Welcome to Bed Bath & Beyond's Fiscal 2020 Fourth Quarter Earnings Call. All participants will be in a listen-only mode until the QA portion of the call. Today's conference call is being recorded. A rebroadcast of the conference call will be available via webcast found on the company's Investor Relations website.

Thank you, and good morning, everyone. Welcome to our fiscal 2020 fourth quarter earnings call. On the call with us today is President and CEO, Mark Tritton; Chief Merchandising Officer and President of Harmon Face Values, Joe Hartsig; Chief Operating Officer and President of buybuy BABY, John Hartmann; and Chief Financial Officer and Treasurer, Gustavo Arnal. Before we begin, let me remind you that our fiscal 2020 fourth quarter earnings release and slide presentation can be found in the Investor Relations section of our website at www.bedbathandbeyond.com, and as exhibits to the Form 8-K, we just filed ahead of this call. This conference call and the slides we refer to may contain forward-looking statements, including statements about or references to our outlook regarding the company's performance, our internal models and our long-term objectives. All such statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say during the call today. Please refer to our most recent periodic SEC filings for more detail on these risks and uncertainties, including the Risk Factors section in our Annual Report on Form 10-K. The company undertakes no obligation to update or revise any forward-looking statements. Additionally, the information we will discuss today contains certain financial measures that exclude amounts or are subject to adjustments that have the effect of excluding amounts that are included in the most directly comparable measure prepared in accordance with generally accepted accounting principles. For a reconciliation to the most comparable measures presented in accordance with GAAP, please refer to the table in our earnings release, available on our website and included as an exhibit to our Form 8-K filed today. It is now my pleasure to turn the call over to Mark.

Thank you, Janet, and good morning, everyone. Fiscal 2020 was a year of fast-paced transformation, in which we reformed the past, overcame extraordinary circumstances of the present, and established a firm foundation for the future. Despite the challenges created by COVID-19, we have relentlessly focused on taking purposeful and bold steps to transform our entire organization, and remain true to our plans to rebuild our authority in home and restore this iconic company. Throughout 2020, we achieved a great deal. We established an entirely new leadership team with world-class retail and digital experience, who helped design and shape the growth strategy that will define our future.

Thank you, Mark. Our digital-first omni-always strategy is working and was a key driver of our fourth quarter performance. We elevated the customer experience across all of our channels to make it easier to shop with us and create a more inspirational and more productive assortment that delivered growth in both comp sales and product margin. Today, let me start with some highlights on the quarter from a commercial perspective, including our strong performance in digital and within our top product categories. Then I will talk about our owned brands, including the recent launch of Nestwell. Our positive comp sales this quarter were again driven by a strong digital growth of 86%, marking our fourth consecutive quarter of greater than 75% growth this year. This was led by our Bed Bath & Beyond banner, which posted digital comp sales growth of 99%, practically doubling last year's sales. During the quarter, we gained 3.1 million new digital customers, of which the Bed Bath banner alone added 2.4 million. Year-to-date, we have gained approximately 11 million new online customers, an increase of 95% over last year. In the quarter, we experienced more than 300 million visits to our digital channels, including 162 million unique visitors, and we had more of the 1 billion visits for the year, with conversion up by 30%. And not only are we attracting new customers, we are also seeing a return at a higher rate than ever before.

Thank you, Joe. Today I’ll first provide some perspective on the quarterly performance of our buybuy BABY business, and then continue with an update on our enterprise operations. To expand on Joe’s commercial update, our buybuy BABY banner showed significant improvement in the fourth quarter, returning to positive growth of low single-digit comp sales led by strong growth in digital of over 50%. On a full-year basis BABY sales were over $1 billion. As we discussed on our last call, BABY was disproportionately impacted in the third quarter by COVID related headwinds. We then made key pivots in November and December, including CRISPR customer communications, collaborative partnerships with our vendors in targeted digital marketing, which produced positive sales and category trends that sustained throughout the fourth quarter and are continuing into the current quarter. Top performing categories in the quarter included BABY and toddler safety, feeding, toys, educational and playroom, as well as apparel. In 2020 BABY gained 2.5 million U.S. online customers, an increase of 45% versus prior year, including more than 600,000 in the fourth quarter alone, nearly two-thirds of those customers shopped only online. We had an over 40% increase in visits this quarter to $51 million, including 24 million unique visitors and an 8% increase in conversion. 19% of U.S. customers placed more than two orders compared to 15% in the prior year period. And more than 200,000 customers placed a BOPIS order, including almost 20% from mobile. BOPIS represented 14% of our digital sales in the quarter. And approximately 87% of orders were ready for pickup within two hours. There were 150,000 buybuy BABY mobile app downloads in the quarter, which contributed to significant mobile growth representing more than 60% of total digital sales. We are excited to begin the transformation of the BABY banner this year and unlock the value of this brand. We previously outlined our six point strategy to accelerate growth, which includes investments to scale our store footprint nationwide. In fiscal 2021, we expect to open seven baby stores, bringing the total store count to 139 by fiscal year-end. In preparation for this transformation, we have taken a deep dive into understanding who our customer is and how we can exceed their expectations. This work has manifested into a new customer value proposition, which states we build trust with parents by supporting them with what they need next. So, families can celebrate every milestone, big and small together. We know that parenting looks different for every person and the journey is unique to every family, but there are experiences that are shared by all. We want buybuy BABY to be the destination of choice for all new parents and young families, and to help guide them on their journey and grow with them. We will continue to share our progress in future conference calls. Pivoting now to an update on our whole enterprise operations, we remain focused on modernizing our operations and optimizing our use of data and analytics to meet our customer and business expectations. The advancements made across our real estate network, supply chain operations and technology roadmap during the fourth quarter reflect these strategic objectives. We continue to make substantial progress with our store network optimization program and remain on pace to achieve our targeted closings of approximately 200 stores by the end of fiscal 2021. Through the end of fiscal 2020, we have closed a total of 144 Bed Bath & Beyond stores including 118 stores closed during the fourth quarter. The program is tracking to plan, it is now about 70% complete. The remaining store closings will occur in fiscal 2021 and be weighted toward the second-half. As we move through the year, we will continue to review our plans and assess the evolving real estate market and conduct further negotiations with our landlord partners. We also remain on track with our previously communicated $100 million EBITDA contribution target for this program. And importantly, while still early transfers from these closed stores to other store locations and or our digital channels is measuring above 20% versus our previously communicated goal of between 15% and 20%. Turning now to our Bed Bath & Beyond store remodel program. We recently completed our proof-of-concept store models in the Houston market, which consisted of four type A full store remodels and three type B remodels, which involved a room reset, and updates to about half the store. This represents the first full designated market area we have addressed in the country. Above and beyond, the general store improvements Joe mentioned, including room resets and new signage. We are now beginning the next wave of remodels by applying the learnings from the New Jersey test store and the Houston market to iterate and continuously improve. As we have said previously, we plan to invest approximately $250 million over the next three years to remodel a total of approximately 450 stores, which together represent about 60% of our revenue. In fiscal 2021, we are targeting about 130 to 150 stores across the country covering nearly 30 States, including 26 stores during our first quarter. We applied a similar level of focus in execution with our supply chain during the fourth quarter, which included the Christmas holiday sales period. As expected, our comp sales growth in the quarter was led by digital, which nearly doubled in size versus the last year to approximately 40% of our total comparable sales. Throughout this year, we've been moving with agility to optimize our store network to support this rapid growth. Earlier in the year, we converted about 25% of Bed Bath & Beyond and buybuy BABY stores in the United States and Canada into regional fulfillment centers to use our vast inventory resources to assign orders locally and deliver even faster. In the fourth quarter, our stores fulfilled 41% of total digital sales including 17% in BOPIS orders. And as we got closer to the holiday, BOPIS accounted for 48% of our Bed Bath & Beyond digital demand during Christmas week. As we highlighted the ease and convenience of these services and customers chose to avoid third-party shipping constraints and ensure they would have their gifts in time. More than 80% of BOPIS orders were ready within our two-hour promise window. We've experienced about a six-fold increase in BOPIS penetration since first launching the service in April 2020, driven by nearly 4 million customers. In addition, customer feedback is highly positive and our net promoter score has increased further from 79 to 81. We've had very similar strong customer adoption and satisfaction with our new same day delivery services. In Q4, over 220,000 same day delivery orders were placed with 78% of orders coming directly from our websites and 22% through a combination of shipped and Instacart marketplaces, which you have access to over 80% of American households. We also watched Harmon Face Values on Instacart, enabling same day delivery for everyday health and beauty care essentials. In other supply chain activity, we kicked off our search for a third party logistics partner as I mentioned last quarter. We plan to establish four regional distribution centers to more efficiently and costs effectively manage the flow of merchandize to our stores. We believe this is a key first step in vastly improving our store replenishment approach. During the quarter, we conducted a thorough RFP evaluation process, which included many market leading third party logistics companies. Ultimately, our partner selection will be based on what we believe yields the best strategic partner and long-term economic outcome for the business. We are working now through the final stages of selection and anticipate being able to make a public announcement soon once we have signed an agreement. The initial focus of the strategic partnership will be to establish two RDCs both in key trading areas, one in the Northeast and the other in the West. Once in place, we expect to achieve many operational and business benefits over time, including reducing the store replenishment time from a noncompetitive period of 35 days currently to under 10 days, which will yield improved sales based on reduced out of stocks as well as lower store inventory levels. Turning now to an update on our technology roadmap, having the right retail technology in place is fundamental to our business transformation. Over the past year, we've been laying the foundation for this change, including our expanded partnership with Google to leverage their cloud technologies and personalize the shopping experience for our customers, enhanced fulfillment capacity and optimize merchandise planning and demand forecasting. In February, we announced the selection of Oracle as our Enterprise Resource Planning or ERP technology provider to replace our legacy suite of technology systems and deliver new data insights and planning capabilities. This ERP deployment is the first key component in our plan, $250 million technology investment roadmap over the next three years to deploy industry leading solutions that enhance the experience for our customers and drive efficiencies across the enterprise. Last month, we announced another technology partnership, this one to help modernize our inventory management systems. We selected Vellum Solutions to deliver automated forecasting, replenishment and allocation planning in order to improve inventory productivity and our ability to respond to customer demand. Our technology transformation effort is expressly focused on building proficiencies to reconstruct and modernize, stabilize, and optimize, invest in and construct and operationalize. This technology transformation is further enabling our business transformation and the building blocks for all of our fulfillment, forecasting, inventory management, and sourcing proficiencies. Alongside these transformations in real estate, stores, supply chain and technology, there's also a cultural transformation underway. For example, we have put in place a business operating structure to manage all of our transformation initiatives. Having this formalized structure has strengthened our foundation contributed to our progress to date and will guide us as we continue on our commitments. I look forward to sharing our progress on these important investments in a future call. Now I will turn the call over to Gustavo Arnal, our Chief Financial Officer and Treasurer, Gustavo.

Thank you, John, and good morning everyone. I will provide additional perspective on the strong results of our fourth quarter. And we'll also discuss our outlook for fiscal 2021 including some visibility on the current first quarter. Before I go on, I'd like to highlight a few key messages. First, our strategies are working. We deliver our third consecutive quarter of comparable sales and adjusted EBITDA growth with positive free cash flow generation. Second, we showed exceptional business agility and financial discipline during a year of unprecedented challenges. We deliver positive comp sales growth, optimize our cost structure, divested non-core assets, reduce debt, invest in the business, and at the same time returned capital to shareholders while increasing liquidity. And third in a year of fast paced transformation, we strengthen our strategic positioning to deliver on our three-year financial plan. We are reaffirming our fiscal 2021 outlook and sales and EBITDA while further investing in the business. We are improving our projection of gross debt-to-EBITDA ratio to below three times this year. And we have increased our three-year share repurchase program to $1 billion above what we communicate at that Investors Day. Now, looking at the fourth quarter, total enterprise comparable sales grew 4%, led by continued strong digital growth of 86%. Our digital-first omni-always strategy continues to be a key driver of our results. Sales from our digital channels represented approximately 40% of total net sales for the full-year and surpassed $3 billion almost doubling in size versus the prior year. In our Bed Bath & Beyond banner comp sales grew 6% fewer by 99% growth in digital partially offset by store declines of 20%. Comp sales were positive each month of the quarter with high single-digit growth in January and February combined. And this wasn’t despite of the industry-wide weather impacts during February. Growth was strong and broad based across key destination categories, which grew 12% in total and represented almost two-thirds of revenue. Importantly, our buybuy BABY banner returned to delivering positive comp sales growth led by strong digital growth of over 50%. As previously communicated, our reported net sales would continue to be impacted from our banner portfolio transformation, as well as our fleet optimization program. As expected, total enterprise net sales of $2.6 billion with flat that these impacts and declined 16%. This was at the healthier end of the 15% to 20% range of decline. We communicated on our earnings call in January. In terms of the bridge from net sales to core banner sales, we saw an approximately 12% on favorable impact from the non-core banner divestitures. Therefore excluding divestitures core banner net sales were down only 3% on around the basis. On these store closures, reduce sales by approximately 8% in line with expectations does resulting in comparable sales growth of 4%. On a GAAP basis, we delivered net earnings per diluted share of $0.08 compared to a net loss of $0.53 in the prior year. Reported net incomes results include approximately $38 million from unfavorable impacts from a special items, which are excluded from adjusted results to provide better perspective on the underlying performance of our business. These special items include the net loss of the sales of businesses, non-cash impairment charges related to certain store level assets and charges recorded in connection with the restructuring and transformation initiatives. Excluding these impacts adjusted EPS was $0.40, which was also an increase over last year. As planned, we drove significant adjusted EBITDA margin improvement in the quarter. EBITDA margin expanded approximately 160 basis points to 6.4%. As we said, we increased adjusted EBITDA on an optimized and healthier revenue base. Adjusted gross margin improved approximately 20 basis points to 32.8% in line with our guidance. Gross margin drivers included 60 basis points of favorable product mix from higher margin categories, 90 basis points of favorable margin and promotion optimization, 190 basis points of leverage from distribution and fulfillment cost efficiencies partially offset by 170 basis points unfavorable impact from channel mix due to the anticipated larger proportion of digital sales versus prior year. And lastly, as expected, we saw an unfavorable impact of around 150 basis points from higher shipping costs given industry-wide freight rate cost increases. Adjusted SG&A expense declined $190 million versus the prior year. This was driven by reduction from the non-core banner divestitures and lower occupancy expense on more efficient stores. As a percent of net sales, SG&A declined approximately 160 basis points to 29.1%. As mentioned a stronger top-line coupled with gross margin expansion and SG&A reduction resulted in another quarter of EBITDA growth. Fourth quarter adjusted EBITDA increased 13% to $168 million. Turning now to some cash flow and balance sheet highlights, operating cash flow was $76 million given working capital improvements from lower inventory balances. Free cash flow was $62 million. We reduce inventory in our core banners by approximately $110 million versus the prior quarter, primarily from seasonal selling and product transitions in preparation for the introduction of own brands, as well as store closures related to our network optimization program. Capital expenditures were $66 million nearly doubled the average in prior quarters as our transformation investments accelerate according to plan. We maintain a strong cash balance of $1.4 billion with even stronger liquidity of $2.1 billion, including our ABL. We're managing cash, including our planned investments to fund our growth on our healthier, more focus and stronger business. We also return significant capital to shareholders through accelerated share repurchases. Since Investor Day in October, we have repurchased approximately 16 million shares, 13% of our shares outstanding at an estimated average price of $23. Our first accelerated share repurchase program of $225 million was completed at the end of January and our second ASR of $150 million will be fully completed next week. We continue to be diligent and agile stewards of cash with our data driven and balanced approach to capital allocation. After having fully funded our capital investment for growth, today, we're announcing another increase in our three-year share repurchase program to $1 billion versus the previous $825 million plan. Our fiscal 2020 performance reflects our commitment to unlocking shareholder value. We had been and will continue being focused on driving comparable sales growth, expanding margin and generating cash flow. We will continue deploying cash to attractive investments for our business and also to our shareholders. Turning now to our fiscal 2021 outlook, on a macro level, our financial performance in fiscal 2021 will continue to be influenced by pandemic related headwinds, including uncertainty around the vaccine rollout and the subsequent impact of customer demand and shopping patterns, especially relating to store traffic and digital sales. Our financial model assumes that our store will remain open and that the current environment will continue in the short-term with gradual improvement as the year progresses. We anticipate in-store traffic trends to begin to recover throughout the year. But we continue seeing previously communicated industry-wide headwinds from freight costs. We have strengthened our positioning as we start fiscal ‘21 and embark on those three year transformation plan. Our significant portfolio transformation is leading to fewer yet better performing stores, which we believe will include a healthier core revenue base with a larger proportion of a faster growing digital business and with a consistent execution of our transformation strategy, we remain well positioned to achieve our long-term financial objectives. Also, we’re reaffirming our previously provided fiscal 2021 modeling assumptions. We continue to project net sales to be in the range of between $8 and $8.2 billion. Net sales assumptions include the impacts of the recent non-core banner divestitures, as well as ongoing store closures under the previously communicated network optimization program. On a quarterly basis, in the first quarter, we expect to recapture sales that were lost in the prior-year from temporary store closures due to COVID, because of this, we have said first quarter sales will not be comparable. In quarters two through four, we expect to sustain comp sales relative to the solid base, we experienced in those same three quarters of fiscal 2020. We continue to assume for financial planning purposes, that total enterprise comparable sales in Q2 through Q4 will be flat versus a strong fiscal 2020 base as we started delivering positive comps as of the second quarter of 2020. We continue to project full-year adjusted gross margin to be approximately 35%. Our model reflects sequential improvement during the year from several key positive drivers, including product sourcing savings from negotiated vendor contracts, higher sales penetration of newly launched own brands in our product mix, and more effective data driven promotion and markdown strategies. We continue to model full-year SG&A to be approximately 31% of total net assets driven by favorable impacts from store closures under the network optimization program and savings from prior-year cost restructuring. And finally, we continue to model adjusted EBITDA to be in the range of between $500 million and $525 million. Turning to some balance sheet and cash flow assumptions, we plan to invest approximately $400 million in CapEx including key projects supporting our IP transformation, supply chain reinvention and store remodels. We now expect to achieve or improve leverage ratios faster than anticipated. In fiscal 2021, we project our gross debt to EBITDA ratio to be below three times. This is significantly better than a previously stated goal of below three and a half times for this year. We also plan to increase cash return to shareholders. As mentioned, our three-year plan for share repurchases has increased to $1 billion. We're now planning up to $325 million in share repurchases in fiscal 2021. Together with the two already completed ASRs, totaling $375 million, we will have repurchased $700 million in shares by this fiscal year. Again, we're doing this while generating cash and funding our business transformation. We remain committed to our capital allocation principles, namely, investing in our business, maintaining financial resilience, and returning capital to shareholders. I’ll now provide some visibility on the current first quarter, which includes the month of March, April and May. As you may recall, this was the period last year when most of our stores were closed and sales were depressed. In addition to the comparisons when the majorities of our stores were closed, our report in itself will continue to be impacted by completed divestitures and fleet optimization. To provide for the perspective on this portfolio transformation and the quarterly comparisons of our core go-forward banners, we have included a table in our press release and slide presentation with a quarterly summary of fiscal 2019 and 2020 net sales on both a reported GAAP and a core go-forward basis. The latter includes Bed Bath & Beyond buybuy BABY, Harmon Face Values and efforts. On this core basis, first quarter sales last fiscal year were $1.1 billion. Directionally in Q1 this year, we would expect core banner sales to be significantly higher than last year by approximately 65% to 70%. Core banner sales in March, the first month of the quarter showed a strong growth and the year-on-year growth will accelerate in April and May as we lap the prior-year period when more stores were closed. In terms of total net sales, directionally we expect them to increase by over 40% on a year-on-year basis. This growth is building through the fiscal year guidance mentioned earlier. In terms of gross margin, we expect to show sequential improvement as this year progresses. Directionally, we would expect adjusted gross margin in the first quarter to be in the 34% range. In terms of adjusted EBITDA, we expect to deliver between $80 million and $90 million in Q1. In 2021, we’ll continue to manage the business diligently, leveraging data and analytics to drive performance and deliver on what we say. We remain confident in our future as we embark on the first year of our three-year transformation journey. I’ll now turn the call over to Mark for some closing remarks. Thank you.

Thank you, Gustavo. As we enter our 50th year of business in our Bed Bath & Beyond banner, our focus remains on being customer inspired in everything we do as we build authority now call home, baby and beauty and wellness markets. With COVID headwind expected to subside, and having our full omni channel suite of options available to us this year, we’ll be able to truly compete fairly and openly with our peers unlike during 2020. In addition to our internal strategic growth drivers, we believe we're well positioned to benefit from the favorable macro environment expected to support continued growth in home related categories through 2021. These include high consumer confidence, a strong housing market, continued work from home trends, and the newly found appreciation for the comfort, safety and value of our homes. As you've heard today, we're excited and confident about our business. We have reaffirmed our fiscal 2021 guidance and are well poised to activate and drive our transformation initiatives to fuel our growth. We have the capital, the plan and the talent to deliver on our three financial objectives. As our transformation continues to take hold, we’ll shop differently for our customers with enhanced omni channel experiences, modern stores, new communications and differentiated own brand, all improved capabilities that will elevate the shopping experience and make it even easy to shop with the new Bed Bath & Beyond. Earlier this week, we launched our new "Home, Happier" brand campaign, which exemplifies our strategic focus on helping our customers realize each room's potential so they can embrace the possibility in every day, helping them to "Home, Happier." We will deliver the products, values, and experiences to inspire our customers to celebrate the important role their homes play in their lives. We're excited today to build this fully integrated campaign which will be entered by a 30-second anthem TV spot airing nationally today, April 14, and featuring a suite of creative assets supported by an omni channel paid media plan, including national broadcast and cable TV, streaming online video, paid social, print, in-store, email, and display. In 2021, we'll continue to make bold pivots to reconstruct, renovate, and restore our company and deliver on what we said we would do. We look forward to sharing our transformation progress with you in future quarterly calls. We will now take questions.

Thank you. And now, I'll begin the question-and-answer session. And our first question is from Bobby Griffin from Raymond James.

Good morning, everybody. Thank you for taking my question.

Hey, Bobby.

And Mark and Gustavo – hey, guys, a lot of moving parts inside gross margin with shipping, and distribution and things like that. But could you maybe unpack what's going on and what you're seeing inside the core merchandise margin? And what some of those drivers and expectations are for fiscal year 2021?

Yes, I think that some of the core drivers is definitely, we've improved our mix, we've improved our negotiated base costs. We're starting to see the work that we've done on cost negotiations really start to filter through, and we see that moving through 2021. What you didn’t see in the quarter was the improvement from owned brand, because that's a March-onward investment, and we see that incremental benefit occurring quarter-by-quarter with the investments we've made with over eight brands for the full-year. But also a big part of that has been John team really reengineering the markdown process and the promotional process and getting more effectiveness out of our marketing dollars as well as our promotional spend, and that's helped really reengineer in this quarter and going forward that margin. And that's despite us getting ready for the owned brands coming in, and we’d take the additional markdowns to do our room resets, as well as absorbing some of those impacts of our freight. So, we feel well poised with the prior work and the ongoing rolling work through 2021 that we'll see incremental benefit to gross margin.

Okay. So, is it fair to say that the -- we saw the sequential slowdown in the year-over-year growth in gross margin, but shipping and different things were different headwinds in the fourth quarter. Is it fair to say that the core performance of the merchandise margin was similar in 4Q as it was in F2Q and F3Q of this year?

Yes, I think the other big differential in that, Bobby, is the mix of digital versus stores, and the impact that had in the interim on margin. And so, we're continuing to double down there. But as we move through to Q1 and beyond, clearly we see a different balance in that margin proposition between increasing our store’s velocity and balancing out our digital sales and the associated margin.

And our next question is from Brad Thomas from KeyBanc Capital Markets.

Yes. Hi, good morning. Thanks for all the details and thanks for taking my questions. I just wanted to follow-up on some of the margin puts and takes there, because that tends to be one of the most important things we find investors asking us about. And I was hoping to, again, just follow-up on what Bobby was asking about, and how you're thinking about some of those puts and takes on margins, and how much of an opportunity there may be as these category resets take hold and what they may be able to add for you? Thanks.

Brad, Gustavo here. Just to give you some perspective, we see sequential improvement in gross margin from Q1 and as the fiscal year progresses. As Mark mentioned before, we expect the penetration of owned brand to improve quarter-after-quarter. So, expect the 34% we're guiding for in Q1 to improve as the year progresses. Also, it's important to keep in mind that we've accounted into our estimates the headwinds that we continue seeing in terms of cost shipping freight increases, and so we will continue to manage that. And we are getting better and better on the processes that Joe is leading, in terms of optimizing, promotion, markdowns, doing more of promotions that drive both revenue and margin increase. So, you will see that improvement as the fiscal year goes.

And Brad, you just mentioned there about the resets in Joe's work there, I think that is part of that overall plan, divesting underperforming product and lower-margin products, resetting that with new national brands, but definitely featuring our key owned brand and their margin reach potential.

Our next question is from Jenna Giannelli from Goldman Sachs.

Hi there. Thanks for taking the question. I was just curious, when you think about your excess liquidity on hand and some of your bond trading below par, that might be an opportunity to manage that leverage or get down to that below three times goal, if we could see you being opportunistic again with your debt stack? Thank you.

Hi, Jenna, Gustavo here. First, let me reinforce that we will be, already in Q1, below the gross debt to EBITDA ratio of three, without taking any additional action on our capital structure. Now, as you say, we have some tranches trading below par. We also have some of the closer maturities trading above par. That is all in our mix. We will remain focused on what we said in terms of capital allocation. First thing, investing in the business and we have the capital spending allocated to that in the business. We're doing the share buybacks, as you saw. We're increasing it this year. And we will continue monitoring during the year on how to optimize our debt structure and certainly bond is part of that equation.

Excellent. Thank you so much.

The next question is from Steven Forbes from Guggenheim.

Good morning. Hey, Mark, I wanted to sort of focus on the new digital customer trends, right, the 11 million customers you called out. Curious if you could sort of just give us a nice review here, right? What categories did they transact, right, understanding their customer journey transact and during 2020? How often are they repeating, right, maybe a timeframe? Is it one month, one quarter? And just your overall thoughts on how that greater base of new customers entering 2021? How the evolution of their spending trends will impact guide, right? As we think about this path to a flat core comp, what is happening in the -- those 11 million customers? And then how did you incorporate that into the guidance here?

Yes, it's a great question, Steven. I think we've incorporated it conservatively into the plan. But there's no doubt that we have been acquiring new customers, and they have been behaving differently coming to being a digital-first and then an omni-always customer. We're seeing them trade within the quarter, and we shared some of those ratios in terms of their increase -- the increase that we've seen in the secondary item purchase within the quarter. Good news is that they are, on average, younger, and they are less likely to buy promotionally. And then category-wise, we're really seeing them kind of delve into all our categories, our core categories in particular, and some growth in the indoor décor area, which for us is really on the rise, and it's something we haven't doubled down in the past, and we're starting to invest and grow in now, which is terrific. So, we're seeing younger, we're seeing stickier. And for us, we see this as a great avenue to connect with a wider customer base. And particularly, because it's digital focused, we're able to kind of use the data and the storytelling to share a plethora of details around the new Bed Bath & Beyond, including the launch of the new owned brands to a wider constituency. So, the kind of trouble, of course, it has actually generated a new avenue of growth for us. But to your point, we've baked that in conservatively. We want to see things really settle with the vaccines and the return to the new normal, and how that plays into our mix, so some potential upside there.

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

Good morning, guys. Thanks very much. So, just a quick one for you, Gustavo, just curious what's driving or give some specificity, I guess, to what's driving the faster deleveraging 2021, the EBITDA guidance is the same. Is this primarily, I guess, on working capital? And I guess just what should we expect for working capital gains for this year?

Yes, a couple of comments there, Curt. Thanks for the question. Look, we -- couple of things improved. First is, we completed -- versus Q4, we competed and signed the divestiture of Cost Plus World Market, that has an impact the on the operating lease liabilities, and is a reaffirmation for us saying now, as we start the fiscal year, and look at the debt in the balance of the year, and look at the EBITDA and adjusted EBITDA on the balance of the year to reaffirm. That's why we're below 3X already if we look at the math in Q1. Your question on working capital, you saw sequential improvement in the fourth quarter relative to the third quarter, $110 million of inventory improvement on the core banners. We expect to continue improving inventory as we go along. Recall, a few months ago we said we will reduce inventory by a billion dollars of retail versus the closing position of 2019. That would take us to about $1.6 billion of inventory. We're not at $1.7 billion, so we're well on track with what we said in terms of working capital improvements. It could vary quarter-to-quarter, but our objective remains driving working capital improvements, and on our way to 3.5 times inventory terms.

Our next question is from Seth Basham from Wedbush Securities.

Thanks a lot, and good morning. My question is around market share performance. You gave some comments last quarter on your performance for core categories. Could you talk about the trends this quarter? In addition, if we think about the non-core categories in your business, they seem to decline pretty materially this quarter, that one-third of your business that's not core. What are you doing to improve performance in those categories? Thank you.

Yes, and thanks for the question. Look, I think in some of those, they pertain to key areas like personal care, which for us is really dependent on store-based traffic. And we know that the digital is returning stronger than stores. We're still in the entry point of 2021, the COVID new normal. So, we have plans to see that stabilize and contribute more. But that is going to be dependent on store traffic. So, again, great compensation and strength to reduce the share declines that we've seen. We do know that we're up against, with the store closures, a more compact market that we're going to be working in. So, we're continuing to focus on that mix of store and digital throughout the year, and focus on share increases.

But just to follow up on that, if I may. How did your core categories perform market share-wise this quarter and compared to last quarter? It doesn’t seem like you made as much improvement, and might have slipped backwards a little bit.

Yes, I think that it was definitely what we're excited about that, is that we had positive comps consistently while we were really readjusting in the fourth quarter and getting readiness for our 2021 plan, and focusing on those all-important room and assortment reset, reducing overall inventory, curating them down so that we can be more powerful in key categories. So, we knew that we would take a dip in a couple of spaces as we readjusted our assortment, taking markdowns, and having some out of stocks in some key areas to get back in to complete the new set and new merchandise. So, I think a quarter of reestablishment and foundation, getting ready for 2021, yet still creating growth so we would feel comfortable about that. But definitely more work to be done with share growth throughout 2021.

Our next question is from Michael Lasser from UBS.

Good morning. This is Atul Maheswari on for Michael Lasser. Thanks a lot for taking our question. Gustavo, on the private brand penetration going from to 30% from 10%, how much gross margin expansion can that contribute over time? Are you able to size that in any which way?

Yes, good morning. We've said, and we're looking at about 10 percentage margin point improvement in our owned brand assortment. So, think about a thousand basis points, and that is part of our gross margin algorithm. This is very important; it's part of our gross margin, so 35% in fiscal '21, and 38% in fiscal ‘23. We look at continue driving own brand penetration, we improve gross margin with that. And while continue optimizing pricing and promotion and continue driving cost savings. It’s a crucial element of our strategy, crucial element of differentiation, and it’s a crucial element of underlying gross margin expansion.

Understood, thank you. And I just want to follow-up, you’ve guided at least on a core vendor basis 65% to 70% of comp for our sales growth for the first quarter. Where are you tracking relative to that expectation right now?

We’re just tracking very well relative to that expectation. Keep in mind we’re not going to give revenue performance month-by-month. Keep in mind this is versus the base last year March, April, June. In March, we closed our stores, the majority of our stores as of March 13th -- March, April and May. In April and May the revenues are much, much more depressed. That’s why we said in the prepared remarks we have a growth rate in March. The growth rate will be much higher in April, much higher in May. Overall in the quarter, 65% to 70%, and I’m very glad you’re picking up on core performance that’s what we’re focusing on the quarter. And I may say that Q1 core growth it’s a low single-digit growth rate on a two year stock basis. So, when we compare Q1 versus Q1 ‘19 it’s positive comp sales growth versus 2019.

And our next question is from Anthony Chukumba from Loop Capital.

Good morning, and thanks for taking my question. You’ve talked a fair amount about the change in private label penetration that you’re projecting over the next few years, but I was wondering about the other merchandising changes that you had talked about, particularly in terms of rationalizing SKU count. I was just wondering kind of where you are there in terms of what dating we are with the other merchandising changes aside from increasing private label penetration? Thank you.

Anthony, hi, it’s Joe Hartsig. A few things, yes, you saw the growth in our destination categories, which was really great for us to seek, it’s been a focus. I think we’ve been pretty clear in our Investor Day that we didn’t have category line of view. So, we’re well on our way on using data, both internal and external to drive better decisions. We’d done the Bed Bath, kitchen resets, and we’re taking that capability across other categories. Now we’re coupling this up with a lot of the room resets that you’re starting to see. So, if you look at the introduction of Nestwell our new own brand that was part of the category line of the work, where we removed a lot of unproductive SKUs that were cluttering up our assortment at common price points that were helping the customer shop. And we’re bringing that to the newly remodeled stores, both in Houston that John talked about, but across the banner, across the chain where we’re really working out a new reset program. So, very excited about coupling all this together products and proposition using our new go-to-market integrated planning process that we call blueprints to deliver a unified centralized plan to our stores and our digital channels at the same time. So, if you can see, you can really see things are coming together from a common view. Our customer value proposition that Mark talked about that’s launching today is really emblematic of kind of the new Bed Bath. So, very excited about the progress more work to be done, but very, very happy about the new muscle that we’re building.

Our next question is from Carla Casella from JP Morgan.

Hi, I’m wondering if you could give us the same-store sales for the stores only, or the digital percentage of sales in fourth quarter. I think you said the 40% was for the full-year?

Yes, hi, Carla. It was 40% for the full-year. It was also 40% for the fourth quarter and the store comp was minus 20%. We saw minus 20% on stores, 86% digital, 4% total come from growth.

Okay, that’s great. And then just given the cost cuts that you’ve made today, are you done implementing costs and the remainder is just a flow through and have you given the amount that’s remaining on the program. And then I’m also wondering what the additional assets sales if you're really looking at a new cost cutting program going forward?

Yes. So, in terms of cost cutting, we constantly look at optimizing our cost structure. So, we're looking at zero-based a product approach to optimize costs. We're working on a rent reduction. We're continuing working with our vendors on reducing our input costs. That is going all plan in terms of additional restructuring, et cetera. We're capitalizing on all the savings of the restructuring done last year. Yes.

And our next question is from Alex Arnold from Odeon Capital Group.

Hey, guys. Thanks for taking my question. Mine is pretty easy one. Could you just give us any sort of granularity or update on the relative performance of re-merchandise remodeled stores?

No, I think what we would say to you is that that's really backing out of the moment and we're very pleased as John said with the initial response we've seen on the quote store closure, the transparency as a head of our plan and on the remodel, we were really happy with the results we're seeing in a preliminary wise. The reason why I am saying now, Alex, is it's really going to be quarter-by-quarter from year one in that we come and share that because we're in the very early stages and we need this stores to get remodeled unsettled. So, we're going to be looking forward to sharing the progress of those results. Early indications are very strong and in line with our plans or a little bit above. So, we're feeling good about that, but stay tuned for Q1, we look forward to sharing more on that arise and we're very positive.

Okay, great. And how about an update on very recent traffic trends, are you seeing any sort of shift as vaccinations start to roll out more aggressively into the marketplace?

Yes, overall we would say that it's generating a high level of consumer complaints. I think about spend in total, as people can see maybe a new horizon, and it's definitely affecting our traffic trends, but we look at areas like Michigan and we know that there's still work to be done. Overall, I think competency is stronger. We're seeing some positivity in the market. The home trend continuing, I think here and we see that as a multi-year mark that moment, so I think that overall positive train.

And our next question is from Simeon Gutman from Morgan Stanley.

Hi, everyone. Good morning. Couple of questions on sales; first, the core BBB comp in the fourth quarter, 4%. I assume it's being held or lifted by store closures and transport pump. And I don't know if there's an assumption that it's reasonable to make there, is that a fair way to look at it? And then second of all, if you look at your business sequentially and adjusted on a core basis, can you comment or help us think about is the business underlyingly from fourth quarter to the first quarter, sequentially accelerating again looking at it and I'm trying to on a core basis and it looked like well I guess I don't know the answer.

Yes, Simeon, thanks for the question. I think it's not the transference in stores is not a key generator, so I just want to clarify with you that Bed Bath & Beyond grew 6%, not 4%, 4% was their enterprise growth. So, 6% growth really we believe generated by our core strategic efforts. So, we don't see any one time event including stimulus checks, which for us really focuses on we've done the math and we've bought past it. They've really been more about essential bill paying some investments in technology. They're not playing into the wider market and the subsequent checks are focusing more on savings. So, outgrowth is actually predicated on that strategic intent. However, the marketing connecting with the customer in their life moments in different ways that's truly paying dividends. And so we see the growth as really strategic against their efforts as opposed to any transparence or one time moment. That means that we are saying a loss in that growth, then an ongoing increment of linear growth where we think we'll express that clearly by quarter going through 2021.

Okay. And then I've picked the math, just quick follow-up the launch of some of the new private brands. Is it too soon to have already seen an impact or what's the reception like anything?

Yes. Look, I mean, it's similar to the previous question. We will kind of come back with a more robust detail. By the end of Q1, we will have launched three brands in substantial categories as well as across the company, across banner opening price point brands which is going to focus on I think drawing in an incremental customer and incremental sales. But what we will say so far is sales are exceeding our expectation. And the customer acceptance of this brand has been terrific. I think the way that approached it in terms of product and messaging and storytelling engagements is something you’ll see with every one of the brands going forward and has really worked incredibly well. So, online, in-store, in social the brand is resonating and clearly is being accepted. And the run rate is a little higher than we expected. So, good news so far, but again, we are only beginning our journey. And we really look forward to sharing more about the growth rate, the penetration, and acceptance as we complete our Q1 period.

Our next question is from William Reuter from Bank of America.

Good morning. Can you remind us what percentage of your products come from Asia? And then if you are seeing any impacts of out of stock due to port disruption on the West Coast, particularly in light of some of the category resets? And if some of those new private brands that you are bringing in where there any of those have had such challenges?

Yes. Thanks, William. We won’t be kind of sharing of our Asian production, right? I think that’s a little too specific. What I would say to you is that the port issues have been well factored into our plan. And I think they are obviously affecting the towel industry. As it relates to our own brand the team did a really good job of thinking through demand and upside potential of these brands. And so, we got them in earlier. We got them in with room to set up a key learning from past experiences. Make sure we have it early and we are ready to sit. And then, we can manage that accordingly. And they have also built capacity in for upside. So, at this point, we feel really comfortable about our preplanned upset and protected our own brand launches. Look, we are working really closely with our vendor base to reinstall. A large chunk of our business is in nation brand and replenishment of key items. And they are getting back into stock. And therefore, we have been getting into backward stock throughout the end of Q4 and into really, really well. We want to maintain that and start communication of partnership with our vendor base is really critical.

And our last question comes from Jonathan Matuszewski from Jefferies.

Hey, guys, thanks for taking the questions. First one, Mark, I think you mentioned recently acquired customers are less likely to use discounts and buy on promotions. Curious the degree to which you think the backdrop is maybe influencing that dynamic. Do you think this newly acquired customer will be predisposed to shop more full price without coupons as the backdrop normalizes a bit? And if you could just refresh us on your latest view of where you think this newly acquired customer is coming from? Thanks.

Yes. Look, I think for us we focused a lot on our value -- everyday value here, Jonathan. And we had some work to do when I first joined. Good news is that we are showing incredible parity on everyday prices that’s pre-coupon, everyday prices to the general market and I think that’s really important. All customers but particularly young customers are very adept at looking online first. And so, they want to look at your first two prices and they will compare with your competition. And for us, we think that coming and seeing that price, comparing and knowing that we are strong and that’s way are investing. And so, I think there is a lot of recognition of what is this everyday price in the marketplace and people shopping accordingly. So, we think that’s sticky. To what level that penetrates promotional activity with this younger customer or newly acquired customer? We have to continue to see that play out. But we feel positive about the metric indicators we have seen so far. In terms of where we are acquiring the new customer from, it’s a great question. We are just happy to be acquiring them. And I think we are doubling down on who they are and then how to deepen that connection with them. We also see that there is an opportunity for us to expand our cross-banner shopping, and therefore cultivate a customer from wherever they shop with inside our banner. So, what you see online now is we have just launched on our Bed Bath & Beyond website that there is direct connectivity at the top to buybuy BABY, and reverse, so from buybuy BABY to Bed Bath & Beyond, there’s always time to create a link. So, where those customers may have been separate, we are providing more of an ecosystem. So, growth in that we know metric wise generate really positive return and higher average unit sales. So, we are going to continue to cultivate these newly found customers, but we are reaching out, and I think that our marketing efforts has been incredibly strong. And we are really tapping into social and new avenues. I think that’s helping to bring in new customer to Bed Bath & Beyond.

And ladies and gentlemen, that is all the time we have today for questions. I will now turn the call back over to Janet Barth for closing remarks.

Thank you, John, and thank you all for participating in our call today. Please feel free to contact me or our affiliates with additional questions. I have a great day. Stay safe. Bye-bye.

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