Q4 2019 Earnings Call
Thank you for holding your conference call well beginning shortly.
Thank you for your patience.
Once again, thank you for holding your conference call well be beginning shortly.
Thank you for your patience.
[music].
Welcome to that they have to be on sports.
Quarter over fiscal 2019 earnings call all participants will be in listen only mode. It can a portion of the call.
Today's conference call is being recorded.
Every broadcaster conference call will be available beginning on Wednesday April 15th 2020, <unk> PM Eastern time to eight PM Eastern time on Friday April 17th 2022 access to be brought cats.
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For three seven for one nine and that you pass code I'd number six one there are five for one seven pounds.
Hi, I like the conference call every Janet Barth, Vice President Investor Relations. Please go ahead.
Thank you and good afternoon, everyone welcome to our fiscal 2019 fourth quarter earnings call. Today, we are coming to your from different okay. As we are strictly adhering to the recommended.
Guideline, please bear with us if you experience any minor delays audio quality on the call.
On the line with me today, President CEO, Mark Tritan, Chief Financial Officer, and Treasurer radically.
Before I hand, you over to Mark for opening remarks, I want a huge okay, the legal safe Harbor and cautionary declaration.
I want to remind you that our fiscal 2019 fourth quarter earnings release, a slide presentation can be found any investor relations section of our website at www Dot that's happened beyond dot com and ethics or 8-K, we filed [laughter] call.
This conference call and the flight we refer to may contain forward looking statements, including statements about where references to our outlook regarding the company's performance, our internal model and our long term objective.
All such statements are subject to risks and uncertainties that could cause actual results could differ materially from what we say during the call today.
Please refer to why most recent periodically I think the filing for more detail on these risks and uncertainties, including the risk factor section in our annual report on form 10-K.
The company undertakes no obligation to update or revise any forward looking statements.
Additionally, the information we will discuss today contains certain financial measures exclude them out.
Our subject to adjustment that have the effective excluding amounts that are included in the most directly comparable measure prepared in accordance with generally accepted accounting principles.
A reconciliation to the not comparable measure presented in accordance with got please refer to the table at the end of our earnings release available on our website and accreted doesn't need to work form 8-K filed today.
I will now turn the call over to Mark.
Thank you Jennifer and good afternoon, everyone.
The agenda said, we have come together, it's not from remote location I'd like thank all of you said joining us on that these I'm pretty certain circumstances.
Frankly, it seems like a different place in time.
Why because when you have before matches a distant memory.
We are in the mom it now and I'd like to stop by discussing Iris onto the covered 19 pandemic then I'll talk about the strategic actions, we're taking in this moment to build momentum around our transformation plan.
Then Robin will review, our fourth quarter financial results and provide some further context around the potential impact from the pandemic.
Our top priority health and safety about customers and out saying.
We are providing essential embed health and personal care items to local communities throughout Buybuy baby and hamann stores as well setting the rest about loyal customers online throughout digital channels.
Our teams are working around the clock to provide these potential product to our customers and they wouldn't show the supply chain is operating as efficiently as possible.
I would like to take a minute to personally bankers sets you teams on behalf of management and the board.
We thank you for your above and beyond said this attitude and dedication to our company and no customers. Despite this extremely challenging situation.
Making it easy to feel that hard means different things to different Paypal and obtained the being worked incredibly hard to support our customer.
I also want to say, thank you to our loyal customers and the show you that we will continue to work hard to help you access the essential products. We sell as you may actually be very difficult car.
In this moment, we're focused on facilitating a coordinating our ongoing response to the current pandemic.
There is no stope in April of this situation, but we have a remarkable thing right by contingency plan.
A very strong balance sheet, allowing us to navigate upgrade.
And with comp.
We quickly initiate that contingency plan, creating an essential response, you end up with a merchant peacocks both groups to focus on several priority areas, including people operation.
In the technology and that financing.
While the situation, it's like nothing was saying before we're adapting as necessary and taking decisive action keep out people say deliver for our customers and strengthen our liquidity and financial flexibility.
This is an important time for us now and moving forward bed Bath and beyond could play an important role in supporting customers and their families in making it easy to feel at heart.
[noise], though but approximately 170 about buybuy baby at historic not temporarily closed at least until my second we continue to provide essential products such as in good health and personal care oddity store subject to state and local regulation and online throughout the area.
Digital channel.
We are rapidly evolving to meet the changing needs about customers.
Relying on us more than ever deliver essential product directly to their hard.
Well for about E commerce fulfillment centers I currently operating and by the end of this week, we will have competitive approximately 25 to 10 about bed Bath and beyond add Buybuy baby stores in the U.S., Canada into regional fulfillment centers do use up oximetry resources to aside orders locally and.
The little quickly.
With these conversions, we expanded our fulfillment capacity significantly.
The regional fulfillment stores have doubled the capacity at very topical network facilitating approximately 44% <unk> overall Daddy orders with almost 40% of these orders being fulfilled within 50 miles that the customer at heart.
There's been an incredible lighting cut fraud, and we continue to optimize our original fulfillment capabilities to live Abbas.
And at lower cost.
Oh supply trends moving quickly to support our digital business. It real time rerouting proximic trying to DC every job helmet store.
Technology team has stood up a 25 group to continuously refine the or the allocation logic between government goal then DC.
At buying team is rerouting still on Otis regional fulfillment location bad Dcs.
At the same time canceling purchase orders and modified with people costs to reduce store inventory level.
On the consumer facing side I take the closely monitoring top sellers and adjusting quickly to get product for that customer need and partnering with our vendors helped get back in stock and well position.
I want to take all of that business partners.
It's in collaboration during this time.
It's kind of strategic action innovation has allowed us to quickly implement curbside pickup which was launched April 1st cut Buybuy baby.
In the first full week alive, we completed more than 11000 cut size order.
We're also introducing curbside pickup homicidal later this week.
Also this week, we are rolling out buy online pick up in store at our baby stores.
We have quickly wedding, how our customers want to shop with us and we will continue to evolve the prices digitally to create a best in class experience.
But buckets, Ed steps I pick up will be rolled out to at bed Bath and beyond stores as a new service offering for our customers when we can safely riocan.
These new sets as well fast track during this period and will significantly enhance replica MCAD ability to make the growing need to that customer.
The vast majority about stores temporarily.
Our customer facing digital channels continue to said the SAP customers and we're seeing an online demand grows significantly.
For example, the bed Bath and beyond diesel business, it's thing net sales growth of more than 90% for the month of April to date.
The strict thing our omni channel strategic direction.
[laughter] demand is being facilitated by our agile digital and marketing team, who are working together responding to consume a data, creating munis impressions across outside highlighting audits customers need to make it easy feel at Hulu and communicating important information about changes in our closure as well thanks.
You made is that a customer a clear on how we're operating and how they can shelf.
Has the currency phase pandemic has taken hold we are seeing consumer purchasing demand focused on categories, such as water filtration, Hey, purifies.
Rises and humidifiers, as well kitchen, electrics cleaning and coffee.
Over the past month, we sold equivalent 10 million cups of coffee and 400% milk bread, Mike is over the last year at last week, we sold at 100% mode vacuums compared to the side period of time last year.
This action to temporary closed up store has of course fundamentally change the nature of that business in the short could be.
The impact on outdoor is albeit but this decision affects the entire company.
My T to merchandising finance to HR, the shape and structure about business is radically different industrial environment across concepts and across the country.
So in this moment, we have tightened holistic approach to managing our financial position, including lagged the efforts to reduce operating costs.
And strengthen our liquidity.
In conjunction with the recent decision to extend the temporary store closures, we implemented several additional cost reduction, including a fellow of the majority of ASTORA associates and a percentage of our corporate associates until at least my second.
Salaries will also reduce for myself and the executive team as well as the board.
We put out a median stock to $150 million in Capex, Spain, and put a whole bunch share repurchases as future dividend.
Robert will provide further detail on our proactive measures in a minute.
We are balancing our ability to provide jobs and financial support to our affected in the short medium and long term.
As well as prioritizing investments designed to strengthen our business.
We believe these actions will help but the weather the storm and put that financial health for the good at our associates.
Customers and shareholders.
If there is a silver lining I would say that given the monumental changes we buy to our business over the past four weeks, our ability to act decisively partner off a move with speed agility has been greatly enhance.
I'm very proud of the ideas exploration and commitment to all our associates of mindset that customer that that business.
It's been incredible to come together as one United virtual team across the company to work together and why it's perhaps that would not be possible, even though in the past.
We are leveraging the planning opportunity, both collaborative and flexible enough focused priorities.
And the middle quickly so that we are ready to welcome that customers back when we can tightly riocan stole.
We have also provided much needed support for local communities, serving food care packages to thing is military personnel and their families.
So do they need from that Christmas tree shops goes across the country, we donated more than half of the an ace to chocolate candy cookies baskets and toys to dozens of likely charities shelters schools Committee organization nationwide from over 250 about cost plus world market stall.
Now turning to the fourth quarter, which just say Michael locked top ago in short the pressures of store traffic trends and heavy promotional activity.
Hold with inventory management issues around the holiday selling period have been now at the stabilized the business in the fourth quarter.
These trends are consistent with the information provided on February 11, when we issue preliminary financial data for the past two month for fourth quarter.
Product availability with that commercial categories, such as kitchen electrics, leading into holiday period was either too low or just out of stock.
We just didn't have enough abroad stuff, which Ed.
We are confident fully rectify blood tests outlining plan and implementation from now until the back half of fiscal Twentytwenty.
At fourth quarter results also pressured by heavy a clearance activity during the quarter as we rapidly action on our strategic inventory reduction program.
Now we surpassed the halfway Mark with this initiative and I'm pleased with our prior great.
It's important to note the price of this current business environment, we were sharpening our focus on inventory ending the fourth quarter with approximately 16% less retail inventory at cost on an adjusted basis.
This is a year ago.
So operating Lena and on a lowest gigabytes.
We are now focusing our attention or optimizing and that's not to make.
Which of course is a key focus about chief merchant Joe Hot seek.
For the full fourth quarter. We also reported a positive shifted thousand across that digital channels with a returned to strong growth of about 16%.
Sales in a month all channels, but that backup beyond the Buybuy baby each group mobile, but if that year over year the fourth quarter.
In order to taken through our mobile App Rapa 75 to say.
These quarterly result, strengthen our results continue to make necessary bowl and both based changes needed to modernize that business and gives us confidence about our ability to approve upon this quarterly performance.
This includes the strategic restructuring program, we implemented in late February to reduce annual SGN expense.
Roughly $85 million and reset our cost structure.
Prior to Cobot 19, we had solid strategic plan for fiscal 2020 in this moment, we need to be agile effects on simplifying and strengthening our business, where it Matt as much to a customer and reestablish our authority behind space.
Let me now addressed the issues of hands on what we are working on.
First recruiting talent remains a top priority.
We have an extensive interview process underway for the iPad role. We have made bold news, we have a robust process and have identified key candidates with Joe caustic being the first major appointment as our new Chief merchandising officer.
There will be more news on all the great talent to come in the coming week.
I'm excited to welcome Joe the team has more than 30 years experience in consumer brand development, and retail merchandising, which will not consumer businesses like walgreen, Walmart Motorola and see job.
To me Joe is that a much expansion and I'm looking to him to be a leader in a teacher as we rebuild that business, including improving key items in golf.
And a proven curation and fed the differentiation of our assortment, which is our number one priority.
Second we remain focused on generating funds from the sale of assets and simplifying our business.
In addition to the previously announced sale leaseback transaction. We recently sold the one Kings Lane business, so with that potty for an undisclosed amounts.
As previously disclosed we entered into a definitive agreement to sell our personalization mold dot com business to one 800 flowers.
$252 billion.
One 800 with required to close the transaction our March thirtyth that breached obligation to do so.
Accordingly, we filed an action to require them to close and intend to vigorously enforce out right.
Well, we can make no assurances, we will continue to pursue other portfolio adjustments and evaluate the remaining our real estate.
But to create a stronger and more focused portfolio.
Lastly, and most importantly, we are driving strategic growth plan.
Under the current business environment, we have modified our capital investments, but we'll continue to invest with competence where matters bars. We now plan to invest about 250 million focusing on our core business and key projects that support the omni channel feature of our company in 2020, and beyond which are more relevant but as such.
Is that digital and omni fulfillment capabilities, including Baucus and cuts I pick up.
Amit inventory management, as well as digital marketing and personalization.
At a high level, we are reengineering, our supply chain and our vendor relationships as well fed the strengthening our brand strategy. We are postponing story model to use the crowd of our situation and the timing issues. It's created as we don't want to read appeal with the critical said fourth quarter holiday period in 22.
Morning.
We will also continue to review our store footprint as we have nearly 250 leases that are up for Bruyneel in 2020, Allied which added financial flexibility.
In technology, we will continue investing or the allocation logic to better leverage out stores. This fulfillment centers and improve the checkout experience in addition to simplify price.
Now we are postponing their plans for share repurchases peachy dividends and debt reduction to bridge, the financial position and retain financial flexibility.
The company remains committed to its capital return program over the mid to longer to and we will reevaluate when appropriate.
Now is the time to stay liquid until we have more clarity on the global situation surrounding covered 19.
All the steps we've taken six arrived at the company five short months ago, including this kind of at 19 moment reinforce our preliminary strategic plan focused on a singular pappas to make it easy to feel at heart.
Our strategy will deliver good five key pillars, namely product price.
Thomas.
Hi.
And Paypal.
We believe this strategy is more relevant today than ever and we will support a significant improvement in upon its performance and a deeper connection without loyal customer.
In this time when harm is even more central to our lives and big sites at higher with family is essential bed Bath and beyond takes on an even more important role supporting customers their families by making it a feel it's hard.
We will provide inspiration and a curated affordable soltan.
Customer create a high my luck.
Now before turning the collaborative Robin I just wanted to mention that we had previously planned to host an investor event. This spring.
And now under these circumstances, we are exploring other options, including potentially eventual events take place at a more suitable time.
We want to introduce you to the new team showcase some of that you capabilities and early result.
Unlike out our lumber tend strategic growth objective, but the business, we'll keep you updated on that plane.
All we deal with the immediate priorities would continue outlet to drive the company forward, we have robust contingency plans and I'm confident that we're able to navigate this crisis.
We have an iconic brands with great consumer brand loyalty and we're taking this opportunity to deepen our connection with our customers as we strengthened our meal ways approach.
I believe that bed bath and beyond will emerge from this even stronger given the strength of our Brad that people and our balance sheet.
Robin will now review out fourth quarter results and then provide some context around the potential impacts from the Kibet 19 pandemic and the measures that we have taken today to protect our financial position and maintain flexibility.
I will then come back for some closing remark.
Robin.
Thank you Mark and good afternoon, everyone.
I Hope you are all faring well under these very unusual circumstance.
On a GAAP basis, we reported a net loss per diluted share a 53 cents for the fourth quarter of fiscal 2019.
Compared to a net loss per diluted share of $1.92 cents in the prior year period.
Our reported net loss in the fiscal 2019 fourth quarter.
Includes an unfavorable impact of 91 cents per diluted share for special items, including.
41 million in severance costs related to the strategic restructuring program initiated in February 2020, and the extensive leadership changes announced in December 2019.
Noncash charge of approximately $35 million to the impairment of certain store level assets.
A noncash charge of approximately $33 million, where the impairment at certain chain names and other assets.
And.
And expense of 33 million related to the loss on the sale leaseback transaction announced in January 2020.
On an adjusted basis, our fourth quarter non-GAAP earnings per diluted share was 38 cents.
The remainder of my review of our quarterly results will be on a non-GAAP basis as applicable consistent with our prior disclosures to better represent year over year performance in the business during the comparative period.
From this year's fourth quarter, we exclude the items I just mentioned.
Along with the related impact on the provision for income taxes and from last year's fourth quarter needs include the 510 million pretax goodwill impairment charge and the related impact on the provision for income taxes.
As a reminder, our fourth quarter. This year consisted of the 13 weeks ending February 29.
And included the cyber Monday holiday week.
While our fourth quarter last year consisted of 13 weeks ending March 2nd and did not include the cyber Monday holiday week.
On February 11, we reported preliminary unaudited financial performance data for the first two months at the fiscal 2019 fourth quarter.
We shared this update to provide visibility into the then current pressures on our business, including store traffic declines.
Combined with inventory management issues and the impact on revenue and margin, resulting from increased promotional activity and markdowns.
Net sales in the quarter were 3.1 billion.
Decrease at 6.1% from the fourth quarter last year.
Sales for the quarter decreased 5.6%.
In the high single digit decline and the number of transactions.
Partially offset.
By a low single digit increased in the average transaction amount.
On a directional basis.
Sales from our stores declined about 10% while comp sales from our digital channels increased by approximately 16%.
Similar to last quarter, our sales in the fourth quarter were positively modified by the calendar shift of the cyber Monday holiday week.
Adjusting for this calendar shift to exclude the cyber Monday holiday week in both periods.
Our comp sales for the quarter declined 11% with a decline in store sales at 13.6%.
And growth in digital sales of 1.1%.
Moving to gross margin.
Our gross margin for the quarter was 32.6% of net sales as compared to 34.7% in the fourth quarter last year.
The 210 basis point decline was primarily due to an unfavorable impact on merchandise margin from promotional activity in markdown.
In addition, we had an increase in net direct to customer shipping expense due to the higher penetration of digital sales within the total mix of quarterly sales.
Moving to ask DNA.
Adjusted EPS DNA expense for the quarter was 30.7% of net sales as compared to 28.2% of net sales in the prior year period.
This 250 basis point increase in SDMA.
In order of magnitude was primarily due to about 100 basis points of consulting expense.
Associated with our efforts to expedite the ongoing transformation initiative and review of assets.
And an increase in advertising expense, including digital marketing.
Related to the heavy promotional activity in the quarter.
And to a lesser extent the effect of fixed costs, such as occupancy and technology related expenses, including depreciation on lower sales based.
Our quarterly effective tax rate with the benefit of 3.3% on an adjusted basis and included $8.3 million net after tax benefits due to distinct events occurring during the quarter.
As a result of the lower pretax earnings base in the fourth quarter. These net after tax benefits have a greater impact on the effective tax rate.
Our effective tax rate in the fourth quarter last year on an adjusted basis was 19.7% and included approximately $8.9 million of net after tax benefit.
A distinct events occurring in that quarter.
Now looking to our balance sheet.
We ended the year in a strong cash position with about 1.4 billion in cash and investments.
Including over 250 million in net proceeds from the sale leaseback transaction that was completed during the quarter.
Adjusted retail inventories of 2.1 billion that cost.
Excluding a charge for markdowns associated with our inventory reduction initiative.
Reflecting a significant reduction of about 16% or over 400 million at cost at the end of the quarter compared to the end of the prior year period.
We continue to action against our previously communicated 1 billion dollar inventory reduction program at retail.
And we are now about halfway through the program and plan to continue to work down the remaining inventory in fiscal 2020.
Moving to cap box.
Our capital expenditures for the year were 277 million with nearly 50% of the expense related to technology projects, primarily focused on logistics digital capabilities and analytics.
The remaining capex expenses, primarily related to investments in stores, including the models and new store openings.
We closed 26 stores and opened two stores during the quarter.
Regarding share repurchase activity there were no open market purchases during the fourth quarter.
As a reminder, we had suspended repurchasing of our shares while conducting the review of our retail portfolio and real estate assets.
The company currently remains committed to its capital return program over the mid to long term and we'll reevaluate when appropriate.
To clarify our previously announced first quarter dividend with paid on April 14, and was not impacted by the temporary suspension.
Moving on to fiscal 2020.
Our first quarter and full year 2020 result will of course, the unfavorably impacted by the Cobot 19 pandemic.
The duration and extend to the pandemic, it's highly uncertain and our results could be impacted in leads we are not able to predict today.
We are monitoring the situation closely regarding our associates customers business partners and supply chain.
We ended fiscal 2019 with cash and investments of 1.4 billion.
And while we feel we are well positioned to manage through these uncertain time.
Subsequent to the end of the fiscal year, we plan to take or are taking proactive steps to preserve liquidity and financial flexibility such as.
Drawn down the additional 236 million of available funds remaining from our revolving credit facility.
Suspending our plan to spend up to $600 million in fiscal 2020 per share repurchases future dividends and debt reduction.
Postponed $150 million in planned capital expenditures out of fiscal 2020.
Including some store Remodels.
Furloughed, a majority of our workforce, including store in corporate associates until at least in a second.
Temporarily reduced the salaries of our executive team, including myself and Mark by 30%.
Temporarily reduce the quarterly cash compensation, our independent board directors by 30%.
Reducing discretionary spend agenda business travel advertising expense associated with maintenance at stores that are temporarily closed.
Renegotiating extensions of payment terms for goods and services and rent.
Managing to lower inventory levels.
And implementing applicable benefit of the Karabakh, such as deferring employer payroll taxes.
And utilizing the ability to carry back and deductible losses to offset prior income in previously filed tax return.
Considering the circumstances, while we have trends capex by 150 million, we're now prioritizing approximately $250 million, an essential capital expenditures to drive our strategic growth plan as Mark described the team and it's about.
In addition, our capital structure provides further flexibility, including the potential to utilize significant balance sheet assets to generate incremental liquidity if needed.
As of the end of the fiscal fourth quarter.
We had approximately $2 billion quality, primarily non seasonal inventory on our balance sheet, which has not been pledged as collateral under our existing debt arrangement.
These actions together with our strategic efforts to reset the organization's cost structure.
Including the recent restructuring program and our strong balance sheet put us in a better positioned to manage through this period of uncertainty.
We remain committed to keeping our shareholders informed about the business and our strategy to reestablish our authority in the home space.
Now I would like to provide some context around the potential impacts from the cobot 19 pandemic.
Clearly the full impact of this situation lumpy known per month.
However, what's important right now that we are proactively managing the immediate challenges and playing an important goal our customers.
As of Friday March Twentyth, we had temporarily closed over 50% of our stores across all banners until April threerd.
The approximately 700 stores that remained open.
In operation, we're stores that sell essential items, such as healthcare personal care infant care cleaning supplies or food and beverages.
The following week the company announced that it was temporarily closing all retail banners across the U.S and Canada other than Buybuy baby and home in stores subject to state and local regulation.
This last about 170 of our 1500 stores in operation to provide the essential items, we sell to customers.
On April 2nd we extended the temporary store closures until may 2nd.
For the month of March while we have not yet finalized our monthly results.
We do have visibility to our sales performance.
For the March period, you're able to share preliminary unaudited financial performance data.
Overall net sales across all banners.
Were down approximately 31% versus the prior year March period.
Led by a decline of about 41% in store sales as expected due to less customer in store shopping, resulting from south quarantine guideline and the initiation of temporary store closures and limited store hours.
Net sales from our digital channels. However, we're strong in March of about 16% benefiting from an increase in digital shopping due to covert 19.
And further enhancements, we have made in our fulfillment capabilities, including converting about 25% of our temporary close stores two regional fulfillment stores as mark spoke about earlier.
The sales performance for both Buybuy baby and Harmon face values stores, which remain open to provide essential items with better than the overall company for the March period.
Through the first two weeks of April the fiscal quarter to date overall decline in our total net sale is around 42%.
Charlie due to the additional temporary store closures.
However, net sales from our digital channels has further strengthened with year over year growth of more than 35%.
Due to the level of market uncertainty, we will not provide further financial guidance for fiscal year 2020 at this time.
As we work through 2020, we believe our financial discipline will help us take advantage of the opportunities available to us to withstand the current pressures on our business and emerge from the crisis, well position to build and manage modern durable business model capture and long term sustainable growth.
Our strong cash position along with our near term actions.
Provide the company with continued financial resilience and ample short and mid term liquidity to fund the operations of the business.
To reiterate what Mark said earlier, we do believe that bed Bath and beyond will emerge from most even stronger given the strength of our brand our people and our balance sheet.
I'll now turn the call back over to Mark for some closing remarks.
Thank you Robin.
As Robin shared we have tremendous opportunities to build to manage about durable business model to capture long term sustainable growth.
We will be driving meaningful and inspiring engagements with customers refining and amplifying and exciting omni channel assortment.
Providing compelling value through price and differentiation.
And delivering an omni always shopping experience that says that customers name.
And we'll continue to look for ways to optimize our business model, whether through the supply chain or through other operating efficiencies across the business.
We're also take advantage of the market dislocation that is already.
And then we'll likely to continue resulting in changing the competitive landscape and opportunities for us to grow market share in the Harlan baby and personal care basis.
This time has been a test for overreached outlets, we believe bed Bath and beyond is positioned to come out stronger as we have the cash the talent.
The right plan and great loyal customers.
I would like to piece, where I started by giving my heartfelt. Thanks to our teams who are going above and beyond to serve our company and loyal customer base. During this critical moment.
I also wish all of you listening today continues safety and good health.
Jennifer we're now ready for questions.
Thank you.
I'll begin the question answer session.
If you have a question. Please press Star then one on your Touchtone phone.
If you wish to even from the Q. Please press the term sign or the key.
I'll be delayed for my first question for now.
If you using speaker phone you may need fixed asset first for pressing the numbers.
Once again, the if not in your question. Please press Star then one and you touched Thompson. Please limit yourself to one question and one follow up question. Thank you.
And our first question comes from Bobby Griffin with Raymond James Your line is open.
Good afternoon everybody.
Hey, Bob is doing long senior NRF.
Yes, I appreciate the update on March April sales could we maybe a little commentary or an update on on where the cash balances and liquidity stands today and maybe the debt balance.
Yes, good cash flow in the fourth quarter, but that was at the end of February any of these bigger drawn out would be helpful.
Yes, I think Bobby this is a really fluid management.
And we're really pleased with what we've done to guide.
Would robbins outlined to others intensive the compensation decisions the renegotiation on times.
Managing receipt flow postponing capex and the suspension on shades and repurchases I mean, we've got hundreds of millions of dollars that weve side. So our cash spent to date at big controlled and we're really happy with that but we see even further activity.
In the subsequent weights that we're able to action as we now on full flow.
This is before we the drawn down on any other potential facilities. So we were liquid to Scott we have said the liquidity available and our.
Cash credit being really control one of the things we did do LCR was bringing the fed potty consultant to really help us with a scenario planning Saul.
Short mid and long term closures.
Due to causes and to manage our cash flow proposition by day by week. So it's been a significant focus very early on in this environment.
I feel really good about where we stayed.
Okay.
You should that Mark and I guess.
I will make a herder promised correctly for the consulting fees for the.
Quarter, It was talking about 1%.
While the sales so about $30 million was the increase in consulting fees messy in April 4th quarter.
Yes.
Okay, Bobby on 100% property, what they have.
Im sorry market.
I mean, what we wanted to outline uses that we had come very unique fees that we are focusing our transformation efforts.
And that we're really centered around fourth quarter expenditure. So we don't see the being heavily repeated in subsequent quarters.
Okay, and then if I could sneak one in its more of your comments of executing a better.
Forming company.
Maybe just expand on that either opportunity to execute more streamlined from a LIBOR organization model or from a store model, we accelerate closures what could you do during this kind of shutdown period from either renegotiating leases or not coming back at the same level labor that could really benefit the company on the on the rebound.
Once we get source back open again.
Yeah, I think every retailer with this holders looking at that Bobby I think we're going to anticipate a tougher environment moving forward, we were really fortunate to.
Put in place made risk.
And now.
Ages in late February, which is really set us up further to weed and we took those costs in 19, which robin outline. So we're already on the that way, but we've already begun and continue to deepen now commitment.
Real estate portfolio review.
I think for profitability and location that they really do change going forward and we'll have.
Ongoing guided to look at that more deeply so that's working flight, we're not ready to share that yet we're still doing assessment and the situation very fluid I think lipa is something that we also had taken a hard look at it might be adjustment team that every period in anticipation of better SG nine management again, continuing to look at it Bouchard.
Hi, good plenary strides.
And I would just add on the on the occupancy front, we do have over 250 leases.
Coming up for renewal in the next year.
Thanks, everyone.
Your next question comes from Michael Lasser, you'd be ask your line is open.
Good evening. Thanks for taking my question, so you're still down 31% March in quarter to the 42% to that implies that April for the last two weeks to be Bro fields are running down 60% is that right and be should should we use that as.
As a run rate number for how to speak about your sales moving forward over the next few weeks as you could change as you keep your stores closed.
Yes, Michael look at them, we're not trying to comment further on our Q1 results and I think is a very fluid volume. It what we're seeing is rational as a caused.
Except for Harman and buy buy baby diabetes stores, where we're able to our.
Digital book business, and I believe lying and so the run rate that you see.
So much is not necessarily applicable because we've seen some significant shifts in consumer behavior with digital but we're going to be coming back at the end of Q1 will outline the outcomes there very fluid market environment. So were put Pressboard program.
In Mark what is your plan, we're reopening your stores do you have an expectation. When you you will do that it seems like the most likely case is it's going to be steep state by state. When do you think you'll be able to open your first one and when will that process be completed in.
Is it realistic.
Cash burn number as your stores or or or closed at this point, just we can calibrate our models properly.
Yes look I mean, Michael on the on the opening.
No crystal ball here for back trip, but but here's what I would say to you. We are we've moved from a now to a next to a future proposition and took about strategic planning.
Albeit securing our current scenario and managing our team we are working on the re emergence and the reentry into the market and how that that plays out we don't have that time down, but we have multiple scenarios, we really tapped into major groups like realize who are doing a fantastic job in terms of sharing data and working with government to us.
Tapulous, what reentry looks like and Geo put Michael I do think that it will be a region by region based response will be part of a baby of retailers that follow the guidelines of government and come back into the market only when at Cypress teams and our customers and would following our guidelines strictly now with that.
Weve factored in our financial models on multiple scenarios, including very elongated period, we feel really comfortable in terms of that cash spend enough liquidity as a result without touching any further available far and so we've.
Looked at the macro but look the timeframe. The actual date, we will be ready and as we've talked about we've already accelerated enough growth capabilities. During this downtime like brokers like curbside pickup and like still for pill that we think are actually going to really sustain and benefit our total business, including.
Traditional Greg digital products would be seeing through the fourth quarter and now into Q1. So at model will be good ready to call, but we are watching these by week by month by month, So, though because we can plateau.
Your next question comes to current Mancos from Bank of America.
Hi.
Good morning, or sorry, good morning, good afternoon.
Hey, Mark how are you doing.
Taking the question.
So.
He to believe you're a point here, but I think of it is important.
In terms of the cash balance I know you just said that.
Lucky obviously, you have a lot of cash on the books additional liquidity.
Have you taken through multiple scenarios, where you've been on a long dated basis, you're pretty comfortable but I could you give a little more detail in terms of what the timeline is given the things that you've done like probably getting concessions on ranch furloughing, 80% of the labor force halting should capex or.
All those things that Scott it puts you at least a reasonable position to managed show any more detail that is important and again I just kind of stress just given.
Ill, just looking at where the enterprise value. The company is it at the moment it would imply.
The market doesn't think that's.
Meeting liquidity when we mentioned that liquidity is there. So that's why oppressed yep, yeah look I mean.
That's why we're sharing a lot of the points liquidity definitely there.
We took really early steps to control costs, the before I mean to to kind of lean into a little bit more credit I would tell you that.
While we base still working on the extra talk so at the negotiations were immediately have with a cap off more than 40% of our weekly cash spend right immediately.
We're implementing the plan through by somewhat Robin and I shared so we've got strong controls there.
Modeling, we like everybody in them and we'd be talking to our financial advisors as well as related and the people I shared with you know we've looked at a single scenario and it might scenario and August scenario, and then a definite scenario and in all of those we've got really create math about sustainability liquidity plus the.
He did go down another facility. So we've got control cash, but we have cash and we have a plan.
Now this is not something that you're making I think your point looking at this in these very short sign ups is but also looking at the worst case scenarios when we sat down with that but would show that was cut scenarios. We have good liquidity and we have stability in that business with the right actions taken to take us through it I think we were in a really.
Unusual physician.
In that we don't have rotting fruit in terms of our merchandise with primarily seasonless, we're not in apparel business.
And we have sustainable product that we can leverage upon reentry and we're not going to be in a black box in terms of call. So there's some real benefits to despite no doubt that the harsh businesses become very fruitful in this period, we just need the customers to be able to access ops and other retailers and product.
Hi, animal fluid white, which is an omni channel environment through digital and physical stores. So we're looking forward to reopening, but we won't be doing anything until excitement appropriate.
Understood and then just as a quick follow up.
I, just said January and.
For Q are very much into your view, but I just wanted to.
Okay.
Possibly hash out some of them off in terms what was applied to the fed were content I think it improves relative to what was going on in the two per amongst but.
Can you comment on that would be great.
Yeah, I think profit was if it's tough to hit the cobot market. When we just saw some pivots happening in February we knew we booked like by issues. The in December January would be transparent around that some of it was self inflicted I mean, when we don't have bestsellers in stock without discounting and we don't have her inventory I mean, some of the sales decline.
So in our stores watered necessarily traffic we did.
Some Intel work on that is sold to customers are coming in and I just couldn't find the product in stock. So we were shooting outsell the foot that is easily rectified. When we started to do that stride to date of January we saw positive comps coming through or more positive comps in terms of trend right in February and as we stated we saw an acceleration of additional business is doing.
Well during the period by that accelerate even further so we'd be seeing out full year 19 business, we were about 19% penetration digital and title for the fourth quarter alluded that was up to 21.3% and we had double digit comps. There now we've seen that digital business, even do more deep.
Equally accelerate.
With a lot of new customers about 31%, 33% about customers in Q1 period being new to the bed Bath and beyond website buy buy baby web sites et cetera. So we got every new business and we were building plans with BOPUS curbside personalization to sustain those relationships. So we were excited.
If thats, what I could even used in this market about what lies ahead, but it definitely was some general momentum coming out why that was positive in February the ball wide that Jim did them, but January trends and then we hit this goal is minus so more to follows we react.
And our next question comes from Simeon Gutman from Morgan Stanley. Your line is open.
Thank you good afternoon, and Hey, Simeon luck navigating how you doing.
I wanted to ask first on the E. Commerce business can you tell us what the size of I guess the ongoing business at the end of 19, and then I thought I caught in the prepared remarks, a 90% digital and I think Mark you said the business was flying I I heard a 90 and a 35 and I just wanted to reconcile those numbers.
Yes so.
The minute by the total number but I just shift Simeon like Q4 over a 21.3% of total sales.
And so we're getting that digital engagement and follow through with the customer what we've seen is these very shop sign ups as the and one of the things that rexam with outlining the periods in which we do a partially open then closed and then.
Particularly bed Bath, and then relying heavily on the digital business. We're seeing strong division is never going to map out to be full coverage about stores based business.
But we are seeing both demand and total sales in the 70 idea at 90% back when we move into the April period.
And as we mentioned really ramping up and flexing with agility, our capability fulfilled as orders.
But in the.
Stores that were using as regional fulfillment centers as well as AFDC that beat tremendous so we may be guest needs. We're working with the fulfilling orders were working through our inventory at with building equity in our meal White business. So some strong bryce there what you're hearing in the 35 is the aggregate at the title business.
I will hand, but definitely the kind of.
Two weeks sign that the will change to the amount of stores we had open.
With changing as well.
Got it my follow up and in this temporary period until we restart can you talk about anything surprising you about the the complexion of what's being sold online and I guess, if you can about the margin mix if theres a wide.
Difference in margin among your product categories.
And then if online becomes more normal for the foreseeable future I think you'd be suggested there's only different scenarios you're planning for.
It does that mean for the margin.
I guess complexity of the overall business.
Yeah, I think our mix is very fluid at the moment I'm clearly people rating cleaning into kitchen into biking.
Hi, Karen So this is a great time for us.
Textile businesses is not as strong and thats something that we see coming forward as people look to refresh that high and we think is getting to be the people bids during the same for wolds for a month opportunistic I think the idea of refreshing bathroom you bedroom you kitchen, that's going to be pivotal intensive somebody engagement, all customers and how by returning to.
The market more than maybe in apparel patches or different and travel purchase so discretionary spending I think we'll be focused and we might be strong beneficiary there.
The margin is balanced.
And what we see is is that add digital business away performs at a much lower coupon right.
And therefore at this point, we getting really balance response, I think that the we see Oman acceleration I think the lot of people are talking around that and I think the great thing about that is is that some of the changes with bus recently made intensive fulfillment and support I mean, not having BOPUS.
Versus the rest of the industry has been Achilles heel. We was set to launch that is fully main stores and we've maintained that speed that commitment to be ready when we add to look to open and then have also added curbside and now we've stood up so Phil which was something that we had on our agenda, but we wanted to get through the other piece. This.
We've accelerated does and as you talked about that in terms of the impact.
No stranger with previous employee is on the margin mix that stool fulfill via oil, but this can do in terms of the math and the matched on diesel. So we'll start to model that out now not the time to get accurate about that but we believe that's positive things that lie ahead for us and then we've already begun to cover.
At some discretionary merchandise into more of an eye Brian platform ahead of a major re launch in 2021 of the stock. So we'll see some margin benefits with those products in the back in the digital fulfill benefits the back end, but will be a new journey.
Your next question comes from Seth Sigman from Credit Suisse. Your line is open.
Hey, guys. Thanks for taking the question just wanted to start with pricing.
Market seemed like you were pleased with some of the results as you sharpen price over the holiday periods. What are you running about in terms of but thats pricing today, what changes, we expecting the current environment and I guess beyond that.
Yes, I mean I think that.
We entered into promotional activity in Hawaii that we had ever before saying I think that.
Got back to the end of third quarter started a fourth quarter was the first time, we'd ever really pain truly promotional app by coupon.
And.
And we really Didnt lay down the planes to get there at the right way. So we've got to margin and we back a lot of inventory and what prepared to get back into stocks are they kind of tough lending, but they're also redeemable moments that we could translate into new actions.
I think that the one thing that I have not as coming into the business and a big working with the T. Montes, the the role of value and price value equation.
I think that we know the customers don't want to do the math and they want to tabs simple readable affordability and I think thats been missing from our equation both in store and online we haven't been making value and I've been just shop price I mean, the resonating true value to the customer has been.
A little bit typical at prices that we've operated and so we've launched a ton of what not to do and as a result, you're going to see coming through and that digital channel a refresh of how we are presenting value and talking to I guess with clarity simplicity, you'll see that roll through circulars and then when we open up new stock to see manifested thing.
Like Ed caps and price point presentation, a real clear understandable everyday value. So weve, there's no doubt that as we come out at the close of 19 market and with unemployment and tough times ahead customers want to be able to get value see value understand value and have a resin.
With that quickly and we think we've got great plans in place to really stepped into that and that Doesnt give my main giving away the margins.
It just means being really clear on their intent upfront carnival lettings from strengthen opportunities that would already be got the channel through to our plan moving forward.
Got it Okay Thats helpful. And then just in terms the need to pare back on spending this year.
Operate on the programs that are getting pushed out and how important where those to the stability that gets you were expecting as we move through this year. Thanks, Yes look I mean, I think it's less about the stability of more about the the long term benefits and really we took that plus causing when it took that canceling the major one really dataset is there.
Around the store remodel program. So I've been working on since I joined on a program with the team. We've got three test stores of the showing really positive signs of growth.
The core model and that was without any assortment changes just imply in any of the price point changes and clarity that we talked about so refreshment at the stores is something we that fast tracked and we're ready to roll out 25, 26 tools to really give us a model to accelerate outspend in subsequent years now.
That was going to take place and be ready all before the beginning in the back to college periods that we did interrupt with our key selling periods and then into Q3 Q4, we would have a doug.
And I started with abundant was really tough because we had good work that we wanted put into play but it would have been crises spend that money disrupt Q3, Q4 and wanting to.
We have some capex. So we've got the planes with the the if I will go up the dream, which is going to finish that further as we get ready to implement that.
Thousand 20 watt, so, it's probably not cancel but no. It it's really helps us with liquidity and it helps us to be focused on the right digs in this in our position.
And your next question comes from Steve Forbes from Guggenheim. Your line is open.
Good evening.
Steve.
Hey, Mark.
So I wanted to focus maybe on to start the 250 leases that are up for renewal this year.
You can maybe discuss how many of those are the core bed bath and beyond brand.
And then provide some color right around the discussion with those landlords given the leverage situation that you are in there is or particular quarter that is heavy with explorations and or right has the digital strength in the business sort of in impacted your perception, but as you enter these discussions.
Yes look I would say stay there was still mcfly did really getting the clarity on the perception change we believe there will be solved.
We already had a preliminary view it look I think this is im going to get hit me on detail here because outside you. It's what could flight and this is where we really work.
We really look at you add quite partners are and how we can work together.
We have states abate across the portfolio clearly we have.
More white in bed back because we have more stores.
But we're going to be looking in each region each concept and each time frame to really map out what is the best sustainable cost wind portfolio moving forward and we're going through working really closely with our real estate partners on a pressure on them at the moment as well as us ruling that together. So we want to sit with them and I don't want to kind of breakout and disclose anything ahead of time.
Time, because we need to our analysis and then work on that is very plans and I won't be a one size fits all we re looking at the menu of options, but it's clear that this is pressuring the moment.
Paul what really does generate profitability, but we will also take into consideration as we think about store fulfillment stores, how it changes the benefit of model.
Each of the location.
And then maybe just a quick follow up on on inventory management, if that sort of interesting here given your comments around not having.
Enough inventory this holiday Red holiday two of 19.
But all the uncertainty that exist today, maybe just give us an update or discuss how your how you're planning your inventory buys this year in particular for holiday 2020.
What's what sort of the typical timeframe when you have to make those decisions and commit to those peos.
And how important right is it.
They are open by the time those commitments occur.
Yes look I mean, a couple of things there I think that we paid.
It's been leading the charge here and have deep compensation with the lab majors and that general vein devices about flow. If you go back to the the inventory position that we had this kind of two things going the good news was that overall, we reduced our inventory by about 16% at the close of the quarter and so we were working later on that.
But inside of that we did have begun not by having more imagery, we think thats a good level that we can come down too, but we could have traded some about mix to be more into talk about key items at generated more more sales and gross margin by having the right merchandise. So again the level coming down at the positive the.
Q ratio within the level becomes critical Jos really went into that charging backing stock about top.
100 to 5500 items.
And making sure that we could draw that down I think well so getting the flexibility to draw the stock from different places.
It helps us to kind of speed up sale to get clarity delivered to the customer on time.
Tens of the.
The point around the commitments, we quickly moved into an evaluation of high risk merchandise seasonal merchandise and anything that kind of if we looked at Alamo plan of what could have been caused that hold really looking at minimizing our discussion of risks and adjusting flows. So thats a very fluid discussion at their real discussion.
And that began on day, one when we start to see the proper badge. So it is a real strength in having job board focusing on this.
And our overall inventory plant, a really highlighted by being in soccer bestseller.
Getting out pretty plan without pain does imply said that we could get that in stock as clap that fourth quarter at a different way.
I think keeping close all in on seasonality and flow that starts from offshore basis.
Your next question comes as Jonathan that's just the key from Jefferies. Your line is open.
Yes, thanks for taking my question.
All question Hi, how are you just a follow up question on reopening.
Really dependent on state and local laws and obviously year on discussion should we expect some type of throughput constrain.
To be in the card when when stores reopened.
You may need to have the inventory or.
In terms of customer traffic and things like that and again, yes.
How quickly these stores.
Could ramp to to normalized level.
Considering maybe some.
Ill health and safety concern.
Yeah, I think in general in the industry. The consensus that I've been saying don't often is that everyone is planning for I mean, this is not going to be a lytswitch climate, where everything goes back to the of media market. We have got our financial plans, a very conservative when I talked about the modeling in terms of an expectation of highly reduced sales level. So that we.
Look at a financial plan to be as liquid as possible megawatt.
The number percentages bank bandied around or they're going to contribute to the dialogue other than the site. We have multiple scenarios quite deep to ensure that we've got our liquidity in place even if the return is there a general.
I think there's going to be different rules here I think you can remember that.
I think that this is we're looking a lot of the recession remittance from the pastas models, but you also have to see factor of safety inside large gatherings.
Shopping at the mall those things become more questionable maybe from it so less than 10% about fleet as mall based with we'd be bulk tumor independent we think that will work in our phase.
And that helps us to do things like cuts I pick up at fluidity of both as much faster than maybe bold bites retailer.
And we think there'll be a gradual turned off but we also think there'll be categories that come back faster and I think that you know how it will be a beneficiary much faster than apparel.
And we think that they've.
Positive upside to establishing relationships and transactions with customers Ellie, but we know it's going to be graded and a lot of that as you mentioned and I mentioned earlier, we will be.
Phased approach based on safety at regional returned to full business.
Yes, Thats Super helpful.
And then just a quick follow up you alluded to continuing to take a look at the portfolio in terms of it.
Banner.
Divestitures potentially in evaluating options for owned real estate.
Just given your thoughts on how how does that Covidien 19 backdrop.
Inform your view on a sense of timing and urgency for.
Banner disposal and if you could just remind us that how much owned real estate. There there is left to monetize.
Well I'm going to disclose that number specifically.
I would say to you is that.
The clearly clearly it's a tough alignment to think about transacting with individuals although we do have some.
Some good dialogue continues on because the both businesses I think that the good thing for us is that.
There was an opportunity to to work on other concepts, we don't have to do that to maintain the strong level of liquidity with buildout plants with these things in place and all that just remind potential positive upside so there's no.
Pain pressure or push to have to completely within a timeframe. They roll just feature opportunities. So you know time will tell.
And as we've said, we've just completed one deal right in the middle of this was still negotiating with others.
So it's a fluid management.
Your next question comes from Christopher Horvers from Jpmorgan Your line open.
Thanks, Good evening.
A couple just clarification question. So so first.
Back to that 90% ecommerce growth number you are saying Thats the court bed Bath comp once all the stores had closed set right.
Yes.
That's in the month, but we'll be seeing accelerating the month of bye.
Right right at 90% relates to bed Bath for the month of April.
Got it and then in terms of you mentioned, improving the cash burn rate 40%.
It sounds like obviously your biggest costs our inventory payroll in rent so as that 40% of good proxy in terms of the sort of what the benefit of the Furloughing was that you did recently.
No I think what was expressing their backdrop number sharing is to date.
That is being.
We still had payroll when we still had rent in those numbers.
Subsequent to that we've taken these additional action. So we were able to control server outgoings and we're in a transition.
Four of during the period, that's kind of an old environment, where we were still the transition we seek further benefits to controlling the band right.
And clearly being on fellow looking at payment terms and looking at our REIT status is only going to add one hundreds of millions of dollars, but with a benefit by month to how we can operate.
And so the two follow ups that as you know is do you think about the total SG $9. We have rent that's disclosed is.
I've always thought a rule of thumb that 40% of ash DNA or so is payroll within within the machine reporting is that fair and then related to the rents when the questions that were asking is have you paid all of your April rents and how are you thinking about.
May I mean, you've you've seen other retailers talk about declare enforcement sure. There's an article on the Wall Street Journal today about retailers not paying rent. So how are you thinking about overall year your need to pay rent on.
On close stores and from a contractual perspective, yes look I just I think it's proved not to comment on that Chris for is that discussion did slide and as I mentioned earlier, we want to be respectful with our partners to work through solution together.
Taking a look at these said we know that this with pain for both sides. So wasting multiple scenarios that were negotiating with different partners on how to manage rain, but to the April period immediately but also fluid so.
I'm not we're not going to be commenting on that today other than the site. We have robustly engaged with price pits and working with our partners to resolve multiple scenarios that we can buy support.
And then the SGN a portion.
In terms of the DNA, we haven't broken those component pieces out but in terms of on site.
Sizing them in order to payroll is the most significant followed followed by occupancy.
Awesome best of up best of luck. Thanks, much thanks, Chris.
And the next question comes in Peter if any from Baird Your line assumption.
Hi, guys.
Taking a question most might have been answered, but I just I wanted to embark I just wanted to ask you about.
The status of this Pmall transaction I mean first of all as people operating right now and what their statuses in this.
In this.
Environment and then just how do you expect that the play out is that something it's just kind of more of a question of when not if or is it more severe or more serious enough.
Well, Peter you know I think that Weve filed.
Based on the lack of completion so.
You have to respect by Tentativeness into it said that saying too much I think that they OXXO operational.
Highly profitable business.
It does really well, it's a great assets.
And we had a good deal.
And so you know the date got cost we tried to negotiate through that and we found that we were forced into situation.
We were going to vigorously pursue the completion.
It's a great business and its operating well and in that selection really side about at this point.
Okay, That's fair understood and then.
Just back to the in the fourth quarter can you give us the so how much of that of the 210 basis point it hit to gross margin how much was that was from the digital fulfillment headwinds.
And the majority was really on related to Mark Downs and promotional activity. So more heavily weighted there was just a lesser extent was the shift in the next to digital.
We really saw subtype points there based on the promotional activity and how we manage to it and that as I said earlier Peter is paid the top tight letting you know theres some impact all strategical fill but it was outweighed by the the margin impact that we took with markdowns permit.
Okay understood. Thanks, so much guys. Good luck.
Thank you.
Thanks into next question comes in France, Thomas from Keybanc. Your line is open.
Hey, Thanks for taking all these questions around long here.
Most of my brassard, but but but I guess market one of just follow up on on the opportunity in merchandising in your vision.
Ahead here I know your background is merchandising and it just brought onboard I guess could you talk about.
How much you think that the assortment in the store you need to change as you think about the next few years and what areas. Do you think you can most quickly address here or potentially even this year.
Yes look I mean, we've already identified in that moving forward on their strategy. So that remains unchanged with this moment and I want to beer is a clear around that couple of things that Brad I think the first thing that we noticed that we just talked about value earlier on the coal is that we had we have some real gaps in opening price point and the clarity of communication around.
Value to our customer so we're leaning into that space I think the second Pcs around really reducing a high level acute location in items and we we were really want to focus on accumulation of differentiation and relevance to our customer.
And where we've done that we've seen real win in some of these these tools that will that I was talking about only that I was playing with the models on we've reduced the SKU count.
By 20% to 30% and we're seeing double digit comps.
At the same time, so there will be Q right, we make our assortment more focused and understandable.
I've just been working even today on our with Joe on a number of really great ordered brands that we cultivating and getting ready to launch at the start of next fiscal year, because these things take time, and we develop newness, there, which will help brief frame out each of the key brands and categories and occasions that we.
Only dominant in have strong market share, but also because we want to call Tonight. So I think the days identity, and our freshness and irrelevant to the board ability.
In that hotline and and.
Personal care space as well as our efforts in side by the which we're well underway.
That can really create more relevant beschloss's open. So we had to up turning a lot of rock say, we've renegotiated costs across the board, which already done and.
I have worked on so there is a margin upside to the mix upside and then may the perception upside including value that we see coming and that will be evolutionary throughout the rest of 2020, and you really going to see some.
The strong green shoot in late 2020 early 2021.
Got you that that's helpful. Thank you Mark and good luck.
Thank you.
Your next question comes from Seth Basham Wedbush Your line is open.
Thanks, a lot and good evening.
Hey, good questions first on ecommerce business per bed Bath beyond the current environments.
Noted that it really strong growth there 9% in April what do you think that potential is for growth in that business. If you had been able to meet all of the demand that you're seeing.
Yes, it's a great question I mean look I mean, I think we really would have been hitting on some high double digit comps.
And I think though we had to restrain some demand by some availability of inventory, especially the items and so those items a strong they don't markdown driven that would have been real please.
Yes, SAP and I think that bodes well for where we can cut and paste says experiences into benefited the fourth quarter in 2020.
The upside, but I think is also going to be distorted by the current behavior and covered 19, and that's why I'm really excited about the fact that we feel background capabilities very quickly.
And that is that the total backup its back up.
And then we've been saying.
Well, we have really changed at the cadence of that communication dialogue and the way we've set up our digital website to be more relevant to.
Weekly gets needs, we're really connecting with customers and driving high double digit comps in those categories that were leading into building really engagement and data with these customers. So I think it's too early to say how high is high I think in seeing total believes that penetration rights will be increased where.
Already on that pathway.
And we know what I'm, saying, 21% about business in Q4 was already digital we see a lot of upside in that but we also want to balance out that with growth in our stores.
Got it and a follow up of course, you've only been in this state home scenario for a few weeks now what have you started to see material change in mix of products being demanded for example, a shift away from demand for cleaning products or anything like that that would be notable or surprising.
No I mean.
Well I mentioned the linear my comments, if I mean, we've definitely seen the stay at home moments in terms of cooking and cleaning and supporting a family.
Early pace abate really exceptional made great. Mike is a blind his head vacuums and cleaning products water filtration coffee coffee coffee like people like Hell, we're just going to make the best but at a time now that's a boon for us and we think we think that it's people come out at this moment.
I think that some of the data that we're seeing very elevated preliminary.
It's going to be some discretionary spend midwife some specific category, but we believe that people will want to celebrate the Han reinforce that refresh it invite friends for small amendments and build equity then a tiny.
And and start to celebrate the time and then leading into effect College, which we're really primes, which as you will have a lifetime, we're really ready to take on that so I think this kind of you creating new nesting.
New love, so climb and valuing the environment, while we'll want to step outside clearly I think there's going to be safety is a consideration I think there's going to be 11 respect for the hunt that way really to take advantage of so we see different categories rolling through over watching that road at costly.
And last question comes from Carla Casella, Some Jpmorgan your line is open.
Hi, I'm just a couple of that weren't addressed on one you're making a lot of changes you mentioned with the merchandising and working with your vendors on that have you changed any of your terms with your vendors during co. There have been able to extend terms something it might help you know on working capital front in the near term.
Absolutely color I think that was one of the best thing that Joe and team and Robin really left off was like.
Hi, Great partners. This is going to be Taco, we will never situation. We know we're going to be it in for the long term. We now we'll liquid we know is stronger than we have a plane and just lets everybody work together on what we can do here and so without going into great detail not those conversations with very robust and we've asked for a level of support it's just short to mid term.
It's not extended by will operate at will overcome the together and we've seen some really good meaning they are.
To to try and that liquidity and as I said some of the bed rights, we talked about earlier would not inclusive of those actions taken, albeit so that's a further benefit to cash flow, but yet we thought out our to do this very early on and we began its to sit with our partners to renegotiate.
Just in the short Dummied, how we can play which has now become book and that does for both.
Our product vendors as well as that supply partners.
Okay, Great and then you've talked in the past about using your strong balance sheet, and our and asset base, but I just wanted to clarify the way I calculate I don't it doesn't look like you have any additional stores or distribution assets. They could you could use leasebacks is that right you've pretty much sold everything that you owned.
No we still have DC facilities offices et cetera, there in the mix. We're now focused on the stores pace. They still assets that we have to review and play with.
Okay, great. Thank you.
Thanks Collyn.
And that concludes their question answer session I'll turn the call back over to Jana part of closing remarks.
Thank you off for participating on our call today, you're free to contact name with any additional questions or comments have a good night and say thanks, everyone.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating and you may now disconnect.
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