Welcome to Bed Bath & Beyond's Second Quarter of Fiscal 2014 Results Conference Call. All participants are in a listen-only mode for the duration of the call. This conference is being recorded. A rebroadcast of the conference call will be available beginning on Tuesday September 23, 2014 at 6:30 pm Eastern Time through 6:30 pm Eastern Time on Thursday September 25, 2014. [Operator instructions]. At this time, it’s my pleasure to turn the conference over to Ms. Sue Lattmann, Chief Financial Officer and Treasurer of Bed Bath & Beyond. Please go ahead.

Hello everyone and thank you for participating in today’s earnings call. I am joined by Warren Eisenberg, Co-Chairman of Bed Bath & Beyond's, and Steven Temares, Chief Executive Officer and member of the Board of Directors. Before we begin, I would like to remind you that this conference call may contain forward-looking statements including statements about or references to 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 here today. Please refer to our most recent periodic SEC reports for more detail on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements as events or circumstances may change after this call. With that said, I will now turn the call over to Warren Eisenberg. Warren?

Thank you, Sue, and good afternoon everyone. Since Len Feinstein and I founded our company over 43 years ago, the mission has remained the same; just take care of the customer. Today more than ever, taking care of the customer means being available wherever and whenever our customer wants to interact with us. We built our company to be flexible and ready to change to meet the evolving needs of our customers and to face the challenges of a competitive and dynamic retail environment. And while much has changed in the past 43 years, change itself has been a constant as well as our ability to respond successfully to it, and we are prudent to be ahead of it. How we have met this challenge is to hold true to our philosophy of providing great service and great selection at the right value. Through the growing breadth of our assortment of merchandise as well as our rapidly expanding omni-channel presence, we are able to interact with our customers throughout their various life stages, some of which might include summer camp, college, first apartment, wedding registry, first home, baby registry, next home, and to begin part of all the cycles again. This ability creates a powerful customer value proposition and a loyal consumer base which forges an enduring seamless relationship with our customers. Building and maintaining this type of relationship in an evolving retail landscape requires a significant investment in technology to engage our customers where and how they prefer in-store, online, through a mobile device, or in any combination of these methods, and it also requires the smart use of the data that our technology enables us to assemble. At the same time beneath all of this are our original core principles, take care of the customer and never be satisfied that you’re doing it well enough, because you can always do it better. The results we reported today for the fiscal second-quarter are a reflection of the opportunities presented by our emerging technologies and the evolving retail marketplace. As Steve and Sue will discuss in greater detail over the next several minutes, we believe we are making the appropriate investments to build on our company’s core strength and grow our company successfully over the long term. Finally, as we have continually said, the success of our company is due to the tremendous efforts of our associates and our unique decentralized culture. This culture takes advantage of the knowledge, independence, and the customer focus of our associates and has always been the foundation of our long-term performance. It allows us to respond more quickly to the market and channel demands to changing economic conditions and is a strong differentiator for our company. I have been saying the same words about our associates and our culture for 43 years because they truly are at the heart of what we have been able to accomplish and in what we strive to accomplish in the future. Together with and through the efforts of our associates, we believe we have the resources and the capabilities to achieve our near and long-term goals. Now, I’ll turn the call over to Steven Temares. Steve?

Thank you Warren. Good afternoon everyone and thank you for joining us today. First of all, I would like to take this opportunity to express how pleased we are to have completed initial offering of $1.5 billion of senior unsecured notes implemented a $250 million revolving credit agreement, received approval from our Board of Directors for an additional $2 billion share repurchase program, and entered into a $1.1 billion accelerated share repurchase agreement. At the same time, we are pleased that Standard & Poor’s has raised our credit ratings to single A-minus from Triple B+, which speaks to the strength of our company and our future prospects. We believe that this was the appropriate time to enter into these transactions to enhance shareholder value, while maintaining our financial flexibility. As we have always said, we continue to review our capital structure on an ongoing basis. Looking at the detail of our fiscal second-quarter performance, we reported net earnings per diluted share of $1.17 compared to $1.16 per diluted share in last year’s fiscal second-quarter. Net sales for the fiscal second-quarter were approximately $2.9 billion, approximately 4.3% higher than in the prior year net sales of approximately $2.8 billion. Of this increase, approximately 78% is attributable to the increase in comp sales and approximately 22% is primarily from new stores offset by a decrease in shipping income. Second-quarter comparable sales increased by approximately 3.4% compared with an increase of 3.7% last year. This comparable sales increase is attributed to increases in both the average transaction amount and the number of transactions. Our comparable sales metrics consider sales consummated through all retail channels in-store, online, and through a mobile device. Customers today may take advantage of our omni-channel environment by using more than one channel when making a purchase. We believe an integrated experience must exist among these channels to provide a seamless customer experience. As some examples, a customer may be assisted by an in-store associate to create a wedding or baby registry while the guests may ultimately purchase a gift from our best websites or a customer may research a particular product and read other customer reviews on our website, before visiting a store to consummate the actual purchase or they may reserve an item online for in-store pickup, or while in a store a customer may make the purchase on their mobile device to deliver it to their home from either a distribution facility, a store, or directly from the vendor. In addition, we accept returns in store without regard to the channel in which the purchase was consummated, therefore resulting in reduced in-store sales by sales originally consummated through our online and mobile applications. As our retail operations are integrated and we can’t always reasonably track the channel in which the ultimate sale is initiated, we can, however, provide directional information on where the sale was consummated. For the quarter, comparable sales consummated through customer facing online websites and mobile applications were up in excess of 50% over last year, while comparable sales consummated in our stores were also up, albeit slightly. Overall, we are pleased by the continued growth and adoption of our omni-channel offerings and excited about what lies ahead. Gross profit for the fiscal second quarter was approximately 38.5% of net sales compared to approximately 39.4% of net sales in the corresponding period a year ago. This decrease in the gross profit margin as a percentage of net sales in order of magnitude was primarily attributed to first, an increase in coupon expense resulting from an increase in redemptions and a slight increase in the average coupon amount; and second, an increase in net direct-to-customer shipping expense which was impacted by a change in bedbathandbeyond.com’s free shipping threshold. Lastly, an increase in markdowns and a shift in the mix of the merchandise sold to lower margin categories also contributed to the decrease in gross profit as a percentage of net sales. Selling, general, and administrative expenses for the fiscal second-quarter were approximately 26% of net sales, as compared to approximately 25.6% of net sales in last year’s fiscal second-quarter, an increase of approximately 40 basis points. This percentage of net sales increase in SG&A can primarily be attributed to higher technology expenses and related depreciation. SG&A, excluding technology expenses and related depreciation for both this year and last year, as a percentage of net sales was flat for the fiscal second-quarter as compared to the same quarter in the prior year. Reflecting the movements in gross profit margin and SG&A expenses, the operating profit margin for the fiscal second-quarter was 130 basis points lower than in the same period a year ago, which is consistent with our previous model. As Warren mentioned, our commitment to take care of our customer requires that we are available when the customer wants to interact with us that we were able to transact how they want to and that we were able to meet their expectations for quality and value in an increasingly promotional environment. Our initiatives, many of which we have spoken about in past quarters, including the expenses related to our investments and technology, as well as increases in our direct-to-customer shipping expenses reflect this commitment, and we believe will position our company to thrive in an evolving retail landscape and further enhance shareholder value over time. To date, we are pleased with the progress on our initiatives and we are excited about the progress yet to come. Again, as we have noted here and in prior quarters, this is a story of significant investments for our company. Although there are required capital investments, and incremental expenses related to this initiatives which will increase technology costs and depreciation as well as other expenses as a percentage of net sales, in the short-term we are confident we are making the appropriate investments to provide a seamless and compelling customer experience across the in-store, online, and mobile shopping environments. To re-familiarize and update you on some of our key initiatives, we are continuing to add new functionality and assortment to our selling websites, mobile sites, and apps to improve the customer experience through such things as more effective search results with type-ahead search and related search functionality, registry kick starters, expanded delivery capabilities to allow delivery of larger items to customers’ homes, international shipping, international credit card acceptance, and customer consultation scheduling for in-store visits. We are continuing our deployment of systems, equipment, and increased bandwidth in our stores, which will enable customer Wi-Fi and new multifunction devices for store associates and provide the means for in-store digital shopping experiences for our customers, including in-store digital messaging of product information and customized brand messages as well as other customer facing applications. These efforts will also result in systems for stores to optimize shipment costs for home deliveries as well as to improve inventory ordering and workforce management. We are improving our customer data integration and customer relations management capabilities. We’re strengthening and deepening our IT, analytics, marketing, and e-commerce groups to more efficiently and effectively reach our customers through whichever channels they want to interact with us. We are opening an additional distribution facility to support our growing direct-to-customer shipments and the growth of our health and beauty care offerings, and we are furthering development work necessary for a new and more robust point-of-sale system, which for example over time will allow customers to shop and pay using their mobile device at a register in our stores, receive or redeem personalized item-specific coupons, receive a selection of multiple item price deals, pay with foreign currencies, and obtain foreign language receipts. As we have mentioned previously, through the investments we have made and will continue to make, our customers can purchase products either in-store, online, or through a mobile device for in most cases either in-store pickup or direct delivery from one of our distribution facilities, stores, or vendors. In addition, we continue to increase, differentiate, and leverage our assortments across all channels, concepts, and countries in which we do business. As Warren indicated, through the acquisition and more effective utilization of information about customer preferences and the expanded merchandise offerings and solutions, we can provide, we intend to do more for and with our customers through their various life stages. As a result, we believe we are well-positioned today and will be increasingly well-positioned to thrive in an omni-channel retail environment so as to grow profitably and increase our market share and shareholder value over time. In addition we are growing our role in a complementary and highly fragmented institutional business with the potential to leverage our existing vendor base to provide products and services to institutional customers in hospitality, travel, and other businesses. Our institutional business also provides the future opportunity to present certain branded and differentiated merchandise to potential retail customers in a non-retail setting. On the real estate side, our second-quarter activities included the opening of two new Bed Bath & Beyond stores, one buybuy BABY store, and three cost plus World Market stores, one of which was our first store in the Northeast. During 2014, including stores opened to date, we anticipate opening approximately 22 new stores companywide. It is our intent to continue to optimize our store operations in markets by expanding, downsizing, renovating, opening, closing, and relocating stores. As you might know if you are aware of our history, we actively managed our real estate portfolio in a manner that permits store sizes, layouts, locations and offerings to evolve over time to optimize market profitability. We believe that throughout the United States and Canada, we have the opportunity to operate in excess of 1300 Bed Bath & Beyond stores as well as grow our cost plus World Market, Christmas Tree Shops andThat!, and buybuy BABY concepts from coast-to-coast. Additionally, in connection with optimizing our operations, we continue to place health and beauty care offerings in selected stores, as well as baby and specialty food and beverage departments in selected Bed Bath & Beyond stores. Although number of these placements continue to evolve, there are currently in excess of 300 additional existing store locations into which one or a combination of these merchandise offerings may be placed over time. Also, our Mexican joint-venture currently operates five Bed Bath & Beyond stores in the Mexico City market, and we are pleased with their performance. The joint venture is planning to open an additional store by the end of the fiscal year. Let me close my remarks by once again thanking our associates throughout our company for their ongoing efforts, which are the foundation for Bed Bath & Beyond’s long term success. As Warren said, we’ll repeat this often because we believe we should. Our success is all about our people, through their efforts and the greatly valued contribution of our merchandise and service providers, we look forward to meeting the challenges that l lie ahead and to ceasing the opportunities to satisfy our customers, and by doing so, improving our competitive position in the merchandise categories that we offer across the channels and within the countries in which we operate. I will now turn the call back to Sue. Sue?

Thank you Steve. As Steven mentioned, we completed our initial debt offering and implemented a revolving credit agreement during our second quarter. I would like to start by thanking all those who participated in this process, and welcome the new holders of the notes to the call. With regard to our second-quarter, I would like to give a few additional details. Primary as a result of the notes offering net interest expense for the second quarter was approximately $9.5 million. Our provision for income taxes for the fiscal second quarter was approximately 37.7% compared to approximately 35.8% for the comparable quarter last year, an increase of approximately 190 basis points. The provision for the quarter, including net after-tax benefits of approximately $800,000 this year and $9.7 million last year due to distinct tax events occurring during the quarters. Our provision for income taxes continues to fluctuate as taxable events occur and exposures are reevaluated. Turning to the balance sheet, during the second-quarter we received $1.5 billion from the notes offering of which $1.1 billion was subsequently used to fund our accelerated share repurchase program, which commenced during the second-quarter, and is expected to be completed before the end of the calendar year. In addition, the uses of cash included capital expenditures and other investments. We ended the second-quarter, with cash and cash equivalents and investment securities of approximately $1.4 billion. As of August 30, 2014, retailer inventories at cost were approximately $2.7 billion or $63.39 per square foot, an increase of approximately 5% on a per square foot basis over the end of last year’s second-quarter. Retail inventory is continue to be tailored to meet the anticipated demands of our customers and are in good condition. Capital expenditures for the first half of 2014 were approximately $156 million; slightly more than half of these expenditures were for technology enhancements in the remaining balance being used primarily for new stores, existing store improvements and other projects important to our future. Consolidated shareholders equity at the end of the quarter was approximately $2.9 billion, which is net of approximately $1 billion, representing about 16.9 million shares, a second-quarter share repurchases. During the second-quarter, we completed our previous $2.5 billion share repurchase program, which was approved in 2012 and began to repurchase shares under our new $2 billion authorization program approved in July 2014. This new authorization had a remaining balance of approximately $1.8 billion at the end of the quarter and which we currently plan to complete during fiscal 2016. Regarding our store counts through the end of the quarter and currently we operate 1506 stores, consisting of 1017 Bed Bath & Beyond stores in all 50 states, the District of Columbia, Porto Rico and Canada, 269 stores under the names World Market, Cost Plus World Market or Cost Plus, 92 buybuy BABY stores, 78 stores under the names Christmas Tree Shops, Christmas Tree Shops andThat! Or andThat! and 50 stores under the name Harmon or Harmon Face Values. As of August 30, 2014 consolidated store space, net of openings and closings for all our concepts was approximately 42.8 million square feet, an increase of approximately 1.2% over the end of last year’s second quarter. Based upon our second-quarter results, we continue to be cautiously optimistic about the balance of the current fiscal year. Turning to the remainder of the year, our current models for each quarter and full-year include the following; one, for the fiscal third quarter, we are modeling comparable sales to increase in the range of 2% to 3%. For the fourth quarter, we are modeling comparable sales to increase in the range of 4% to 5%. This will bring the modeled full-year comp sales to a range of 2.6% to 3.1%. Consolidated net sales modeled to increase by approximately 2.8% to 3.7% for the third quarter, and approximately 4.5% to 5.5% for the fourth quarter. This results in a modeled full-year consolidated net sales increase of approximately 3.4% to 3.9%. Three, assuming these sales levels, we are modeling to leverage for gross profit for fiscal third and fourth quarters. Contributing to the modeled gross profit deleverage our increases in coupon expense and net direct-to-customer shipping expense. While any free shipping threshold is subject to change, our current $49 free shipping threshold at bedbathandbeyond.com is due to anniversary in February 2015. Four, we are modeling the leveraged for SG&A the third quarter and slight deleverage in the fourth quarter. The modeled SG&A leverage includes increases in technology expense and depreciation related to our ongoing investment. Five, depreciation for fiscal 2014 is expected to be approximately $240 million. Six, our model includes approximately $45 million in annual interest expense, resulting from our debt issuance and approximately $8 million resulting from our sale/leaseback obligations related to certain distribution facilities. Seven, the third quarter tax provision is estimated to be in the mid-30s percentage range while the fourth quarter tax provision is estimated to be in the mid to high 30 percentage range, both with expected variability as distinct tax events occur. Eight, we expect to continue generating positive operating cash flow. Nine, capital expenditures for fiscal 2014 are planned to be approximately $350 million with slightly more than half for technology enhancements. Of course these expenditures remain subject to the timing and composition of projects. Ten, our model reflects continued repurchases of shares under our new $2 billion repurchase program, authorized on July 7, 2014 with an assumed completion during fiscal 2016 which may be influenced by several factors including business and market conditions. In connection with the share repurchase activity which includes assumptions about future market conditions including timing of the completion of the accelerated share repurchase program, share price and trading volume, we are modeling diluted weighted average shares outstanding to be approximately 184 million for the third quarter, 178 million for the fourth quarter, and 189 million for full year. Based on these and other planning assumptions, we are modeling net earnings per diluted share to be approximately $1.17 to $1.21 for the third quarter, and approximately $1.78 to $1.83 for the fourth quarter bringing the full-year modeled net earnings per diluted share to a range of $5 to $5.08. I would like to point out that the timing and amount of our accelerated share repurchases impacts the quarterly and full year diluted weighted average shares outstanding differently. As you can see from our model of diluted weighted average shares outstanding, the impact on our individual quarters will be greater than the impact on the full year. As a result, with some of the net earnings per diluted share for the four quarters of the year representing the two fiscal quarters already reported and estimate earnings per diluted share for the third and fourth fiscal quarters are greater than the estimated full year net earnings per diluted share by approximately $0.05 to $0.06. To summarize, looking at our second quarter results, we executed our strategy and continue to invest in technology and delivery initiatives that position our company for success in today’s omni-channel retailing environment, while returning substantial capital to share holders. As reflected in our model, we plan to continue our solid financial performance over the remainder of the fiscal year. As a reminder, our next conference call to review operating results for the third quarter ending on November 29, 2014 will be on Thursday, January 8, 2015. As always we look forward to answering your questions and appreciate the opportunity to speak with you this evening. Ken, Franklin and I will be in our offices and we will ensure that all the calls we receive will be returned tonight. If you have questions, we encourage you to call and we will get back to you. As always, we appreciate your interest in Bed Bath & Beyond.

Ladies and Gentlemen: this concludes today’s conference call. Thank you for participating, you may now disconnect. [No Q&A for this event].