business and growing that ad business actually provides a bit of fuel for us so that we can continue to reinvest back into things like price, reinvest into things like the customer experience and into driving awareness. Those are -- that growth of that profitability will help us fuel the core retail business as you were talking about. Those are a couple of examples of how we are evolving our strategy to move forward, which helps us move beyond maybe just harvesting the business in terms of being more aggressive in terms of like how do we grow the business more proactively in the future?

The last thing that I would add, Michael, is even as it relates to the core business, our priority is driving those amazing experiences for our customers. And we highlighted on the call so many ways that we do that in partnership with our vendors. You can imagine we are continuing to expand and deepen those relationships. So that we provide not just the like SKU for SKU competition with others, but this really broad, really immersive technology experience that is different. And we are the only place where you get that kind of breadth which means we get to partner with people like Roku or Amazon and bring to life these experiences, not just for the hardware but also in terms of how we think about connecting with our customers on the software side. We also talked about the upgrades from Windows 10 to 11. So these relationships are deeper than just let's go fight it out on the SKU for SKU hardware level, but we will do that. They are also about us being the 1 place where you can come and see all of these brands and all of these operating systems. And you can imagine that behind the scenes, we continue to navigate that in partnership with our vendors to bring these things to market uniquely.

Okay. My follow-up question is in last couple of quarters, home theater and appliances have been a bit more challenging for Best Buy as you do the review and diagnose some of those challenges you outlined steps that you're going to take in order to stabilize those businesses, including making sharper pricing. So how much are you willing to invest in order to improve the performance of those categories? Is it really just a function of price? Are there other factors at play? And if you look across your portfolio of profits, how much are you willing to fund some of these -- or take the profits associated with these emerging pools like Best Buy ads in marketplace and reinvest them back in stabilizing parts of your core business?

Yes. Thank you for the question. I think TVs and appliances are very different categories. So maybe I'll hit on really quickly and some of the differences associated with each. In half 1, the TV trend has been a little bit softer, and there has been more of a shift towards value. So there is a need for us to make modifications to our assortment. Some of that is price, but some of that is also what we offer and the way that we bring that experience to life in store. As Corie alluded to, we are actually expanding our relationships with some of our vendors, in particular, TCL, Hisense and LG, creating more experiences in our store that not only lean into the more premium side of technology but also allow us to better meet some of those value-seeking customers. That's the way things look from a TV perspective. And on top of that, additional marketing investments to make sure that we're driving the right traffic Appliances is a little bit different situation in the fact that the market is very focused on duress right now just because the housing upgrade market has been a little bit softer and the rest has not historically been our sweet spot. Our sweet spot is more around packages associated with appliances. So there is a need for us to modify our assortment there and also placement. So in some cases, it's less about price, but more about speed of fulfillment or even the ability for a customer to actually take an appliance out of our store and just directly take in that particular day. And those are some of the moves that the teams are making as well to better meet the customer where they are in the market today.

Michael, I might just add in terms of how that's represented in our financials. I think we're always strategically trying to balance sales and profitability. And I think even in our guide this year, though, we did note that product margin rates are expected to be lower year- over-year. And some of that, most of that is due to just the mix of what we're selling, but we have built in a level of promotionality or competitive pricing so that we can actually make sure we are being competitive as we get into Q3 and Q4 to support not just all the experiences that Jason talked about, but also just from a competitive price standpoint, we have tried to incorporate that into our guidance as best as we can see. And obviously, we'll adjust as we see.

And I think it's just worth noting that kind of a ribbon on this. That guide that we put out -- that includes all of these things we're talking about, it includes mix. It includes making sure we feel like we have a very strong promotional stance. And it includes that conversation we just had about balancing sharing in the tariffs. And I think it's worth noting that even with all of that put together, our guide has remained very stable on the profitability side.

Is that why you are thinking, hey, we might be at the high end of our top line, but just in line on the profitability side because of tariff, pricing, mix, those factors are just playing out to be a little bit more challenging?

Yes. I don't think our profit expectation has changed dramatically. We haven't changed the guide for the year. And in the previous guide, we did also talk a little bit about building in that promotionality and that remains pretty consistent. I think we are believing that we're a little more confident in the top end of that sales range, as we talked about. And we did exceed our expectations in Q2, which is coming in some lower-margin category areas. So -- it's fair to say that on the high end as you mix into those lower margin areas doesn't come with as much profitability. So we have a little bit of room there, but that would have -- we've already factored that in.

The next question comes from Anthony Chukumba with Loop Capital Markets.

So it sounds like the Switch launch was a success, but I was just wondering how did it perform -- or sorry, Switch 2, how did it perform relative to your expectations? And then how does that -- how did that flow through to your guidance for the back half of this year?

Yes. I mean we did exceed our sales expectations in Q2. A big part of that was our performance coming from the Switch launch. So fair to say that, that was a significant part of the beat to our expectations in Q2 and we do expect to continue to grow in gaming as we get into Q3 and Q4, and that we've reflected any sort of additional upside that we might see as it relates to that product. But it did represent something. We also, though, did exceed expectations in other categories like computing as well. So it wasn't the only thing that did better than we expected in the second quarter.

Got it. And then in terms of the Windows 10 support expiration, so based on that -- because I know your computing sales has been quite strong for quite some time. But is it -- is it safe to say that you would expect a further acceleration just based off of that?

Yes. In computing, we expect to see continued momentum. So a couple of things. There's been 6 consecutive quarters of growth in computing and Q2, as Corie mentioned, we actually had the highest laptop volume in Q2 than we've had in 15 years. So we are continuing to see that acceleration. And there's really 3 factors that are driving growth in computing. The Windows 10 end of life support is driving customers that have not been in the market for a long time in and they have very specific needs, specific things like data transfer and things like that are top of mind. . There's also a pretty significant trend of MacBook users that have MacBooks that are 3 to 8 years old that are still on the Intel-based platform that can get some significant changes in performance in battery life and performance in general as well as AI when they upgrade, and that's driving interest in the market. And then just the AI features continue to evolve. Every single quarter, there are new features dropped from Apple and Microsoft in total and customers are seeing interest and our CoPilot plus PC assortment has grown pretty dramatically. We're up to 120 different models in our stores. So those 3 factors are really what's driving the growth, and we think it will continue moving forward because those are all really important things to different groups of customers.

The next question comes from Robert Ohmes of Bank of America.

Maybe for Corie. Just -- sorry, on the Verizon and AT&T carrier system commentary, can you just walk us through, is this a significant back half benefit you're expecting in traffic? Or is there any structural change in the agreement versus things you've done in the past?

It's not a structural change. I would think about it more as an expansion. We actually saw mobile phone sales grow in both Q1 and Q2, and that was after years of declines. And so what we're doing is we're actually an operating model that we have had in some of our stores with both Verizon and AT&T. And the reason is advantageous is it's just easier to access all of the myriad of pricing and arrangements that you need in this space with the customer, depending on if they have a family and they have multiple lines and they have different needs in terms of data. This just allows a really seamless way for the customer to interact with a more specialized associate given the complexities but also have access to the greatest deals. So yes, we expect that to continue to drive momentum in the mobile category in the back half. It's part of what is baked into our belief system around being at the higher end of the range.

Got it. That's helpful. And then maybe for Matt, any -- the restructuring charge in this quarter it makes sense. Just any -- should we expect more restructuring charges through the balance of the year?

The restructuring charge that we took in the quarter reflects basically our motivation to move resources towards those strategic areas in our business. And I think there are some of the impacts will happened this year. Some of those actual impacts happen as we carry into next year, but we don't expect to be adding a material amount more restructuring at the rest of the year.

The next question comes from Scott Ciccarelli with Truist Securities.

This is Shervin on for Scott. Just had a question here regarding tariffs again. While we've been in a bit of a limbo situation still dynamic. I'd love to hear about your progress since last quarter when we talked about sourcing distribution like what's the split of your exposure today to China versus other countries? What's the end goal? What are you doing and like when you expect to get there? I also think that you talked about your progress with vendor negotiations surrounding costs. So a little bit more color there would be great.

Sure. So as a reminder, before I start this conversation. We are the importer of record on only about 2% to 3% of what we sell. So whenever we're quoting the sourcing on this, it is in partnership with our vendors and understanding where they are doing the majority of the sourcing. Right now, the U.S. plus Mexico are about 25% of product cost of goods sold, at this point, those have 0 tariffs. China has come down to 30% to 35% compared to the 55% we shared back last March and about half the China source products are at 30% tariffs, roughly half are at 20% tariffs, and that leaves another roughly 40% of CE products coming from other countries like Vietnam, India, South Korea and Taiwan, which as you know, are at varying levels right now. . And so the kind of blended effective rate of all that is about 16% versus the 12% to 13% we shared with you and I will reinforce that because we continue to work on the mitigation strategies that we've talked about amount of cost adjustments that are coming through are materially less than that blended rate because our partners are doing an amazing job really trying to work through these very global supply chains.

And the last question will come from Zach Fadem of Wells Fargo.

This is David Lantz on for Zach. I guess first 1 for me. How do you think about sizing a potential upgrade cycle? And to what extent does that incorporated in guidance?

Yes. I think I'll step back a little bit. I think every category is at a different level of upgrade cycle pretty uniquely. And I think as an example, we've been seeing, as we've talked about a lot, replacement cycle, upgrade cycle coming through computing. It first started with notebooks. It's moved into other things like desktops. There's been along the way strength in gaming computers as well. And I think that's the first place where we saw because of that significant purchase during the pandemic, maybe not getting the optimal machine, seeing a replacement cycle happen for quite a bit of time now in that category. And I think it kind of varies by product category. Gaming is another example. It's usually pretty launch dependent where we just had a Switch launch. We have -- we probably won't see a PS5 or Xbox for a little bit of time. I think TVs and appliances are a little longer in the replacement cycle window closer to the 6-, 7-, 8-year cycle, probably not seeing a large level of replacement having there, although there is a lot of innovation happening in some aspects of those categories like extra large televisions that didn't exist years ago. So I think every category is a little bit different. I think broadly, our business shines when there's innovation. And so it's always some combination of needing to replace the technology in your life, but also being interested and curious about new innovation that's coming that both of those things combined is kind of where we do our best work. And so we aren't quite back all the way on an innovation or replacement cycle, but we see the momentum building in a number of the different categories.

Got it. That's helpful. And then with expectations that rates ease in some of your business tied to housing, curious how a rate tailwind would impact your business?

Yes. I think probably in appliances the most. I think there's the strongest correlation with the housing turnover or housing starts coming to the major appliance business, maybe a little bit on the home theater TV side, but mostly on the majors. And I think as people start to get into new homes or actually want to remodel their homes, we start to see people gravitate maybe towards package appliances versus right now, it's a very duress market. And we also offer a very broad range of assorted major appliances, all the way from Viking and [indiscernible] the high end to opening price points. And so I think as we get into better housing turnover, housing starts, you start to see people want to pursue different types of major appliance purchases. And I think from that respect, that helps our business because we have more dedicated labor. We have more showcasing in our stores. We have a broader assortment. I think so when we do see that, we would expect to be able to drive a bit of better performance on the major side of the business.

All right. With that, I think that's our last question. I want to thank you all for joining us, and we look forward to updating you on our progress in November. Have a great day.

This concludes today's conference call. Thank you for joining. You may now disconnect.