Welcome to Bed Bath & Beyond's Fiscal 2020 First Quarter Earnings Conference Call. My name is Hilda, and I will be your operator for today. Operator instructions: Please note that this conference is being recorded. I will now turn the call over to Ms. Janet Barth. Ms. Barth, you may begin.

Thank you, and good afternoon, everyone. Welcome to our fiscal 2020 first quarter earnings call. We are still working remotely and connecting with you today from different locations. Please bear with us if you experience any minor delays during today's call. On the call with me today is President and CEO, Mark Tritton; Chief Financial Officer and Treasurer, Gustavo Arnal; Chief Operating Officer and President of buybuy BABY, John Hartmann; and Chief Merchandising Officer and President of Harmon Stores, Joe Hartsig. Before we begin with our opening remarks, let me remind you that our fiscal 2020 first quarter earnings release and slide presentation can be found in the Investor Relations section of our website at www.bedbathandbeyond.com and as exhibits to the Form 8-K we filed just ahead of this call. This conference call and the slides we refer to may contain forward-looking statements, including statements about or references to our outlook regarding the company's performance, our 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 on these risks and uncertainties, including the Risk Factors section in our Annual Report on Form 10-K. The company undertakes no obligation to update or revise any forward-looking statements. Additionally, the information we will discuss today contains certain financial measures that exclude amounts or are subject to adjustments that have the effect of excluding amounts that are included in the most directly comparable measure 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 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, Janet. Good afternoon everyone. As Janet said, we're speaking with you tonight from a remote location. I'd like to welcome you all to our call. I'm happy to be here and excited for you to hear from some of our new leadership team, as Janet described. Our presentation agenda for today includes an update on the strategic focus of the business, including our near-term actions in response to the COVID-19 pandemic, and our approach to store re-openings. Next, Gustavo will review our first quarter financial results. Then John will give us an update on the strategic focus of our operations and Joe will do the same from a commercial perspective. We will then take questions. The first half of 2020 has been extraordinary by any measure. No one could have anticipated the scale of the impact from this pandemic on the global economy and our own North American business, let alone the massive amount of decisions we would have to make to keep our people, customers, and communities safe. I'm very proud of how our teams came together to assess the risks, understand the consequences, and take decisive action. These decisions have not been easy, and we are aware of their consequences, especially for those of our associates impacted by the furlough. But I believe our responses are the right ones for the short-, medium- and long-term health of our people and our business. Throughout the quarter, we remained hyper-focused on ensuring liquidity and optimizing costs, including actions to improve cash flow generation. We swiftly implemented various actions to maintain our financial flexibility, including tight control on operating expenses, managing our inventory, postponing some capital investments and suspending our capital allocation plans for share repurchase, debt reduction and quarterly dividends. We succeeded in controlling our monthly cash burn and ended the quarter in a strong cash and investment position of $1.2 billion. Last month, after the quarter close, we further strengthened our liquidity with a new three-year $850 million asset-based revolving credit facility. We are confident about our financial position and our ability to manage through these uncertain times. While we have been managing through this difficult environment, we have not lost focus on our strategic imperative to rebuild our authority in the home space. We continue to make strong progress and even accelerated several elements of our transformation agenda. Importantly, we onboarded five new senior leaders during the quarter, which was no small feat: Gustavo Arnal, Chief Financial Officer and Treasurer; John Hartmann, Chief Operating Officer and President of buybuy BABY; Rafeh Masood, Chief Digital Officer; Arlene Hong, Chief Legal Officer and Corporate Secretary; and Cindy Davis, our new Chief Brand Officer and President of Decorist. These five joined Joe Hartsig, our Chief Merchandising Officer and President of Harmon Stores, who joined in March; and Gregg Melnick, Chief Stores Officer, who was appointed to his new role in May and previously served as our Interim Chief Digital Officer. I spent many months supported by the Board, meeting candidates who have the right skills, experience and character to take our business to the next level. Our diverse team of highly experienced retail experts is complete. I'm delighted to finally have them all on board to accelerate the pace of transformation. Now from the outset of the COVID-19 crisis, we've prioritized the health and safety of our team, customers and communities. We closed the vast majority of our retail banner stores on March 23 across the U.S. and Canada, excluding most buybuy BABY and Harmon Face Values stores. As a result, nearly 90% of our locations remained closed during the majority of the quarter, leading to a 49% decline in net sales. This was a critical moment, and we needed to act quickly. It was an important opportunity for us to pivot to a new model and support changing customer preferences and our omni-always approach. Now with the vast majority of our stores closed, we realigned our network and converted 25% of our total store fleet into regional fulfillment centers, nearly doubling our fulfillment capacity to handle the dramatic shift in demand to our own digital channels and unlock store inventory. Building on our fulfillment capability, we accelerated the pre-planned rollout of our Buy-Online-Pick-Up-In-Store or BOPIS and Curbside Pickup services offered in April, which is one of the key highlights of the quarter, especially for our buybuy BABY banner. As John will discuss in a few minutes, this was a game changer for us as it allowed us to restart operations and serve customers at locations that were still closed to the public. By the time we ended the quarter in late May, we were offering BOPIS and Curbside Pickup at nearly 60% of our store locations. These new capabilities powered digital sales growth of more than 100% during the months of April and May. Net sales from our digital channels grew 82% in the first quarter and therefore represented nearly two-thirds of total net sales. Digital growth was also favorably impacted by pivoting our merchandising and marketing plans and how we engage with our customers, including more frequent updates through our website to stay current and relevant. Joe will talk more about this in a few minutes, but a key highlight for us was the strong growth we saw in new customer acquisition through our digital channels. Nearly 40% of our online orders were placed by customers who were new to ordering online with us and over 10% of them were also completely new to Bed Bath & Beyond. In late May, we began taking measured steps to reopen stores to the public, including the launch of our store safety plan to help ensure customers can shop in our stores confidently. During the past month, the pace of store re-openings has accelerated in line with changing local and state regulations, market data, and the wider retail landscape. Our strong financial flexibility allowed us to implement a market-by-market approach, while we invest in rebuilding our business and introducing new services for our customers. I want to thank our dedicated team for helping us resume operations safely and welcoming back our loyal customers. We are proud of our teams and how quickly they adapted and took decisive actions to keep our people safe and deliver for our customers. As of today, nearly all our stores have reopened to the public and we continue to prioritize the health and safety of our associates and customers. We're seeing good results across our reopened stores and it's clear from the feedback we're hearing that customers are delighted to be able to again shop in our stores and are taking advantage of the new BOPIS and Curbside services. At the same time, we continue to see gradual recovery in weekly sales trends across our digital channels and growth, consistently more than 80% during the month of June. It is still early in the reopening process and the virus and its impact are still unpredictable, but we're encouraged by our customer support and response so far. This COVID moment has provided many learnings that we are capitalizing on, as we continue to track against our strategic objectives. As previously stated, we have grounded our strategic framework in five key pillars: product, price, place, promise, and people. You'll hear more about the product, price, and place pillars today from John and Joe. With these five pillars as our guide, we've embraced a commitment to reconstruct and modernize our operating model to drive greater efficiency and effectiveness, charting a new course for our company. To start, we redefined our purpose to make it easy to feel at home. This is a defining role of our business, a North Star that guides all our actions. To achieve this purpose, our mission is to reestablish our authority and be the preferred home destination driven by teams consistently delivering balanced, durable growth. We believe this mission is more relevant today than ever when home is everything and being safe at home with family is essential. Bed Bath & Beyond takes on an even more important role, supporting customers and their families by making it easy to feel at home. In addition to the pillar strategies, we're also focused on investing and improving core proficiencies, the plumbing of the house that is essential to rebuilding the foundations of our business. This COVID moment also represents an opportunity for us to drive strong actions as part of our ongoing restructuring program. We have accelerated the further alignment of our cost structure with our near-term performance related to the pandemic. These include, among other things, our efforts to reduce cost of goods and drive supply chain transformation to address current gross margin pressures related to the substantial shift to sell from stores to digital channels. Furthermore, we plan to close approximately 200 mostly Bed Bath & Beyond stores over the next two years under our store network optimization project and focus on other SG&A expense reductions. We believe the aggregate benefit from these actions will generate future annualized savings of between $250 million and $350 million, excluding related one-time costs. We're also making additional investments in our digital transformation to accelerate and drive growth. As we previously outlined, we are committed to an ongoing review of our non-core business concepts. As of now, we have not factored any future proceeds from potential asset sales, including the sale of personalizationmall.com, into our internal financial model. We plan to share the details around these actions and other short-term and longer-term goals and objectives during an Investor Day event expected to be held mid to late October of this year. Due to the uncertainty surrounding the pandemic, we don't know if we will host the meeting in person or virtually, but our Investor Relations team will share more detailed information later this summer. I will now turn the call over to Gustavo to review our first quarter results in detail. Gustavo?

Thank you, Mark, and good afternoon, everyone. I look forward to continuing interactions with our analysts and investor community over the weeks and months to come. I've been on the job around two months now, which in pandemic time feels more like two years. I have been delighted to join Bed Bath & Beyond's team and look forward to helping strengthen a sustainable business model for our company. We have an iconic brand, so I was attracted by the challenge and the opportunity of transforming the company to restore relevance in the minds and homes of customers. Since I joined in May, our team has been intensively focused on ensuring liquidity and driving cost interventions as we manage our operations during the COVID crisis. This was achieved as we pivoted the company to a predominantly digital business, while the majority of our stores were temporarily closed. Let me provide some highlights on our fiscal first quarter. First, it's important to note that our quarter spans the three most critical months to-date of the COVID-19 pandemic: March, April, and May. In response to this situation, our company acted quickly, prioritizing interventions to maintain liquidity and took actions to control cash burn. Keep in mind that by the time we announced the temporary closure of stores on March 23, we had already paid some monthly expenses such as payroll, rent and other operational costs. So cash management strategies were in effect in conjunction with the store closure announcement in late March. Specifically, we furloughed the majority of our store associates and a portion of corporate associates. We started renegotiating with our vendors for extended payment terms and savings related to goods, services, and rent. We proactively managed inventory and canceled purchase orders. And we immediately reduced discretionary spending in areas such as business travel, advertising, and expenses associated with the maintenance of stores, as well as deferred approximately $150 million in planned capital expenditures. As a result, we successfully lowered our monthly cash burn and recorded a strong cash and investment balance of $1.2 billion by end May. And in June, we bolstered our liquidity with a new $850 million asset-based lending facility, which provides substantial additional liquidity if needed. Our net sales were impacted by having the vast majority of our stores closed during most of the quarter. We operated mainly as a digital business during these months. With this, our gross margin was impacted by channel and product mix, resulting from the substantial shift of sales toward digital channels. Let's now look at our monthly cash burn. We entered the quarter in a very strong cash position, coming off a year-end balance of $1.4 billion in cash and investments. In March, we elected to draw down the available $236 million from our unsecured revolving credit facility, which enhanced our cash position. As I said earlier, we had significant cash outflow during the first month. As we moved into April, we implemented cash management strategies and carefully managed our inflows and outflows to reduce our cash burn. As we moved into May, we were cash neutral, leaving us with a quarter-end balance of $1.2 billion in cash and investments. If we consider the available liquidity under the new ABL facility that we entered into after the quarter closed, we have a total liquidity of more than $1.8 billion in available funds. This is great insurance and provides further financial flexibility as we implement our store reopening plans and focus on driving important actions under the company's strategic transformation plan. Now I'll turn to the operational results of the quarter. On a GAAP basis, we reported a net loss per diluted share of $2.44 compared to a net loss per diluted share of $2.91 in the prior year period. Our reported net loss includes an unfavorable impact of approximately $0.48 per diluted share for special items mostly related to non-cash impairments of certain store level assets and trade names. On a non-GAAP basis, our first quarter net loss per diluted share was $1.96. Consistent with our prior disclosures, the remainder of our quarterly results will be on a non-GAAP basis to better represent year-on-year performance of the business. Net sales in the quarter were $1.3 billion, a decrease of 49% from the first quarter of last year, primarily due to the temporary store closures. On a directional basis, net sales from our digital channels increased by approximately 82%, while net sales from our stores declined about 77%. We experienced strong digital growth each month of the quarter, starting in March, with net sales from our digital channels up 17% as compared to March 2019. Then during April and May, we experienced explosive growth across our digital channels with net sales up more than 100% each month compared to these same two months in 2019. These strong results were supported by the rollout and subsequent expansion of our BOPIS and Curbside Pickup service offers, not only for Bed Bath & Beyond, but also across our buybuy BABY, Harmon and Cost Plus World Market stores. In June, after quarter-end, we initiated our phased approach to store reopening as Mark discussed earlier. As of today, nearly all of our stores are open and while it is still early days, we're pleased with the customer response. For the month of June, overall net sales decreased only 7%. During this same period, net sales from our digital channels remained strong, with year-over-year growth in excess of 80%, while net sales from stores declined approximately 25%, reflecting the gradual reopening during the course of the month. Moving to gross margin; our gross margin was 26.7% of net sales as compared to 34.5% last year. The 780 basis point decline was primarily due to the unfavorable impact on channel and product mix in connection with a substantial shift in sales to digital channels. For some context, net sales from our digital channels represented nearly two-thirds of our total quarterly sales, compared to penetration of nearly one-fifth in the prior year period. The incremental direct-to-customer shipping expense represented the bulk of the channel mix impact. In addition, higher sales of lower margin COVID essential items contributed to pressure in product mix. Moving to SG&A, adjusted SG&A expense for the quarter declined 15% or $123 million compared to the prior year. This decline reflects the impact from actions taken in response to COVID-19, including the associated furlough, lower discretionary spending and benefits from the CARES Act credit and cost reduction interventions that were initiated at the end of fiscal 2019, such as the corporate restructuring program. As a percentage of net sales, first quarter SG&A significantly increased to 55.3% from 32.9% of net sales in the prior year period, due to the impact of fixed costs on a net sales pace that was about half of the prior year. A few additional balance sheet items: retail inventories were $2.2 billion at cost, a modest increase versus year-end, as we took actions early in the quarter to cancel or reduce product purchase orders. Moving to CapEx, our capital expenditures were $42 million, with approximately 55% of the expense related to technology projects, including inventory and warehouse management capabilities, such as advanced allocation logic and replenishment strategies to meet the changing customer needs during this period. In regard to our capital allocation strategies, as a reminder, we have suspended our share repurchase and our quarterly dividend programs as part of our COVID response. The company remains committed to a capital return program over the mid-to-long-term and we'll reevaluate when appropriate. Due to the continued uncertainty related to the impact of the COVID-19 pandemic, we're not providing financial guidance for 2020. The situation is still evolving and remains volatile. We are continuing to monitor the situation closely in relation to our associates, customers, business partners, and supply chain. Given the strength of our balance sheet, we believe we're well positioned to manage through these uncertain times. Before closing, I want to reiterate some of what Mark stated earlier. First, we continue to have a strong focus on liquidity management, and will continue to drive actions to improve cash flow generation. Second, we're pursuing deliberate actions as part of our ongoing restructuring program to reduce cost of goods and drive supply chain transformation. This will help address gross margin pressures related to the substantial shift of sales to digital channels. And as part of our store network optimization project, we plan to close approximately 200 stores over the next two years, representing about 21% of our total Bed Bath & Beyond stores, and we'll continue to focus on other SG&A expense reductions. We believe the aggregate benefits from these actions will generate future annualized savings of between $250 million and $350 million, excluding related one-time costs. Third, we are making further investments in our digital transformation to accelerate and drive growth. I will now turn the call over to John, for an update on our transformation progress within our operations.

Thank you, Gustavo, and good afternoon, everyone. I'm happy to participate in my first earnings call with Bed Bath & Beyond. I joined the company a little less than two months ago, and like my colleagues, I have come up to speed rather quickly under these most unusual of circumstances. Mark's vision for the future was the major attraction for me to join Bed Bath & Beyond, and I'm excited to be part of the broader team that will together transform this great brand. Today, I'll be speaking about three topics. First, a few comments about how our operations pivoted in the face of the COVID pandemic and store closures and powered the growth of our digital channels. Second, I will provide a few more details about our Store Network Optimization Project that was mentioned earlier. And third, an update on the end-to-end redesign of our global supply chain. As the COVID pandemic took hold in late March and enforced the temporary closure of the majority of our stores, we rapidly evolved our operations to meet the changing needs of customers. As our stores closed, people across the country and beyond needed us more than ever to deliver essential products to their homes. To support the increased demand across our digital channels, we rapidly converted about 25% of our stores across the U.S. and Canada into regional fulfillment centers, which almost doubled our digital fulfillment capacity during the quarter. This allowed us to leverage the vast inventory resources within our stores to assign web orders locally and deliver quickly, and enabled us to ship online orders in two days or less, on average, or make orders available for pickup in less than two hours. Thanks to the extraordinary efforts of our teams, we accelerated the launch of BOPIS and contactless Curbside Pickup services in mid-April, starting with buybuy BABY and Harmon Stores that remained open and expanding to Bed Bath & Beyond and Cost Plus World Market stores that had remained closed to the public. By the end of the quarter, these offerings had expanded to nearly 60% of our total stores. Customer response has been increasingly favorable, which shows how important the strategic investment in BOPIS and Curbside Pickup is to our business and to our customers. As our stores reopen, we are expanding the services to these locations, and we'll continue to optimize our omni-fulfillment capabilities. In this COVID moment, we believe we can take this opportunity to not just simply close stores, but to pivot and reshape and truly optimize our store footprint. We continue to believe that our physical store channel is an asset for us as we transform into a digital-first company, especially with our new omni-fulfillment capabilities in BOPIS and Curbside. As our initial work gets under way, we are building off the Network Optimization Project that was completed by the company last year. Our approach includes a much deeper analysis of both individual store and market data. Recent geo-analytical modeling shows that our Bed Bath & Beyond banner has lagged the market in store and digital sales growth. More specifically, we believe that the current physical footprint of our stores only addresses about 80% to 85% of the market opportunity, and does not fully align to the local market sales demand. Our immediate goal is to right-size our store network in such a way that reduces redundant stores and supports a digital-first platform, with the appropriate number of stores in the right locations, to serve customer demand and accelerate growth. We will both lean into store closures and leverage a significant number of lease expirations, coming due over the next several years, to restructure our Bed Bath & Beyond store portfolio while in parallel, look at our other retail banners, drive cost productivity and accelerate improvements designed to help stabilize the business and deliver long-term profitable results. As previously said, we plan to move forward with about 200 store closures across the country over the next two years. While we expect the closures to unfavorably impact our top line there is significant EBITDA upside. As we restructure the real-estate portfolio, we will drive cost productivity and continuous improvement efforts to enable investments in operational capabilities to sustain business results. In the future, we will also test new store format economics and locations, with a goal to strategically grow market share, profitably. Next I'll provide an update on our end-to-end redesign of our global supply chain or E2E for short, which is a multi-year initiative, intended to deliver a new supply chain and technology infrastructure to enhance fulfillment, drive cost savings, improve the customer experience and support the acceleration of omni-channel enhancements. The redesign roadmap touches all aspects of our business, including our product assortment, vendors, fulfillment centers and stores all-in support of our customers' experience and cost efficiency. The program is expected to reduce our working capital requirements, significantly expand our direct sourcing and importing capabilities and further optimize our network routing. The redesign will facilitate growth in owned brands, improvements in lead-time for store ordering and support enhanced omni-channel capabilities to drive digital growth. As part of the program, we plan to realign our network of pool points that replenish our store inventory, which will optimize our in-stock numbers and reduce store inventory requirements. We also plan to drastically reduce, by the millions, the number of annual vendor purchase orders we create, which our vendors will love. It will also drive greater efficiencies within our accounts payable area and we plan to further optimize our fulfillment network routing, to increase one-day deliveries from our DCs and store locations. Overall, the E2E redesign is targeted to deliver significant savings over the next three years, a reduction in inventory and faster lead times. Through this initiative, we expect to deliver significant future cost savings, while driving greater efficiencies across the supply chain. Technology will support the bulk of the redesign work. And our teams are creating a more modern technology stack and efficient operating model to serve the company's transformation efforts. We are currently planning for the migration of our data and computing to the cloud, which will expedite and enhance our technology capabilities. We look forward to sharing more on this, and the progress of all of these operational initiatives in the future. I will close with a brief update on the performance of our buybuy BABY banner during the quarter. On a directional basis, our U.S. and Canadian buybuy BABY business made up approximately 20% of our company's total net sales in the first quarter, compared to about 10% last year. We remain very pleased with the business and how our teams excelled in creating a positive customer experience, and providing the essential items they need to care for their families. Early on, buybuy BABY was deemed an essential retailer and roughly 97% of our U.S. stores remained open during the pandemic. The spirit our people have shown to fight for our customers and our company has been tremendous, ensuring we were in stock on the most essential items like diapers, wipes, formula, and baby food goes to the heart of our commitment to our customers. A key highlight of our performance was when our baby stores led the company's pilot and standup of BOPIS and Curbside Pickup, boosting online sales of toddler food, safety equipment, playroom items and sleepwear. Even with stores open, buybuy BABY's digital business grew almost as exponentially as the total company's digital sales in the quarter. In response to the rapidly changing customer demands, buybuy BABY quickly shifted its marketing approach to support growing online demand through increased digital marketing and adjusted content to reflect customer needs. For example, we enhanced our baby registry program to support expecting parents during these challenging times, including a new phone consultation service enabling customers to ask questions to an expert baby registry advisor. We also launched Design Squad, an innovative one-stop shop for nursery design services and inspiration in partnership with our sister brand Decorist. With a mission to provide parents everything they need to confidently prepare for their baby, we are reminded during these difficult times how important our role in their journey can and should be. I will now turn the call over to Joe.

Thank you, John, and hello, everyone. It certainly has been an exciting time to join Bed Bath & Beyond. Since arriving in March, I've learned so much in really a short amount of time. And I have to say, I'm incredibly encouraged by how quickly our teams have responded in meeting the needs of our customers during this challenging time. The opportunity to make it easy for our customers to feel at home has never been greater. Today, let me start with some highlights of the quarter from a commercial perspective, and then I'll provide an update on our transformation progress within the merchandising area. As the impact of temporary store closures became apparent in March, we became incredibly agile and pivoted our merchandising and marketing approach starting with expense control. We quickly canceled product purchase orders and modified future purchases to reduce merchandising inventories further and manage costs. We converted stores into regional fulfillment centers and redirected product from closed stores to these fulfillment stores, as well as to our web warehouses to support increased digital demand. And we partnered with vendors to increase supply of and expedite high demand products as customer needs were changing, as well as to optimize working capital. We also adjusted our marketing plans by minimizing or canceling print programs, brand campaigns and events that were focused on driving in-store only traffic. We adapted our marketing communications to better engage our customers online and stay relevant. Turning our attention to our digital business, we shifted our collective efforts to capitalize on the strong online demand as customers sheltered in place. We created daily working teams, focused on inventory flow and built new reporting to keep top items in stock. We increased our digital marketing spend to drive traffic to our websites, including increased investments in search, paid social, and affiliate marketing to reach new customers online. We also refreshed our website with a more modern look, feel and voice aligned to customer insights, as well as with our new branding. Finally, we incorporated key learnings of our customer behavior through detailed site metrics from partners like Pinterest to optimize merchandising and messaging. During the first quarter, we had greater than 200 million visits across our digital properties, which is more than a 35% increase over the prior year period. We also had in excess of 500,000 downloads of our Bed Bath & Beyond mobile app across Apple and Google Play stores, which contributed to strong revenue demand from our mobile channel, which is up 134% compared to last year. And as Mark mentioned earlier, new customer acquisition through our digital channels, was also strong with nearly 40% of our online orders placed by customers new to ordering online, including over 10% that were completely new to Bed Bath & Beyond. Third-party data show that overall Bed Bath & Beyond saw stronger online engagement rates than our peers during the quarter, including higher conversion derived from first-time purchasers. These are important insights for us to leverage, as we further analyze our customer behavior trends to develop more advanced engagement tactics. These efforts in digital marketing, merchandising and agile fulfillment, along with the rollout and expansion of BOPIS and Curbside Pickup services helped support explosive growth across our digital channels in the first quarter. As John described earlier, customer adoption of our BOPIS and Curbside pickup service is extremely exciting and our online customer ratings for these omni-channel services are high. We have created a great new opportunity to make it even easier for our customers to shop with us in new and safe ways. We have already enhanced this service with a new mobile app experience launched last month that allows customers to place BOPIS orders, check in in the store and receive Curbside orders from their cars, all from their phone. In addition, Bed Bath & Beyond stores are now offering Apple Pay to simplify the transaction process. From a product perspective, we saw product category trends in our own online business during the first quarter that were similar to broader market trends. For Bed Bath & Beyond, Kitchen and Food Prep was the top performing category online across each of the three months, including sales of kitchen electrics, which grew more than 117% as customers prepared more food at home. Sales of water filtration systems spiked in March and April, coinciding with the broader market trends of stockpiling on the essentials. Cleaning and Home Care was another strong product category throughout the first quarter with online sales of vacuums up 129% significantly outperforming compared to last year. The Baby and Toddler categories performed well online throughout the quarter, peaking in April due to strong overall demand for baby essentials and our acceleration of BOPIS and Curbside Pickup. In May, as customer behavior turned more inward to providing comfort and enjoyment in the home, we saw strength in our bedding category beginning to grow, driven by basic sheets, pillows and comforters. As we commenced store re-openings in late May and early June, we have seen the excitement in our customers looking to shop our total store across the board again. Kitchen electrics like mixers continue to surge in sales of 75% as customers enjoyed cooking for their families who are gathered at home. We're also seeing a surge in outdoor living categories as customers invest in their home spaces and migrate from the inside to the outside of the house in the summer months. At a time when our homes have become the center of our lives, we're very excited about the work that we're doing on the merchandising team in support of our new customer-driven purpose; make it easy to feel at home. We have developed a robust plan on the strategic framework of our five key pillars; product, price, place, promise, and people to rebuild our merchandising authority in the home space, stabilize the business and optimize for growth. Simply put, product is at the heart of what we do. Our goal is to create a differentiated and curated assortment that appeals to a broader array of customers from Gen Z to Boomers, inspiring them to shop with us and making it easy to find what they need. Some of our initiatives underway include curating a new customer-driven assortment, starting in key Bed Bath & Kitchen categories, including which products we should carry, which products we should add, and which we should eliminate; developing and expanding our own brand portfolio to enhance our differentiation in the market. Next year in fiscal 2021, we plan to launch a number of exciting owned brands across multiple categories and aim to create preference through our quality brands and products. Negotiating improved cost and terms from our suppliers so we can increase our competitiveness in the marketplace; ensuring higher levels of in-stocks and inventory turns, while placing the right amount of product in the right stores, through improvements in forecasting and centralized inventory replenishment logic; and establishing a vision for a new and improved omni-always customer experience both in stores and on our digital sites. Additionally, price is a key driver of our ability to gain customer share and frequency, as well as long-term loyalty. The goal of this pillar is for Bed Bath & Beyond to be known as a specialty for less retailer by offering clear and compelling value. Key areas of focus include ensuring we have a competitive everyday pricing by leveraging our new dynamic online pricing engine and testing localized pricing for margin opportunity, building new end-to-end promotional tools and processes, as well as optimizing our promotional spending and therefore profitability. Re-curating our assortment to ensure we have the right price points and true value representation to better compete with mass market retailers and evolving and modernizing our loyalty programs to better engage and retain more of our valuable customers. Lastly, we have launched an integrated planning process for our stores and our digital platform that will tie the product and price pillars together, with place and promise, creating a consistent and compelling omni-channel experience for our customers in-line with our strategic intent. We're excited about this new way to create a stronger merchandising and marketing plan, and look forward to sharing our progress for review. So while we're busy transforming for the future, we remain very focused on our store reopening plans and capitalizing on the momentum we have in our digital business. As an example, we have overhauled and elevated our back-to-college program this year, which brings to life greater ease and affordability. With four value-oriented and affordable options combined with the ease and convenience of our signature college registry, and Pack & Hold services, we can help make often stressful college transition experiences that much easier. Overall, we're very encouraged about the progress we made to rebuild our authority within the home space with our customers. While we are in the early stages of this transformational work in Merchandising, we are confident that our initiatives, such as refining and elevating our assortment through our customer-centric lens, strengthening and better communicating value and modernizing our online store experiences for the new omni-channel approach are the right strategies. Our teams are embracing this change and leaning into the new strategic direction with excitement. I'll now turn the call back over to Mark.

Thanks, Joe. In the last few months, despite the crisis, we've continued to accelerate and make strong progress into our strategy, delivering significant growth in digital while our stores remained closed. We have a strong new management team with extensive retail transformation expertise. And you heard from three of them tonight. We have maintained a strong liquidity position, including recent initiatives around cash preservation and the new ABL facility, and believe we can continue to manage for these uncertain times. Our multi-year transformation is underway with cost interventions and investments in capabilities to reestablish our authority in the home space. We expect to deliver future annualized savings between $250 million and $350 million. And our strategic growth agenda is customer-inspired, omni-always and designed to deliver future market share and margin growth. At a time when our homes have become the center of our lives, Bed Bath & Beyond is rapidly evolving to meet the everyday needs of our customers and making it easy to feel at home. We are now ready to take your questions.

Thank you. We have a question from Seth Sigman from Credit Suisse.

Hey, guys, thanks for taking the question. Welcome everybody. My first question is just on the improvement that you talked about in June. You do seem pleased with the trends that you're seeing. I think you mentioned that stores were still down 25%, but obviously that was impacted by some of those stores being closed throughout that period. I think the math would imply that stores that were reopened could be positive. Are you able to confirm that, give us any more color on some of the in-store trends and behavior that you're seeing as you reopen?

Yeah, thanks, Sigman. The 25% reflects a week-by-week change in the doors that were actually open, but what we are seeing is that about 50% of our open doors are comping last year or having slight improvements. So, we've been really pleasantly surprised by the early response we've seen. Now, there is in that the pent-up demand piece, there could be the checks from the government that are affecting the outcomes. But overall, we're seeing good patronage, good traffic, and the trends stabilize. And what's nice against that as those sales climb inside the stores, we're still seeing strength in our digital channel that is not changing. So a nice mix there. And also a transfer to a greater merchandise mix, rather than staying in that early COVID period of essentials. So some positive indicators that we're going to continue to track. We're seeing that throughout June and into July.

Okay. That's helpful. Just to confirm, you said 50% of the stores that are opened are positive, just clarify that data point?

Yeah, 50% of the stores that are open are approximately flat or have an increase versus last year. This is exceeding our expectations as we went into the ambiguous opening moment with some conservative plans, so we're pleased with what we're seeing.

Got you. Okay. My follow-up question is just on the longer term outlook; it's really early for the team there, but can you give us a sense of at least the timeline, how are you thinking about the margin progression here? And I'm wondering as everybody's gotten up to speed on the business, is there a view that you do need to invest more upfront here to drive change or do you feel like through some of the savings that you've identified, you can effectively offset that to deliver margin expansion? How should we be thinking about that?

Good question, Seth. I think that we are looking to offset some of the costs and we built some of it into our CapEx expectations, but we'll continue to review going forward. The large chunk of it is really responding to already pre-planned transformation around supply chain to focus on our omni-always channel. We're in flight with that and will continue on that pathway. So the first part of your question again was?

I think the operator cut me off. Can you hear me?

Yeah, I can hear you now. Thanks.

The question was really around margin progression. I know you're not going to give us an exact target at this point, but is it a hockey stick with the investments upfront or should we start thinking about some stabilization in the back half? Just any color on how to think about that progression?

We'll talk more at the October Investor Day. I'm just going to let Gustavo add some color there.

Yeah, hi Seth. Thank you for your question and nice talking to you. Just two comments: one is, as Mark said, when we get together in October for Investor Day we will lay out a progression of margin improvement year-in, year-out. And the other thing is, I think we should think of Q1 as hopefully the worst quarter in terms of margin and from here we will improve.

Our next question comes from Seth Basham from Wedbush.

Thanks a lot, and good afternoon. Welcome to everybody. My question is following on Seth Sigman's question. Thinking about the cash flow dynamics here, if your store sales trends and your online sales trends were to persist through the balance of the year, what would your cash flow look like for the full year?

Hi Seth, Gustavo here. Look, we're not—as we said in the prepared remarks, we're not going to provide guidance on the year, but I can tell you that we feel very confident on our ability to generate cash flow. We obviously had a significant cash burn during the first quarter, which we managed as I explained month in and month out. In the months to come, we should not be seeing that trend. And I could say preliminarily in the month of June, we've not closed the books yet, but our cash balance will be ahead of the close of May.

That's helpful color thank you. And then secondly, if you could provide some more color around the fulfillment changes that you're planning going forward. Will you continue to fulfill online orders out of stores and how do you think you might approach that over the medium term?

John, over to you.

Thanks, Mark. Seth, thanks for your question. So, it's very interesting to see the breakdown of our fulfillment in the first quarter with BOPIS representing 5% of our fulfillment total, our regional fulfillments—the stores that we ramped up—representing 30%, and 41% coming out of our warehouses, with the balance 24% coming directly from our vendor partners. So we've learned a lot in this quarter around our digital response to the customer's demand in the context of COVID and these lessons we will be applying in the months ahead. So, more to come on our end-to-end supply chain transformation and we'll have further detail for you at our Investor Conference in the fall.

Fair enough. Thank you very much and good luck.

The next question comes from Jonathan Matuszewski from Jefferies.

Hey guys, good evening. Thanks for all the color so far. I had a question on just the new customers you've seen during the past quarter. You indicated 10% of those were placing orders for the first time, brand new to Bed Bath. We'd love to hear just a little bit more about the profile of that new customer that you welcomed predominantly in the digital channel? And if you could parse out any differences in the profile of that customer versus your core Bed Bath customer in a pre-COVID sense? Thanks.

Yeah, so that customer is younger in profile and still has strong spending power. We're seeing them across buybuy BABY and Bed Bath & Beyond in the same way. But overall, Jonathan, what we're seeing is that the spending patterns of the digital customer in total—whether they are a prior store customer or entirely new—are driving strong baskets. Our conversion rates are very, very strong and we're really forging a new deep relationship with them. So we're going to come into the post-COVID period as a very refreshed company with BOPIS and curbside intact, but a whole new set of customers and a new way of working in an omnichannel way. So it's an exciting time for us.

That's helpful. And then just a follow-up question actually on that is, how are you guys thinking about customer retention going forward and how is your plan for converting these newly acquired customers into longer-term lifetime loyalists? What are you going to be doing differently going forward versus maybe retention marketing that you've done in the past and what's the opportunity there?

I think there has been an immediate change in the way that customers have been receiving messages and are more open to direct engagement. So, we've blended targeting between existing customers and new customers with more personalized messages and more targeted offers. On a more macro scale Jonathan, Cindy Davis, our Chief Brand Officer, is embarking on a full review of loyalty and we look to address a number of these issues and we'll be sharing more of that as we meet with you at the Investor Day in October.

Great, thanks so much.

Our next question comes from Curt Nagle from Bank of America.

Great, good evening. Thanks very much for taking the question. So, I guess just start off, it sounds like the comp exit rates at the end of June, July are quite strong as most of the store base is open, generated positive cash flow in June, if I heard correctly, and we are going to be lapping a bunch of headwinds in the back half of the year and maybe even starting to trim some decent number of unproductive stores. So in theory, do you think it's possible that you could grow core Bed Bath EBITDA for the remainder of the year?

Hi Curt. We're not going to give any forward-looking statement on EBITDA as you know. But what we do think is your math is somewhat right; we are keenly putting together some very strong headwinds to be out with tailwinds to support us for an increase in profitability. Q1 is such a strange anomaly, but the building blocks of that transformation as well as the acceleration we're seeing with new customers, digital, and the return to stores is going to provide a nice outcome for us. We won't give predictions or deliverables today.

Okay, fair enough. And then maybe just, if possible, could you clarify a little bit more, at least directionally the composition of the $250 million to $350 million in savings in terms of how much of that is SG&A? Is some of that gross margin? What is the timeline? How to think about reinvestments? And any early color in terms of some of the bigger gross margin initiatives like sourcing and private label and how that stands for the back half of the year and into next year?

Again as we outlined—we will take that last bit first. The owned brand piece will materialize from Q1 onwards and will add value to our overall gross margin mix. We have been very active in a number of buckets and we are giving an aggregate number which is substantial on an annualized basis. We have negotiated substantial savings in our COGS lines, we are refashioning our assortment to lean into our brands which will have a supplementary benefit to margin. We are transforming our IT and general infrastructure costs with meaningful savings. We are going to look at the store rationalization program, which will add dollars to the EBITDA line. And we were fortunate enough to embark on a strong $85 million cost reduction plan earlier this year which was fortuitous ahead of COVID. All these things collectively will represent the $250 to $350 million and we will provide more detail at the October Investor Day.

All right. Okay, that's terrific. Thanks very much.

Our next question comes from Christopher Horvers from JPMorgan.

Thanks. Good evening. So my first question is there are some disclosures in the Q about some reclassification of some costs, I believe out of cost of sales and into SG&A. Can you talk about that? And then with the disclosure that you gave, is that inclusive of the change or did you restate last year? It seems like it probably helps you by about 400 basis points year-over-year.

Hi Chris, Gustavo here. First these did not have any impact on the total company P&L or EBITDA. It's only, as you know, per GAAP rules, we need to record some of our fulfillment and distribution costs into cost of goods sold. With the explosion that we saw in digital growth in Q1, we took the opportunity to revisit some of the assumptions and with that, we updated that allocation. The impact was about 300 basis points in Q1; it's a little bit bigger than it would be on a going basis given the depressed level of sales in the quarter. We wanted to be transparent on that and that's why we disclosed it in the quarter. We do not think that the reality of this warrants any restatement of prior periods, because again it was simply refining the assumptions as we are pivoting our business model into a digital first model. I hope that helps. We can follow up separately if needed.

Okay. And then in terms of the 200 closures, how many of those do you envision being the core Bed Bath versus the other banners? And prior to COVID, can you talk about how many of those were four-wall negative on an EBITDA basis?

Christopher, John here. Thanks for your question. Approximately the 200 stores that we've referred to in our prepared remarks are primarily Bed Bath & Beyond stores, but I don't have any further detail for you on this call today about the four-wall performance of those stores.

Understood. Best of luck, guys.

Our next question comes from Kate McShane from Goldman Sachs.

Hi, good afternoon. Thanks for taking my question. With regards to the canceled purchases, I wondered if that had any negative implications with regards to what you were carrying for the back half of the year. And related to that, with regards to just inventory before COVID, you had plans to reduce inventory; can you talk about how you're thinking about inventory through the end of the year? And could you still see inventory come in below 2019 levels?

Hi Kate. This is Joe. I'll take that. Thanks for your question; it's a good one. I think as you know we've been on a multi-year journey to reduce inventory and increase turns. And Gustavo made some comments about inventory position at the end of Q1. So we feel very good about that and our agility to reduce receipts. As we think about restarting our stores, we've been able to turn our supply chain back on and we are being very mindful of balancing the outlook for the COVID situation at hand and yet being opportunistic in terms of where we want to be investing in areas of growth. So we're doing a lot of work on inventory management, in terms of centralizing inventory planning, we're using new tools and processes to manage efficiencies for inventory. We will be more purposeful in terms of where we put products, as I mentioned. And we're doing things around category line reviews to optimize our assortment and make sure we're efficient where we have SKU investment. So doing a lot of good work on inventory. It's our intention to continue on the goals that we outlined before and I think we're well on our way doing that.

Thank you.

Our next question comes from Bobby Griffin from Raymond James.

Good afternoon, everybody. I first wanted to just talk a little bit more at a high level. Mark, when you think about the store closures that you've announced or targeted, and you look back at some of the closures you've done in the past, have you seen any notable change in your e-commerce sales in those markets? Over the years I've heard companies talk a little bit about weakness in some markets on e-commerce once they close a store. Just curious how that's worked for Bed Bath & Beyond.

I can't comment in detail about prior closures. I think what we've done is a market-by-market analysis, then a micro level of store overlap, digital fulfillment, and understanding what that looks like for the upcoming years. We feel confident that in the closures that we are projecting, we are going to absorb and retain a level of the prior revenue naturally through stores in a 15- to 20-mile radius and as well through the digital channel. I think it's a new game coming out of the COVID moment and the customers' reliance and strength with digital. And so I think that provides us even greater access to engage the customer and provide them with supplementary services. We don't have a lot of closure background with digital performing as it is now. So I think we're really looking at a new game plan.

Okay. And I guess lastly for me, based on some of the June commentaries about cash flow and assuming some of the margin pressure continued because of e-commerce, that would imply that you're coming back on with a much lower SG&A structure, is that true? And how are you bringing SG&A back on and what are you allocating to in terms of employees or any other type of cost versus pre-COVID structure?

Hi Bobby, Gustavo here. Look as Mark has said, we will continue looking at opportunities in SG&A. And part of that $250 million to $350 million savings will come from SG&A, not only the store or real estate plan that John talked about but SG&A in general. We are not waiting. We are not waiting to take action—some actions we took in February as Mark alluded to. And we will continue to take actions shortly. You think of it like this, right; Q1 SG&A was down 15% and that was really after intervening in the last two months of the quarter. So in those two months the reduction was above 20%. And yet, as I said, we want to continue driving SG&A reductions throughout the year.

Bobby, I'd just add that if you look at gross margin during that heavy digital period, we didn't have capabilities geared to offset those costs effectively, and we had a double-dip moment of a large amount of lower margin product filtering through. As we've come through into June and July, what we are seeing is our BOPIS and store fulfillment taking up 30% to 40% of our mix and changing our cost structure. We're also seeing our natural margin mix across the board come into play. So I don't think that Q1 is indicative of anything much; it's really trapped in time. We see good upside, not just from our actions, but just the natural reflow of what customers are buying and where they're buying it from.

Thank you. Best of luck in the second quarter.

Our next question comes from Brad Thomas from KeyBanc.

Hi, thanks for taking my question. You emphasized the importance of price going forward, and I just wanted to circle back to that topic. What does your latest work show in terms of how you're scoring from a price perspective today and what the customer perception is? And how are you thinking about the importance of those coupons going forward? Thanks.

Hi Brad. This is Joe again. So I think as Mark had mentioned, price is one of the five key pillars that we're focused on. When you think about price and promo that all comes together under value. Value is important to our customers and it's something we're taking very seriously. As a new management team, we're spending a lot of time talking about this and evaluating and formalizing our strategy so we can evolve it. Coupon, as you all know, is a big part of our mix today. But we're doing work on baseline pricing: we launched dynamic pricing late last year. I think you've seen some more competitive price gaps to market over the last six months, which is something we want to expand and will continue to evaluate more categories that we would look to put into dynamic pricing. Overall pricing and promo is something we're spending a lot of time on and it comes into play in a few different ways. One, we're establishing category roles where we want to better guide our pricing strategies. So we are more focused on where we want to put price investments. Two, we're activating thorough line reviews, where we can affect pricing in conjunction with supplier discussions. We're using own brands and we will be more proactive in the future to address opening price points and good value points. Then we're also looking at new promotional tools to optimize promotion so that when we do run promotions, that promotional spend is very effective and efficient. Lastly, we are studying new ways to evolve our loyalty programs because we think there are new ways to better retain customers. I hope that helps.

That's very helpful. Thank you so much and good luck.

Our next question comes from Michael Lasser from UBS.

Good evening. Thanks a lot for taking my questions. So you nearly have 100% of your stores open. So if you look back since a store is opened and you aggregate all of the openings, what would your same-store sales be in aggregate? I recognize that 50% are flat or up, but what in aggregate is the comp for the open stores?

Hi Michael, Gustavo here. The comparable sales performance per store during the month of June, on average, would be a negative low-single digit with a pickup in the last two weeks of the month as Mark alluded to.

Okay, thank you. And my second question: you're closing 200 stores; your SG&A per store is about $2 million to $2.5 million. You're going to save almost $0.5 billion in SG&A costs just from closing those stores. Why wouldn't your ultimate cost savings be much larger than the $250 million to $350 million that you've outlined today?

We will give you more detail when we get together in the fall, but think of it, we're not only thinking of this as an SG&A intervention. We're looking at this holistically as a change in our business model, putting digital first. Therefore it is not only about the SG&A within those four walls, but what revenue and P&L they generate. The program that John is leading is focused on value creation. There may be some lost revenue and some move into digital, but the net of what we will achieve will be a really strong positive to the bottom line in terms of EBITDA. We'll map out the P&L components and provide more detail later, but at this point we remain focused on the intent of the program and the value creation plan.

Makes sense. Just to clarify, do you expect—do you have some expectation around the sales for those stores that you'll be closing? What is their number?

Mike, you were cutting off a little bit, can you repeat?

Do you have an expectation of the percentage of sales from those stores that you expect to retain?

Yes, it is part of the plan. We're not going to share that now, but we will put together a sales recovery plan as we close stores.

And Michael, we will lose the SG&A, but we'll also lose or transfer some of the sales. So the net of that is what we focus on—the EBITDA savings, not just the SG&A exercise. More to follow in October.

Got it. Thank you very much and good luck.

Our next question comes from Simeon Gutman from Morgan Stanley.

Hi everyone, thanks for taking my question. Can I—I'm going to try one more time Mark and Gustavo on the sales transfer rate. I realize you are not putting a lot of math around it, but based on your answers to the prior question, it sounds like you may be assuming a higher sales transfer rate. Mark, I appreciate it may be apples to oranges. This is a tricky moment in time. I do think this moment suggests that maybe more can be retained digitally than ever before, but with regard to prior numbers in retail we've heard in the 20s and 30s. Is that the realm of expectations for you or are you thinking higher or lower?

Simeon, I'm not going to get specific, but yes, it's in that realm. We're looking at 2019 numbers and clearly 2020 will be a different ballgame. What we see is a slightly different issue than a lot of our competitors, because we've been able to establish market density overlap and therefore duplication in the market. So we've got maybe two stores addressing one market that we could collapse at a higher level. We'll see some degradation and some move into digital, and some transfer, but the net of what we will achieve will be a real positive to EBITDA. We'll map out the sequential year-by-year impact. Some of it will begin in Q4 2020, but the majority will be over the next two years. We look forward to sharing more detail with you.

Okay. And my follow-up is regarding the next quarter, a little bit on the back half. Everything is fluid because you have stimulus and pent-up demand. How have you shaped your back-to-college plan at this point? What actions have you taken recently? And have you ever shared—can you share how much in the second quarter sales are impacted by back-to-college and back-to-school?

We won't be sharing the portion of sales, but we actively pivoted heavily into back-to-college as our first major event. We launched back-to-college early; it set up in stores over July and into August and we've been active digitally for several weeks. We are very pleased with the double-digit gains we've seen both in-store and online in that program. We correlated with partners like Pinterest and established that people were engaging around back-to-college very early. We've leaned in with sharper product value, clear store and digital setups, and a comprehensive program. It's up and running. We see positive results, and we're encouraged about the rest of the quarter.

And a separate clarification: Gustavo, you said down low-single digit on comparable stores. That's stores only, not including digital, correct?

Correct.

Our next question comes from Carla Casella from JPMorgan.

Hi. One question to follow-up on the prior caller. The back-to-school, back-to-dorm, college type business you talked about—how much does that typically represent of the second quarter? Is that one of your biggest seasons?

It's not one of our biggest seasons, no. It is an important seasonal event and an area where we engage customers across life moments, but we are not providing the proportion of quarterly sales. We're very happy with the early response to the program.

Okay, great. And then on the new credit facility, is it $236 million drawn initially that you just transferred over from the revolver on to the new ABL?

Yes, that was simply a rollover into the ABL. The ABL provides a net additional $600 million of liquidity, not the full $850 million as drawn. It provides additional capacity.

Okay, great. And does it have any restrictions on your ability to buy back bonds?

No.

Okay. Great, thank you.

Our next question comes from Anthony Chukumba from Loop Capital.

Good evening. Thanks for taking my question. I appreciate it. I wanted to talk a little bit about your promotional strategy. I know you gave a lot of color in terms of gross margin, that was very helpful. But as I'm on your website right now, I see 30% off select bedding and up to 50% off towels and rugs, up to 30% off bath lighting and I just don't recall seeing this level of promotion. So my question is first, were increased promotions a factor in gross margin degradation in the first quarter? And second, am I reading too much into this? Or have you made any changes in your promotional strategy?

Hi Anthony, this is Joe. I'll take that. Promotions will continue to be part of our marketing and merchandising mix, but we learned a lot about promotions over the last several months. Back in March, we dialed back promotions because they weren't working as effectively. We didn't have all the right processes and tools to understand elasticity and lift. We're building tools to make sure when we do promotions we get a stronger lift for the investment. So I wouldn't read too much into what you're seeing on the website; we will do promotions where we need to clear out inventory and work through resets, but we're working to be much more surgical and data-driven about promotions.

Okay. And a follow-up: have you come to any decisions on the 20% off coupons? I know that's part of the broader promotional and pricing strategy you're working through. Any update there or are you still experimenting?

The coupon is absolutely part of our marketing mix and we want to use it more strategically and surgically going forward. During the COVID period we didn't lean into it as much. Coupon will not disappear; it is part of who we are, but we'll be more strategic in its management as we look at our price, value, and loyalty pillars. More to follow as Cindy and Joe address loyalty and price strategies.

Got it. Thank you.

We have time for one more question from Mr. Peter Benedict from Baird.

Hey guys, thanks for sneaking me in. Most of my questions have been addressed by the other callers, but one thing on the slide that had rebuilding merchandising authority, there is category profit part of that and it speaks to assortment optimization reviews and supplier profitability actions. I was curious if you could expand on that: what's the timeframe for those efforts? What form do they take? What are you going to be doing with your vendor base?

Hi Peter, Joe here. Some of the work started back in the fall of last year when we looked at our destination categories like bedding and bath. We undertook work to improve our COGS through different ways of sourcing. We've been effective in that, but we are now rolling into the next phase with a second and third set of categories. One of the promising aspects is using data—both internal and external—much more effectively to do line reviews. The teams are embracing this and we are pleased with the initial results. We'll share more as things progress.

Peter, I will just add the general assessment: we were paying too much, ordering in a decentralized way which created ancillary costs, not focusing enough on our key winning categories, rooms and shopping occasions, and we didn't lean into margin-rich, differentiable brand programs. We are doing all of the above concurrently. They have different timelines for hitting the benefit to the bottom line, but they are ongoing, deep, and far-reaching. We are excited about the curation work Joe is leading and it's contributing to the overall EBITDA benefits we expect to realize.

Okay, terrific. That's helpful. Thanks and good luck.

Thank you, Hilda. Thank you all for participating on our call today. Feel free to contact me with any additional questions or comments. Have a good night and stay safe.

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.