Ladies and gentlemen, thank you for standing by. Welcome to Best Buy's First Quarter Fiscal 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this call is being recorded for playback and will be available by approximately 11:00 a.m. Eastern Time today. I would now like to turn the conference over to Mollie O'Brien, Vice President, Investor Relations.

Good morning and thank you. Joining me on the call today are Hubert Joly, our President and CEO; and Sharon McCollam, our CAO and CFO. This morning's conference call must be considered in conjunction with the earnings press release we issued this morning. Today's release and conference call both contain non-GAAP financial measures that exclude the impact of certain business events. These non-GAAP financial measures are provided to facilitate meaningful year-over-year comparisons, but should not be considered superior to, as a substitute for and should be read in conjunction with the GAAP financial measures for the period. 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. Today's earnings release and conference call also include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements address the financial conditions, results of operations, business initiatives, growth plans, operational investments and prospects 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 SEC filings 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. In today's earnings release and conference call, we refer to consumer electronics industry trends. The consumer electronics industry, as defined by the NPD Group includes TVs, desktop and notebook computers, tablets not including Kindle, digital imaging and other categories. Sales of these products represent approximately 65% of our domestic revenue. It did not include mobile phones, gaming, movies, music, appliances or services. During…

We'll have our first question from Aram Rubinson with Wolfe Research.

Hey. Thanks so much for taking the question. Two quick ones, hopefully easy. Anything that you can help us with to give us a line of sight into the holiday season this year on how you think that might shape up? And then I had a follow-up. Hubert Joly - President, Chief Executive Officer & Director: Good morning, Aram. As you know, we're not talking about holiday today. It's still – it's too early to provide any color commentary. I think we've made some positive comments about some of the categories that are driving our growth in the large-screen televisions, phones and appliances. That pertains to the next quarter and going forward but it's premature to talk about holiday at this point. I wish I could tell you more.

Okay. And the second thing is you're operating in an industry that's shrunk by 3% in Q4 and shrunk by 5% in Q1. Can you just talk broadly about things that might be on the horizon to help you? Because you're doing a great job of gaining share but it makes your life a lot easier if that was not a negative? And then also are there any other big opportunities in margin or SG&A that you work on and develop that haven't yet been announced that could be in case that industry trend continue ad infinitum? Hubert Joly - President, Chief Executive Officer & Director: Yeah, so let's – we need to be very clear. The 5.3% decline we called out pertains to the NPD tracked categories which are our most traditional product categories. They represent about 65% of our revenue. So you have other product categories that are not included in there, in particular, phones and appliances as well as gaming and entertainment. As you would know, phones and appliances are growing categories. Now, there's not immediately available precise information on these categories but I think if you look around you would assume that phones and appliances in particular are growing nicely. So I would not conclude even though we don't have precise facts for the quarter, I would not conclude that the industry as a whole is down by that much. Okay? So that's the first. It's really important to understand from an investment thesis standpoint because the industry is not down 5%. Okay? Now, it's hard to track exactly the number but it's not down 5%. Now, talking about categories we are excited about into the future. I think we've been consistent in saying, in fact, in particular that phones and appliances where a key area…

Thank you for that.

We'll go next to Brian Nagel, Oppenheimer. Brian W. Nagel - Oppenheimer & Co., Inc. (Broker): Hi. Good morning. Hubert Joly - President, Chief Executive Officer & Director: Good morning, Brian. Brian W. Nagel - Oppenheimer & Co., Inc. (Broker): Good morning. First off, a question on TVs. You called out the TV categories, one of, so to say, the bright spots in sales. How would you describe right now the overall momentum in that business from a product cycle standpoint and then relative to what the products may be coming out as we get closer to the holiday season? Thanks. Hubert Joly - President, Chief Executive Officer & Director: Yeah, thank you. It's evidently an important driver of our quarter. Let me try to describe what you would see if you were looking at NPD data. The market is actually not up in the quarter. It had been up in Q4. It's not up in Q1. However, you have something that is going on which is a genuine customer interest for larger screen televisions. And, in particular, as the quality of the pictures has improved, and partly it is driven by 4K, a large-screen television is actually very appealing given a set number of pixels. And so what you're seeing is this wave in the large-screen television. What you are also seeing for us, and let me emphasize this because it's something we control, the work that our team, our merchandising team, has done in the stores in particular to showcase the latest TVs is quite extraordinary. As you know, we've done that in partnership with some of our key vendors in the stores, so Sony and Samsung in particular, with a pretty dramatic exposition of the TVs, as well as investment in expert labor. So there's more and…

We'll go next to Scot Ciccarelli, RBC Capital Markets.

Hey, guys. How are you? Hubert Joly - President, Chief Executive Officer & Director: Good morning.

Good morning. I guess this is a little bit of a follow up on Brian's question. I mean, if you look at Best Buy's history, you guys have always significantly over-indexed with new technologies. You did mention having a higher market share in the new technology TVs. Can you give us an idea or some sort of range on what your rough share is? And specifically, how would you expect that share to change as the category starts to mature, especially as prices start to come down, as you just referenced, Hubert? Because obviously we're in a bit of a different competitive environment than what we were the last time we saw a major product innovation outside of the Apple ecosystem. Hubert Joly - President, Chief Executive Officer & Director: Yeah, so this is a highly competitive arena. There's intense competition around this category. So I am going to refrain from giving too much information to our friends around the other players. We do see and as we've highlighted this morning, a material share gain for us, so that's very clear. I've also told you that we are indeed doing better, as you've highlighted, with the large-screen new television 4K. as is the case. So over time, we fully expect that this market share may go down as the new technology becomes more mass market. When that will happen, I think it's hard to call with precision. But we would expect that the benefit of what we've done will continue as I think we've really created a material difference in the customer experience as relates to buying these TVs. And it's still early in the cycle of adoption of these large-screen TVs and 4K TVs. So we don't expect a reversal in the short-term, but over time it will happen, always does, and then we focus on the next big thing.

So maybe a little bit of a different question then. So as you wind up seeing the ASPs on the new technology come down, because you mentioned significant price deflation, can you give us a general description, at least in terms of what you're seeing on the margin on that product? Thanks. Hubert Joly - President, Chief Executive Officer & Director: Well, so your question is, does ASP deflation, does it have an impact on our gross profits?

Correct. Hubert Joly - President, Chief Executive Officer & Director: Again, the answer is absolutely, yes, because it is a game of percentages and dollars. Even if the percentages stay the same when the ASP goes down, the dollar gross profit rate goes down. So welcome to our world. It's a world where we need to race constantly to beat these trends. And I think that what we're seeing in this quarter is the demonstration of our ability to do a very strong job taking advantage of the opportunities in the market. But it's hard work. Sharon L. McCollam - EVP, Chief Financial & Administrative Officer: Our expectations – the expectation for the entire industry going into the back half of this year and going into next year would be that you would see increased volume because of the lowering ASPs, which then makes them more approachable to the mass. And then that would be true probably across the industry. So you end up with increased revenue and a slightly lower gross profit rate. That would be how we would see that playing out. And I'll just add to that that another place where we are in our minds clearly being able to inspire the customer and be able to put ourselves in a better position, of course, is from the promise that we can make to the customer on advice, service and convenience. Hubert talked a lot about it in his prepared remarks. And we clearly recognize that when somebody's in a Best Buy store and they are looking to invest in this type of technology, which is complex technology that we have a service offering that is not available across the landscape of retail and it makes a significant difference when you are changing technologies like this. So those combined is one of the reasons why we believe that it's a competitive advantage for us to be able to offer this more encompassing experience for the customer.

Got it. Thanks a lot, guys. Hubert Joly - President, Chief Executive Officer & Director: Thank you.

We'll go next to Michael Lasser, UBS.

Good morning. Thanks a lot for taking my question. Two, actually. In recognizing that there's not a lot of visibility in the sales outlook for the second half of the year, can you discuss some of the puts and takes on the margin side and some of the discrete factors that we should expect to see as you move into the third quarter and fourth quarter? Sharon L. McCollam - EVP, Chief Financial & Administrative Officer: Michael, yes. We didn't guide the third quarter and fourth quarter at this point because we're still looking for clarity, obviously, around the top-line. I just described what we expect around the industry for television going into the back half. We are extremely focused in the back half of the year on executing against the Renew Blue initiatives that we had laid out earlier in the Q4 release and then of course the efforts that we have been putting towards our waste efficiency and other types of optimization, margin optimization initiatives. So we'll give you guys more color. We are very confident as we look toward the back half of the year in what we can execute at Best Buy. We are making a lot of progress on the system side. You guys are giving us the latitude of being able to make these investments in our future growth initiatives. And as a result of that, we have taken that and run with it. You can see what we have been doing. We actually told you guys we would allow you to track that. We gave you real numbers this quarter around how much we invested in the first quarter in order to be able to drive the type of outcome you would all be looking for in the back half of the year…

Understood. And a quick follow up on the television category. We heard from many others that inventory was scarce of advanced televisions because of the West Coast port strike in the first quarter presumably given your strong inventory position you're going to be ahead of others to get products. So do you think that you were in better in stock position with that product during the quarter and that helped you gain some market share? Or was that really not part of the story? Sharon L. McCollam - EVP, Chief Financial & Administrative Officer: I'm going to applaud our inventory demand planning teams and our supply chain teams here because the port strike seems to be coming up in a lot of announcements. We made a decision as we talked to you guys about in Q3 of last year that we were going to stay ahead of this. We did bring in more inventory, we did work with our vendors and partner with them, it was a small price to pay to be able to serve our customers. Being in stock is critical in our goals around our NPS. So we don't have a port strike story to tell you. Do we wish we had more? Yes. Do we have some pluses and minuses? Of course. But overall, the execution from those teams has been very strong. So we are applauding them and recognizing it's difficult. But at this point, we feel that we're in a good place, always like to have more but we're in a good place.

Understood. Good luck with the rest of the year. Sharon L. McCollam - EVP, Chief Financial & Administrative Officer: Thank you. Hubert Joly - President, Chief Executive Officer & Director: Thank you, Michael.

We'll go next to Matthew Fassler, Goldman Sachs. Matthew Jeremy Fassler - Goldman Sachs & Co.: Thanks a lot. Good morning. Hubert Joly - President, Chief Executive Officer & Director: Good morning, Matt. Matthew Jeremy Fassler - Goldman Sachs & Co.: I'd like to focus on two details from the P&L in the quarter. First of all, if you could give us some context for the credit card line item. How often do you true this up? Is this a thing you look at once a year? With more frequency, if the performance remains good, could we get another item like this? So how do we think about the cadence of credit card impact in the P&L? Sharon L. McCollam - EVP, Chief Financial & Administrative Officer: So, remember, associated with the credit card that year-over-year last year we were down almost, I believe, it was 45 basis points year-over-year. So what we did this year – that was the transition period of the credit card. So this year we are obviously coming into a place where we are much more stable in the projections around the credit card and all transition for the most part is gone. We are benefiting in the credit card portfolio right now by a very strong backdrop which I would call the economy which of course gets around your loss ratios and other things in the credit card. Not to mention the fact that we're executing well at retail and building our portfolio. So it is a combination of two things. But the place, Matt, where we will be cautious – it's not cautious, it is a macro situation that we have to recognize is that the economy is tracking along. At any point there can be moments in the economy, both positive and…

We'll go next to Peter Keith, Piper Jaffray. Peter Jacob Keith - Piper Jaffray & Co (Broker): First off, just on the improved domestic revenue outlook, it looks like maybe came in towards the high end of your expectations for Q1, now expecting better results in Q2. Could you talk about what's driving that near-term whether it's products or store execution? Hubert Joly - President, Chief Executive Officer & Director: Yeah, good morning, Peter. I think that Q2, it was – there's a few things we can highlight. First, from the phone standpoint, if you compare to last year, we have two iconic phones in the market compared to last year. I think we can agree with this. Second, still on phones, we are now in a position compared to last year where we're offering installment billing, we were just beginning last year and it was just ramping up. And so that's another positive. From an internal standpoint, I would also highlight that last year we did something pretty much right around this time, which was the reorganization of our field structure. Remember, we talked about this. This was a very material reorganization. We're very happy with the outcome of that reorganization but as you can imagine, this was disruptive at the time. So these are illustrations of what is leading to a better outcome – expected outcome in Q2 of this year versus last year. Peter Jacob Keith - Piper Jaffray & Co (Broker): Okay. Thank you for that. And then a follow up maybe for Sharon. Some good detail on the outlook for Q2. If we're backing into it right, it looks like you're thinking about the domestic gross margin flattening out or maybe declining. I was wondering if you could verify that and maybe what changes from…

We'll go next to Seth Sigman, Credit Suisse. Seth I. Sigman - Credit Suisse Securities (USA) LLC (Broker): Great. Thanks very much and nice progress in the quarter, guys. Hubert Joly - President, Chief Executive Officer & Director: Thank you. Seth I. Sigman - Credit Suisse Securities (USA) LLC (Broker): The $0.10 to $0.20 impact from the Canada restructuring, how is that weighted throughout the rest of the year? Is it heavily weighted to Q2 or pretty balanced? And then if you look at the other side of that as you think about the potential benefits from the consolidations, I realize it's early, but what type of transfer rate are you seeing on those stores that you're consolidating early on? And just in general what type of benefits, if any, are included in the outlook at this point? Sharon L. McCollam - EVP, Chief Financial & Administrative Officer: I'm going to let Hubert talk about how the Canadian consolidation is progressing. And then when he's finished, I'll come back and talk about the $0.10 to $0.20. Hubert, do you want to take that? Hubert Joly - President, Chief Executive Officer & Director: Yes. Thank you for the opportunity to lay out what's happening in Canada. This was obviously a very significant decision we made. So as I said in my prepared remarks, we've closed the stores that we were going to close. We've also closed the Future Shop site. The Best Buy stores are doing great. There's a lot of momentum there. The remaining Future Shop stores, the 65 that are open and that are converting to Best Buy are very much in a period of transition. It's very important to understand. If you go to Toronto or Vancouver, you're going to be surprised because you're going to see Future…

And we'll go next to Joe Feldman, Telsey Advisory Group.

Hi, guys. Thanks for taking the question and congratulations. Hubert Joly - President, Chief Executive Officer & Director: Thank you.

Wanted to ask – you guys have talked about services and the efforts that are going on there but, I guess, are there other maybe specific things you could talk about, I guess, within that? Hubert, in your prepared remarks, you mentioned we need to identify the pain points and fix them quickly, and I was just wondering if you had an example or two that you could share that that maybe where you are doing that? Hubert Joly - President, Chief Executive Officer & Director: Yeah, thank you for your comments, because indeed, services is a big part of our competitive advantages. One area that I've commented upon is appliance delivery and installation. It's a big part of our growth strategy. And doing appliance delivery and installation right is not easy. You're talking about moving (57:57), making sure it's not damaged in the process, then delivering it in people's homes. If there is installation work related to gas or electricity or water, getting licensed professional into people's homes and coordinating the entire process is an area where – that we identified candidly as an area of opportunity, where we have high standards at Best Buy, where we want to make this great and a source of differentiation. So there's a process redesign work going on, both impacting the online buying experience as well as the in-store buying experience because everything needs to go well at every step in the process. So that's an example of fixing pain points. On the flip side, an example of providing an inspiring customer experience which is the – increasingly we're going to spend more time on the latter. And I would highlight a couple of things that we are excited about and that I've recently mentioned, which is the in-home consultations provided today…

That concludes today's conference. Thank you for your participation.