Welcome to Bed Bath & Beyond’s Third Quarter Fiscal 2017 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 20, 2017 at 8:00 PM Eastern Time through 8:00 PM Eastern Time on Friday, December 22, 2017. To access the rebroadcast, you may dial 888-843-7419, with the passcode ID of 46090929. At this time, I would like to turn the conference over to Janet Barth, Vice President, Investor Relations. Please go ahead.

Thank you, Adrienne, 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 Sue Lattmann, our Chief Financial Officer and Treasurer. 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 during the call today. Please refer to our most recent periodic SEC filings for more detail on these risks and uncertainties. The company undertakes no obligation to update or revise any forward-looking statements. Our earnings press release dated December 20, 2017 can be found in the Investor Relations section of our website at www.bedbathandbeyond.com. Here is a brief summary. Net earnings per diluted share were $0.44 on net sales of approximately $3 billion. Quarterly comparable sales declined approximately 0.3% and included strong sales growth from our customer facing digital channels and a low single-digit percentage decline in sales from our stores. Sue will review our quarterly results in more detail, but first I will turn the call over to Stephen who will provide an update on the progress we are making on the transformative initiatives discussed during our last several conference calls.

Thank you, Janet. We are focused on our long-term strategy and continued to prioritize initiatives and align resources as we execute our plans to transform many aspects of our business in support of our mission to be the trusted expert for the home and heartfelt life events. During our quarterly conference call in September, we discussed our three strategic customer-centric priorities that we believe will further differentiate our business, deliver on our mission and position us for long-term profitable growth. First, assortment, we want to present the meaningfully differentiated and complete product assortment for the home of the right quality and at the right value. Second, services and solutions, we want to provide services and solutions that enhanced the usage and enjoyment of our offerings. And third, experience, we want to deliver a convenient, engaging and inspiring shopping experience that is intelligently personalized over time. Concurrently, we also are driving several internally focused initiatives that are building upon our solid foundation of operational excellence. I would like to spend the next few minutes highlighting some of the progress we have made in these areas. First, let’s start with some elements of our assortment strategy. We have developed a multifaceted approach to expedite our growth within the furnishings and decor category and further establish ourselves as the expert for the home and heartfelt life events. As we have said before, this is an important category for us not only for building credibility as the expert for the home, but also for driving incremental top line growth. The approach we are taking to accelerate results is to assemble a highly cross-functional dedicated team of internal experts to build and execute against all aspects of growing the furnishings and décor business, including assortment, store, marketing, supply chain and customer experience. Some categories for us that continue to see strong growth are rugs, furniture, lighting and home office. This is reflected in the more than 70% sales growth we have achieved year-to-date in Bed Bath & Beyond, the total furnishings in décor that is fulfilled directly by our vendors. We are excited by our progress as we expand our market share within this category. During this past quarter, we continued to make progress on the development of our business plan, our assortment strategy and resource needs to deliver on its critical objectives. We also accelerated our efforts in analytics, marketing, the store experience fulfillment and SKU on-boarding to further support this. Another part of the assortment strategy is the expansion of our newly evolved [indiscernible] concept. With its ever-changing merchandise selection, deep value and treasure hunt shopping experience, all of which continue to drive foot traffic and complement well for growth in digital channels. During the quarter, we opened two [indiscernible] stores. This makes three very recent openings reflecting our latest iterations of our store layout, merchandise assortment and store operations model. The newness and freshness of the assortment together with the deep value offered are important part of the treasure hunt shopping experience and encourage more frequent visits. Each of these new stores is off to a good start. Another key component of the assortment strategy focuses on how we ensure that the value we offer across all our products is fair, reasonable and competitive. For example, we are dynamically pricing online and we remain committed to being consistently right priced in our stores as well. While market responsive price changes are more challenging to store-based product, we are taking the operational steps necessary to improve our ability to do so. In the near-term, we plan to re-launch our price match promise to our customers to further emphasize that we match competitive prices, including our own online prices, where they may differ. We are building upon our prior investments in pricing by incorporating additional tools and processes to identify pricing opportunities that will drive volume, margin dollars and enhance our value proposition to our customers. Next, let’s turn to services and solutions. Here, we remain strategically focused on our core life-stage businesses, including wedding, baby, college, and moving as well as our newest service offering for decorating, which further support our mission. Over the years, we have grown our leadership and expertise in these areas by helping customers manage through these exciting, but oftentimes stressful life stages. In our registry services, enhancements to our digital registry platform provide a simple, more personalized and guided experience to build and manage a registry. To further differentiate ourselves of service and strengthen our leadership position and registry, we are planning to expand our omni-channel service offerings and leverage our expertise and robust customer data to provide an even more engaging customer experience. For example, we will have live chat available for customers to connect online with one of our registry experts to get answers to questions or receive product recommendations. We believe there is a tremendous opportunity to improve how we transition customers through these important heartfelt life events and enhance the lifetime value of our customers. Within the decorating initiative, we are leveraging decorists, our newly acquired online interior design firm and their growing designer network and platform to integrate design services across many of our concepts, including Bed Bath & Beyond, buybuy BABY, Cost Plus World Market and One Kings Lane. We are in the early stages of rolling this out both online and in-store. To start, we have launched a nursery design services landing page on buybuybaby.com and recently introduced interior decorating services on bedbathandbeyond.com both powered by decorists. Cost Plus World Market has also introduced decorists to its customers and an e-mail marketing campaign during the summer and we will launch interior design services on its website in 2018. In-store, we have been conducting a few test and learn experiences to refine our approach as we move forward. For example, we recently launched an initial test, which includes custom-built store applications to drive engagement in-store through online. By bringing these services to a broader audience and providing customers with an affordable and convenient solution to interior design, we strive to create a competitive advantage and further enhance our credibility in the furnishing and décor space. Turning now to our third area of focus delivering a convenient, engaging and inspiring shopping experience that’s intelligently personalized over time, experience, a key initiative within this objective is the development of a modified store format for Bed Bath & Beyond that creates a more engaging environment for our customers. The newly designed format will essentially transition our Bed Bath & Beyond stores to include additional elements of retail that are working well today both in our own stores as well as in the broader bricks and mortar retail environment. For example, we know that deep value product and the treasure hunt experience are driving foot traffic in-store encouraging browsing and increased purchases and promoting frequent visits. We know this from our own performance across several of our categories within our concepts as well as from seeing the traffic and results of other retailers. Deep value can be represented in consumables such as health and beauty care and food and beverage as well as within the core Bed Bath & Beyond offering. Treasure hunt is represented in the differentiated mix of merchandise consisting of product that is new, fresh and/or has limited availability. These types of products exist across many of our categories, including furnishings and decor and our seasonal departments. Going forward, we plan to put a greater emphasis on these elements in our Bed Bath & Beyond stores and incorporate our successes from across all of our retail concepts to more fully leverage them. Beginning in March 2018, new Bed Bath & Beyond stores will be noticeably different to our customers as these facets become more significant components of the store. The existing space of core Bed Bath & Beyond merchandise will be reduced. However, through our show more, carry less initiatives, we can show the customer all we offer today in-store and more. As we continue to enhance the store experience and incorporate new infrastructure within our stores, our associates will have devices that will greatly expand their ability to service our customers. Coupled with an increased emphasis on selling, skills training, we will be able to create a better experience for our customers and drive future sales growth. Approximately a dozen newly formatted Bed Bath & Beyond stores, including a combination of relocated and renovated stores are planned to open by the end of our fiscal 2018 third quarter and then we will assess, refine and iterate for future openings and rolling back to additional existing stores. To further deliver a noticeably different and better shopping experience online, we are elevating the shop ability of our digital channels. We will do this by providing a complete and differentiated assortment that is easily searched having the right information and content that help our customers make confident purchase decisions as well as ensuring that the experience is frictionless at all stages and intelligently personalized. Our investment in digital innovation, are both foundational and meant to create further differentiation for us. We are focused on those initiatives that communicate our expertise throughout the online experience, including through content and curation as well as through guided selling tools, idea boards and interactive checklists, all to help the customer or easily find, manage and purchase the items they are interested in and receive them when and where they want. For example, on the Bed Bath & Beyond website we continue to update and refresh our trends and ideas tab, where customers can browse curated collections of product for inspiration. We recently added a feature to the site that allows customers to tag items they like and save into an idea board for future reference. This feature has become very popular very quickly with thousands of idea boards created everyday. Of course, achieving digital shop ability goes hand-in-hand with ensuring that we have smooth and efficient fulfillment processes for our customers across all of our product categories. With this objective, we are examining all aspects of our logistics network to improve speed and efficiency, convenience and the overall delivery experience for our customers, especially as we expand our position within the furnishings and decor category. For example, we are comprehensively evaluating our supply chain and utilizing industry leading optimization software to accomplish this goal. This supply chain study will help us optimally structure and resource our current infrastructure for future business demands. Our focus on our assortment, our services and solutions and the shopping experience we provide are as I mentioned more customer-facing in nature. In addition to those initiatives, we are driving integrated portfolio of internally facing projects that will build upon our strong foundation of operational excellence and improve our efficiencies over time. With the assistance of our SPMO, we have identified several strategic priorities, including customer service transformation, gross margin enhancements, inventory optimization and supply chain. These initiatives are ongoing and for some are executing against the roadmap, while to others, we are aligning resources and completing the roadmap. Let me give you an example from customer service transformation initiative since it is the furthest along. As we described during our call last quarter, CST is focused on transforming our store operating model to better meet the evolving needs of our customers in an omni-channel environment. During the quarter, industrial engineers completed an assessment of our Bed Bath & Beyond store operations as planned. Over the next several months, we will begin to implement certain of the recommended changes that will drive operational efficiencies. In addition, we are in the early stages of implementing a new learning management system to deliver e-learning and training programs. We plan to convert existing content and develop new e-learning material, specifically for our store based associates to provide a more efficient and effective product and sales training, so they can better assist our customers and demonstrate our expertise for the home and heartfelt life events. On a cumulative basis, we continue to project that these SPMO initiatives and other ongoing internally facing initiatives will produce savings in excess of $150 million over the next few years. As we have said previously, we do plan to strategically reinvest a portion of these savings to drive future growth. While it’s too early to say how much will be reinvested our focus remains on driving customer satisfaction, which should manifest an additional top line growth. In this rapidly changing environment, we are moving fast by leveraging our newly established SPMO team adding skilled resources both with internal and external expertise where needed and reprioritizing the efforts of our talented and dedicated associates. We have further advanced our ability to accomplish our mission. We have made considerable progress in our ability to align the organizational resources to accelerate our strategic priorities. Each of the initiatives we are working on has its own framework and structure built around cross-functional coordination to expedite results, to further our mission and to drive greater efficiencies to achieve operational excellence. We believe we have the right priorities that will move our business forward and strengthen our position as the trusted expert for the home heartfelt life events. In closing, I would like to thank our dedicated associates for their ongoing efforts as well as their enthusiasm in embracing the transformation of our company. We have never had better people or capabilities in our organization to move as aggressively as we are today to satisfy our customers and position our company for long-term success. I will now turn the call over to Sue who will review our quarterly results in more detail and then discuss our modeling assumptions for the year and for all best wishes for a Merry Christmas, a happy holiday season and a healthy and happy new year. Sue?

Thank you, Steve and then good afternoon everyone. During the quarter, we experienced better than expected top line performance benefiting from the opportunistic marketing spend and increased promotional offering that we had plans going into the quarter, which corresponds to the higher advertising costs and lower margins we incurred this period. As the holiday season approached in our third quarter, the retail environment continued to be more promotional potentially pulling sales forward. This justified in the short-term a more aggressive approach to satisfy customers, which has continued to be necessary as we approach Christmas. Now, I will review our quarterly results in more detail. Our net sales were approximately $3 billion relatively flat to the third quarter of last year primarily due to a 0.3% decrease in comp sales offset by an increase in non-comp sales, including One Kings Lane, PMall and new stores. Our third quarter comp sales reflected decrease in the number of transactions in stores partially offset by an increase in the average transaction amount. We have previously said we believe an integrated and seamless customer experience. And although we cannot tell you through which channel, a sale was initiated we can provide information based on where the sale was consummated. As a reminder of how we characterize certain omni-channel transactions, sales consummated on a mobile device while the customer is physically in the store location are treated as customer-facing digital sales. Customer orders taken in-store by an associate through the Beyond store, our proprietary web-based platform are treated as in-store sales. Customer orders reserved online and picked up in the store are also treated as in-store sales, while purchases made online that are subsequently returned to a store are treated as a reduction in store sales. With that said directionally, comp sales from our customer-facing digital channels continued to have strong growth in the quarter, while comp sales from our stores declined in the low single-digit percentage range. Gross margin for the quarter was approximately 35.2% as compared to approximately 37% of net sales in the third quarter of last year. In order of magnitude, this decrease as a percentage of net sales was primarily due to a decrease in merchandise margins, an increase in coupon expense resulting from increases in redemptions and the average coupon amount and an increase in net direct to customer shipping expense. SG&A in the quarter was approximately 31.6% of net sales as compared to approximately 29.8% of net sales in the prior year period. In order of magnitude, this increase in SG&A as a percentage of net sales was primarily due to increases in advertising expenses, technology-related expenses, including related depreciation and payroll and payroll-related expenses. As a reminder, we anniversaried the acquisition of PMall at the end of November, which did not have a meaningful impact on our third quarter operating margin. Net interest expense was approximately $13.6 million compared to $18.3 million in the prior year period. This decrease in net interest expense was primarily the result of a $4.7 million favorable change in the value of our nonqualified deferred compensation plan investment, which was fully offset in SG&A and therefore did not impact net earnings. Our income tax rate for the quarter was approximately 35.3% compared to approximately 34.5% in the prior year period and reflected net after-tax benefits of approximately $3.3 million and $6 million respectively due to distinct tax events occurring during these quarters. Considering all of this activity, net earnings per diluted share were $0.44 for the quarter. Now, looking to our balance sheet, we ended the third quarter with approximately $561 million in cash and cash equivalents and investment securities. Retail inventories of $3.1 billion at costs were down approximately 2% and continue to be tailored to meet the anticipated demands of our customers and are in good condition. We are pleased to see some of the early benefits from our inventory optimization initiatives that Stephen mentioned earlier. Capital expenditures for the first 9 months of 2017 were approximately $264 million, with more than 40% related to technology projects, including investments in our digital capabilities and the development and deployment of new systems and equipment in our stores. The remaining CapEx was primarily related to investments in our stores, our new distribution facility in Las Vegas, which began direct shipments to customers during the third quarter and a new customer contact center in the Orlando, Florida area. Also during the quarter, we opened 14 stores and closed 6 stores. Share repurchases under our current $2.5 billion share repurchase programs were approximately $24 million in the quarter representing a little over 900,000 shares and has the remaining balance of approximately $1.5 billion at the end of our third quarter. In addition, our Board of Directors today declared a quarterly dividend of $0.15 per share to be paid on April 17, 2018 to shareholders of record as of March 16, 2018. Before I discuss our outlook for fiscal 2017, I want to address the topic of tax reform. First of all, we are excited and look forward to the future benefits of a lower federal corporate tax rate. Second, we are in the process of reviewing the components of the tax reform plan, including like most companies evaluating a one-time non-cash expense related to a decrease in the value of our net deferred tax assets. We will have more to discuss on tax reform during our next quarterly conference call. Now, let’s turn to our modeling assumptions for fiscal 2017 which do not include any assumptions for tax reform. Given our actual comp for the first 9 months plus the fourth quarter comp-to-date as well as our assumptions for the remainder of the year, including the critical days leading up to Christmas, comparable sales for the full year are estimated to decline in the low single-digit percentage range. As a reminder, sales of PMall will now be included in our fourth quarter comp sales as the 1 year anniversary of the acquisition impact at the end of November. We are modeling consolidated net sales for the full year to be relatively flat to slightly positive including a slight benefit from the 53rd week. We continue to model gross margin deleverage for the full year including a decrease in merchandise margins and increases in net direct to customer shipping expense and coupon expense. We continue to model G&A as a percentage of net sales to deleverage for the full year including increases in payroll and payroll-related expenses, advertising expense, the store management restructuring charges taken in the second quarter, technology-related expenses including related depreciation and the cost related to Hurricanes Harvey, and Maria. We are modeling 2017 depreciation expense to be in the range of approximately 310 to 320 million. We are estimating net interest expense of approximately 70 million for the full year. We are modeling our 2017 tax rate to be higher than last year but still within the mid to high 30 percentage range primarily due to the impact of adopting the new share-based payment accounting standard. We also anticipate the net after-tax benefits from other distinct tax events will be lower than in 2016. Capital expenditures are modeled to be in the range of 350 million to 400 million which remain subject to the timing and composition of projects. We continue to believe that for the foreseeable future, we are plateauing at about these levels. In addition, approximately half of the 2017 spend is planned for technology-related projects in support of our growing omnichannel capabilities. We have opened 20 new stores to-date with the potential of two or more openings before year-end and we plan to close approximately 15 stores all of which would result in a net reduction of 5 Bed Bath & Beyond stores. We continue to expect our positive cash flow to fund our operations and capital expenditures as well as our quarterly dividends and the share repurchase program which is subject to several factors including business and market conditions. We believe, we will end the year with approximately the same or slightly higher cash and investment balances than last year. All this considered, we are continuing to model net earnings per diluted share for the full year to be about $3. We are currently working through our financial planning assumptions for fiscal 2018. We will provide further information related to these assumptions during our fourth quarter conference call on April 11, 2018. And on behalf of all of us here, we wish you a safe and enjoyable holiday and a happy New Year. Adrian, we can now open the call to questions

Thank you. [Operator Instructions] Our first question comes from Michael Lasser from UBS. Please go ahead.

Can you say little bit more detail on the merchandise margin decline and how far are you willing to take down your gross margin in order to drive sales?

Hi, Michael, it’s Sue. I will take your question. So regarding merchandise margins for the quarter. Was your question?

Yes. For the third quarter and then prospectively, how far are you willing to take down your gross margin in order to drive sales?

So for the quarter, in order of magnitude, we did have a decline in merchandise margin, coupons and net direct to customer and just net direct to customer expense, shipping expense. Merchandise margin includes all kinds of things in order to get the good to the stores or available for sale at through the e-com site. So it would include things such as mark-on, mix of merchandises purchased, freight markdowns to those types of items were included in merchandise margin. In terms of margin stabilization, we don’t know when the margin pressure will stabilize but there is many factors that go into it, price transparency, merchandise margin items I just discussed shrink whatnot. So, when you consider all of that and knowing that it remains a competitive environment and that we need to continued to be as Steven talked about being at the right price and offering services and solutions, we compete with that as well. We continue to have – as Steven talked about strategic focus from a gross margin enhancement, prospectively the team has focused on that and always looking to continue to see how we have proven that space.

Yes. Michael, also just to add to that is that like Sue said is obviously the objective is to keep our customers into attract new customers and so pricing is a critical component and we are doing a lot today with regard to dynamically pricing and making sure that we are priced right in our stores, but we work hard today and we have a number of initiatives around meaningfully differentiated products with the gross margin enhancement initiatives that we are doing and even around pricing and pricing isn’t just one wave, so opportunities within pricing to drive volume and margin dollars there as well. So, these are significant initiatives. So, we are not satisfied with the fact that we should get erosion that’s not a satisfactory conclusion for us, but that is where we are today.

My follow-up question is it looks like your fourth quarter guidance is implying based of low single-digit declines for full year and what you have done year-to-date. It looks like it’s implying that we are down 2% to 3% comp for the fourth quarter. All the signs have been that holiday spending has been encouraging. So, are you suggesting that maybe that has been participating in what’s been a better holiday season so far?

Now, what you listened is the first and second quarter were slightly less than we expected. This quarter was slightly more and the fourth quarter remains to be seen. So now, we were not trying to imply anything about the quarters. There is nothing noteworthy really about the quarter-to-date. We have a lot of the quarter that remains in front of us. We have obviously 5 significant days leading into Christmas and then they are about 50% or thereabouts of our sales remain to be achieved for the quarter. So, now that wasn’t the intention.

And our next question comes from Simeon Gutman from Morgan Stanley. Please go ahead. Mr. Gutman your line is open.

Sorry about that. Can you hear me?

Yes we can.

Okay, thanks. Sorry. Steve, what you are trying to build in terms of omni-channel and sales and transformed the company, I think it’s a lot bigger down the road than how the business is performing today. How do you get comfortable that you are not teaching sort of bad habits, the gross margin being down more than I guess we had expected or what the Street had expected, sales improved, but I guess talk about the trade-off and how you gain comfort that while this transition period is happening, you are not eroding how the customer shops you?

It’s a great question and there is an element of like when your company is just behind something to spec it’s either open or closed. S, there is that - always that concern, but I think we have first of all we have a good or obviously a great culture here. We are putting the customer first, so certain things don’t change that we try to really communicate what the objectives are and what we are trying to achieve and why we are trying to achieve them. It really doubled our efforts to really communicate across the company. The things we are doing, why we are doing them so that people understand what we are driving today and that we try to remain consistent that today should fit into the big picture. So, it’s a good question, but so I think it comes from a lot of – really a lot of conversation and a lot of education within the company, but I think that’s fundamentally who we are. That hasn’t changed, the things that are most are the priorities for us in terms of the customer that remains the same and we should always be asking ourselves what are we doing to satisfy the customer to exceed their expectations? And so if their expectations change, we have to be honest with us if they are expecting same day delivery, they are expecting transparency in pricing that they are accepting different prices online and in the stores. All these things have to do things that we recognized as part of the retail environment and the customers expectations. So, we stay grounded in that. And again as if we give the customer the best experience and we really truly provide them with differentiated products, the assortment that we are looking to provide them better services and solutions and an experience that really excels in our category and for these heartfelt life events, then we will be to turn the dial on these other things.

Okay. And then my follow-up, the top line run-rate certainly improved if you look at it on to 2 or 1 year basis this quarter. As you look forward and granted, you know we can do the math on the guidance. How are you confident that any of the improvement you are seeing is from some of these initiatives getting traction? Sue did mention that we still don’t know how much of it might have been pull forward, so that kind of left an impression that things have slowed and I guess the guidance would suggest it but curious how you are separating the internal improvement from things you are doing versus sort of the environment?

So you really have to get granular. I think certain things you can measure real clearly. I mean, with that initiative, you can really look at profitability with growing the decorative furnishings business and what we’re doing this. There is metrics to everything we’re doing so we could really measure and to see if they are improving and now when we look at the inventory, we see the things that we are doing and affecting. There is certain things like you said with sales whether you pull them forward, you don’t pull at all because of heightened activity or being a little bit more promotional. Those are good questions. Those are kind of to be determined types of things but for most of these initiatives, we have very concrete metrics that we’re looking at and we are very close to them because we want to be able to turn left or right based upon what we’re seeing. So again, it’s a question that’s an individualized answer to each of the initiatives that we are working on.

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

Maybe to start here, can you touch on how the newly hired CTO and CIO are impacting the company strategic business plan? And Steve if you can right, where do you think the greatest opportunity is for them to increase the brand’s customer value proposition as you go through this transformation?

Well first of all they have been wonderful, and I say that hoping they are listening. But they truly have been. We had experience with Kevin before because Kevin for family reasons had left us previously but and had been here. But Sanjeev and Kevin have done wonderfully well. They communicate extremely well. Their experience is right on point for us. Their levels of expertise, the way they manage the group. The way they interact with the company, how they driving collaboration within the business, how they are focusing on the big picture and has, they have been able to identify the things we really need to be working on, and the things that are blockers. They have been able to alleviate a lot of that. They have really been fabulous. So they even exceeded our very high expectations of them. So I am not sure if I have answered the question to something specific. I will follow you go ahead and let me know.

Just curious you can kind of touch on where you think the greatest opportunity for them is to improve the customer value proposition maybe over a shorter-term duration right, sooner rather than later. Is there something specific that they are working on that gets you excited or any color you can give?

We’ve made this transformation from this wonderful methodology to an agile methodology that they sort of walked into. So the value streams and the work streams that they are now leading and the way we are doing business and the standards that they are involved in and even bringing in and recognizing the talent within the group. I mean, these are all the things that they are able to leverage. So it’s very difficult for any individual to, they are not making change the movement of the ship but what they’ve done is that they really I think driven the great talent that we have within the company and a lot of the things that we’ve been doing whether its moving things out to the cloud or whether it’s looking to internalize resources or to do something overseas and how that’s an opportunity. All these things with their experience that they’ve identified and really the focus that they’re providing on the initiatives that we are working on to say here, this is really and to help us think through these things to accelerate then. Those have been the big wins. So they’ve married up to a process that was well underway because we have many talented people in the organization that were really driving these things before. But they really provide a greater leadership and clearing the decks for the thrust to accelerate the things we are working and deliver much more quickly.

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

You covered a lot of ground today. I was just wondering if you could comment on few things. First on store remodels, it sounds like you have a format that you think might be worth rolling back to the rest of the base once you’ve tested it. I’m just curious, when you look at the store base today, what percentage of the base would you say is in need of meaningful remodel activity and how quickly can you can you do that? Is it part of your plan?

As we move through bringing in these aspects of retail that are working within our concepts being the deep value, being the commodity product, being the what we call treasure hunt product, we would like to really lower that. So, again, when you are asking what percentage or what numbers of stores we like to remodel or that really would be something that would be ideal to touch all those stores. It’s not really realistic in terms of how we would go about it, how much lease term do we have, does it make economic sense, some of these cases that is exclusives that other retailers have in these centers that we might not be able to do certain things. In some cases, the stores are too small might that makes sense as the things we do might not even be as productive as the things we would be taking out. So, all those things are part of the thought process, but we have laid out a game plan that will allow us to go fairly quickly. It would be a significant capital expenditure, but as is proven over time it will be iterated into the degree that, that was successful and that we are seeing the results tied to the other uses of capital to a great degree, we will determine that. So, I guess the big picture answer is that yes, I think that all the stores are candidates to do better in the terms that we have learned and what we are learning and at the same time it’s unrealistic to go exceptionally quickly in addressing what is about 1,200 Bed Bath stores.

Thanks. And just as a follow-up question, can you give us an update on your loyalty Beyond Plus program and then also what that extra week is worth this year in terms of dollars?

I can take the second part of the question regarding the extra week. It’s an average week for us. So, there is a slight benefit. It falls at the end of the quarter – end of the February quarter timeframe. So, it’s an average thing. I believe back in particularly fiscal ‘12 53 weeks and around then, I think we have been able to drop $0.05.

As far as Beyond Plus, listen, it’s by all the metrics we are looking at it, it’s going well, because many things that are important about the program that aren’t there yet. We don’t want to just to be about the 20%. There is a lot of the things that we are working on and we have rolled out some small wins to the participants, but really we are still in the test and learn to understand the lifetime value of the customer and we really are developing the bells and whistles around the program, so that the program really has deep value to the customer as opposed to just being about a discount.

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

Thanks for taking the question. I wanted to just follow-up on pricing. So, as you analyze your pricing, can you give us a sense of where you think you have the biggest gaps today versus some of your competitors and as you think about the price investments you are prepared to make here, how widespread will they be? And then just the final piece of that thinking about it in relation to the existing couponing strategy, can you help us just balance those two different strategies? Thank you.

With regard to the pricing, we are dynamically pricing online today and we are changing prices throughout the day on thousands of items, I shouldn’t say a number, but I think it’s in excess of that, but anyway so it’s something that we do everyday and it’s something that we need to be at the right price and the right value. With stores obviously it’s more difficult to be changing back and forth, but generally speaking, we tend to be fairly right on price, but we need and are committed over the next months to come to make sure we are and there is a number of initiatives that will allow us to be closer to dynamically pricing in the stores in the sense that if we have not every item was priced, we would be able to change more quickly. If we had sign as that permitted an area pricing as opposed to every item pricing that might be easier. If we have the ability really to identify and to narrow down the right price, so that it’s something between 16.99 to 17.49 online if we were 17.19 or 16.99 that we could stay there and be comfortable that was the right price. So that initiative in the stores which is again a little bit more difficult to tackle, we will be aggressively getting there, but we don’t think where that falloff and again it’s funny because we look at all these pricing studies and they are really beneficial for us, but something that we look at one it says there is 100 items that were priced wrong. Some people say we are priced right on 70, some say we are priced wrong on 70. So, we take a look at it and then as we give it to our pricing group and as they go through the items and again so it turns out that there is only 32 items are really matched and as of 30, some of it is secondary goods that we are looking at is not really comparative goods that was the customer understand that, that’s a good question, but we might be wrong on 7, so some study might come out and suggest that we are way off than when we look at it, we internally, we are not but then was the customer saving. So again those are really important because so we have to in most cases communicate better why is it a different product that we really meaningfully differentiated than the goods we are looking at. So that’s all part of the customer understanding. As they are looking at one set of towel are they looking at the same towel or a different towel and why is it a different towel. But we are really not that far off and online we are basically with there. And in the stores there is product that is differentiated and there is product because of the vendor base that could be in our product so there is price maintenance by the vendors. And then there is prices that that we could be wrong at any given point in time but we want to be right on that as well. So it’s not, you know, I think that in some cases there is a perception that’s not matching up with reality but the perception is reality so we better change that perception.

That’s helpful. And just a follow-up on one of your points, are you working with the vendors any differently than in the past to ensure that the value is where it needs to be and that you don’t necessarily have to take the full impact from these investments where you are going to make them? Thanks.

I think that there is – we have a heightened awareness when things are changing dramatically and there is greater transparency in pricing but our vendor relationships are critically important to us. You know, when we talk about some business with deep value in the stores there are opportunities to partner with our vendors to create it. There is opportunities whether we’re looking at transitioning goods, there’s an opportunity to do great buys or whether we decide to work shorter but those vendor relationships are critical to us and most importantly really to drive with those vendors differentiated products so it’s not about price. But I would hope that the vendors would tell you specially if they’re in the holiday mood that the relationships with us a good one and that we have a common goal and that is to create differentiated product, great value to the customer that that and really drive to sell their products.

[Operator Instructions] And your next question comes from Matt Fassler from Goldman Sachs. Please go ahead.

Thanks so much and good afternoon. I have two questions and my first is also on pricing but specifically Steve, you made mention of the price match offer and the goal you have, I think of re-emphasizing it and perhaps remerchandise, remarketing it to the customer in some way. Can you talk about what you have in mind to make that price matching impression stronger?

You are right, that’s exactly what we said and that’s what we intend to do. That the execution of it I think is messaging in the stores most important is our associates really being committed to it and understanding. Like we said, the ticket is open or close. That people think that they’re doing the company a service because there is a certain item that might be on a website that they are not aware of or that you know that something doesn’t seem right to them. Again, so those are part of the issues but I think in part is that as we differentiated prices online even ourselves from what were in the stores it’s critically important that everybody understand that we match competitor’s prices. And when we look at what other retailers have done well and look at Best Buy, there is models out there. But people have done a great job of messaging the price match promise and so I think that there is messaging that we will do with signage and opportunities there. But it really come down to our execution in the stores really of our associates really believing it or wanting to stand for it and being comfortable with it. So that’s a significant component of it.

My follow-up question relates to tax reform, for better or worse, you might be the first company holding a conference call since this actually was signed into law and the question I would ask is, is there anything that you all have wanted to do as a company where you have felt constrained by capital or by your cost structure where the windfall associated with this in terms of liquidity and relief in the federal tax rate might enable you to move even more aggressively, and you have been quite aggressive in what you’ve done.

Yes we said it. Yes again, I am sorry but with that, generally speaking, we have not been limited by capital. However, there is so many initiatives today that we are trying to accelerate. And we bought in a lot of talented people and we want to go faster and it’s critically important for us to go faster. And we have created an environment where we could fail faster than we’ve ever done before and test and learn and move forward. So we are, we are in an investment phase, so the capital to us is really a good thing and that again that our primary focus is investing in our company. So, we are very favorably on disposed towards this opportunity that this is presenting for us.

And our next question comes from Kate McShane from Citi. Your line is open. Kate, your line is open.

We can move on to the next question. Maybe she will come back in the queue. Next question, Adrienne.

I apologize. I lost my audio. One moment and we will continue. And our next question is from Matt Fassler. Your line is open. Matt McClintock from Barclays. I apologize.

Hey, I was little worried about that. So, good afternoon everyone. Hey, Steve just so much talk about pricing and all of that. I was wondering higher level taking it up to a next level, what is it that the consumer actually wants, because we look a lot at Amazon and talk a lot about Amazon, but it doesn’t seem like they are competing as much on prices they used to and it seems like some of the better performing retailers today are competing more on service. So, can you – from your perspective today and it was question from the consumers constantly, but your perspective is A) what is that the consumer actually wants?

Well, I think that there is not one answer to that, because even across the things that we sell and the categories we sell that we obviously really want to excel when it comes to the home in these heartfelt life events and we really want to be trusted as the expert. So, for us, really bringing new product to market and having differentiated product is critically important to us, but it’s really to have the better services and solutions as we look at the registries as we look at the college the new movers, we look at what we are trying to do in decorating and we look at the experience of getting the customer. We want it to be personalized. We want it to be targeted to our customer. We want to give them a better digital experience. We want to – so, again that’s critically important for them to think of us first, because they are vetted to us, because we are providing inspirations for them that we are slightly ahead of them. We talked about in our BABY World and the CRM programs that we are doing. Internally, we referred to it is that what to expect when you are expecting, we expect to be that. We expect to be slightly ahead of the customer. We want to be able to suggest that they are going to need before they realize it. And so those are important things, because we want to be the expert. So, that’s critically important. So, we want to have a voice. We wanted to be – so, again that’s why our catalogs are so important. That’s what showing the entire room is important. That’s why decorative furnishings are so important all these things to really be the expert for the customer to look at us as a voice. In summary, they could trust that’s why when we say that things we are doing in our registries to get it person when you do call that that’s an expert in registry. The things that we are doing with our checklist and suggesting things and what we are doing – we are targeting personalization all these things is for the customer to recognize that we provide value to them that we are an added resource. That’s why they are coming to us. It’s not just about price. At the same time, we have to provide we are not going to accept providing a lesser value than somebody else.

And then if I could follow-up on that, that same question. It’s end of the day, I feel like if I wrote you a black check, you could spend a lot of money on a lot of things that would provide value to the customer, but how do you think about put a capital allocation framework over that right. How do you know that is you spend more money and you renovate on some of your Bed Bath & Beyond stores that you are going to get the return over a period of time of 5 to 7 to 10 years or whatever it is that you do your NPV analysis on how do you get comfort with that in today’s environment?

Well, first we have to recognize the environment and how quickly it’s changing. We have to build things. Firstly, we have to build it out in a way that you test and learn, we have to build it out in a way that gives you flexibility so that if you are not sure that you are making sure you have a lot of headroom so that if you won by 5% or 10% that you let yourself that you have the returns and the financial returns that you are looking for, but the other thing is that listen, that’s always been the case that we have been and nobody wants to hear that we have been doing this, I have been here for 26 years that’s we have been running the business. It’s been fairly successful that we look at a business that in an industry that if you were around 26 years ago, you could say don’t answer you could say the department stores all walked away from it. You have looked at linens and things which are parts of 3D Strauss, VJ [ph], Home Express, specific one. You go to JCPenney house of brands [ph] which was our target but all these people are out of business. They didn’t do it. We did the same thing and we made some of the best returns in retail. So again, these are, a lot of the things, it’s an art. It’s not a science. It’s about people, it’s about judgment. It is about intuitions about and making tracks and not following other people’s path but learning, being informed from the decisions we make. This is what we do. We are committed to being great. And then, so again. And the one thing I would tell you again and again is that we’ve never had more opportunity in the company. We’ve never had better people in the company and that each and every day, I’ll tell you, a week goes by and we look at what we’ve added and where we are going both in terms of opportunity and people and you couldn’t be more excited. So yes, there is judgments involved in these things, but most of these things we will be able to test and learn. And again, we should leave ourselves enough room is that for wrong, we can turn left or right and still be happy with the results and that’s the way we move. You know us I guess. Matt, listen, we’ve never been somebody to bet the house on something. But we’ve always tried to make deductive systematic logical decision. So we’ve always tried to measure everything we do. That’s how we’ve grown the company. But now, we have to do those things quicker than ever. So it’s a good question but you know those rules of engagement are significantly the same and it’s still remain significantly and automatically to the quantitative facts that we have and you were betting on us big time.

[Operator Instructions] And your next question is from Laura Champine from Roe Equity.

Thanks. Sue, I wanted to get a better sense of what your comments on a pull forward of demand in the Q3 meant. Are you seeing a changing in the cadence of sales in December compared to what you saw in prior years?

Well what I meant by that was that we had an opportunistic marketing spend planned in Q3 which we executed upon that and we saw some good results. We may, like I said, we potentially may have pulled forward some sales. However, we have five critical days left within Christmas leading up to that and the shopping pattern is different this year compared to prior years. Christmas falls on a Monday. So therefore, there’s a full Saturday shopping. So we’re really not going to know if we potentially did pull sales forward or not and so we have the full picture. We will be able to share more of that with you in fourth quarter.

Got it. And then secondly, your share buyback this quarter is less than it has been. Does that just reflect seasonal cash needs or is there something else driving that lesser buyback rate?

Well, first of all, our board reviews our capital structure on a regular basis and our cash flow remains strong. I think, we discussed before the priorities of how we take a look of using our cash. First, we look investing it back into the business then we take a look at acquisition. We obviously have our dividend program and then any excess cash could be used for share repurchases. Keep in mind, I did mention that we want to maintain the same or higher cash balance at the end of the year. So that factors also into the capital allocation structure and how we’re approaching it for this quarter.

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

Thanks for taking the question. Just on the 12 stores, the test stores remodeling to bet. I mean, how is the margin profile of those categories, the deep value, the more commodity stuff as well as treasure hunt, how is that compared to maybe the company average. And then what categories are being replaced or repaired back to make room for those?

The margin opportunities run again. So a lot of that is differentiated product when you look at our seasons department. The availability to buy, riding to bring in treasure hunt product that is not continuity, that’s in and out. There is huge opportunity for us, but most importantly, just that we paint the complete picture, the idea is not that we are going to be doing less Bed Bath business. The idea is that we will be generating additional foot traffic so that we could shrink today the Bed Bath assortment in most stores and be able to present even more products than we currently present when we don’t carry the back stock in certain categories. So we are able to show more, carry less. Now we have, the associates have tools like tablets to approach our customers, interact with them and conduct the on-store sales with them and so they could see and touch more products. So, again, the idea is to be able to shrink the core assortment by in terms of back stock show more, carry less interactive customer more often and take advantage of the additional foot traffic will be seeing from the deep value that we will be presenting and the treasure hunt product.

Okay, that’s helpful. Thank you. And then just on a couple of mix questions, can you give us a sense of maybe what the e-commerce was as a percentage of sales in the quarter and then where do consumables sit at this point. You have been doing that for a while, but what percentage of sales could you give us that consumables are for the company? Thank you.

I don’t believe, Peter that we shared what the e-com mix was with for the particular quarter. We did indicate though that we continue to see strong growth in customer facing digital channels. And the second part of your question was on consumables?

Yes. Just curious what share of sales that has gotten to at this point, because it sounds like it continues to grow?

Again, that’s not something that we have shared in the past, but we continue to obviously sell consumables and we are pleased.

And again I think in the big picture we are talking about that as we bring in that food and beverage as we increased say health and beauty as we change. What we are able to do in downsizing the assortments in health and beauty and bring it into more stores that there is that we see the opportunity within the commodity product to drive foot traffic?

Yes absolutely.

Last quarter, Peter, this is Janet, this is a reminder last quarter, we had given that statistic of roughly 15% on an annualized basis is what our customer-facing digital channels represent, that was not in particular quarter, but we were kind of just saying that’s kind of where it’s tracking on an annualized basis.

Good. Thanks for that. Okay, thanks guys. Good luck.

Thank you.

And the next question comes from [indiscernible]. Please go ahead.

Hi, thanks. It’s Greg from MoffettNathanson. I guess I had two questions, but I think it’s really one trying to get around arms around digital. I think last quarter you mentioned digital have been growing 20% for something like three straight years. Is that still the case or is it gotten to a scale now where that’s actually while still strong growth starting slow a little bit and then I had a follow-up related?

Yes, I think that we said that what we say.

We said that we had strong growth, continued strong growth in customer-facing digital channels, so we did answer.

Yes, it was strong. And actually the digital experience the quarter and the in-store experience was our strongest quarter of the year.

So it was better than the 20% still just?

Good math.

Okay, great. And then the real you talked a lot about shipping costs and how that does to gross margin, could you remind us how you are actually fulfilling online direct orders and I think the Las Vegas facility remind me, is that pure online or how are you actually fulfilling these orders or is that shipping costs just a simple more free shipping or is there something else going on there from a cost side that could be impacting the margin?

We fulfill the direct to customer shipments out of one of three ways one is out of one of our distribution centers. The second, we have a large and growing vendor direct to customer program online and then lastly on all our stores have the ability to ship to our customers we have certain stores that we call regional fulfillment stores that have more capabilities and others or staffing, but we are able to ship from any of our stores to our customers. And is there a second question, I just want to make sure I answered it, no okay.

And our next question comes from Curtis Nagle from Bank of America. Please go ahead.

Good evening. Thanks very much for taking my question. So, just wanted to go back on to the new store format, I guess just what are your thoughts on – is there potential any risk from perhaps losing focus or cohesion with adding some of these I guess more value-based products in the stores, are you testing anything else that could go in, just curious your thoughts on that?

No, we don’t have a concern about losing focus. Actually, we are providing – we are resourcing this with significant resources to make sure that we accomplished our objective. And again, I think the focus is on the deep value to commodity product, deep value that we could across all our categories that significantly we see it in health and beauty care and what we do today. We see it with the opportunities with food and beverage but again across all the categories that when we look at the treasure hunt experience that we would say, the seasonal department and the furnishings and decor are significant opportunities for us. So again, these are things that are working within the Bed Bath & Beyond parent company. So these aren’t things that we don’t have great experience with. So not sure if I answered the question, Curtis. If not, point me in another direction.

No, that’s a fair answer. Appreciate it and good luck with the rest of the quarter.

Okay, thank you.

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

Hi thanks and good evening. My first question is on CapEx. You talked about plateauing CapEx. But as you think about next year and your investments in store remodels, would we still expect CapEx to be plateauing?

We are working through our fiscal 2018 modeling assumptions now but what we’ve seen is that we’ve been around the 350 million, 400 million mark for the past few years and that’s what we saw for the foreseeable future will be able obviously you know any impact in terms of new store formats or what not would be baked into the modeling assumptions for next year.

There is puts and takes every year. This year, we opened up a new call center. We opened up a new distribution in Las Vegas which we probably won’t have next year but then we will have remodels come in. So they tend to balance out but we will give more of an update in April.

Got you. That’s helpful. And then secondly, just thinking about the guidance implied for the fourth quarter, obviously it’s a little bit lower than you are expecting before in the bottom line. From that change in the margin outlook, is that due to competitive environment or is there any acceleration of your spending on various initiatives as well baked in?

Well on the margins and on the baked in, we didn’t give specific guidance for the fourth quarter but we are cognizant of the trends that have been in existence and we tried to build that into what we are forecasting for the future. And the same thing with the initiatives. I mean, the initiatives are underway. We know the cost. And so all that’s factored in when we are estimating what we are going to have for the year.

Okay, thank you.

And your next question comes from Adrienne Yih from Wolfe Research. Please go ahead.

Yes, thank you. Good afternoon. Steve, I was wondering if you can give us an update on the kind of home vignette and the small furniture that you had launched last October, I believe, whether you sent out another catalog and if so, how is that going? And then for Sue, can you give us any direction on SG&A dollar growth for 2018. Should we at least expect it to be up in dollars but just not as much as 2017? Thank you very much.

Can you clarify what do you - up or down what, is that CapEx, higher, lower or?

Sorry, it’s SG&A dollar growth for 2018.

As I said, we are working through the estimates for fiscal 2018. I would be able to provide that more for you at the end of this year as we provide our assumptions really for the full year. I don’t have those figures for you to be able to share that for 2018.

Okay, fair enough. But the characterization, was it, it remains in investment phase?

Yes, it remains investment phase.

Okay, thank you. And Steve?

Yes with the question about decorative furnishings. So I am not sure if I quoted all but the catalogs, you know, continuing down the path of the catalogs where the last one more than half the merchandise in the catalog is not things that we carry in the stores and we show them the inspirational room settings and that we were growing the numbers of our customers that are seeing the catalog, so we’re expanding that. In terms of the stores, the objective is to make sure that each stores that as we open going forward whether be it renovation or a move of the store whether it would be a new store in those few cases that new to a market, I mean, that we express that we are in this business. And so we have done a number of things that are test and learn in terms of showing rooms, product, I am not sure, Adrienne, where you are but if you have the opportunity to go to these panels around route 10 in New Jersey, there is another. The latest iteration opened last week. However, two weeks ago now of that and it’s already obsolete, but we are learning a lot from it but you will see something that’s decidedly different but the objective is that we got to get to at least neutral. But people who walk into our stores and they say we are not in the business. That’s not good. They have to walk into stores and say, oh, they are in the furniture business, where they might be in the furniture business, but we can’t them walking twisters thinking we are not in the furniture business, so that will be expressed in our stores going forward.

Okay, thank you very much. Best of luck and happy holidays.

You too. Thank you very much.

Thank you.

And our last question comes from Cristina Fernandez from Telsey Advisory Group. Please go ahead.

Adrienne, the only thing I would say is also that I think the one point Kate McShane was trying to get through when we have technical issues, I am not sure if she is still listening or she is available we did not get to speak to her.

Kate, please press star one to re-enter the queue. Kate McShane, please press star one.

She might not be, I am just saying that I just re-noted that, because I think Adrienne that was also bumped, but then she came back, but okay, Cristina let’s go.

Yes. Hi, good evening. I wanted to ask about your delivery and shipping capabilities, can you update us where are you in being able to reach the customer in today’s across the country. And in addition to price match, are you considering also a faster delivery promise and also what are your thoughts on same day delivery? Thanks.

So, yes, I think 2 days we are in excess of 90% capability, but there will be additional facilities that we are looking at and we are looking to optimize our pools in consolidation sensors and unknown buildings to make sure that we are able to do better. With regard to our same-day delivery, I think we are in 6 or 7 markets rolling out another 7 markets in January, so that’s something that we feel again competitively that we need to be doing. And the middle question was?

It was on price match and where we are seeing a faster delivery promise?

Yes. So, again, we are looking at that, because we do have a lot of merchandise that we know that it’s in stock and where it is and we are able to get it to the customer quicker. So, the question becomes how do we denote that say in the digital experience of the customer knows that it could be delivered quicker and that we can get credit for.

Alright, thank you. And then as a follow-up, any thoughts in speeding up the openings with some of your smaller concepts like Harmon and Bed, we are accelerating their addition into the existing Bed Bath & Beyond stores?

There is – everything that’s the first thing again is that we are taking the best of these everything under our umbrella and we are trying to present it to the customer in a sensible way. So whether that means a freestanding store or store within a store or taking some departments aspects of them and given store so all those things are happening. What we are seeing is that we are seeing on one end that foot traffic is challenged as the world moves to digital. So, that’s one thing that we do see, but at the same time we do see an opportunity with these concepts that are not in market today and that is the importance of having bricks and mortar omni-channel expense for the customer, whether it’s that buy online, pickup in store, whether it’s an appointment schedule and whether it’s return to us things that are brought online in store it’s the benefit we are getting in the marketing, because people see the nameplate and they go right online or whether they shop you in a store and then go back and buy online. So, there is that opportunity for these concepts but don’t have presence in these markets and we are seeing the occupancy cost opportunities come about as this retailers go away and there is pressure in the landlord community to fill space. So, all those things will dictate the rate that we go. And one of the questions asked earlier how do we measure these things and how do we know it’s the right thing and how do we not get clicked 5 years from now or 7 years from now, so it goes through the assumptions about the will foot traffic continue to decline and at what rate, our expense structure. What will happen to the wages in these markets, what we will be doing in the stores that will be automated as opposed to what can’t be today or what isn’t today that what are we doing with the checkout experience, all these things will dictate the rate in which we open stores going forward, but again, we don’t have a religion about stores or digital experience, we have a religion around satisfying our customer and exceeding their expectations. And so we do believe that having a bricks and mortar presence is giving us an additional opportunity to do that, done correctly.

And this concludes the question-and-answer session. I will turn the call back over to Janet Barth for final remarks.

Great. Thank you, Adrienne and thank you all for joining us today. We look forward to speaking with you again on April 11 when we report our fiscal 2017 fourth quarter and full year results. Have a good night.

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