Q3 2020 Bed Bath & Beyond Inc Earnings Call

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Welcome to the bed Bath and beyond fiscal 2023rd and fourth quarter earnings call. All participants will be in a listen only mode until the Q and a portion of the call. Today's call is being recorded a replay of broadcast of the conference will be available via webcast found on the company's Investor Relations website.

Right.

At this time and when I like to turn the conference over to Janet Barth, Vice President of Investor Relations. Please go ahead.

Thank you and good morning, everyone welcome to <unk> fiscal 2023rd quarter earnings call.

On the call with US today is president and CEO Mark Tritton.

Chief Financial Officer, and Treasurer, Gustavo Arnaud, Chief operating officer, and President of Buybuy Baby, John Hartman, and Chief Digital Officer rock and the soon.

Before we begin let me remind you that our fiscal 2023rd quarter earnings release, and slide presentation can be found at the Investor Relations section of our website at www dot at Bath beyond Dot Com and.

And as exhibit to the form 8-K, we just filed ahead of this call.

This conference call and the slide we refer to may contain forward looking statements, including statements about or references to our outlook regarding the company's performance or internal models and our long term objectives.

All such statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say during the call today.

Please refer to our most recent periodic SEC filings for more detail and these risks and uncertainties, including the risk factor section and our annual report on form 10-K it.

The company undertakes no obligation to update or revise and forward looking statements.

Additionally, the information we will discuss today contain certain financial measures at exclude them out.

For our subject to adjustments that have the effect of excluding amounts that are included in the most directly comparable measures prepared in accordance with generally accepted accounting principles.

For a reconciliation to the most comparable measures presented in accordance with GAAP. Please refer to the table in our earnings press release available on our website and included as an exhibit to our form 8-K filed today.

It is now my pleasure to turn the call over to Mark.

Thank you Dennis and good morning, and happy New year to you all.

It's hard to believe in the U.S.

Yes, Mike this and of course, Ceos that Bob beyond one and exceptional year of change it has been.

At that time, I clearly stated at fiscal 2019 third quarter results for unsatisfactory and underscore the parity of the change.

Hi declared that we must respond to the challenges we face of the business, including price should sales and profitability and reconstruct of modem durable, but well for long term profitable growth.

To date, we stand at a very different position at the company than we did just for me 12 months ago.

Firstly, we continue to execute on our digital first on the old way strategy and of delivered a second consecutive quarter of comparable sales and EBITDA growth through strong margin management.

Secondly, responding to our customers aware of what they needed and growing our omni capabilities to accelerate profitable digital growth and grow our customer base.

Thirdly, we continued to strengthen an already strong balance sheet and remain focused on ensuring liquidity optimizing costs and significantly reducing debt, while driving positive cash flow generation.

And while we drive overall business results. We also completed our non coal Ben and monetization plan with the final transactions at to close in at fiscal 2024th quarter. These efforts will help fund, though at transformation and put us in a position to start fiscal 2021 with a more cohesive set of core businesses.

Our favorable sales results are also starting to be reflected in market share data.

Month by month, we have been minimizing akshay differentials business of market and encouragingly in the most recent NPD data for October and November we achieved market share gains in the bed category with improving trends in both Bath and kitchen category.

We expect to see continued improvement and market share trends as at strategy continues to take hold.

Additionally, we continue to show strong market share of strength and wedding registry, where we believe we are very well positioned as a market leader when we get back to celebrating important lifetime clutch of getting married.

All of this has been achieved this quarter. Despite the significant headwinds of kind of at 19.

During our call today, the stock price now Chief Financial Officer, and Treasurer, who will review at the quarter financial results and then put lots and perspective on our fourth quarter and our outlook for fiscal 2021.

Then wrapping the food Chief Digital officer will speak about the quarter from a digital first and customer perspective and.

And then John Hoffman, Chief operating Officer, and President Buybuy Baby, we'll do the same for our operations, including the progress on at plans to close underperforming stores and invest in our remaining portfolio we.

We will then take questions.

Saba.

Thank you Mark and good morning, everyone.

Today I will cover two key topics.

First I will provide perspective on the performance of our third quarter as well of from December sales trends.

And then I will provide visibility on the current fourth quarter as well as and our outlook for fiscal year 2021.

To begin it is important to note that our fiscal first quarter runs through September October and November.

And consistent with last year, the Saturday of Thanksgiving weekend with the last day of the period.

We delivered strong results, despite extensive and widely reported corporate related headwind.

These include and lower foot traffic trends shipping capacity constraints and much higher freight costs.

Further during a challenging holiday period, we strengthened our commercial plans to drive significant digital demand, while remaining focus on delivering gross margin expansion.

Positive comp sales growth was led by our core bed Bath and beyond banner, which was up 5%.

He was skewed by exponential digital growth of 94%.

Which more than offset store declines of 14%.

Gross was healthy and broad based across five key destination category.

Which grew 11% and represented two thirds of revenue.

Total enterprise comparable sales grew 2% also driven by strong digital comp growth of 77%.

As you'll hear from John and a few minutes.

Hope and related headwinds disproportionately impact at store sales and our baby business during the quarter, yet encouragingly, we saw a return to growth in December following from key interventions.

The strength of our digital growth has been powered by the investments we have made and only capability, including BOPUS curbside pickup and same day delivery, which are all completely new this year.

Book. These orders represented 60% of total digital sales in the quarter.

These service offerings provide ease and convenience and allow us to further gain trust from our customers, including the approximately 7 million new online customers gain do you see here.

Our digital capability are becoming a key driver of results.

Net sales were 2.6 billion and expected reduction of 5% primarily due to the impact from banner of divestitures and the continuation of our bed Bath and beyond store network optimization initiatives.

This has been at holiday season like no other.

As outlined by third party data sources, including Sensormatic and Adobe analytics market wide Black Friday in store traffic was down by over 50% and online spending was up 22%.

Similarly for the six week holiday period market wide, Inc store traffic sales between 34 and 36%.

We performed strongly again this report and trends during.

Moving to competitive feed and by the holiday sales period from Thanksgiving through cyber Monday.

Overall comp sales of demand for our core U.S. bed Bath and beyond banner was up double digits for us with last year.

And the liver digital comp sales growth of approximately 69% low.

More than offsetting store comp sales decline of 24%.

And during the six week holiday sales period from November 16, two December 27 of our total enterprise comp sales grew low single digits led by significant digital growth of more than 90%, which more than offset the store comp sales declines of more than 20%.

I will now continue with of third quarter financial results.

On a GAAP basis, including the non cash loss from banners divested for held for sale, we reported a net loss per diluted share of 61 cents.

Our GAAP results include approximately $86 million from favorable impacts, which are excluded from adjusted results to provide better perspective on the underlying performance of our business.

These include especial items such of losses from the sales of businesses, including cost plus world market, which is held for sale as well and non cash charges for the impairment of certain long lease assets.

Restructuring and transformation and expenses.

Adjusted gross margin increased 310 basis points to 35.4%.

This expansion was driven by a 180 basis points of favorable strategic engineering of promotion and markdown expense, including data driving coupon of two mutation.

120 basis points of favorable product mix from higher margin categories, such as bedding and Bath at.

And 210 basis points of leverage from distribution and fulfillment costs.

These benefits were partially offset by a 200 basis points impact from channel mix due to the anticipated larger proportion of total sales from digital channels versus the prior year.

These impact also includes around 80 basis points from higher shipping expense associated with industrywide outbound freight rate increases, particularly in the latter part of the quarter.

The significant year over year improvement and our adjusted gross margin reflects the management team's focus on driving the components of margin, while delivering explanation of growth in digital.

As DNA expense declined $41 million versus the prior year, driven primarily by lower payroll related expenses, including savings from our comprehensive restructuring actions earlier in the year.

Adjusted EBITDA increased 168% to $121 million, which is almost three times higher than the prior year period.

This was driven by digital sales growth coupled with gross margin expansion.

Once again this was wholesale of straight at our efforts to transform the business and build a modern durable business model are working.

Turning now to some cash flow and balance sheet items statements.

We are not $244 million and positive cash flow generation.

Cash flow from investments was $200 million positive effect included proceeds from non core asset monetization net of Capex.

Operating cash flow of $44 million was also positive in spite of seasonal dynamics.

We continue to carefully manage working capital of this quarter with ending inventories of $1.8 billion.

On a sequential basis inventories were 13% lower versus the second quarter and 30% lower than last year.

This was primarily due to the impact from banner of divestitures, including seasonal inventory purchases for the holiday selling period.

We are tracking at a faster pace to deliver our previously stated 2021 goal of $1 billion and inventory reduction at retail compared to 2019.

Our capital expenditures in the quarter were only 38 million.

We have plans to significantly ramp of our capex spending starting in fiscal 21 in support of our digital first on me always transformation.

During the third quarter, we also improved for gross debt balance with a reduction in operating lease liabilities of about half a billion dollars from non core banner divestitures and store closures.

Taken together with the half a billion and debt reductions we achieved in the second quarter, we have reduced total gross debt by about $1 billion. So far this year a reduction of about 25%.

We remain in a strong net cash position with an ending cash and investment balance of 1.5 billion. This.

This is in line with the ban and for the end of the second quarter, even after returning cash to shareholders in the form of accelerated share repurchases.

We have also maintained its strong liquidity of $2.2 billion, including our IPO.

So capitalizing on this strong financial position, we launched a 225 million accelerated share repurchase in late October.

And in December in conjunction with the announcement of a definitive agreement to divest cost plus world market. We reported plans for a second asrs in the amount of $150 million.

These two programs totaling 375 million are expected to be completed on or before the end of for fiscal fourth quarter next month in February.

And will result in a reduction of our shares outstanding of approximately 15% at current stock price levels.

Our authorized level for share repurchase at this early stage of the planning period is now up to $825 million over the next three years.

These actions reflect our balanced capital allocation principles strong liquidity and pump and entering our strategic growth plan.

In summary, our third quarter performance shows consistent execution of our strategy, which drives sales and EBITDA growth, coupled with strong cash flow generation and the renegotiation of capital return for shareholders.

Now moving onto our outlook.

I will start with some directional color on our expectation for Q4, and then provide perspective from fiscal Twentytwenty one.

It has been widely reported at COVID-19 related headwinds continue to impact the retail industry.

And this context, we will not be providing specific sales and earnings guidance for the current fourth quarter.

That said, we feel positive about the parts of the business, we can control and expect to deliver year on year adjusted EBITDA margin improvement in Q for.

This despite lower store traffic and shipping constraints accompanied by higher freight costs.

In terms of the topline comp sales are expected to be approximately in line with last year we.

We expect consistent strength and digital to be tempered by credit related headwinds impacting stores.

December sales show positive total enterprise comparable growth, including continued strength across key destination and category.

Importantly, we're planning for a double digit on favorable impact on Q4 total net sales versus last year, Steven the divested banners and the ongoing store optimization initiative.

In terms of growth margin in spite of the anticipated drag from significant freight cost increases in Q4, we're driving cost optimization actions to manage the impact of these pressures. So we expect gross margin to be about in line with the same period last year.

Again, we expect to deliver a year on year adjusted EBITDA margin increased in Q4 with absolute EBITDA Tdrs in line with the prior year.

Now I'll turn to fiscal Twentytwenty one.

Our initial outlook, including fiscal year 2019, as the base year.

At the time.

Our portfolio of annual review will still underway.

We had already divested for banners, but we did not half of signed deals for cost plus world market. Yet now we do and we expect this transaction to close end immensely.

Today, we're providing additional visibility and the significant reshape of our PML as a result of lease divestitures and the closure of underperforming stores.

Our significant portfolio for information, we lead to fewer better performing stores and will include a healthier core revenue base with a larger proportion of a faster growing digital business.

We're now tightening our projected fiscal 21 revenue range to approximately eight to 8.2 billion.

Looking at quarters, starting with the first quarter, which will not be on a comp basis, we expect to recapture the lost sales opportunities from the store closures and 2020 due to cold at 90.

During quarters, two through four of which will be on a comp basis, we expect to sustain comparable sales levels in relation to the solid comp sales pace of fiscal Twentytwenty.

Our sales forecast for financial planning purposes assumes total enterprise comparable sales to be in line with fiscal 20 planes.

We are reiterating our expectation for adjusted gross margin of approximately 35%.

Which represents a more than 200 basis point improvement versus pro forma of 2019.

We are enhancing adjusted fiscal year 2021, EBITDA to a range of between $500 million to $525 million.

This represents a 20% increase from the pro forma at 29 teen EBITDA openings of 425 million.

The drivers of the adjusted EBITDA range are consistent with the ones. We have previously shared including cost savings from planned store closures product sourcing and restructuring actions and the impact from Reinvestments and channel shift and shipping costs.

And as I said earlier, we have assumed comp sales to be in line versus fiscal 2020 for modeling purposes, as we're not requiring sales growth to deliver the higher EBITDA range.

But needless to say, we will strive for continued top line growth in a highly competitive environment.

Our performance to date gives us confidence in our longer term goal of achieving between 850 and $1 billion and adjusted EBITDA by fiscal 2023.

Importantly, our portfolio transformation, coupled with store closures is driving significant balance sheet improvement through gross debt reduction of $1 billion.

This will result in a gross debt to EBITDA ratio below 3.5 times.

Which puts us well on our way to our mid term goal of below three times.

We have for strategic and disciplined pathway for driving sales and margin growth.

Generating cash and investing our business plan to drive shareholder value creation and.

And it is working.

I will now turn the call over to rock shipments from.

Chief Digital Officer Rafi.

Thank you discover.

With coal that as a headwind to our store traffic. We have stepped up our strategy has an omni always retailer and it is paying off.

During the third quarter, we delivered digital growth of 77%.

Our third consecutive quarter of growth in excess of 75% this year.

Our bed bath and beyond better or low post and digital comp sales up 94% almost doubling last years sales.

With this momentum and based on current trends, we are on track to exceed our digital sales goal of $3 billion by the end of fiscal 2020.

We have laid out of transformation plan to unlock the potential of our omni always growth strategy by elevating customer experience.

Building out our army capabilities and evolving to a digital first culture.

The goal of this initiative is to meet customers wherever they are.

Im pleased to report that the company is now of incredibly equipped to do that.

The benefits are coming through not only and digital sales growth, but also end customer metrics.

During the quarter, we gained 2.2 million new online customers of which the bed Bath batter alone added 1.8 million.

Year to date, we have gained approximately 7 million new online customers.

And not only are we attracting new customers, we're seeing them return at a higher rate than ever before.

And the third quarter, 21% of our bed Bath and beyond customers placed more than one online order compared to about 16% versus last year.

So what's driving the sticky customer experience for online customers.

We book is a true here of for US is buy online pickup and store.

Since introducing BOPUS and contact list curbside pickup services earlier. This year, we have seen a rapid rate of adoption by our customers.

And the third quarter, approximately 1.2 million customers placed and focus quarter right.

Representing 16% of our total digital revenue.

And the bed Bath and beyond banner BOPUS orders represented 15% of total digital sales and 17% of total digital orders.

And 60% of our BOPUS orders are we're ready within 30 minutes.

Surpassing our two hour prominence.

This fast and convenient experience has earned bed bath and beyond and net promoter score of 80 per cent for our book to services up from 49% in May when we first introduced the service.

Our stores are now at competitive advantage of our omni strategy.

Fulfilling a total of 36% of all digital sales and the third quarter.

At this mccoll was not in place last year.

And now we're conducting our stores with our online platforms and the power of army as enabling us to better serve our customers. However, they choose to shop.

We know omni channel at the future of retail and we are making the right investments that are resonating with our customers.

The fast paced transformation of our digital offerings and elevated customer experience has resulted in a 25% lift in our online conversion rate for the third quarter EPS compared to the pre of prior year.

Key drivers of the increase include for.

First the relaunch of our mobile site and mobile App.

We've implemented a new framework of and optimize experience that drove a 33% increase and conversion and mobile sales growth of 107% versus the prior year period.

During the five day holiday shopping period from banks, giving to cyber Monday, our mobile home page load of 74% faster than the same period last year.

We also relaunched bed bath and beyond and Buybuy baby mobile apps, resulting at over 800000 downloads this quarter.

Our bed Bath and beyond mobile App was launched over 15 million times during this quarter and revenue more than doubled versus last year.

We have also seen the rate of App and installs continue to improve further underscoring the stickiness of our customer experience.

Second in order to ensure that we were firing on all cylinders going into the holiday season, We launched same day delivery and bed Bath and beyond dotcom and Buybuy baby dotcom to provide our customers another convenient and cost effective way to shop.

This service was introduced in Q3 results are preliminary but we have seen hundreds of thousands of our customers take advantage of this new convenient way to shop.

We also began to offer same day delivery service through the launch of bed, Bath, and beyond and Buybuy baby stores and shipped and Instacart.

With both marketplaces, each reaching more than 80% of view of household.

Harmon face values was recently added to the Instacart marketplace and we are pleased with the initial launch and continued positive response from customers on this platform.

Third we implemented over 100 improvements to make our shopping experience for convenient and easier to use including a faster checkout process and do payment type options.

This includes buy now pay later options like after pay and paper sales and for as well as extending Apple pay from store only to our mobile apps.

During the quarter, we also focused on optimizing our experiences and speed to place orders on our site, making it even easier convenient and faster for our customers to shop with us.

Again each of these initiatives were geared to customers with the goal of meeting them, where they are creating multiple options for payment and delivery.

As we look at our digital program and Holistically is a true revolution from where we were a year ago and has become part of the fabric of how we operate at bed Bath and beyond.

The customer environment is rapidly changing.

And we are there to greet them at every turn.

Drawer and health services speed and focus on engagement, Arkansas customer reception continues to improve.

Our Ami always strategy is working and was a key driver of our third quarter sales performance.

Our strength and digital has more than compensated for the headwinds of the pandemic and has fast track our transformation as we moved into the important holiday season, this year and sets us up for success moving forward.

We have delivered and elevator customer experience and auction.

Okay, and meaningful capabilities and pin for digital from a laggard tactic to a strategic asset at a profitable growth engine that has delivered another strong quarter of growth.

With that I will turn the call over to John Hartmann, Our Chief operating officer, and President of Buybuy Baby.

John Thank.

Thank you Rafi, we made exceptional progress across our operations from the third quarter.

Specifically as it relates to our supply chain Reformation, optimizing our real estate portfolio and advancing our technology roadmap.

Modernizing our business remains a key focus and we are evolving our store formats, our distribution and fulfillment capabilities alongside leveraging our unique data and insights to meet the changing needs of our customers and deliver and exceptional shopping experience.

I'll start with supply chain.

While we remain focused on mid to long term capability building, we made very substantial pivots from the third quarter.

As Rafi mentioned, our stores fulfilled 36% of total digital sales in the third quarter.

Well last year, we didnt have BOPUS curbside pickup for same day delivery and our offerings.

Not only do these new capabilities provide ease and convenience to our customers. They also help us to partially alleviate current shipping from strength and additional cost pressures in the supply chain.

During the quarter. We also added a secondary national carrier and several regional parcel delivery carriers, which helped to offset and over 20% of cost increase from our primary carrier Fedex.

And importantly, we continue to focus intently on the health and safety of our associates working at our fulfillment centers by instituting daily cobot cleaning procedures and our facilities.

Concurrently, we launched and evaluation of a number of potential third party logistics providers, who will partner with us to establish new regional distribution centers and the managed and efficient flow of domestic distribution.

We anticipate that using third party logistics operators will also provide increased financial flexibility and reduce capital expense.

This is the cornerstone of the transformation of our supply chain network and will increase our capacity for fast store replenishment, while continuing to leverage of store network for omni fulfillment.

By making the replenishment process more efficient our store teams will have a more predictable and faster flow of the products we sell most.

And in turn this will allow us to meet the increased demand for BOPUS curbside and same day delivery services, while also reducing the time our store teams spend managing deliveries. So they can spend more time with our customers.

Also core to our transformation at his technology.

And we are taking a disciplined approach to our investments and building a technology infrastructure that will enable us to personalize the service for our customers.

Improve our ability to predict and meet demand.

And make it easier to collaborate across teams and drive down inefficiencies in our business.

Over the next three years, we plan to invest approximately $250 million to modernize the application and technology landscape to a cloud empowered foundation.

Last quarter, we talked about our expanded multiyear partnership with Google and devoid to enhance our omnichannel shopping experience. This.

At quarter redefined our plans for a new ERP system.

We will also be pursuing a product of lifecycle management solution and support of our own brand initiative and of inventory management capability to improve inventory productivity.

These plans will all start in 2020 warm and our foundational part of building out our technology infrastructure.

And other activity, we are making significant progress towards the targets. We have previously highlighted regarding our real estate portfolio, including our store network optimization and store remodel plans.

Let me start with our network optimization program, which is designed to not only ensure our stores remain of strategic asset for us, but also to ensure that we have them in the right locations to deliver more sustainable sales growth improved margins and greater cash generation.

As part of this work, we are well underway and the process of closing approximately 200 underperforming bed bath and beyond stores by the end of fiscal 2021.

Initially we identified about one third of the stores to be closed by the end of the fiscal year.

We have sense accelerated the pace of targeted store closings. This year from 70 to about 120 stores with certain stores closing earlier than planned due to having efficiently sold down store inventory during the closing process.

In the third quarter, we closed for bed Bath and beyond stores and in December we closed another 75, and we are currently and liquidating an additional 42 stores.

We're very pleased with our progress to date and completing the store closure program during fiscal 2021 remains a priority.

Turning to our bed Bath and beyond store remodel program, we of advanced from the initial prototype phase to act of iteration within 10 stores at our Houston markets.

These proof of concept stores highlight our destination categories bed Bath kitchen and storage.

We expect to complete the phase of the remodel program by the end of February 2021.

Additionally, we will take all the visual signage enhancements and immediately apply them to the entire fleet of stores on the same timeline.

Next we will take our learnings from Houston and moving to our first expanded wave of renovations and 2021, which includes approximately 150 stores.

In total our store remodel plan involves $250 million of investment over the next three years and touches over 450 stores, representing roughly 60% of our revenue.

In addition, we will utilize strategic sourcing methods to procure and necessary remodel components at a lower cost and leverage economies of scale with this overall initiative.

Instead of the legacy store by store one off approach of the past.

We have established a unified planning process to identify prioritize and sequence all aspects of the remodel.

These store Remodels and our network optimization plans are crucial steps and building and omni always organization that serves our digital first customers with an intuitive and modern shopping experience.

We look forward to reporting our progress along the way.

Before closing, let me provide some perspective on the quarterly performance of Buybuy Baby, which represented approximately 10% of total enterprise reported sales in the third quarter.

This included strong growth and digital of approximately 40%, which represented more than half of the sales in the quarter.

It remains a challenging environment for our new or soon to be parents, who are particularly vulnerable to the perceived challenges associated with in store shopping due to cold at 19.

As a result, we saw a disproportionate level of store traffic declines from our baby customers this quarter than across our other banners.

These cold and related headwinds have also had a short term impact on the registry component of our business.

Which is highly correlated to in store activity.

While we have seen overall growth and the registry debt.

Digital registries created online currently tend to carry a lower average value from those created in store.

Enhancements to the digital registry experience are addressing this opportunity to assist our customers and building a more well rounded baby wish list.

Colgate headwinds have also constrained inventory levels and certain of our key categories, such as furniture and gear as a result of disruption from the global supply chain.

We have made key pivots, you're including share improved forecast with our vendor partners well into 2021.

So as consumer behavior shifted we pivoted and leaned into digital to create an enhanced online experience with a more convenient suite of checkout option, including after pay pay and for and Apple pay.

We also upgraded and re launched our Buybuy baby App in November strengthening the choices, we offer our customers to connect with us digitally.

Year to date, we have gained nearly 2 million us our online customers an increase of 46% over last year, including more than a half a million new online customers in the third quarter.

And all nearly two thirds of our baby customers only shop online this quarter.

As young parents take safety into consideration this year, our new omni capabilities allowed us to meet them, where they are with BOPUS curbside and same day delivery service.

Digital orders fulfilled by our baby stores represented a significant portion of total orders for the quarter with BOPUS orders, representing approximately half of all store fulfilled orders.

One of the holiday period of traditionally not a big baby season, except for gift, giving or needs of families getting ready for for just having had a baby. We did see strong digital demand comp growth of 49% year over year. During the five day holiday period from Thanksgiving to cyber Monday.

This growth was driven by top performing baby categories, including toys play room furniture and apparel for these positive sales and category trends accelerated in December.

We believe in this business and we are now ready to double down on and significantly of invest and expanding sales and margin and growing our market share.

We plan to accelerate our growth and baby over the next several years, including introducing owned brands and.

Aging up in the toddler and younger children as well as expanding of the categories like toys and educational as well as furniture.

Enhancing our registry and leading with new partnerships.

We will also invest to scale our footprint nationwide with about 50, new stores over the next three years.

Fiscal 2021 will mark the true beginning of the transformation of this banner as we execute our three year plan and unlock the value of this brand from.

Earlier this week, we announced the appointment of Patti will as senior Vice President and General manager for Buybuy Baby.

Patty exceptional experience will help accelerate our plans and drive meaningful change.

We look forward to sharing our progress and future conference calls.

Mark I'll turn it back over to you now for closing remarks.

Thank you John.

Our strong performance this quarter across several key performance metrics, including positive comp sales growth for.

Gross margin expansion.

Positive cash flow generation and gross debt reduction is evidence of that transformation, taking hold even despite significant headwinds of of global pandemic.

Yes, what I still beyond the numbers was even more impressive.

Our team was planning modifying and executing and and aligned and disciplined why like never before.

And we're learning and improving and real time and at the customer and conditions changed showing true agility and motion.

These newly acquired muscles extended from product to price through messaging and digital expression to sales flow and distribution center.

I'm truly grateful to all of our associates rallied around this cold of actions demonstrate our strength and opportunities as the new bed Bath and beyond team.

And what has been an exceptional year of change so far we still continue to make bold pivots to reconstruct renovate and the store our company.

Simply put we of delivering and what we said we would do.

The simple we've put a team and types that would have the right talent and expertise to execute our new vision and inject new ideas and that we would create the right organizational structure to facilitate and will streamline decision, making and we've done that.

We said, we would lean into the digital space and make it easier and more convenient for our customer to shop with us and we are doing that.

We said, we have reset our cost structure modernize for growth and refine our organization and we've done that and continue to focus on gross margin improvements.

We said we had a clean managed day to reestablish authority at the profit Omni channel Im destination and that we would use customer inspired and market insights to develop at new customer value proposition and way of doing that.

We said, we would evaluate our asset base and how best to optimize its value for the business on a go forward basis, and we have done that.

And finally, we said our mission is to ensure the bed bath and beyond is well positioned to long term success.

And way of doing just that.

I'm proud of what our teams of achieved non thank them for their continued dedication and commitment to the long term success of our company.

Our results this quarter set of from base from which we will continue to drive our bold transformations and seek to deliver on our free strategic and financial goals shares at our 2020 Investor day.

We have many ball and exciting plans for fiscal 2021, such as launching new and brands that will help differentiate us and not pay destination and category.

Re modeling approximately 150 stores under at store network optimization program.

Introducing new and unique digital services designed to enhance our omni always experience.

Modernizing and technology and operations and reinventing our supply chain for the future.

Investing to further strengthen our buy buy baby and home and benefits.

And continuing to unlock and deliver shareholder value.

In a year and locked Nova we are embracing and driving transformative change staying curious and bold and so much more.

I'm proud of the commitment at team to Shine and what we have achieved together.

With that we will now take your questions.

You will now begin the question and answer session share of a question. Please press Star then one on your Touchtone phone.

If you a stream of from the queue. Please press the pound sign or the hash key.

There will be the labor for the first question is announced if using a speakerphone you may need to pick up the handset first for for pursuing and numbers once.

Once again, if you of question per Se.

Store than one on your Touchtone phone.

And our first question is from current Nagle from Bank of America.

Hi, good morning, Thanks, very much for taking my questions.

Yes for the first one is on.

And shared how very strict shipping at UBS.

Credit was an issue for holiday margins, but how good of this pressure.

Pressure carries and 21 it sounded like at least for the full year tickets of issues since you're still targeting to.

20, I'm sorry, sorry.

35% gross margins and 21 and then some of the hall of after that.

Hi, Good morning, Thanks look I, we we know that the price pressure across retail is here to stay and we've built that into at future plans. So we see that at margin stability and the offset for we've created currently and the proof of concept of does of about Q2 and Q3 at this year.

Really standards and good state to deliver that 35% margin. So we feel really comfortable around that.

Okay and.

Maybe just our free of March.

There may be give us a quick update on some of the big our merchandising initiatives you guys have outlined at October on analyst day, such as lower sourcing and other costs and then starting to rollout improved and for.

For merchandise or more exclusive product and how much of an impact at all.

Great and 20 water or how to think about cadence of those things and 2021.

Yes, I mean at the good news is that we have already built from foundation and with these results and the actions and trends we at here in terms of margin, but across the board of really substantial and sustainable and then we're going to add into those the rolling benefits as you outline for us so the sourcing benefits that we've undertaken throughout 2020 are really going to be.

Evidenced in first quarter onwards, 2021, and then we begin in March with the rollout of our end brands and again be sharing more closed end of pagination of that flow throughout the day several brands will be launched but the key news is that in the first half of 2021, we'll be at dressing the majority.

Already all of our big key categories, we are already seeing strength and growth and reinvesting those with our end brands and also the introduction of opening price point items and our range there, which is paid for huge missing a part of our equation in terms of Bay trail and competitive in the marketplace to build our authorities. So the step changes.

For the the consistent management of promotions.

The mix management now we've got a delay in the incremental benefits of sourcing and I and brand. So we're excited about that progression in 2021.

Our next question is from some income from Morgan Stanley.

Good morning. Thanks for taking my question can you talk about where your expectations for a couple of months ago for the fourth quarter and sales and now and I know the outlook for next year in bed flattish I'm done.

That change now that you're going to be lapping something that may be potentially weaker in this years fourth quarter.

Yes, I think the cement again, we have robust plans for Q4 of this year we.

We feel good about how we're executing on those but there is no doubt that the cause of headwinds and the impact of that of head on foot traffic at June a growth consumer confidence and something that weve had to factor out of plan and what we talked about the agility that same is true Q3, and now Q4 GAAP to respond to those challenges and so.

We think weve met all of those in in.

What has been the title and time and we really look for the lapping those next year and a very different why.

Okay. Thanks for that and then my follow up.

Can you talk about Q.

Q for you.

Mentioned, the freight headwinds and but offset by some optimization.

And I think the gross margin and in terms of promotion and pricing can you talk about the promotional environment.

And then you know thinking about.

How much margin opportunity there still is I think for next years.

Guidance revision that is it looks like it's more of a function of the margin changing as opposed to the topline just to confirm.

Yeah, I think that you know we.

We would stress that we did not become more promotional during the quarter in Q3 or in Q4 was actually reshaped and reengineering of our promotional activity, we had opportunity to do so, but thats really paying dividends in terms of generating gross margin and helping to credit that balance and Ics.

Saving equation on the on the margin differentials from shipping and price so.

So we are less promotional were more focused on Reg price.

We are winning customer and we see that progressing forward and as Gustavo had outlined and we're not putting pressure on the low.

The working and sales plan to generate EBITDA, we believe that we can do that through a number of the different initiatives. We have three of cost control and definitely margin growth in 2021, as we outlined at Mapthree day planned at three plants sorry.

And our next question is from Bobby Griffin from Raymond James.

Good morning, everybody and thanks for taking my questions I guess, we sort of a marked the first thing I want to talk about was low.

Looking at the range for next year, it's a fairly tight range of 500 to five and a 25 million EBITDA and it was still a lot of uncertainty out there. So can you maybe talk a little bit more about what you see in the business now that really gives you confidence and tightening that range up and at the second part of that where what what could be the driver that would cause that range to underperform.

At sales and margin what what gives you the most concern that.

Hi, Bobby and several of year so.

Definitely there's still a lot of uncertainties and as we look forward, but we feel very confident in our plants. We have clarity on the drivers of gross margin expansion, which is why we are reiterating a gross margin of 35% next year in spite of the recent headwinds that we're seeing.

Freight costs as Mark mentioned, we're being more data driven and managing our promotion and our mix and with that we will offset it it.

It is a tighter range than the white and the one we provided at Investor day, but we said that.

We completed the portfolio work the monetization of non core assets, we would tighten debt and Thats what were coming of.

For to you right now.

On your question of what kind of throws off is not sales. We are proven lease assuming for financial planning purposes that we would have.

Sales comp sales in line with prior year and EPS by with that we will deliver significant EBITDA growth.

Yes, Bobby just I would just at the I think at the plan where pricing is a responsible plan based on changing circumstances of the market any threat or of consent would really be at macro.

Macro market issue, not and intently cost issue and again I think 2000, twentys exemplified how everyone gets affected by those things. So we are monitoring things very carefully by week and by quarter retail at plump and is responsible and achievable I am looking for delivering that.

Okay. Thank you and I guess my second question would be for the December commentary you mentioned that at the enterprise did show some growth for comparable sales within I guess for the entire quarter, you're kind of calling for flattish versus last year are in line of believes the wording can you maybe just talk a little bit about what is going in there or something.

Popped up and the last couple of weeks of given you concerned or is that just a little bit of a function of being conservative given the level of uncertainty that still out there in the world Yeah.

Yes Bang on there.

It's definitely around we've seen positive signs in December and remembering that our fourth quarter is December January February we still have to for months to complete this part sales, there's a lot going online the world and we want to make sure that way of being responsible in at planning and we look for.

Kind of sharing more at the fourth quarter.

Thank you very much best of book.

Once again, if you have a question press Star then one on your Touchtone phone.

And our next question is from Chris Horvers from JP Morgan.

Thanks, Good morning, guys.

So my first question and as a follow up as you think about you know you're talking about things evolving and changing and as you thought about.

Your your 21 plan this at fair to say that.

Cove and changed in terms of the recent surge are you assuming that this sort of last a little longer until we actually get to a vaccine. So what was the change there and also as the other change.

The freight costs mean, presumably as the holiday and the volume surcharges should come down as you get into and more normalized profit of shipping environment here. So.

Is there something structural within that freight that of your day, you're assuming sticks around.

Yeah, I think that if he gets period and to think about and environmental and we saw an acceleration of change of behavior of between.

Our our Q2 and and September October results and that's got November results based on cost of it and based on foot traffic to stores customer is being concerned around what the future held and real uncertainty and the market really began around the election day period. So.

We are being prudent and thinking through with the vaccine roll out it's still at the wide. So very early we want to be of a bunch of that and it impacts we haven't factored anything in terms of stimulus checks and their impact of the business because again thats being so uncertain is on aegis news so just ensuring.

At the level of uncertainty and volatility that that has or could bring as bill conservatively into our plans and that we can balance out any of those headwinds and.

And it's been interesting that there's been a lot of discussion around the home category experiencing its great tailwind from.

The covered by mid August and retail and based pricing credible headwind and confusion and concern from the customer that what type of buy so thats, a really positive that we're delivering positive comps profit EBITDA in the face of that of uncertainty and want to ensure that we've got a balanced by and going into 2012 month.

Got it so I understood and then in terms of the fourth quarter I mean, just relative to history for gross margin rate to be.

No worse in the fourth quarter than it was and and the third quarter, just trying to really understand that Ian mentioned not being at home.

More promotional and December.

It is yes.

You get about our math about 140, bips from the accounting shift between cost of goods and machine and so is shipping surcharge are going to be charge can be much larger than the 80 basis points.

And that you saw in Threeq, you you lap of 180 basis points.

Of markdown pressure and obviously, you know and it seems like at very clean inventory. So just trying to understand that dynamic on a you know sort of year over year and sequential basis and gross margin such that it would be flat and the fourth quarter year over year.

Sure Chris.

It's right on what you said about the shipping cost of part of the reason in the prepared remarks, we talked about 80 basis points impacting Q3 I was just the latter part of the quarter. What we're estimating and Q4 is over 150 basis points impact and we're committed to offsetting that again through disciplined.

For motion management and mix and that's what we will do but the incident on the shipping cost is much larger and Q4 and that's why we're be prudent and up.

Great I just.

And so because I'll just also add if you are looking at Q4 versus Q4.

Last year at the thing you'd be so recognizing that as the conceive of behavior and and the impact of digital touch sake vs store purchasing it is not like for like and it's definitely accelerated.

And thats brought with it.

Natural pressures to margin and mix as we've shared at the were offsetting that and mitigating that to be stable. I think is the real achievement. So these are you know it is our Q for like no other and the consumer behavior that digital EBIT and net for what that meant for margin inclusive of shipping is part of what were balancing and again.

One month into out at three months quarter, but we want to make sure that way of big period.

Understood. Thanks, so much guys.

Our next question is from Peter Benedict from Baird.

Hi, guys. Thanks, and thanks for taking my question first I just curious on the adoption of BOPUS and I know, it's been around six months and.

And you know the curbside, but just I mean, how is that trending relative to your expectations and what kind.

Kind of what are your plans or goals to drive continued adoption of that.

In the months ahead, that's my first question.

Yeah pit of Great question, I think what we've seen we shut and overall statistics for.

Q3 bed unpacking that you see and escalation and of movement into the new muscle remembering we have and introduce this and Mike So.

So what we're saying now is we have and MPS score of 80, where we're able to provide about a two hour assurance on our order fulfillment and store level and that's actually in real terms around 30 minutes customer as a loving it I think in at total industry level, but at this as a muscle on and I knew methods.

Methodology is very accepted by the customer and way of benefiting from that as well we saw our rights in the December period, Esca light week in week out as customers became more concerned around delivery shipping times and really ensuring that they had a joyous holiday period of.

I could secure the present under the tree and so we really went into creating.

Ease and convenience for our customer the day really responded to and we're very grateful for we believe these are contracts now and they muscles and the business that we want to maintain and for US we know that a bunch of us left until by store is almost equivalent to a store by solid to profitability. So the differential helps us and has helped us through Q3.

Okay, and will help us and Q4 in terms of our shipping and profitability cost. So we think it's here to stay at is one of the best sticky outcomes of not just the progression and BOPUS, but how coded as four to five this is and you muscle for most retailers.

Okay. Thanks, Thanks for that Mark and then I guess ship for you guys brought registry a couple of times during your prepared remarks and.

I'm not sure how much you're willing to share quantitatively and on the size of those businesses, but maybe some color at more qualitative comments.

Baby vs wedding at.

And I mean, you talked a little bit about basket size, but just curious kind of how you. How you see those two businesses are not business across the two segments.

As part of your outlook over the next couple of years any opportunities. Thanks, Yeah.

Yes, it's a great point I would actually differentiate between the money and time experienced at some of the credit for experience and the moment in time experience as John outlined by the registry is very strong profit, but he has been more reliant on and in store experience and when we do that we build a bigger basket and it's more sticky and high customer engagement and so.

We've been pivoting to strengthen and digital registry and.

And we'll invest at site, but for US we see complete upside in 2021.

With the return to a more normalized shopping environment in stores and digital into the true Omni, let me turn to bed Bath and beyond the stores even bed. We are consistently in the top of the ranking and and have held market share and most recent data in terms of registries.

Now we haven't had the benefit of that and at 2020 or current numbers because of the Cogs at moment and people are just not having wedding ceremony in 2021, and it's going to be pent up demand and transparent to end to that year.

For weddings to occur and because we are number one in of spices, and well placed with held market share and at the stats of good we feel like that as a runway for growth over the next couple of years is one about solid strength of hasn't existed and at 2020 of current numbers and we're going to be doubling down investing there and further.

Our next question is from Steven Forbes from Guggenheim.

Good morning.

I wanted to focus on the trends within the categories, maybe outside of the top five at you noted in the release of.

So mark just curious how how these categories are performing.

And now it's early but performing and within some of the new concept stores and Remodels and and.

And all of you could just speak to some of the initiatives right that said around addressing the performance here right because although it's.

The lower percentage of sales is still one third here some of the C at how you're thinking about improving and.

No specific categories, and yes, and the shifts that through within them.

Yeah. Thanks, Steven its great question, I think that there's been some natural hedge.

Headwinds there and just based on some of these businesses being more relevant to store based traffic and digital traffic for us and one of them is personal care again.

And we now remodeled stores that we've been testing of personal care business is booming and actually show and huge differential to of control and when we get the traffic we get the tried.

And I think what we saw and in the end of Q3 and.

And and somewhat in Q4 or is it sort of suppression of foot traffic in stores and has a direct correlation and that's a business that Ida.

It's a great basket billed business or is just part of a trip to store. That's just not occurring at this moment at break it hasn't the Pos and it was a couple of key areas to where we have had some some softness I think cleaning is a really good example for us and they're at its normally been strong I think getting supply of product.

And as being an issue it's constrained across the globe.

And and we just haven't been of firing in that space.

But at the same time, we also carried out of smaller categories like food.

To kind of clean up our assortment that we build into that impact. So we're really focused on doubling down and strength categories, you see that coming through and customer consistent through Q3, Q4, and our efforts and strategically in 2021, but we are definitely focusing on a couple of key categories, where we can really right.

Amp up our inventory and our focus and we're already starting to see positive signs of that in January.

Thanks, Mark and then maybe just a quick follow up for you.

Stevo.

Obviously, we know the minimum wage rate increases that are transpiring and sharing.

Potential some pressure right from other retailers announcing.

And the path of 15, so curious how you guys think about that.

That at the pressure point on the business.

And whats incorporated right and the financial guidance as it relates to wage investments for 20 equivalents.

Yeah, we definitely see the emerging trends and the and the evolution. We're looking at change of leadership and how that can impact on that non news on that day other than a way of looking at of Burberry carefully I want to be competitive in the marketplace and we'll be absorbing that into our goal of costs and financial plans going forward.

Thank you and stock.

Our next question is from Carla Casella from JP Morgan.

Hi, I'm could you just give us an update on what how much of your cost savings could you achieved in the quarter.

From your overall goal.

Yes, we're on track with B Bath that the of.

Could we half of $200 million to $250 million going next year, we expect about 125.

At least in the current quarter, we saw savings as you saw in the building blocks for like a 180 basis points from product margin.

And savings, including leverage of distribution costs of 210 basis points.

Okay, and we had kind of towards the cost savings program, Okay, that's great and.

And also.

And thank you for by overall and same store sales and Buybuy baby and harm in any case and details, but I don't think I heard the same store sales number overall.

No we did not provide at hub.

I mean, historically for the third quarter.

No. We Havent will now we've said in the prepared remarks this.

In the third quarter same store sales were down and Buybuy Baby and then recovered in December and the reason where they were down temporarily in the quarter of some of the dynamics of John spoke about.

Just keep in mind.

Store sales of store traffic, particularly buy buy baby slow down significantly in November and he was partly compensated by the strength and digital.

But still got recoveries and sort of happening in December.

Okay, great and if here how much of here if you look at the bed Bath and beyond business alone and how much of that business was done by digital and he talked about digital growth there, but I'm wondering.

And you gave it at for the overall company, but how is that trending in bed bath and beyond versus last year.

We didn't share that the digital growth there is 94% for the quarter call at so exceptionally strong.

I guess I was wondering what percentage of the bids store sales now for growth.

[noise] every month or end of the overall company, Okay third and just about a third of similar.

Yes, I think that the reference point to that color is that we're at 9% and last year, So and that was at a growth and growth of the prior year at 16%. So you can see that exponential growth of remembering that only includes and I've been but portion.

Of a holiday period so.

And our next question is from Mike Lasser from you yes.

Good morning, Thanks, a lot of for taking my question Mark you mentioned several times about.

About the importance of driving in store traffic to the bed Bath model, whether it's through the wedding registry for some of the personal care products and one of the low at the outcomes of this situation is that they're just going to be a higher penetration of E commerce in retail and some of the initiatives.

That you're rolling out like for like pick up and ship to ship.

At the home are going to drive less traffic to your stores. So how are you going to fail and that over the long run and generate some of your sales productivity initiative.

Well, we look for.

Good luck. Thanks to your question at we store when.

When things start to normalize and the middle of the year before the second wife of time through and we saw really great comps and stores and the omni channel benefit of stores and digital really tied together in a per.

Positive why.

You know for us enough for planning that we provided for the three year plan, we've actually shower and with.

We've actually factored in and very high digital right into that so that at financials remained stable, but we see that the the driving to store pace really does come from and omni channel environment. I think there's a number of quite retail like for example, find this at the moment and at trip to the store whether it be for both this old for a true trip buses generate at.

Since all of the so in your community as part of your network and part of your needs lifestyle. So we look forward to a more normalized price. We think at stores will be ready when that come through with new visual merchandising you assortment, you planning and in $150 plus a completely new environment and.

And what we've seen and that is in your environment is that when we provide that.

The differential to at control is very very strong and that we see sales growth. So we are assembled labor and stores, we're investing in stores and and we think that our assortment at presentation and at our our remotes were really help us at in terms of it.

Okay.

Although of question is in the bridge that you provided through.

For your gross margin for 22018 to 2021 and you talk about the the positive drivers of sourcing old brand of better.

Better promotions, and markdowns and coupon of debt by and sales shift from freight book in.

Beyond that there is no real discussion around reinvestment in price.

Other traffic driving initiatives and this is going to be at a time, where arguably I mean, those and debatable that some of the tailwinds at home related category are going to be either reopening environment.

Yeah, I think the reason why that's not in there as of that work has been done them and we're already showing that the indices and the caveat for our key categories that we're showing great every day parity to at key comp set.

We at promotion that we using now at taking hold and actually we're using them more effectively so we're seeing cost savings in the promotion and getting much more effectiveness. We believe that these muscles, which weve displayed and a lot two quarters that of really driven and great gross margin growth how sustainable are inside the mix.

Michael I think that the at the promotional expectation of 2021 I told by the stated I think we see great data that shows that the heim trend will be sticky pot all peoples lives now and their expectation of creating joint company at home and and and we don't believe that there's going to be.

And exceptional ties into our promotional activity, but our financials and at promotional cadence that we have and the balance and we've created this year is ready for that in 2021.

And our last question is from Seth Basham from Wedbush Securities.

Thanks, a lot and good morning, and my first question is just on your EBITDA guidance for 2021 at could you give us some color as to what the impact from the banner sales is specifically cost plus and and.

Christmas tree shops in that forecast.

And so the guidance were providing and 2021 is already on our core banner basis.

Is it only includes bed bath.

Buy buy baby Decorous, and arm and we showed into bridge what would be the pro forma.

And 2019.

Most of those then at the best hitters and Thats, a starting point of $425 million.

Okay, that's healthy end and ongoing basis, yes.

Yes at one of the things that we weren't able to do at the Investor day, and we share with many of you off debt was that we.

We had to include and pull out cost plus world bond at that business.

In terms of the EBITDA projection, but we didn't include in the south projection. So what you're seeing now with that style is that from a range of bank presented.

Based on the true poker platform of 29, saying I can still with that responsible attitude to EBITDA for the full year based on some of the early changes and hop on looking at it but it was the of secondary pivot that we can provide to be even more definitive on the widest at and of course.

Yeah, and and is that I know you know this but it's a tighter range on revenue now when you compare net sales 2021 versus reported sales and Twentytwenty were 29 team is non comparable that's why we want to provide the guidance on a comparable basis and we're going to see some of that dynamic and Q4 already.

Why we've mentioned that Q4 net sales are going to be down double digits. My reported basis between 15% to 20% is simply the impact of the ban and divestitures. It's a significant for information going on it's a totally different shape of the PNM retail.

Next year.

And concepts and sales on stores.

Understood My follow up questions related to the mix of online versus in store sales at you're expecting and 2021. When do you expect that mix of in store sales to increase from 2020 and if so why do you expect so much channel shift headwind is it just because of freight rate.

Increases.

Yes, I mean, we do it I mean, there is a natural pick the best of stores that just will be at.

And again, it's been touched and exceptional.

We think that the digital penetration book.

Continued to be strong.

And we've got great offsets to that including that we're sharing that 36% of of additional losses were actually for steel by store.

Stores in the quarter was just incredible agility, there so we're going to be offsetting some of the costs, we see some price at meeting and 2021, but.

We are factoring into higher digital penetration right.

Thank you very much.

And at all time for questions I will now turn the call back over to Janet Barth for closing remarks.

Thank you and thank you all for participating in our call today, Please feel free to contact me or Felix with any additional questions have a great day sales day.

Thank you, ladies and gentlemen that concludes today's call. Thank you for participating and you may now disconnect.

[music].

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Welcome to the bed Bath and beyond just what 2023rd quarter earnings call. All participants will be analysts and only mode until the Q and a portion of the call. Today's call is being recorded every broadcast of the conference will be available via webcast found on the company's Investor Relations website.

At this time and when I like to turn the conference over to Janet Barth, Vice President of Investor Relations. Please go ahead.

Thank you and good morning, everyone welcome true fiscal 2023rd quarter earnings call.

On the call with US today is president and CEO, Mark tried and Chief Financial Officer, and Treasurer at this double or at all Chief operating officer at present and of Buybuy Baby, John Hartman and.

She's digital officer optimistic and.

Before we begin let me remind you that our fiscal 2023rd quarter earnings release, a slide presentation and be found at the Investor Relations section of our website at www dot bed Bath and beyond Dot com and as an exhibit to the form 8-K, we just filed ahead of this call.

This conference call and the flight from refer to May contain forward looking statements, including statements about or references to our outlook regarding the company's performance or internal models and our long term and jumped at.

All such statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say during the call today.

Please refer to our most recent periodic SEC filings for a more detailed and these risks and uncertainties and putting a risk factor section and 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 contain certain financial measures and exclude them out.

For subject to adjustments that had the effect of excluding about their included at the most directly comparable measures prepared in accordance with generally accepted accounting principles.

For a reconciliation for the most comparable measures presented in accordance with GAAP. Please refer to the table in our earnings press release available on our website and included as an exhibit to our form 8-K filed today.

It is now my pleasure to turn the call over to Mark.

Thank you again at and good morning, and happy new year to you.

It's hard to believe it they see it since my first earnings call at C O that Bob beyond at one exceptional your change and has been.

At that time, I clearly stated at fiscal 2009 pay for the quarter result, well and satisfactory and underscore the parity of could change either.

I declared that we must respond to the challenges we face of the business, including price should sales and profitability and reconstruct a modem durable bubble for long term profitable growth.

To date, we stand at a very different position of the company than we did just and maybe 12 months ago.

Lastly, we continue to execute on at digital first omni always strategy and of delivered a second consecutive quarter of comparable sales and EBITDA growth at three strong margin management.

Secondly, responding to our customers wherever they needed at going out and omni capabilities to accelerate profitable digital growth and grow our customer base.

Thirdly, we continued to strengthen an already strong balance sheet and remain focused on ensuring liquidity optimizing cost and cigna.

Secondly, reducing debt, while driving positive cash flow generation.

And while we drive overall business results. We also completed our non core Ben and monetization plan with the final transactions at the close enough fiscal 2024th quarter. These efforts will help fund, though at transformation and put us in a position to start fiscal 2021 with a more cohesive debt at core businesses.

Oh favorable sales results also starting to be reflected in market share data.

Month by month, we have been minimizing akshay differentials versus the market and encouragingly in the most recent NPD data for October and November we achieved market share gains and the bed category with improving trends and by BAW and kitchen category.

We expect to see continued improvement in market share trend as our strategy continues to take hold.

Additionally, we continue to show strong market share and strength in wedding registry, where we believe we are very well positioned at a markedly that when we get back to your celebrating important lifetime and lots of getting married.

All of this has been achieved this quarter at despite the significant headwinds of kind of at 19.

During our call today, Gustavo Nadal, Chief Financial Officer, and Treasurer overview of the quarter financial results and.

And then for parts and perspective on at book quota and our outlook for fiscal 2021.

And then wrap hemophilia Chief Digital officer will speak about the quarter from a digital first and customer perspective.

And then John Hoffman, Chief operating Officer, and President Buybuy Baby, we'll do the same for our operations, including the progress on our plans to close underperforming stores and invest in our remaining portfolio.

We will then take questions.

Saba.

Thank you Mark and good morning, everyone.

Today I will cover two key topics for.

I will provide perspective on the performance of our third quarter and.

Well of on December sales trends.

And then I will provide visibility on the current fourth quarter as well as and our outlook for fiscal year 2021.

To begin it is important to note that our for its scope first quarter wrong from September October and November.

And consistent with last year, the Saturday of Thanksgiving weekend, what the last day of the period.

We delivered strong results, despite extensive and widely reported cold and related headwinds.

These include and lower foot traffic trends shipping capacity constraints and much higher freight cost.

Further during a challenging holiday period, we strengthened our commercial plans to drive significant digital demand, while remaining focus on delivering gross margin expansion.

Positive comp sales growth was led by our core bed Bath and beyond banner, which was up 5%.

He was skewed by exponential digital growth of 94%.

Which more than offset store decline of 14%.

Growth was healthy and broad based across five key destination category, which grew 11% and represented two thirds of revenue.

Total enterprise comparable sales grew 2% also driven by strong digital comp growth of 77%.

As you'll hear from John and a few minutes.

Oh and related headwinds disproportionately at store sales and our baby business during the quarter, yet encouragingly, we saw a return to growth in December following some key interventions.

The strength of of digital growth has been powered by the investments we have made in omni capabilities, including book its curbside pickup and same day delivery, which are all completely new this year.

Both of these orders represented 16% of total digital sales in the quarter.

These service offerings provide ease and convenience and allow us to further gain trust from our customers.

Moving to be approximately 7 million new online cost numbers game.

Our digital capability are becoming a key driver of results.

Net sales were 2.6 billion and expected reduction of 5% primarily due to the impact from banner of divestitures and the continuation of our bed Bath and beyond store network optimization initiatives.

These have been at holiday season like no other.

I've outlined by third party data sources, including Sensormatic and Adobe analytics market wide Black Friday in store traffic was down by over 50% and online spending was up 22 per se.

Similarly for the six week holiday period market wide, Inc store traffic sales between 34 and 36%.

We performed strongly again this report and trends.

During the competitor anything and by day holiday sales period from Thanksgiving through cyber Monday overall.

Overall comp sales demand for our core U.S. bed Bath and beyond banner was up double digits for as with last year.

And the Liberty digital comp sales growth of approximately 69% low.

More than offsetting store comp sales decline of 24%.

And during the six week holiday sales period from November 16, two December 27 of our total enterprise comp sales grew low single digits led by significant digital growth of more than 90%, which more than offset the store comp sales decline of more than 20%.

I will now continue with of third quarter financial results.

On a GAAP basis, including the non cash losses from ban of divested for held for sale, we reported a net loss per diluted share of 61 cents.

Our GAAP results include approximately $86 million from favorable you were.

Which are excluded from adjusted results to provide better perspective on the underlying performance of our business.

These include especial items, such as well for some of the sales of businesses, including cost plus world market, which is held for sale as well and non cash charges for the payment of certain long lived assets, well restructuring and transformation of expenses.

Adjusted gross margin increased 300, and and basis points to 35.4%.

This expansion was driven by a 180 basis points of favorable strategic engineering of promotion and markdown expense, including data driven coupon optimization.

120 basis points of favorable product mix from higher margin categories, such as Danny and Bath.

And 210 basis points of leverage from distribution of whom and costs.

These benefits were partially offset by a 200 basis points impact from channel mix due to the anticipated larger proportion of total sales from digital channels versus the prior year.

These inc. But also includes around 80 basis points from higher shipping expense associated with industrywide outbound freight rate increases, particularly in the latter part of the quarter.

The significant year over year improvement and our adjusted gross margin reflects the management team's focus on driving the components of margin, while delivering explanation of growth and digital.

At DNA and declined $41 million versus the prior year, driven primarily by lower payroll related expenses, including savings from our comprehensive restructuring actions earlier in the year.

Adjusted EBITDA increased to 168% to $121 million, which is almost three times higher than the prior year period.

This was driven by digital sales growth coupled with gross margin expansion.

Once again these results demonstrate that our efforts to transform the business and build a modern durable business model or.

Working.

Turning now to some cash flow and balance sheet and statements.

We are not $244 million and positive cash flow generation.

Cash flow from investments was $200 million positive I think crude at proceeds from non core asset monetization net of cash.

Operating cash flow of $44 million was also positive in spite of seasonal dynamics.

We continue to carefully manage working capital of this quarter with ending inventories of 1.8 billion online.

On a sequential basis inventories were 13% lower versus the second quarter and 30% lower than last year.

This was primarily due to the impact from banner of divestitures, including seasonal inventory purchases for the holiday selling period.

We are tracking at a faster pace to deliver our previously stated 2021 goal of $1 billion and inventory reduction at retail compared to 2019.

Our capital expenditures in the quarter were only 38 million.

We have plans to significantly ramp up our capex spending starting in fiscal 21 in support of our digital for all me always transformation.

During the third quarter, we also improved for gross debt balance with a reduction in operating lease liabilities of about half a billion dollars from non core banner divestitures and store closures.

Taken together with the half a billion and debt reductions we achieved in the second quarter, we have reduced total gross debt by about $1 billion. So far this year a reduction of about 25%.

We remain in a strong net cash position with an ending cash and investment balance of 1.5 billion. This.

This is in line with the bottom for at the end of the second quarter, even after returning cash to shareholders in the form of accelerated share repurchases.

We have also maintained and strong liquidity of $2.2 billion, including our IPO.

So capitalizing on this strong financial position, we launched a 225 million accelerated share repurchase you later.

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And in December in conjunction with the announcement of a definitive agreement to divest cost plus world market. We reported plans for a second asrs in the amount of $150 million.

These two programs totaling 375 million are expected to be completed on or before the end of our fiscal fourth quarter next month in February and will result in a reduction of our shares outstanding of approximately 15% at current stock price levels.

Our authorized level for share repurchase at this early stage of the planning period is now up to $825 million over the next three years.

These actions reflect our balanced capital allocation principles strong liquidity and pump and anything or strategic growth plan.

In summary, our third quarter performance shows consistent execution of our strategy, which drives sales and EBITDA growth, coupled with strong cash flow generation and the renegotiation of capital return for shareholders.

Now moving onto our outlook.

I will start with some directional color on our expectation for Q4, and then provide perspective from fiscal Twentytwenty one.

It has been widely reported at COVID-19 related headwinds continue to impact the retail industry and.

In this context, we will not be providing specific sales and earnings guidance for the current fourth quarter.

That said, we feel positive about the parts of the business, we can control and expect to the need of a year on year adjusted EBITDA margin improvement in Q for.

This despite lower store traffic and shipping constraints accompanied by higher freight costs.

In terms of the topline comp sales are expected to be approximately in line with last year we.

We expect consistent strength and digital to be tempered by quoted related headwinds impacting stores.

December sales of show positive total enterprise comparable growth, including continued strength across key destination and category.

Importantly, we're planning for a double digit on favorable impact on Q4 total net sales for since last year, Steven the divested banners and the ongoing store optimization initiatives.

In terms of growth margin in spite of the anticipated drag from significant freight cost increases in Q4, we're driving cost optimization actions to manage the impact of lease pressures. So we expect gross margin to be about in line with the same period last year.

Again, we expect to deliver a year on year adjusted EBITDA margin increased in Q4 with absolute EBITDA Tdrs in line with the prior year.

Now I'll turn from fiscal 2021.

Our initial outlook, including fiscal year 2019 at the base year.

At the time.

Our portfolio banner review was still underway.

We had already divested for banners, but we did not half of signed deals for cost plus world market. Yet now we do and we expect this transaction to close imminently.

Today, we're providing additional visibility and the significant reshape of RP and now as a result of lease divestitures and the closure of underperforming stores.

Our significant portfolio transformation will lead to fewer better performing stores and will include a healthier core revenue base with a larger proportion of a faster growing digital business.

We're now tightening our project this fiscal 21 revenue range to approximately eight to 8.2 billion.

Looking at quarters, starting with the first quarter, which will not be on a comp basis, we expect to recapture the lost sales opportunities from the store closures and 2020 due to cold at 19.

During quarters, two through four of which will be on a comp basis, we expect to sustain comparable sales levels in relation to the solid comp sales base of fiscal 2020.

Our sales force for financial planning purposes assumes total enterprise comparable sales to be in line with fiscal 2012.

We are reiterating our expectation for adjusted gross margin of approximately 35%.

Which represents a more than 200 basis point improvement versus pro forma at 29.

We are enhancing adjusted fiscal year 2021, EBITDA to a range of between $500 million to $525 million.

This represents a 20% increase from the pro forma 2019, EBITDA openings of 425 million.

The drivers of the adjusted EBITDA range are consistent with the ones. We have previously shared including cost savings from planned store closures product sourcing and restructuring actions and the impact from Reinvestments and channel shift and shipping costs.

And as I said earlier, we have assumed comp sales to be in line versus fiscal 2020 for modeling purposes at were not requiring sales growth to deliver the higher EBITDA range.

But needless to say, we will strive for continued top line growth in a highly competitive environment.

Our performance to date gives us confidence in our longer term goal of achieving between 850 and $1 billion and adjusted EBITDA by fiscal 2023.

Importantly, our portfolio transformation, coupled with store closures is driving significant balance sheet improvement to gross debt reduction of $1 billion.

This would result in of gross debt to EBITDA ratio below 3.5 times.

Which puts us well on our way to our mid term goal of below three times.

We have for strategic and disciplined pathway for driving sales and margin growth.

Generating cash and invest in your business plan to drive shareholder value creation.

And he is working.

I will now turn the call over to Rafi missing.

Chief Digital Officer Rafi.

Thank you Dave Styblo.

With coal bed as a headwind to our store traffic, we have stepped up our strategy as an omni always retailer and it is paying off.

During the third quarter, we delivered digital growth of 77%.

Our third consecutive quarter of growth in excess of 75% this year.

Our bed Bath and beyond batter or low post and digital comp sales of 94% almost doubling last years sales.

With this momentum and based on current trends, we are on track to exceed our digital sales goal of $3 billion by the end of fiscal 2020.

We have laid out of transformation plan to unlock the potential of our omni always growth strategy by elevating customer experience.

Building out our omni capabilities and evolving to a digital first culture.

The goal of this initiative is to meet customers wherever they are.

I'm pleased to report that the company is now of incredibly equipped to do that.

The benefits are coming through not only and digital sales growth, but also in customer metrics.

During the quarter, we gained 2.2 million new online customers of which the bed Bath batter alone added 1.8 million.

Year to date, we have gained approximately 7 million new online customers.

And not only are we attracting new customers, we're seeing them return at a higher rate than ever before.

End of third quarter, 21% of our bed Bath and beyond customers placed more than one online order compared to about 16% versus last year.

So what's driving the sticky customer experience for online customers.

We book a true here of for US is buy online pickup and store.

Since introducing BOPUS and contact less curbside pickup services earlier. This year, we have seen at a rapid rate of adoption by our customers.

And the third quarter, approximately 1.2 million customers place to book this quarter right.

Representing 16% of our total digital revenue.

In the back up and beyond batter BOPUS orders represented 15% of total digital sales and 17% of total digital orders.

And at 60% of our focus orders are we're ready within 30 minutes.

Surpassing our two hour promise.

This fast and convenient experience has earned bed bath and beyond and net promoter score of 80 per cent for our bulk of services up from 49% in May when we first introduced the service.

Our stores are now at competitive advantage of our omni strategy.

Fulfilling a total of 36% of all digital sales and the third quarter.

This muscle was not in place last year.

And now we're connecting our stores with our online platform and the power of army is enabling us to better serve our customers. However, they choose to shop.

We know omni channel at the future of retail and we're making the right investments that are resonating with our customers.

The fast paced transformation of our debt offering and elevated customer experience has resulted in at 25% lift in our online conversion rate for the third quarter EPS compared to the period prior year.

Key drivers of the increase include for.

First the relaunch of our mobile site and mobile App.

We've implemented a new framework of and optimize experience that drove a 33% increase and conversion and mobile sales growth of 107 per cent versus the prior year period.

During the five day holiday shopping period from Thanksgiving to cyber Monday, our mobile home page load of 74% faster than the same period last year.

We also relaunched bed bath and beyond and Buybuy baby and mobile apps, resulting in over 800000 downloads this quarter.

Our bed Bath and beyond mobile App was launched over 15 million times during this quarter and revenue more than doubled versus last year.

We have also seen the rate of App and installed continue to improve further underscoring the speaking of of our customer experience.

Second in order to ensure that we were firing on all cylinders going into the holiday season, We launched same day delivery and bed Bath and beyond dotcom and Buybuy baby dotcom to provide our customers another convenient and cost effective way to shop.

This service was introduced in Q3 results are for preliminary but we have seen hundreds of thousands of our customers take advantage of this new convenient way to shop.

We also began to offer same day delivery service through the launch of bed, Bath, and beyond and Buybuy baby stores and shipped and Instacart.

With both marketplaces, each reaching more than 80% of the U.S. household.

Harmon face values was recently added for the Instacart marketplace and we are pleased with the initial launch and continued positive response from customers on this platform.

Third we implemented over 100 improvements to make our shopping experience for convenient and easier to use including a faster checkout process and new payment type options.

This includes buy now pay later options like after pay and Paypal and for as well as extending Apple pay from store or lease to our mobile EPS.

During the quarter, we also focused on optimizing our experiences and speed to place orders on our site, making it even easier convenient and faster for our customers to shop with us.

Again each of these initiatives were geared for customers with the goal of meeting them, where they are creating multiple options for payment and delivery.

As we look at our digital program and Holistically is a true revolution from where we were a year ago and has become part of the fabric of how we operate at bed Bath and beyond.

The customer environment is rapidly changing.

And we are there to greet them at every turn through.

Sure and enhanced services speed and focus on engagement arc of customer reception continues to improve.

Our army always strategy is working and was a key driver of our third quarter sales performance.

Our strength and digital has more than compensated for the headwinds of the pandemic and has fast track our transformation as we moved into the important holiday season, this year and set us up for success moving forward.

We have delivered and elevator customer experience.

Okay, and meaningful capabilities, and Pip and digital from a laggard topic to a strategic asset and at profitable growth engine that has delivered another strong quarter of growth.

With that I will turn the call over to John Hartmann, Our Chief operating officer, and President of Buybuy Baby.

John Thank.

Thank you Rafi we.

We made exceptional progress across our operations from the third quarter, specifically as it relates to our supply chain Reformation, optimizing our real estate portfolio and advancing our technology roadmap.

Modernizing our business remains a key focus and we are evolving our store formats, our distribution and fulfillment capabilities alongside leveraging our unique data and insights to meet the changing needs of our customers and deliver and exceptional shopping experience.

I'll start with supply chain.

While we remain focused on mid to long term capability building, we made very substantial pivot from the third quarter.

As Rafi mentioned, our stores for Phil 36% of total digital sales in the third quarter.

Well last year, we didnt have BOPUS curbside pickup for same day delivery and our offerings.

Not only do these new capabilities provide ease and convenience to our customers. They also help us to partially alleviate current shipping from strength and additional cost pressures in the supply chain.

During the quarter. We also added a secondary national carrier and several regional parcel delivery carriers, which helped to offset and over 20% of cost increase from our primary carrier for that.

And importantly, we continue to focus intently on the health and safety of our associates working at our fulfillment centers by instituting daily cobot cleaning and procedures and our facility.

Concurrently, we launched and evaluation of a number of potential third party logistics providers, who will partner with us to establish new regional distribution centers and the managed and efficient flow of domestic distribution.

We anticipate that using third party logistics operators will also provide increased financial flexibility and reduced capital expense.

This is the cornerstone of the transformation of our supply chain network and will increase our capacity for fast store replenishment, while continuing to leverage of store network for omni fulfillment.

By making the replenishment process more efficient our store teams will have a more predictable and faster flow of the product we sell most.

And in turn this will allow us to meet the increased demand for bulk of curbside and the same day delivery services, while also reducing the time our store teams spend managing deliveries. So they can spend more time with our customers.

Also for to our transformation of this technology.

And we are taking a disciplined approach to our investments and building a technology infrastructure that will enable us to personalize the service for our customers.

Improve our ability to predict and meet demand.

And make it easier to collaborate across teams and drive down inefficiencies in our business.

Over the next three years, we plan to invest approximately $250 million to modernize the application of technology landscape to a cloud empowered foundation.

Last quarter, we talked about our expanded multiyear partnership with Google and deployed to enhance our omnichannel shopping experience.

At quarter, we defined our plans for a new ERP system.

We will also be pursuing a product of lifecycle management solution in support of our own brand initiative and of inventory management capability to improve inventory productivity.

These plans will all start from 2021, and our foundational part of building out our technology infrastructure.

And other activity, we are making significant progress towards the targets. We have previously highlighted regarding our real estate portfolio, including our store network optimization and store remodel plan.

Let me start with our network optimization program, which is designed to not only ensure our stores remain of strategic asset for us, but also to ensure that we have them and the right locations to deliver more sustainable sales growth improved margins and greater cash generation.

As part of this work, we are well underway and the process of closing approximately 200, underperforming and bed Bath and beyond stores by the end of fiscal 2021.

Initially we identified about one third of the stores to be closed by the end of the fiscal year.

We have some accelerated the pace of target of store closings. This year from 70 to about 120 stores with certain of stores closing earlier than planned due to having efficiently sold down store inventory during the closing of process.

In the third quarter, we closed for bed Bath and beyond stores and in December we closed another 75, and we are currently liquidating an additional 42 stores.

We are very pleased with our progress to date and completing the store closure program during fiscal 2021 remains a priority.

Turning to our bed Bath and beyond store remodel program, we of advanced from the initial prototype phase to after integration within 10 stores at our Houston markets.

These proof of concept stores highlight our destination of categories bed Bath kitchen and storage.

We expect to complete the phase of the remodel program by the end of February 2021.

Additionally, we will take all of the visual signage and enhancement and immediately apply them to the entire fleet of stores on the same timeline.

Next we will take our learnings from Houston and moving to our first expanded wave of renovations and 2021, which includes approximately 150 stores.

In total our store remodel plan involves $250 million of investment over the next three years and touches over 450 stores, representing roughly 60% of our revenue.

In addition, we will utilize strategic sourcing methods to procure and necessary remodel components at a lower cost and leverage economies of scale with this overall initiative.

Instead of the legacy store by store one off approach of the past.

We have established and unified planning process to identify prioritize and sequencing all aspects of the remodel.

These store Remodels and our network optimization plans are crucial steps and building an omni always organization that serves our digital first customer with an intuitive and modern shopping experience.

We look forward to reporting our progress along the way.

Before closing, let me provide some perspective on the quarterly performance of Buybuy Baby, which represented approximately 10% of total enterprise reported sales in the third quarter.

This included strong growth in digital of approximately 40%, which represented more than half of the sales in the quarter.

It remains a challenging environment for our new or soon to be parents, who are particularly vulnerable to the perceived challenges associated with in store shopping due to cold at 19.

As a result, we saw a disproportion at level of store traffic declines from our baby customers. This quarter then across our other banners.

These cold and related headwinds have also had a short term impact on the registry component of our business.

Which is highly correlated to end store activity.

While we have seen overall growth and the registry debt.

Total registry is created on why and currently tend to carry a lower average value of the lowest created from the store.

Enhancements to the digital registry experience are addressing this opportunity to assist our customers and building a more well rounded baby wish list.

Colgate headwinds have also constrained inventory levels and certain of our key categories, such as furniture and year as a result of disruption from the global supply chain.

We have made key pivot here, including share improved forecast with our vendor partners well into 2021.

So as consumer behavior shifted we pivoted and lean into digital to create and enhanced online experience with a more convenient suite of checkout option, including after pay.

Pay and for and Apple pay we.

We also upgraded and rewards for our Buybuy baby App in November strengthening of the choices, we offer our customers who connect with us digitally.

Year to date, we have gained nearly 2 million U.S., our online customers an increase of 46% over last year, including more than a half a million new online customers in the third quarter.

And all nearly two thirds of our baby customers only shop online this quarter.

As young parents take safety into consideration this year, our new omni capabilities allowed us to meet them, where they are with BOPUS curbside and same day delivery service.

Digital orders for filled by our baby stores represented a significant portion of total orders for the quarter with BOPUS orders, representing approximately half of all store fulfilled orders.

One of the holiday period of traditionally not a big baby season, except for gift, giving for needs of families and getting ready for for just having had a baby. We did see strong digital demand comp growth of 49% year over year. During the five day holiday period from Thanksgiving to cyber Monday.

This growth was driven by top performing baby categories, including toys.

Okay room furniture, and apparel these positive sales and category trends accelerated from December.

We believe in this business and we are now ready to double down on and significantly and invest in expanding sales and margin and growing our market share.

We plan to accelerate our growth and baby over the next several years, including introducing owned brands and.

Up in the toddler and younger children as well as expanding of the categories like toys and educational as well of furniture.

Enhancing our registry and leading with new partnerships.

We will also invest to scale our footprint nationwide with about 50, new stores over the next three years.

Fiscal 2021 will mark the true beginning of a transformation of this banner as we execute our three year plan and unlock the value of this brand for.

Earlier this week, we announced the appointment of Patti were as senior Vice President and General manager for Buybuy Baby Paddy.

Patty exceptional experience will help accelerate our plans and drive meaningful change we.

We were for the sharing our progress and future conference calls.

Mark I'll turn it back over to you now for closing remarks.

Thank you John.

Our strong performance this quarter across several key performance metrics, including positive comp sales growth.

Gross margin expansion.

Positive cash flow generation and gross debt reduction is evidence of that transformation, taking hold even despite significant headwinds of a go up of pandemic.

Yes, what I still beyond the numbers was even more impressive.

Our team is planning modifying and executing and and aligned at this but why like never before that.

I have a learning and improving and real time at the customer and conditions changed showing true agility and motion.

These newly acquired muscles extended from product to price through messaging and digital expression to sales floor and distribution center.

And truly grateful to all of our associates rallied around this course of action to demonstrate that strength and opportunities as the new bed Bath and beyond team.

And what has been an exceptional year of change so far we still continue to make bold pivots to reconstruct renovate and the store our company.

Simply put we of delivering on what we said we would do.

Simple we've put a team in place that would have the right talent and expertise to execute and new vision and inject new ideas and that we will create the right organizational structure to facilitate and will streamline decision, making and we've done that.

We said, we would lean into the digital space and make it easier and more convenient for our customer to shop with us and we are doing that.

We said, we have reset our cost structure modernize for growth and refine our organization and we've done that and continue to focus on gross margin improvement.

We said, we had a clear mandate to reestablish our authority at the profit Omni channel I'm destination and that we would use customer inspired and market insights to develop at new customer value proposition and way of doing that.

We said, we would evaluate our asset base and how best to optimize its value for the business on a go forward basis, and we have done that.

And finally, we said ambition is to ensure the bed bath and beyond is well positioned to long term success.

And way of doing just that.

I'm proud of what our teams of achieved not thank them for their continued dedication and commitment to the long term success of our company.

Our results this quarter set up from base from which we will continue to drive up all transformation and seek to deliver on our free a strategic and financial goals shares at at 2020 Investor Day.

We have many ball and exciting plans for fiscal 2021, such as launching you and brands that will help differentiate us and not pay destination and category.

Re modeling approximately 150 stores under at store network optimization program.

Introducing new and unique digital services designed to enhance our omni always experience.

Modernizing at technology and operations and reinventing at supply chain for the future.

Investing to fair the strength and out buy buy baby and Hamann banner.

And continuing to unlock and deliver shareholder value.

In a year like no other we're embracing and driving transformative change, thank curious and bold and so much more.

I'm proud of the commitment at team to Shine and what we have achieved together.

With that we will now take your questions.

You will now begin the question and answer session share of a question. Please.

Our stores and one on your Touchtone phone if you wish for your move from the queue. Please press the pound sign or the hash key.

There will be the labor for the first question is announced if using a speakerphone you may need to pick of the handset first for for pressing on numbers at once.

Once again, if you of question Press Star then one on your Touchtone phone.

And our first question is from current Nagle from Bank of America.

Hi, good morning, Thanks, very much for taking my questions.

Yes for the first one is well understood how very constrained shipping and.

Credit was an issue for holiday margins, but how long it took us from.

Crusher carries and 21 and it sounds like at least for the whole year, you don't tickets and issues since you're still targeting a two.

20, I'm sorry 30.

35% gross margins and 21, and then shut the hall of after that.

Hi, Good morning, Thanks look I, we we know that the price pressure across retail is here to stay and we built that into our future plans. So we see that at margin stability and the offset for we've created currently and the proof of concept of does of about Q2 of Q3 at this year.

Really stands and good state to deliver that 35% margin. So we feel really comfortable around that.

Okay and.

Maybe just I guess for your March.

Maybe it gives us a quick update on some of the big Merchandizing initiatives, you guys and outlined in October and analyst day, such as lower sourcing and other costs and then starting to rollout improved at.

For merchandise or more exclusive product and how much of an impact at all.

Great and 20 water or how to think about the cadence of those things and to go.

21.

Yeah, I mean, the good news and we've already built upside of foundation and with these results at the actions and trends we at here in terms of margin, but across the board at really substantial and sustainable and then we're going to add into those the rolling benefits as you outline for us so the sourcing benefits that we've undertaken throughout 2020 are really going to be.

Evident in first quarter onwards, 2021, and then we'd begin in March with the rollout of our of brands and began sharing.

And closed end the pagination of that flow throughout the day several brands will be launched but the key news is that in the first half of 2021, we'll be at dressing the majority of how big of key categories. We are already seeing strength and growth and reinvesting those with and brands and also the introduction of opening price.

Point items and at range, they at which has paid huge missing a part of our equation in terms of being true competitive in the marketplace to build their authorities. So the step changes that the consistent management of promotions.

Mix management now we've got to lie in the incremental benefits of sourcing and high end brands. So we're excited about that progression in 2021.

Our next question is from some income from Morgan Stanley.

Good morning. Thanks for taking my question can you talk about where your expectations for a couple of months ago for the fourth quarter and sales and now and I know the outlook for next year in bed flattish.

Did that change now that you're going to be lapping something that may be potentially weaker this years fourth quarter.

Yeah, I think so I mean again, we had robust plans for Q4 of this year, we feel good about how we're executing on those but there's no doubt that the cause of headwinds and the impact of that of head on foot traffic and June overall consumer confidence and something that weve had to factor into our plan and why.

You talked about the agility of that same is true Q3, and now Q4 GAAP to respond to those challenges at and so we think we've met all of those in in.

You know what has been the type of on time, and we really look for to lapping those next year and a very different why.

Okay. Thanks for that and then my follow up.

Can you talk about Q4 at you mentioned, the freight headwinds and but offset by some optimization on I think the gross margin and in terms of promotion and pricing can you talk about the promotional environment.

And then you know thinking about.

How much margin opportunity there still is I think for next year's guidance.

And to revision that is it looks like it's more of a function of the margin changing as opposed to the top line just to confirm.

Yeah, I think that you know we would stress that we did not become more promotional during the quarter in Q3 or in Q4 was actually reshaped and ranjan need at promotional activity, we had opportunity to do so, but thats really paying dividends in terms of generating gross margin.

And helping to credit that balance and exceeding equation on the on the margin differentials problem.

Looking at price.

So we are less promotional wed more focused of Reg price.

We are winning customer and we see that progressing forward and ask for Savo had outlined and we're not putting pressure on the.

The working and sales plan to generate at EBITDA. We believe that we can do that through a number of different initiatives. We have three of cost control and definitely margin growth in 2021, as we outlined at Vathree day planned at three play and sorry.

And our next question is from Bobby Griffin from Raymond James.

Good morning, everybody and thanks for taking my questions I guess, just kind of a mark the first thing I want to talk about was low.

Looking at the range for next year at a fairly tight range of 505 and at 25 million EBITDA No. It's still a lot of uncertainty out there. So can you maybe talk a little bit more about what you see and the business now that really gives you confidence and tightening that range up and at the second part of that.

Share what what could be the driver that would cause that range to underperform as at sales and margin and what what gives you the most concerned that.

Hi, Bobby and several of you. So definitely there is still a lot of uncertainties and as we look forward, but we feel very confident in our plan. We have clarity on the drivers of gross margin expansion, which is why we are reiterating a gross margin of 35%.

Next year in spite of the recent headwinds that we're seeing and freight costs as Mark mentioned, we're being more data driving and managing our promotions and our mix and with that we will offset at.

It is a tighter range than the white and the one we provided at Investor day, but we said that.

We completed the portfolio work the monetization of non core assets, we would tighten debt and that's what we're coming off of.

For to you right now.

On your question of what kind of throws off is not sales. We are prudently assume for financial planning purposes that we would have.

Sales comp sales in line with prior year and each bite with that we will deliver significant EBITDA growth.

Yeah, Bobby just I would just at the I think at the plan where pricing is irresponsible plan based on changing circumstances and the market any threat or a consent would really be at macro.

Macro market issue non and intently cost issue and again I think 2000, twentys exemplified how everyone gets affected by those things. So we are monitoring things very carefully by wake and by quarter retail at plans responsible and achievable and were looking for delivering that.

Right. Thank you and I guess my second question would be for the December commentary you mentioned that at the enterprise did show some growth for comparable sales within I guess for the entire quarter, you're kind of calling for flattish versus last year are in line and believes the wording can you maybe just talk a little bit about what is going in there or something.

Popped up and the last couple of weeks at given your concern or is that just a little bit of a function.

Function of being conservative given the level of uncertainty that still out there and the world Yes.

Yes Bang on there.

It's definitely around we've seen positive signs in December and remembering that outflow of quarter is December January February we still have two for months to complete this process, there's a lot going on and the world and we want to make sure that way of being responsible in at planning and we look for.

Kind of sharing more and the fourth quarter.

Thank you very much best of luck.

Once again, if you have a question for Star then one on your Touchtone phone.

And our next question is from Chris Horvers from JP Morgan.

Thanks, Good morning, guys.

So my first question of as a follow up as you think about you know you're talking about things evolving and changing and as you thought about at your.

And your 21 plan this at fair to say that.

Co of it changed in terms of the recent surge are you assuming that this sort of last a little longer until we actually get to a vaccine. So what was the change there and also as the other change.

Of freight costs mean, presumably as the holiday the volume surcharges should come down as you get into and more normalized profit of shipping environment. Here. So is there something structural within that freight that of your day, you're assuming sticks around.

Yeah, I think that air tickets per it and to think about at environment, and we saw an acceleration and change in behavior of between.

You know at our out Q2, and and September October results and that was out of November results based on cost of it and based on foot traffic to stores.

Customer is being concerned around what the future held at real uncertainty and the mockup really began around the election day period. So we are being prudent and thinking through with the vaccine roll out it's still at the wipes over at all you want to be of a bunch of that and it impacts we haven't factored anything in terms.

Of stimulus checks and their impact of the business because again thats being so uncertain is Amit just new news, so just ensuring that the level of uncertainty and volatility that that has or could bring as bill conservatively into our plans and that we can balance out any of those headwinds I think it's been interest.

Moving that there's been a lot of discussion around the home category experiencing these great tailwinds from.

The covered by them and all of us and retail and based pricing and credible headwinds at and confusion and concern from the customer that what type of price. So that's a really positive that we're delivering positive comps profit EBITDA in the price of that and certainly and want to ensure that we've got a balance play and going into 2021.

Got it and so I understood and then in terms of the fourth quarter I mean just for.

Relative to history for gross margin rate to be in.

Worse in the fourth quarter than it was and and the third quarter just trying to really understand that you just mentioned not being.

More promotional and December.

It is yeah you.

You get about our math about 140, bips from the accounting shift between cost of goods and machine and so is this shipping surcharge are going to be charge can be much larger than the 80 basis points.

And that you saw in Threeq, you you lap of 180 basis points.

Of markdown pressure and obviously, you know and it seems like at very clean inventory. So just trying to understand that dynamic on a you know sort of year over year and sequential basis and gross margin such that it would be flat and the fourth quarter.

Sure.

Sure Chris.

Right on what you said about the shipping cost of part of the reason in the prepared remarks, we talked about 80 basis points impacting Q3 that was just the latter part of the quarter. What we're estimating and Q4 is over 150 basis points, Inc. Back and we're committed to offsetting that again through disciplined.

For motion management and mix and that's what we will do but the incident on the shipping cost it's much larger and Q4 and that's why we'll be prudent and up.

Great I just had.

God circuits and just also add if you're looking at Q for business useful.

Last year.

The thing you've used for recognizing that as to conceive of behavior and and the impact of digital touch sake vs store purchasing it is not like for like and it's definitely accelerated at.

And thats brought with it.

Natural pressures to margin and mix as we've shared at that we're offsetting that and mitigating that to be stable. I think is the real achievement. So these are you know it is up Q for like no other and the consumer behavior that digital EBIT and net for what that meant for margin inclusive of shipping is part of what we're balancing and again.

One month into out at three months quarter, but we want to make sure that way of big prudently.

Understood. Thanks, so much guys.

And our next question is from Peter Benedict from Baird.

Hi, guys. Thanks, and thanks for taking the question first I just curious on on the adoption of BOPUS and I know, it's been around six months and.

And you know the curbside, but I mean, how is that trending relative to your expectations and and what I'm kind.

Kind of what are your plans or goals to drive continued adoption of that and in the months ahead. That's my first question.

Yeah pit and Great question, I think what we've seen we shut and overall statistics.

Q3, but I'm packing that you see and escalation and a movement into the new muscle remembering we have and introduce this and Mike So.

So what we're saying now is we have and MPS score of 80.

We're able to provide at about a two hour assurance on our order fulfillment at store level and that's actually in real terms around 30 minutes customer as a loving it I think in at total industry level, but at this as a muscle and and I knew method.

Methodology is very accepted by the customer and way of benefiting from that as well we saw outright.

In the December period, Esca light week in week out as customers became more concerned around delivery shipping times and really ensuring that they had a joyous holiday period that back at secure the president of the tray and so we really went into creating.

Ease and convenience for our customer the day really responded to and we're very grateful for we believe these are Cogs and has now and their muscles and the business that we want to maintain and for US we know that I've been at this elliptical by stores almost equivalent to a store by solid to profitability side of the differential helps us and has helped us through Q3.

Free AD will help us and Q4 in terms of up of shipping and profitability cost. So we think it's here to stay at is one of the sticky outcomes of not just the progression in both at this but how close it as four to five this is and you might flow from us for each islands.

Okay. Thanks, Thanks for that Mark and then I guess shift for you guys brought registry a couple of times during your prepared remarks and.

I'm not sure how much you're willing to share quantitatively on the size of those businesses, but maybe some color more qualitative comments.

Baby vs wedding, and I mean, you talked a little bit about basket size, but just curious kind of how you how you see those two businesses or that business across the two segments.

As part of your outlook over the next couple of years and the opportunities. Thanks, Yeah.

Yeah, It's a great point I would actually differentiate between the money and time experienced at some of the credit for the experience and the moment in time experience as John outlined Baby registry is very strong price, but it has been more reliant on and in store experience and when we do that we build a bigger basket. It's.

Sticky and and high customer engagement and so we've been pivoting to strength and add digital registry and.

And we'll invest at side of that but for US we see complete upside in 2021.

With.

The return to a more normalized shopping environment in stores and digital in terms of true Omni, let me turn to bed Bath and beyond the stories, even bed, we are consistently and.

The top of the ranking and and have held market share and most recent data in terms of registries.

Now we haven't had the benefit of that in at 2020 or current numbers because of the Cogs at moment and people and just not having wedding ceremony in 2021, and there's going be pent up demand and transparent into that year.

For weddings to occur at because we are number one and spices and well placed with held market share and at the stats of good we feel like that as a runway for growth as of the.

Next couple of years is one about salt strength of hasn't existed and at 2020 of current numbers and we're going to be doubling down investing there at all about.

Our next question is from Steven Forbes from Guggenheim.

Good morning, So I wanted to focus on the trends within the categories maybe outside of the top five that you noted in the release.

So mark just curious how how these categories are performing.

And now it's early but at performing and within some of the new concept stores and Remodels and.

And if you could just speak to some of the initiatives right that's at or around addressing of performance here.

And although it's.

At the lower percentage of sales is still one third here some of the see at how you're thinking about improving.

Yeah, no specific categories, and yeah, and Mr sector and within them.

Yeah. Thanks, Steven its great question, I think that there's been some natural hedge.

Headwinds and just based on some of these businesses being low relevant to store based traffic and digital traffic for us and of one of them is personal care again.

And we you now remodeled stores that we've been testing of personal care business is booming and actually show and huge differential to control and when we get the traffic we get the tried and true.

I think what we saw in the end of Q3.

And and somewhat in Q4 is it sort of suppression of foot traffic and stores and has a direct correlation and that's a business that either.

It's a great basket billed business or is just part of a trip to store. That's just not occurring at this moment at break it hasn't the Pos and it was a couple of key areas to where we have had solid and some softness I think cleaning is a really good example for us and they're at its normally been strong I think getting supply of part of.

And as being an issue it's constrained across the globe.

And and we just havent been of firing in that space, but at this.

Second time, we also cleaned out of small and categories like food.

To kind of clean up our assortment that we build into that impact. So we're really.