Welcome to Bed Bath & Beyond’s third quarter fiscal 2016 earnings call. All participants will be in a listen-only mode until the Q&A portion of the call. Today’s conference call is being recorded. A rebroadcast of the conference call will be available beginning on Wednesday, December 21, 2016 at 7:30 PM Eastern Time through 7:30 PM Eastern Time on Friday, December 23, 2016. To access the rebroadcast, you may dial 888-843-7419 with a passcode ID of 43897412. At this time, I’d like to turn the conference call over to Janet Barth, Vice President, Investor Relations. Please go ahead.

Thank you, Adrian. And good afternoon, everyone. Joining me on our call today are Steven Temares, Bed Bath & Beyond’s Chief Executive Officer and Member of the Board of Directors; Gene Castagna, Chief Operating Officer; and Susan Lattmann, Chief Financial Officer and Treasurer. Before we begin, I’d 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 during the call today. Please refer to our most recent periodic SEC filings for more details 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. Our earnings press release dated December 21, 2016 can be found in the Investor Relations section of our website at www.bedbathandbeyond.com. And for those of you who may have holiday parties to get to tonight, here are some highlights. Third quarter net earnings per diluted share were $0.85. Net sales for the quarter were approximately $3 billion, an increase of approximately 10 basis points compared to the prior-year period. Quarterly comparable sales decreased approximately 1.4%. Sales from our customer-facing digital channels grew in excess of 20% and sales from our stores declined in the low single digit percentage range. In addition, our Board of Directors today declared a quarterly dividend of $0.125 per share to be paid on April 18, 2017 to shareholders of record at the close of business on March 17, 2017. Given the comp in the fourth quarter to-date and our assumption for the remainder of the year, including the critical days leading up to Christmas, we're modeling a full-year comp sales decline of approximately 50 basis points, with net sales increasing about 1%. Fiscal 2016 net earnings per diluted share are expected to be at the low end of the range we have described in our previous earnings press releases. During our call today, Sue will review our third quarter financial results and some of our planning assumptions for fiscal 2016 and then Steven will give an update on some operational and strategic developments, including the recent acquisition of PersonalizationMall.com, which is known as PMall.com and PMall. After our prepared remarks, we will open up the call to questions. I’ll now turn the call over to Sue.

Thank you, Janet, and good afternoon everyone. I’ll start with a review of our third quarter results, which include the activity of PMall for the last few days of the quarter. Our net sales for the quarter were approximately $3 billion, and increase of approximately 10 basis points from the third quarter of last year, primarily due to a 1.5% increase in non-comp sales, including One Kings Lane and new stores, partially offset by a 1.4% decrease in comp sales. As we expected, our third quarter comp sales trends were running sequentially better than the second quarter. However, sales softened considerably a week before the presidential election. After the election, comp sales picked back up and, in fact, we experienced relatively strong comp sales from Black Friday through Cyber Monday. Overall, for the quarter, the decline in comp sales was attributable to a decrease in the number of transactions in our stores, partially offset by an increase in the average transaction amount. Comp sales from our customer-facing digital channels grew in excess of 20% in the third quarter while comp sales from our stores declined in the low single-digit percentage range. As a reminder, One Kings Lane and PMall are both currently excluded from our comp sales calculations. PMall will be included after the one-year anniversary of its acquisition. One Kings Lane will be included in comps when the re-platforming of its systems and integration of the support services, both of which are currently in process have been in place for a period long enough to allow for a meaningful comparison of One Kings Lane’s sales over the prior period. Gross margin for the third quarter was approximately 37% as compared to approximately 37.8% in the prior-year period. This decrease as a percentage of net sales was primarily due to, in order of magnitude, first an increase in net direct-to-customer shipping expense as a result of more promotional shipping offer activity, including a change in the Bed Bath & Beyond free shipping thresholds from $49 last year to $29 this year. And for a few days, we offered free shipping on all purchases. And second, an increase in coupon expense, resulting from increases in redemption and the average coupon amount. The inclusion of One Kings Lane reduced total company gross margin as a percentage of net sales by approximately 13 basis points in the third quarter. SG&A for the third quarter was approximately 29.8% of net sales as compared to 27.9% of net sales in the prior year period. This increase in SG&A as a percentage of net sales was primarily due to, in order of magnitude, an increase in payroll and payroll-related expense and an increase in technology expense, including related depreciation. The inclusion of One Kings Lane increased total company SG&A expense as a percentage of net sales by approximately 15 basis points in the third quarter. Our income tax rate for the quarter was approximately 34.5% compared to approximately 35.3% in the prior-year period. The third quarter provisions included favorable net after-tax benefit of approximately $6 million this year as compared to $6.9 million last year due to the same tax events occurring during these quarter. Considering all of this activity, net earnings per diluted share were $0.85 for the quarter. Moving on to the balance sheet, we ended the third quarter with approximately $559 million in cash and cash equivalents and investment securities. Retail inventories were approximately $3.2 billion at cost, an increase of approximately 1.4% compared to the end of the prior-year period due in part to the growth in inventory in our distribution facilities for shipments to customers as well as the inventory balances from PMall and One Kings Lane. Our Lewisville, Texas facility was opened for inbound freight last quarter, began direct shipments to customers during the third quarter. Retails inventories continue to be tailored to meet the anticipated demands of our customers and are in good condition. Capital expenditures for the nine months of 2016 were approximately $276 million and included the following: Enhancements to our digital capabilities; ongoing investments in data analytics; expenditures for the continued development and deployment of new systems and equipment in our stores, including our new POS systems; the re-platforming of One Kings Lane systems and integration of its support services; spending related to the opening of our new distribution facility in Lewisville, Texas; and investments in new stores, store relocations, and store refurbishments. We opened ten new stores during the quarter, including five Bed Bath & Beyond stores, four of which were in Canada; four buybuy BABY stores, three of which were in Canada; and one Face Values store. We also closed eight Bed Bath & Beyond stores. During the quarter, we repurchased approximately $76 million of stock, representing about 1.8 million shares under our current $2.5 billion share repurchase program. This authorization had a remaining balance of approximately $1.9 billion at the end of the third quarter. In addition, our Board of Directors today declared a quarterly cash dividend of $0.125 per share to be paid on April 18, 2017 to shareholders of record at the close of business on March 17, 2017. Now, again, here are some of our planning assumptions for fiscal 2016, which incorporate our year-to-date results, including One Kings Lane and PMall since their dates of acquisition, and recent business conditions. Given the comps in the fourth quarter to date and our assumptions for the remainder of the year, including the critical days leading up to Christmas, we’re modeling a full-year comp sales decline of approximately 50 basis points, with net sales increasing about 1%. We continue to model gross margin leverage for the full year, including increases in coupon expense and net direct-to-customer shipping expense. We said previously that we expect the gross margin de-leverage to be slightly less than in fiscal 2015, including the extension of Bed Bath & Beyond’s $29 free shipping threshold, the slide deleverage from One Kings Lane and a slight leverage from PMall, we’re modeling the full-year gross margin deleverage to be relatively flat with fiscal 2015. We continue to model SG&A as a percentage of net sales to deleverage for the full year, primarily due to payroll and payroll-related items, including wage increases, further investments in technology including related depreciation, and advertising expense. This assumption includes slightly deleverage for One Kings Lane and PMall. As a reminder, last year in the fourth quarter, SG&A included certain non-recurring items which benefited our fiscal 2015 full-year net earnings per diluted share by about $0.06. We continue to estimate depreciation expense of approximately $290 million for the year. Annual net interest expense was estimated to be approximately $75 million. We estimate our full-year tax rate to be in the mid to high 30s percentage range, with continued quarterly tax rate variability as the same tax events occur. Year to date, we have opened a total of 27 stores and have closed nine stores. Earlier this month, we opened Beyond at Liberty View, a unique shopping experience in the Sunset Park neighborhood of Brooklyn, consisting of four of our retail concepts under one roof, including Bed Bath & Beyond, buybuy BABY, Cost Plus World Market, and Face Values. In addition, we opened our second reformatted andThat! store, which is located in Jacksonville, Florida. We remain on track with our fiscal 2016 model to open approximately 30 stores, most of which are in new markets for our various concepts and closed approximately 15. Capital expenditures in 2016 continue to be planned in the range of approximately $400 million to $425 million, which remains subject to the timing and composition of projects. We expect to repurchase shares under our current $2.5 billion authorization and anticipate the completion of this program to occur sometime in fiscal 2020. Of course, the completions will continue to be influenced by several factors, including business and market conditions. As we have described previously, our net earnings per diluted share have been in the $4.5 to just over $5 range since we entered a heavy investment phase several years ago. Based on the planning assumptions I just discussed, which reflect our nine-month results including One Kings Lane and PMall since their dates of acquisition and our recent business trends, we’re modeling our fiscal 2016 net earnings per diluted share to be at the low end of this historical range. We are currently in the process of completing our financial planning assumptions for fiscal 2017, which as a reminder is a 53-week year. We will provide further information related to our modeling assumptions for fiscal 2017 during our fourth quarter conference call, which is planned for April 5, 2017. With that, I will turn the call over to Steven.

Thank you, Sue. Our third quarter results were in line with what we experienced during the first half of the year. This reflects the increasing proportion of sales moving online through various digital platforms. Within this environment, we’ve been working continuously revolve our company and expand the breadth of the differentiated products, services and solutions we offer. By providing real answers to our customers’ needs at the right time and at the right value, we can further strengthen our credibility as the experts for the home and for our customers [indiscernible] (0:01:41). Today, I will provide an update on some of the key developments in our business over the past several months and the progress we are making in transforming our company to be increasingly relevant and to improve our competitive position in this ever-changing retail environment. As we reported on November 23, we made an all-cash acquisition of PersonalizationMall.com, an industry-leading online retailer of personalized products. The addition of PMall expands our existing personalization and customization capabilities and further enhances our offering of differentiated product, service and solutions to our customers. As we have said previously, we view personalization as a significant opportunity for us to create additional differentiation and enable us to do more for and with our customers. The market for personalized products is highly fragmented and estimated to be in excess of $15 billion, with a high-single digit annualized growth rate. Historically, demand has been largely driven by gifting occasions, peaking during the winter holiday season. Over the past 18 years, PMall has developed into a high successful and innovative company within the personalization category. A key competitive advantage is their fully integrated proprietary technology platform that drives quality, speed and efficiency. PMall’s production facilities are capable of automating 14 different innovative personalization processes on a variety of services. These processes include [indiscernible] (0:03:19), embroidery, digital printing, engraving and sand blasting. PMall already has a large assortment with the opportunity to grow. The assortment includes personalized products to commemorate all of life’s events and special occasions, such as weddings, birthdays, holidays, and the welcome of a child. Their streamlined production processes enable a one-day average turnaround time. And importantly, they also share our passion for and commitment to excellent customer service. PMall will remain a distinct brand under the Bed Bath & Beyond umbrella and we will support them as they continue to improve the customer experience by enhancing their product mix, upgrading their e-commerce website, and driving optimization of their marketing initiatives. As we described in our November 23 press release, we expect the acquisition to be slightly accretive to our fiscal 2016 net earnings per diluted share. Going forward, there are synergies that should result in future cost savings and efficiencies in areas including shipping and marketing. While PMall will remain a distinct brand, at the same time, we already have nearly 5,000 items available on the Bed Bath & Beyond and buybuy BABY websites and in-store through the Beyond store that can be personalized. We believe there is an extensive opportunity to grow this assortment. We’re excited to partner with PMall and leverage their advanced personalized and production capabilities to further advance our personalization capabilities [indiscernible] (0:04:54). In addition to growing our assortment of personalized products, we have also continued to build out our product and service offerings within other categories, notably furniture and home décor. As we have previously said, the home furnishing space provides tremendous opportunity to build a large, curated assortment that includes unique and differentiated product that will engage with our customers in a meaningful way by providing inspiration, solutions and services across various lifestyles. Also, we recently introduced a new home décor feature, a drapery design gallery, to be available in select stores and online at bedbathandbeyond.com. Customers can customize draperies for their home by choosing from 250 fabrics, three header styles and four lanes. In just a few simple steps, customers can select the look and style of the window treatment that best fits their home décor. To showcase our expanding offering, including within the home furnishings and the core categories and our expertise for the home, we released our first-ever welcome home catalog in early October, containing 84 pages of product inspiration for the entire home. In some respects, we’re at the beginning stages of building awareness of our wide-ranging assortment of differentiated products, services and solutions for the home, and the accompanying life stages and life interest, through more inspirational imagery and content. Catalogs of this type are one way to introduce customers to these expanded offerings and our broad-based expertise. While the results of the catalog will include the benefits of longer-term brand building, we’re pleased with the initial reception of the book and the positive feedback from customers. Based on the initial results, we plan to release another home catalog this spring to further reinforce our position as the experts of the home. Also, to further these efforts, we're bringing a significant portion of our creative and photography work in-house and hiring a team of about 70 people who will work together, alongside existing One Kings Lane creative and photography staff and our new creative and photo studios in Manhattan. We believe bringing more of these capabilities in-house will allow us to have greater control over our ability to produce more inspirational content. In addition, we expect this effort to help increase our digital marketing assets and drive other operational efficiencies to the business. During the third quarter, other marketing initiatives included the launch of a beta test for a new annual membership program called Beyond Plus for an annual fee of $29, which is being used in our test. Members receive 20% of their purchases as well as free standard shipping on every order for an entire year. The initial test includes a small cross-section of our customer base and we are currently monitoring the purchasing behavior of our members over time. We will formulate the next test for this program based on the key learnings from the beta test, which to date remain encouraging. In addition to elevating the customer experience through our product and marketing initiatives, we have also advanced our initiatives to elevate the experience within our stores. As Sue mentioned, we have opened our second reformatted andThat! store, which is located in Jacksonville, Florida. We were excited to design this new store to reflect the lifestyle of the area and to feature merchandise inspired by its coastal location. The grand opening occurred last week and we look forward to learning from our customers’ response to our store. As you may recall, our first reformatted andThat! store opened this past April in Kennesaw, Georgia, and it continues to perform well. A couple of weeks ago, we opened the doors of our new shopping venue Beyond at Liberty View, located in the Sunset Park community within Brooklyn. With approximately 120,000 ft.², this is a unique shopping destination that includes Bed Bath & Beyond, buybuy BABY, Cost Plus World Market, and Face Values, all under one roof. For about two years now, we have worked to help transform this historic industrial complex constructed in the early 1900s into a vibrant retail space that showcases the products, services and solutions we have to offer today. We believe the learnings generated from this initial Beyond experience will be beneficial to us in many ways. First, many of the aspects of what we’ve done here, including our enhanced assortment and services, can be rolled forward to other store locations. Second, we will iterate the entire experience in other settings where appropriate. This experience gives us tremendous clay to work with and continue to do more for and with our customers. We are very excited to be open in Brooklyn and service the local community and have planned our grand opening to take place during the Martin Luther King holiday weekend in January. In addition to bringing Bed Bath & Beyond, buybuy BABY, Cost Plus World Market, and Face Values together in one location and under one roof, there are many features and services special to the Beyond venue. They include an experiential environment where customers and their families can participate in product demonstrations, how-to sessions, cooking classes and other live events in our event space called 71 at Beyond named after the year Bed Bath & Beyond was founded. A Born in Brooklyn feature consisting of Brooklyn-based designers and their products, a seamless and more personalized shopping experience utilizing our latest digital tools to assist customers in finding the right merchandise for their homes and lifestyles, such as scan for more which enables the customer to view product images and get product pricing information as well as customer reviews. Interact with catalogs which enable customers to view an expanded assortment of product, such as seasonal furniture and bed and bath items. And a digital product advisor which enables customers to find what they’re looking for based on responses to questions that will filter the assortment to products that best fit their needs. Also, a dedicated area called the Beyond Room for customers to work with our in-store exports for concierge services, such as our personal shopping, registry and soon-to-come decorating services. Our curated collection called Best of New, which will feature the best new items from Bed Bath & Beyond, buybuy BABY, Cost Plus World Market, and Face Values. This collection will be located in the Beyond Room. A blow-in, blow-out bar where customers can make appointments with professional stylists to wash, blow and style their hair. Additional special services, such as home delivery, assembly and installation services, a unique food hall style dining experience call the Bay Market Kitchen, which serves casual American cuisine as well as local craft beers and select wines. In addition to the restaurants, there are other food stations, featuring local fair that change vendors on a regular basis and coffee bars featuring local favorites such as Brooklyn-based Toby's Estate Coffee. The Sunset Park community is a thriving and dynamic part of Brooklyn and we are happy to be part of this growing and diverse neighborhood. We believe that this venue, including the revised format of our stores, along with the enhanced services we offer, will become a retail destination for customers to have a fun and productive shopping experience. We hope many of you will be able to visit Beyond at Liberty activity view and give us your feedback. In summary, it continues to be a transitional time for retail and new advances in technology are creating opportunities for our customers to shop in a more seamless environment and for us to do more for and with our customers and connect with them in a more personalized manner. As our business transforms, we are navigating the competitive landscape and adapting as customer preferences and purchasing behavior evolve. We believe that we are making the right investments for our company’s long-term success and are well-positioned to deliver for our customers and our shareholders. In closing, I would like to thank our dedicated associates, including our new team members from PMall, for their ongoing efforts to satisfy our customers and improve our competitive position in the categories in which we do business. I wish you all a healthy and hot happy holiday season and new year. Janet, I will turn the call back over to you.

Thank you, Steven. We will now turn to the Q&A portion of our call. As usual, we would appreciate if you would limit yourself to one question and one follow-up, please, so that we can get through as many questions as possible. Adrian, we are now ready to take questions.

Thank you. [Operator Instructions] And our first question comes from Christopher Horvers from JP Morgan. Please go-ahead.

Thanks. Good evening. Two questions. So, first, on the beta test of the shipping program, I believe this was invite-only. Was curious what the response was in terms of how many people signed up and would love to hear what has surprised you the most. And then my second question is from – on the SG&A line, if you just get sequential SG&A dollars, it really blew out here in the third quarter. So was curious what really drove that. Was payroll dollars and advertising dollars actually growing year-over-year, and hence more than just deleveraging? And what other factors continued to that level of spending?

Sure. Hey, Chris. Steve Temares. How are you?

Very good, very good.

That’s great. I will handle the beta test question. It was an invite-only, correct. It’s a limited test. And we were quickly oversubscribed. So, as I said, one of the things that we were learning was going out at $29 and trying to get an understanding. The other thing about it is the learnings of it. It’s very much a work-in-progress right now because the initial reaction, very good, but how does it modify behavior over time is really what we are looking to learn. So, it’s really too early to really give you any real information on it. But so far, it has been – exceeded our expectations. We are very happy. But there is a lot to learn about what it will be and what it could mean to us.

And I’ll take the second question regarding SG&A. So, you had asked about payroll and technology increases, we did, as we called out on the call, have a negative 1.4% comp. So, that impacted from an SG&A perspective, the deleverage that we saw in those two line items.

Well, I guess it's really from a sequential dollar, it seems like your SG&A rate has really accelerated in the third quarter. From another perspective, just look at the dollars in 3Q versus 2Q. It seems to have taken a step function up, so it seems like it's something beyond the deleverage.

Well, as we’ve said in the call, in addition to the deleverage of payroll, we have been making investments in it, especially in late this year, so there is a sequential dollar increase in payroll, as you said. Also, other categories may have some sequential increases, but the payroll was the main one.

And our next question comes from Alan Rifkin from BTIG.

Thank you very much. Steve, in the recent past, your acquisitions have increasingly been along tangential lines. Does there come a point in time where you take a look at the current portfolio, particularly as it relates to Christmas Tree Shop or even Bed Bath & Beyond stores that are possibly not earning their cost of capital, and you take a more disciplined approach to potentially shedding assets? And then I have a follow-up, please.

You know what, we’re not locked into heading assets or disgorging of assets. We’re trying to do the things that make sense for the company. So, again, we have said it over and over again, but our focus is on the customer. How do we do more with the customer? And the ability to offer these services, the categories of product, the solutions that we can offer, and how to leverage that is the goal. We start with the customer, trying to understand their interests, their life stage through analytics and target marketing, service them with this. So, whether we are adding furniture and home décor, whether we are adding services or if we are adding differentiated product and personalized product, all these things are in keeping with what we’re doing with our objective and our stated objective to do more with the customer. And so, whether we add people by way of hiring people or we buy a small company or how we move forward, it’s just a vehicle in a lot of ways. So, all these things are giving us a better ability to deliver for the customer. So, it’s not that we are trying to get bigger or there’s nothing about ego here, it’s all about being better. And so, it’s the same thing with disgorging. We will close stores when they make sense to close them. We will move things out of a portfolio if it makes sense to do that. If we’re providing certain types of services that don’t make sense or that we can’t make sense of, we’ll stop doing it. Of course, we’ll try to do it correctly and then we would stop doing it. So, it’s not a matter of – we don’t look at it as a size component of getting bigger or smaller. It’s really just being better.

Okay, thank you. And a follow-up, if I may. Based on your commentary, obviously, you are now going to be in the $4.50 to $5 plus EPS range for what will now be five years. I know you haven't given 2017 guidance yet, but by your estimate, when do you think that we may break out of this $4.50 to $5 range? Is it two or three years out or is it hopefully something sooner than that? And along those lines, do you still anticipate that this year will be the maximum investment spend with respect to e-comm? Thank you.

You know what, the answer is, first of all, we don’t give guidance beyond this with timeframe, and the truth is that I think anybody who tells you what they’ll be making three or four years out, it’s just based upon a set of assumptions, and as everybody learns is that the further out you go, the more difficult it is to predict what it’s going to be. So, a lot of these investments we've made is really been foundational for us. They’ve put us in a position to grow and that’s hopefully what will happen but we can't – we’re not able to say we don’t know – we know for sure if we didn’t make these investments, we’d be one of those companies that you wouldn’t be talking to any more. So, we’re fortunate that we still make some of the best returns in retail. We know that it’s not a sexy place to be today retail. We know what our competitor doing from looking or not doing. So, these investments are really intended to position us to grow our earnings. We won't be satisfied till we’re growing our earnings again. I wish I could tell you exactly the day that would be but it’s just – it’s not the case. We’re not going to be telling you something that’s three or four years out. Obviously, things that we’re working on like the growth of our digital business which has been so strong, the larger the component of our overall business, our digital business becomes and we continue to growth it, that will be beneficial to us. If we’re able to execute against the differentiated product, the service, the solutions that we offer, that will help us to achieve greater profitability. The differentiated product, the marketing structure is different. So, all these things are component pieces of getting better and producing the better earnings but it’s the question that the right question to ask is the question that we work towards accomplishing but they just simply I can't tell when that is, is internal variables that we execute against that we think we’re doing fairly well and those external things that are happening in the marketplace. It’s still – the lion’s share of our business is done in bricks and mortar. And the foot traffic that we’re seeing the reduction in foot tracking I think is being seen across all retail and as long as we have a significant component in bricks and mortar like that, that is a bit of a headwind for us.

And regarding your CapEx, directionally this is our peak period, but I do want to call out that CapEx doesn’t always neatly fit it into a fiscal year but projects shift due to timing or whatnot, so we’ll take that into account with our planning assumptions for ’17 because we also need to take a look at PMall which we recently acquired and what their needs are in terms of CapEx as well. But right now we are – directionally, yes, we’re in the peak period of CapEx.

And our next question comes from Steven Forbes with Guggenheim. Please go ahead.

Good afternoon.

Steve, how you doing?

So, you talk about differentiation a lot. So, when you think about the in-store experience maybe in a holistic manner, do you think there is a greater opportunity over the near-term to drive differentiation through service and customer engagement, more so than product? Is that where the focus should be when you think about the short-term opportunity here?

It has to be both. When we talk about if we’re going to be providing differentiated products, I’ve said it often as life and death for us and we got to continue to increase the degree that we explain to the customer, the differentiated product that we carried and how it’s different and why it’s better and how it’s the right value for them. At the same time when you talk about the services, whether we have the largest broader registry, whether we are going to have the largest BABY registry because we’ve been in the largest new mover business. All these things are important to deliver on those related services when we talk about the decorating, so this is being able to have scheduled appointments to go and to create a registry, when we talk about the things that create the additional stickiness with the customer to more experiential things that will increase foot traffic relative to where it is today. Those are all critical elements of being different but making sure the customer understands that we’re different and we’re delivering on the message that we’re different. So, it can't be done in one way. And again, it goes back to the inspirational content. We’re showing all the things we’re doing to make the customer feel as if we’re the experts for the home. It’s just not one road that we could travel. Each of these things are important to us. I understand that you were in Brooklyn location I think today.

Yes.

So, you’ll see there some of the things that we’re delivering to the customer and not everything is even open yet. But again, those are the things that we’re trying to explain to the customer, so if you could bring together the differentiated products, you could bring together the local products, if you could bring together different services that we offer and the expertise that we provide, all these things have to be get great at them, the customer has to understand that you have them and you have to deliver on them. So, once they wanted more important than the others are all critical to us.

And then probably a perfect segue into a follow-up. How do you – how long do you think it takes before you can capitalize on the earlier future learnings from Liberty View, and at what pace do you think you can roll it out? Where do you – how do you think about repurposing the space in the legacy stores? I mean, is it – are you starting to think about leveraging some of these learnings, because, obviously, the store is very different, whether there be the merchandising, the customer experience, having all the brands where they are. How do you think about leveraging that and at what pace can you do it?

Interesting enough, a lot of the things that we brought together in Brooklyn, we’ve actually went to all these places and it’s the first time since that’s all been pulled together. So, when you look at some of the digital experience that scan some more of the interactive catalog, the digital products and device those exist elsewhere, the idea of doing localized product in shell would be like the one in Brooklyn aspect, we’ve done elsewhere. If you go down to Kennesaw of some of the fixturing, if you gone to Hyannis and you seeing a new Bed Bath & Beyond, some of the picture and the signing components we’ve done elsewhere, so if you take some of the special services, the home delivery, the assemble, the installation, some of these things have been done elsewhere that the growth of the food component that we have in the stores the craft beer and wine that we sell directly ourselves. So, all these things that some aspects of it had been in the works elsewhere and we’ve taken these learnings and we’ve put it into this one venue. So, those things are being rolled forward and hopefully as we open up new stores, they will not look like the old stores, and to the customer it will be recognizably different. So, we’re taking those learnings now and moving them forward. So, on an individual basis, that had been happening, and if the opportunity exists going forward and on the big scale to take the project in it’s totally iterated and to do it elsewhere that will also exist.

And our next question comes from Simeon Gutman from Morgan Stanley. Please go ahead.

Thanks. Good afternoon. So, one question on sales, one on margin. On sales, just trying to get a sense a sort of tempo in the business. I think it was mentioned that it was good Black Friday and I think through Cyber Monday, the implied Q4 guide I think is almost plus 1%. Just curious if that implies that the trend has continued and can you talk about what percentage of the quarter, in terms of revenue, is still to go?

So, you’re right. We did mention that we had some strong comp sales from Black Friday through to Cyber Monday and we’ve had what we’ve seen to-date. We do have a few critical days leading after Christmas that we have assumptions for and then plans for the rest of the quarter. So, we do in our model have quite a positive comp for the fourth quarter.

And Simeon just also to the answer what Sue said is that actually that sequentially we had held for and we’re seeing sequentially a better third quarter than both our first and second quarter in terms of our comp right up until the week before the election, and then I think there is a lot of noise around the election and then after it, we recovered again, so from all those perspectives and then had a good Black Friday week and we can write into that through that Monday, so again all of that is encouraging.

And I didn't want to – I guess, I didn't want to ask this as the follow-up, but can I ask why are you seeing all categories pick up, is it response to free shipping, is it response to some of the higher ticket items you're selling in the home furnishing space. Curious what's the change? Is it something that feels sustainable to you?

We really don’t talk specifics about a category, an individual category but as we’ve been calling out, we have seen good growth in our digital channels and we’re going to continue to provide great customer service through the rest of the quarter.

And Simeon since you didn’t want to ask that as a follow-up, we should give you a third question? That’s a way.

And our next question comes from Michael Lasser from UBS. Please go ahead.

Good evening. Thanks a lot for taking my question. You've always kept your cost structure very lean, especially on the SG&A side. So, if sales continued to be sluggish, do you have opportunity to pull back on costs, and what's your philosophy there? How do you manage that without impacting the customer experience?

Well, you said it well. You can’t impact the customer experience that’s one thing that we feel is extremely important. We’ve talked to them in the past about how we’re a cost-conscious organization and we feel we have a culture of cost controls. It’s something that we look at and monitor every day and we’ll continue to see where we can cut costs but obviously not at the expense of customer service.

Just to add to that, I think we were just looking at something, the question about the SG&A regarding the dollar rise in the third quarter. The third quarter was the first full quarter for...

One Kings Lane.

One Kings Lane and also we had a little bit of the hangover through PMall. Could you say that? I’m sorry.

No, you’re absolutely right.

We didn’t mention that. We should have.

So, you do you think you have an opportunity to cut costs if sales remained sluggish? And let me add my follow-up question because that was more of a clarification. You are running up against a 3x adjusted leverage ratio. What's your appetite for buying back stock as you move towards that guardrail? Thank you so much.

Our appetite in buying stock is that we’re – we’ve generally dollar average in and we look at – we look at that every quarter and consider through that.

And the first thing we’re looking to is use the dollar stores basically to reinvest in the company.

Yes, after that we would look at acquisitions and then in the dividends but share repurchases was some of the end of that. But we do have share repurchases. We do plan on continuing that program.

And on the SG&A side of your capacity to pull back on – could you size that amount that you could potentially tap into if sales do remain under pressure?

You know what, again it’s that the things that we’re spending on because we believe in these investments we’re making, so it’s not a lack of capability and we’ve always said we could produce whatever numbers anybody wants in a short-term but the thing is we’re investing in the foundation we’re building is to be a great company. We’re not going to save our way to create this. So, it’s not our intention to cut back on things that we believe in and that we believe we need to be building on for the sake of to do things additional earnings for particular period of time. The things we’re doing believe will generate the additional sales overtime and will generate at the additional profitability, but it is like you said it’s something we’ve always been tremendously of course conscious but the decisions we’ve made not to do these things has been not for lack of capability because these are the things we believe we need to be investing in.

And our next question comes from Seth Sigman from Credit Suisse. Please go ahead.

Thanks. Good afternoon. I wanted to follow-up on the fourth quarter outlook. When you look at the guidance, it implies an improvement in earnings growth, or I guess, less of a decline. Some of that’s the sales improvement that you talked about but how much of that is accretion from PMall, and also I guess what else would be contributing to that earnings improvement relative to some of the margin trends we saw in the past quarter?

Well, we do have PMall included for a full quarter in the fourth quarter. They have some slight leverage in terms of the gross margins, and we also do we have as previously mentioned a slightly positive comp in the fourth quarter plan.

Okay. And can you quantify the accretion from PMall?

We did – when we did our release we did say its slightly accretive overall from an EPS perspective, that’s as far as we disclosed. But overall PMall is not material but it is slightly accretive to the overall business.

Understood, okay. And then, Sue, you outlined some investments earlier in the year, the $0.17 for technology investments. I think it was $0.23 for payroll. Can you give us an update on how that's tracking? It seems like a little bit higher with One Kings Lane and PMall, but just where are we today, and then also as you think about next year, I realize you're not going to give guidance but can you give us a sense of whether these investments or these expenses start to roll off, or do you consider them as part of the embedded cost structure going forward? Just trying to understand, do we assume sort of a higher level of spending could persist in 2017? Thanks.

Sorry, so we have been calling out all year that we’ve had increases in the payroll and technology, so we have been seeing what we originally meant and way back when at the beginning of the year and so we continued to see those trends.

Yes, and as far as next year, the investment we made in payroll rate will continue next year. That won't reverse itself. That will continue. We’ve given people raises and so they will still continue to at those last year, and like Sue said we continue to invest in technology platforms and so that will continue next year also.

And our next question comes from Matt McClintock from Barclays. Please go ahead.

Hi, yes, good afternoon, everyone. I was wondering if you could talk a little bit more about the opportunity in personalization. You mentioned 5,000 SKUs already. I was wondering how big can that be and how crucial is that to the differentiation strategy that you are trying to follow? Thank you.

Yes, it’s just a component piece of it. It’s important and I think where we say there is – what’s the number – a few billion dollar, and I know again all these things you could read any trade journals. Believe it or not believe it, the part of it is also when you make of it. Now importantly when we talk to you internally with a lot of our merchants, they think it’s a significant opportunity with our existing merchandize assortment to draw it business through personalization. And personalization and aspect of differentiation is one aspect of it. I wouldn’t say that it’s more or less important than anything all other things that we could do to differentiate, but it’s something that we were building out ourselves, we’ve looked at opportunities for a while and we’ve really thrilled to be able to have been able to partner now with PMall and we think that this is the beginning of something that will grow very well for us.

And it also complements a couple of our lifestyle businesses such as BABY or Bridal where personalization is a desired product at that time.

All right, and when we go back to talking about doing more that customer understanding their life stages and the life interest. If you understand those things to be able to buy it and get that directed towards those very important events for interests, it could be very competitively sound for us. So, one of the things that their processes are very strong, they have – it’s just strong customer service mentality that they have – the technology is very strong and their turnaround time is world class and the capability is to support the rest of our business we believe is there. So, for all those reasons growing them from what they do under the PMall name and then what it could mean for the rest of the organization, we think it will be wonderful.

If I could follow-up on that as you think about the market, the $15 billion that you talk about, is there really anybody that's doing it the way that you could potentially bring personalization to the consumer. I'm just trying to think about the competitive dynamic that exists in that market today. Are you looking to take market share of that market, or are you just looking to grow the TAM that addressable market in a more meaningful way because you are focusing on something that's just un-serviced today?

I think both. I think that as they improve their look and their feel, as they improve their blanks, so they are products that they offer and they are marketing, there is an opportunity to take market share and there is really develop new categories within personalization with our product offerings. So, I think there is an opportunity to expand the market. So, both would be opportunity. It’s funny to be going back when your bed and bath as a business there was little bed and bath stores and it was done by department stores and they felt the market was less but then you get specialization and then you recognize the market might be wide. No different in the pet industry or no different with container stores or closet and storage. So, in each of these categories I think that you actually do something well is that you do in part develop demand. So, that is hopefully part of what we will do.

And your next question comes from Matt Fassler from Goldman Sachs. Please go ahead.

Thanks a lot. Good afternoon. My question focuses around how you think the company is thinking about value as they think about list price, as they think about the coupon and what levers you have to drive the perception of the value you deliver whether – and I know that the membership program I’m sure is probing at ways of thinking about that, but how has that evolved in your view as pricing has gotten somewhat more transparent and the competitive environment has broadened out as you described earlier in your comments? Thank you.

Having different -- you’re welcome, Matt. Yes, you have to differentiate a product again. If you’re going back to that is that if we really want – it’s great that if we want to do less sensitive to that direct competitive pricing models that you have to have differentiated product services and solutions, so we start with that and that’s very important to us. However, when it comes to being at the right price or similar or the same merchandize, we’ve taken a position and we maintain that. We have to be at that price, so that if other people are which price transparency more so than ever that you have to be at the right price in terms of that but right price before the coupon. They can have the coupon be a – think that that’s in anyway an answer for us. It might be for some customers. It might be for some point in time, but we have to be at the right price without the use of a coupon. So, that’s the way we’ve thought. That’s the way we think that we’re constantly looking at and calling our competitors’ website that we have a dynamic price capability that we are using today in growing it, and so it’s all important that we got and it’s something that we report on with everybody every day and with every plan and that we look at – measure ourselves against to make sure that we’re at that right price because we don’t believe that for a second that it’s okay now to be. I’m not sure if that answers the question, Matt?

It does. And to the extent I guess that in the past perhaps you leaned on the coupon more to bring you to that targeted price, and now you want to get there beforehand. Is membership the best or most likely way to deemphasize the coupon, or are there other kinds of marketing you could do to maintain that traction and drive the traffic, without hitting yourself twice on price by getting right product coupon and then having that extra discount?

So, listen, I don’t want to keep beating this drum but it is the truth is that, first of all, we have to be thought of by the customers as their first choice. So, when we talk about all those life stages and life interests, truly when I talked about BABY and Bridal and new mover and back to college and decorating, we have to be the first choice. We have to be the first choice for enthusiasts. We can't have it be a competitor when it comes to cookware or bakeware or when it comes to closet in stores. We have to be the first choice for these things. So, with this certain point that we have that differentiated product that we really do provide services and solutions that are better for the customer and they recognize that and that we doing through inspirational marketing and that we do it through better content. Now I was just looking before something that we do versus one of our competitors in the cookware arena and how we sell it online and how we talk about it and the knowledge that, and frankly we’re doing well. So, these are the things that customer has to see, so that’s critical to us because again it can't be about the coupon. We have to be at the right price because all different things that are revolving that this product that that’s we’ve got been – that the vendors maintain pricing, everybody is at the same pricing. We’ve never been able to take a coupon on. Now that’s a new model. That’s something that we understand is product that to a customer who say it different but they might not understand how it’s different, so we’re not doing a good enough job of communicating, so we can't price it differently perhaps but when it’s the same product that customer believes it’s the same product, we have to be at that price pre-coupon. It’s that to be after one price going forward, the customer won't find you. When they go online, we’re not going to be prevalent. We were not going to show up an algorithm. We’re not going to be in the right place if our pricing is wrong. New customers who come online don’t understand even though we have a coupon that we didn’t know what coupon is or what it means. So, for us to be reliant on a coupon and to be at the wrong price, it’s just a wrong thought process. So, when you said that we’ve used to think that way, I don’t know. If somebody in the organization told you that it’s not the organizational thing. We’ve never believed that we could be at a one price because of the coupon but the coupon protect us for being at the wrong price, never the case.

And our next question comes from Dan Binder from Jefferies. Please go ahead.

Thank you. Maybe just following up on that question, when you say the right price, I just want to understand who you are putting in that competitive set. Is it Target and Wal-Mart, is it Amazon, is it all of the above? And does that put you in a position where you actually want to be the low-price leader or just need to be within X percent of the low price with it?

They are all competitors as other department stores as other specialty players, so as are the other pure play people, so they are all competitors. The overlap of merchandize with a Wal-Mart is far different but to a target and maybe less so than Amazon in a different way. But for the same product, all those places are very relevant, so to the extent that we’re at the wrong price, you wrote the wrong price. And then when you see the right price, that’s something that literally is an interesting question. We have all these analysts now and they run all these algorithms and they’ll come back with the conclusions and how you move to shopper and if you’re within certain percent or a certain sense, have certain price points or a certain times of the year and certain categories you got to be exactly the same pricing, so all those things are things that are not one answer across the board. In some cases, they have to be at the same price and maybe in some instances, if you would $0.10 higher or 2% higher might not be important if they are bundled with other things that only will carry perhaps. In some cases if we’re competing with somebody who is really a category killer who is really known it, maybe we have to be below that place to be relevant. So, all those things is now one answer but generally if you ask me the question the general answer that I will tell you ask those things right to the general answer I would give.

Okay. My follow-up question related to new categories that you've added online over the course of the last year to two years. Curious if you could just give us an update on how those categories are doing, and if you've found ways to differentiate in those categories beyond just the initial urgency to get them up and on the website to have the assortment that you want?

Well, the categories are all growing. That’s a general all, because the reason I’m – most things but aren’t all, but it happens to be because they are all started smarter plays with of course the board. They are all growing. The other thing that we did talk about and that we acknowledge is that we haven't gone to great lengths to introduce our customers to these other categories today. So, it is critical that would be great in our core categories, it’s critical to us I think that we’d be great and really close ancillary categories. At that point we would make sense to start introducing them to everything else that we sell. At that point, we would know about our customer. We’ll know more about their life stage, their life interest, what they’ve shopped or what they’ve searched for where they’ve done other sites, where they’ve come from, where they’ve gone to, when they’ve left our sites to be able to offer them other products that we sell. But for today we really haven't gone really any length to really introduce the customers to all the other things we’re adding. It will be there, and at the point in time that we’re prepared to do that the assortment will be rich. There is so many things about it. A lot of it is then to direct. So, lot of it we have to get relationships with these vendors that have confidence in their capabilities to satisfy the customers to deliver to the customer. If you look at certain categories and you look at the search and how do you search for it on our site, you would be disappointed. You would look at things and say, my god, that’s not best in class in some of these categories but to be wanting to introduce the customer to certain categories today when we don’t do it well, when we really have to double down on our core categories to make the customer understand how we’re different, why we’re different, why we’re great at them. It’s just – it hasn’t been the appropriate time. When you take a look at the 84 page on catalog that we did that it’s perhaps a first step in just introducing to the customer that a number of other things that we sell are categories that we sell. That’s really maybe from the first time a constant piece run out to even introduce through them in a large scale and that book was a very limited book. In this spring we’ll have the opportunity to expand upon that but it’s really having something that – I think we asked nine out of 10 customers maybe I shouldn’t be giving numbers for most customer, a lot of the categories we added there, we carried they would be surprised. I know that Gene tells me stories all the time it’s about family members who don’t know. I count on Gene to make sure these are good communication vehicles for us. So, it’s a big opportunity for us that we’re not in a rush to be off with something. We’re looking out – so we will get there but for the time being we’re adding to our website. We’re organizing it so to be searched. We’re learning the vendors to make sure that they could deliver on our promise to service for our customer and at the appropriate time we’ll introduce the customer to the expanded offering.

And our next question comes from Budd Bugatch from Raymond James. Please go ahead.

Good evening. This is David on for Budd. Thank you for taking my question. I was hoping that you could provide a little bit of color on the ticket and the frequency of shop for customers that have gotten the opportunity to sign up for the membership program?

Listen, if Budd was here, Budd would tell you then don’t even ask that question. I’m not going to share that type of information. Again, it gets a little bit more specific than we compare to discuss today. It’s really a small segment. It’s a real one for us and it’s a really – it’s going to be a learn-over time. It’s so important to understand that – because the initial excitement about joining these programs and initially use related to it and to understand the sustainability of it and what it means overtime is something that we need to learn.

Okay. Then maybe coming at that different way, can you talk about or can you just give an idea of the online customers that used to get fulfillment of the product to home under the old free shipping threshold and the current $29 free shipping threshold, what percentage of those online orders qualify for free shipping?

Under the beta test do you mean?

No, no, it’s…

It’s going from the $49 to $29 at Bed Bath & Beyond. Q - David Vargas. Yes.

Is the question how much is the shipping at $29 – how much of the shipping becomes free shipping? Q - David Vargas. Yes, as a percentage of all orders placed online, how much of it ships free under the beta test $29 and under the, I think the older or the prior free shipping threshold, correct me if I’m wrong, was $49. What percentage of online orders shipped free?

Yes, we don’t have the percentages to released, but it is a significant portion. It’s shipped free and it did – obviously, it did go up once we know what the threshold. Q - David Vargas. Okay, and that’s been a significant contributor to the gross margin decline just out of more customers have shopped online and you’ve expanded that? A - Susan Lattmann Yes, one of the callers we made actually was – it was the in order of magnitude. It was the first one. Q - David Vargas. Okay. All right, thank you for taking the question.

Thank you.

And your next question comes from Denise Chai from Bank of America. Please go ahead.

Great. Thank you. So, you mentioned closing 15 stores. Were there any common themes in terms of location, demographics, maybe competitive set or performance, is this a new run rate for closures? And just given all your investment in e-commerce, how are you thinking about your store network now?

No, and we love it. Yes, we just look it is that it really has been a cross section of stores. It really has more to do with coming to the end of the term, not being able to negotiate a favorable occupancy looking out over the future term of the lease with our expectations of what’s happening with foot traffic. Also, we look at what business do we pick up in the market if it was out the cannibalization. If we look at the other impact of closing this door, because getting to your last part of the question, the third part of the question, the stores are critical. The stores – not only for their four-wall profitability but the store is also today for the appointment scheduling to start a registry, to buy online and pick up in the store, to be able – to buy expanded assortment and return something in a store. Those things are critical to store in a market drives online digital business. It drives it the visibility of the store. So, for all those reasons why the stores are important. And the middle – the second part of the question I guess which is the run rate question, is that there really isn't a really run rate and these are independent decisions being made based upon what’s coming available to renegotiate and the landlord’s flexibility and the impact of keeping it open or close based upon the new economics. So, if told me that every landlord was going to cut their occupancy in half, I would tell you that that run rate would be one thing. If you told us that everybody was going to imply with the lumpiness of the flavor of the day, then it would be something else. But I don’t – it’s not fair say to a run rate. We really are making independent decisions in each case trying to make the right decision.

Okay. Thank you. Understood. And just a follow-up on that. How big is buy online pick up in store and can you comment on attach when people make a transaction like that?

What was the last one? I’m sorry.

I mean, when they do buy online pick up in store, how often do they buy something else in the store?

It’s a growing part of our business. It’s popular, and so we continue to make sure that we offered and we think it’s a great service for our customers. We haven't shared what the incremental saturated other items when the purchase happens in the stores. We haven't shared that information. Q - Denise Chai Okay. Thank you.

And our next question comes from Brad David from SunTrust. Please go ahead.

Yes, hi. It's David Magee. I had a couple of questions. One is with regard to the comp number, if you looked at the stores that have the latest offering of Harmon and Cost Plus, and other items that were more seemingly traffic-driving, how did those stores do relative to the broader comp pool?

We slice it and dice it all those ways and I would say that what we’re experiencing really is those differences are a lot small at best. The notion that if you have more commodity goods, you don’t do create more foot traffic, so that those stores might experience a smaller decline in the comp. I mean that makes a logical sense and those departments might do – might fare better, but again when you look at it in totality, is that it really this is something that we’re seeing across the board in relatively similar proportions when it comes to the impact of the foot traffic and our reductions in comp. There is not a silver bullet by saying that if we had more stores with commodities or more stores with combination BABY Bed Bath that we would to be doing slightly better. It’s very – it’s on the margins.

Thanks, Steven. And my second question has to do with just the way you all are messaging now. Obviously, coupon has been around for a while and the whole new catalog I thought was good and the Beyond+ sounds promising. Which do you think will have the most traction with millennial customers going forward?

Well, my 18-year-old daughter texted me today because the Wall Street Journal wrote about our beta plus program, she says no they were everybody is want to spend more money there. So, personal to every millennial. When you say what would have more, I think it really depends upon an individual. I think that when you talk about a millennial, the really – it’s a business opportunity we are growing our digital business. When you talk a millennial, you’re talking about the social media that to do when they say – look at our experience with Instagram or with Facebook and you see that when we’re improving those vehicles to communicate with the customer and you see the response rate increase, when you look at the ability to drive better content online, when you look at being able to be more inspirational, I think all that will register well with the millennial. So, when you talk about, well, do you think that the beta programming or that, I don’t think it’s those types of things. I think it’s really reaching the millennial customer where they are and it starts with our back to college business. It starts with our Bridal business, with our BABY business, with our new mover business. Those are opportunities to address this customer to provide them a great experience, learn about what they are doing, what they are interested in, what they are doing next to communicate to them, what we have to offer and how we’re providing solutions for them to create that stickiness. So really I think it’s to be where they are and to deliver in a way that they appreciate it. So, I don’t think that you can look at those two programs and say one of those two programs is some type of abstract.

And our next question comes from Laura Champine from Roe Equity Research. Please go ahead.

Good afternoon. We'll keep it brief. When Bed Bath rolled out more advertising that promotes the fact that coupons are saved to a consumer's online account, did that drive incremental usage of coupons online?

Are you talking about My Offers?

Yes.

Yes, and you’re talking the postcards what we called out at that postcard to be used online?

Yes. Did that show and did you see an incremental level of utilization of the My Offers site or of the coupon generally when you did that?

Yes, I think a certain percentage of the customers showed that on the coupons. There has always been a desire for a segment of the customers to use their big bloom – we call them the big blue coupons online and a percentage of them did use them online.

And then just as a follow-up, you've called out e-commerce growth better than 20% for many, many quarters now. Is it a material lift that you see when you lower shipping thresholds or are you needing the lower shipping thresholds just to be competitive?

Competitive environment is important. It really it is and so – and as Sue said and how it impacted us is that it is received by the customer and it is a relevant element for our customer deciding where to shop. So, we went to the $29 and we will really add it all quarter?

Yes, except for a few days.

And it’s being extended at this point?

It is.

So, you could take from that, that’s our interpretation.

And your next question comes from Peter Benedict from Robert Baird. Please go ahead.

Hey guys, real quick. Thanks. Two questions. One, just on the membership program, Steve, you said you were encouraged so far. How do you define success here, is it customer acquisition and revenue growth? Is that priority one? Where does maintaining the margin profile rank within your goals for that program?

It all rolls up, again, listen it comes out to profitability, right. You’re looking at the life time value of that customer and you’re looking it and you’re improving, you’re creating additional stickiness to shouting more often with the average ticket. You’re looking at what you’re giving away in connection with that. You’re looking at also the opportunity to reduce mailings to that customer to learn. So, all those things are part of the equation but really understanding is that relationship a more profitable relationship for us which is something that we’ll see overtime and when we say that the response to it exceeded our expectations and we have a long waiting list of people who have been told of it. And so, from that perspective it’s a learn as well, but we went out there with the test of $29 and we went out there with the purpose of learning whether it will be not just initially but what it will be with these customers they will decline and that’s what we’re doing. So, it really – the chapters are not written yet. We can't give you the answers but ultimately we want to be able to be have that relationship being more profitable for us that the customer is having a more sticky relationship for this and they feel better and are happier and they are shopping more because of it.

Okay. Thanks for that. Understood. And so just quickly on the interest guidance for the year, I mean, obviously the fourth quarter is implied a decent step-up versus the trend rate so far this year in terms of quarterly interest. Are you expecting another deferred comp adjustment like we saw a couple times last year? Is that what's driving the uptick in interest in 4Q?

Yes, it’s generally – you’re referring to the prior year?

No. I just think it implies something north of – pardon me, it would be north of $22 million in the fourth quarter and has not been running anywhere near that in the last few quarters. So, I'm just curious what's driving the uptick?

Yes, previous quarters will have adjustments to the non-comp, non-qual plan. We never anticipate what the current quarter is going to show. It’s really dependent on the stock markets as most of the participants have their investments in stock market funds. So technically we’ll plan each quarter just with our insurance payments and our debt and some of amortization of the capitalized leases and then it will fluctuate. So, it rarely will be that number at the end unless the stock markets stayed the same. If the stock market goes up and down, it will go up and down.

It will impact us.

And if it goes, it’s all set up in SG&A and has a zero impact on the P&L.

Okay, understood. Thank you.

And our next question comes from Seth Basham from Wedbush. Please go ahead.

Thanks a lot and good evening. I want to circle back to the topic of pricing, just to understand where you're at now. You want to be competitive at your competitors' level. Do you feel like you're there as of now? Based on our study against Amazon, which obviously is showing one of your competitors, a basket of goods that we priced is still meaningfully higher than Amazon, so that's why we're asking.

Yes, in terms of what we – that is all good input, but yes, we do believe that you’re never there because of dynamic pricing. So, if we call our competitor’s website throughout the day and I just looked at a report. I don’t know if it was two days ago again that showed that we were in a good place. So, that doesn’t mean that every item and every minute we’re going to be right and whatever you could send up or whatever we could learn is valuable to us. We’ve seen reports overtime that indicate that we’re X percent better which is not what we’re showing either. So, but we have very hard data on every skill that overlaps with our competitors. So, last thing wrong because you picked the basket and we need to study it because we do this all day long every day and we believe we’re in a good place.

Got it, okay. If you are in a good place on price, and you are in driving personalization, et cetera, what do you think is the main thing that's leading to some share loss that you guys have been experiencing? Is it simply just a decline in footsteps through your doors because of the overall retail trend, or something else?

I think that’s a very good contributor. When you look at the large percentage of our business that we rely on in store today that when we look at all our competitors basically and we see that they are having similar issues with foot traffic, that would seems to be and when we look at our digital business and how strong it is, as we look at – as we – components of our business where we expected to be relatively strong, it keeps coming back to foot traffic in the stores. I guess there was the case that we expected this that we’ve expected this over time that of course that we could drive and go our digital business to better off we’ll be in that sense in terms of our top line, and as far as this quarter itself because that we just reported on, we were seeing that sequential improvement from those our first and second quarter right up until that week before the election and then after the election we started to improve again, but we had a couple of very bad weeks and we had a strong Black Friday through that Monday and we’re anticipating a positive comp for the fourth quarter, so but given that all in totality, it would all be better with stronger foot traffic.

And then as well, we have…

And by the way just to be clear that is because Seth that’s a great question that this is our model and we always want to be our model but it’s our model but to the extent that we under-perform our model and it doesn’t come in this plan, then it does jeopardize the entire model. So, to the extent that we were – first that we’d be stronger in terms of the range at the beginning of the year and now we’re less strong within that range, listen, if things were worse we would be out of the range. So, all those things are the reality of building the model, but for now as the model would show and the business would indicate from where we are today and where we predict that we’re going is that the trend line is a good one for us but we’ll have to see.

And that’s all that we have in the queue. I’ll now turn the call back over to Janet Barth for final comments.

Great. Thank you, Adrienne, and thank you all for joining us on the call today. From all of us here, best wishes for happy holiday and we look forward to having you join us again on our next quarterly earnings call which is scheduled for April 5, 2017. Have a good night.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.