Bed Bath & Beyond (BBBY)

Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a chain of retail stores, operating under the names Bed Bath & Beyond (“BBB”), Christmas Tree Shops (“CTS”), Harmon and Harmon Face Values (“Harmon”) and buybuy BABY. The Company sells a wide assortment of merchandise principally including domestics merchandise and home furnishings as well as food, giftware, health and beauty care items and infant and toddler merchandise. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of its infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors, including, but not limited to, general economic conditions including the housing market, fuel costs, and a declining overall macroeconomic environment, unusual weather patterns, consumer preferences and spending habits, competition from existing and potential competitors, and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

The Company’s results for the three months ended November 29, 2008 were adversely affected by the declining overall macroeconomic environment during the period, the liquidation sales of a major competitor, as well as a one week shift in the Thanksgiving holiday as compared with the three month period ended December 1, 2007. For the nine months ended November 29, 2008, the Company’s results were negatively affected by the economic slowdown, including issues specific to the housing industry, and the liquidation sales of a number of retailers, including a major competitor. As discussed in more detail below, the following represents an overview of the Company’s financial performance for the periods indicated:

·                  For the three and nine months ended November 29, 2008, the Company’s net sales were $1.783 billion and $5.285 billion, respectively, a decrease of 0.7% and an increase of 3.3%, respectively, as compared to the three and nine months ended December 1, 2007.

·                  Comparable store sales for the fiscal third quarter of 2008 decreased by approximately 5.6%, as compared with an increase of approximately 0.8% for the corresponding period last year. Comparable store sales for the fiscal nine months of 2008 decreased by approximately 1.7%, as compared with an increase of approximately 1.5%, for the corresponding period last year.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks). Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period. In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

·                  Gross profit for the three months ended November 29, 2008 was $692.9 million or 38.9% of net sales compared with $747.9 million or 41.7% of net sales for the three months ended December 1, 2007. Gross profit for the nine months ended November 29, 2008 was $2.088 billion or 39.5% of net sales compared with $2.126 billion or 41.6% of net sales for the nine months ended December 1, 2007.

·                  Selling, general and administrative expenses (“SG&A”) for the three months ended November 29, 2008 were $556.5 million or 31.2% of net sales compared with $544.7 million or 30.4% of net sales for the three months ended December 1, 2007. SG&A for the nine months ended November 29, 2008 was $1.646 billion or 31.1% of net sales compared with $1.548 billion or 30.3% of net sales for the nine months ended December 1, 2007.

·                  The effective tax rate was 36.3% and 37.2% for the three and nine months ended November 29, 2008, respectively, and 33.6% and 35.0% for the three and nine months ended December 1, 2007, respectively. The tax rate for the three months ended December 1, 2007 included an approximate $8.0 million benefit primarily due to the effective settlement in the quarter of certain discrete tax items from ongoing examinations. The tax rate for the nine months ended December 1, 2007 included an approximate $17.1 million benefit primarily due to the effective settlement of certain discrete tax items from ongoing

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Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a chain of retail stores, operating under the names Bed Bath & Beyond (“BBB”), Christmas Tree Shops (“CTS”), Harmon and Harmon Face Values (“Harmon”) and buybuy BABY. The Company sells a wide assortment of merchandise principally including domestics merchandise and home furnishings as well as food, giftware, health and beauty care items and infant and toddler merchandise. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of its infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors, including, but not limited to, general economic conditions including the housing market and fuel costs, unusual weather patterns, consumer preferences and spending habits, competition from existing and potential competitors, and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

The Company’s results for the three and six months ended August 30, 2008 reflect the challenges presented by certain macroeconomic conditions, including the economic slowdown, in general, and specific issues related to the housing industry. As discussed in more detail below, the following represents an overview of the Company’s financial performance for the periods indicated:

·                For the three and six months ended August 30, 2008, the Company’s net sales were $1.854 billion and $3.502 billion, respectively, and increased by 4.9% and 5.5%, respectively, as compared to the three and six months ended September 1, 2007.

·                Comparable store sales for the fiscal second quarter of 2008 decreased by approximately 0.1%, as compared with an increase of approximately 2.2% for the corresponding period last year. Comparable store sales for the fiscal first half of 2008 increased by approximately 0.3%, as compared with an increase of approximately 1.9%, for the corresponding period last year.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks). Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period. In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

·                Gross profit for the three months ended August 30, 2008 was $739.3 million or 39.9% of net sales compared with $732.2 million or 41.4% of net sales for the three months ended September 1, 2007. Gross profit for the six months ended August 30, 2008 was $1.395 billion or 39.8% of net sales compared with $1.378 billion or 41.5% of net sales for the six months ended September 1, 2007.

·                Selling, general and administrative expenses (“SG&A”) for the three months ended August 30, 2008 were $551.9 million or 29.8% of net sales compared with $511.1 million or 28.9% of net sales for the three months ended September 1, 2007. SG&A for the six months ended August 30, 2008 were $1.089 billion or 31.1% of net sales compared with $1.003 billion or 30.2% of net sales for the six months ended September 1, 2007.

·                The effective tax rate was 37.3% and 37.5% for the three and six months ended August 30, 2008, respectively, and 35.5% and 35.8% for the three and six months ended September 1, 2007, respectively.

·                For the three and six months ended August 30, 2008, the Company’s net earnings per diluted share were $0.46 ($119.3 million) and $0.76 ($196.0 million), respectively, compared to net earnings per diluted share of $0.55 ($147.0 million) and $0.92 ($251.7 million) for the three and six months ended September 1, 2007, respectively. The net earnings per diluted share include the impact of the Company’s repurchases of its common stock.

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Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a chain of retail stores, operating under the names Bed Bath & Beyond (“BBB”), Christmas Tree Shops (“CTS”), Harmon and Harmon Face Values (“Harmon”) and buybuy BABY. The Company sells a wide assortment of merchandise principally including domestics merchandise and home furnishings as well as food, giftware, health and beauty care items and infant and toddler merchandise. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of its infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors, including, but not limited to, general economic conditions including the housing market and fuel costs, unusual weather patterns, consumer preferences and spending habits, competition from existing and potential competitors, and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

The Company’s results for the three months ended May 31, 2008 reflect the challenges presented by certain macroeconomic conditions, including the economic slowdown, in general; specific issues related to the housing and mortgage industries; and a heightened promotional environment. As discussed in more detail below, the following represents an overview of the Company’s financial performance for the periods indicated:

·                  For the three months ended May 31, 2008, the Company’s net sales were $1.648 billion and increased 6.1% as compared to the three months ended June 2, 2007.

·                  Comparable store sales for the fiscal first quarter of 2008 increased by approximately 0.8%, as compared with an increase of approximately 1.6%, for the corresponding period last year.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks). Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period. In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

·                  Gross profit for the three months ended May 31, 2008 was $656.0 million or 39.8% of net sales compared with $646.1 million or 41.6% of net sales for the three months ended June 2, 2007.

·                  Selling, general and administrative expenses for the three months ended May 31, 2008 were $537.2 million or 32.6% of net sales compared with $491.7 million or 31.7% of net sales for the three months ended June 2, 2007.

·                  The effective tax rate was 37.8% and 36.3% for the three months ended May 31, 2008 and June 2, 2007, respectively.

·                  For the three months ended May 31, 2008, the Company’s net earnings per diluted share were $0.30 ($76.8 million) compared to net earnings per diluted share of $0.38 ($104.6 million) for the three months ended June 2, 2007.  The net earnings per diluted share include the impact of the Company’s repurchases of its common stock.

In May 2008, the Company entered into a joint venture agreement with Home & More, S.A. de C.V., a privately-held home products retailer operating two stores in Mexico. The cost of investment in the joint venture totaled to approximately $4.7 million, including fees.

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Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a chain of retail stores, operating under the names Bed Bath & Beyond (“BBB”), Christmas Tree Shops (“CTS”), Harmon and Harmon Face Values (“Harmon”) and buybuy BABY (See “Acquisition,” Note 11). The Company sells a wide assortment of merchandise principally including domestics merchandise and home furnishings as well as food, giftware, health and beauty care items and infant and toddler merchandise. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of its infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors, including but not limited to, consumer preferences and spending habits, general economic conditions, unusual weather patterns, competition from existing and potential competitors and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program. During the three and nine months ended December 1, 2007, the Company faced a challenging retailing environment related to the home.

As discussed in more detail below, the following represents an overview of the Company’s financial performance for the periods indicated:

·      For the three and nine months ended December 1, 2007, the Company’s net sales were $1.795 billion and $5.116 billion, respectively, and increased by 10.8% and 10.7%, respectively, as compared to the three and nine months ended November 25, 2006.

·      Comparable store sales for the fiscal third quarter of 2007 increased by approximately 0.8%, as compared with an increase of approximately 4.6%, for the corresponding period last year. Comparable store sales for the fiscal nine months of 2007 increased by approximately 1.5%, as compared with an increase of approximately 4.8%, for the corresponding period last year.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks). Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period. In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

·      Gross profit for the three months ended December 1, 2007 was $747.9 million or 41.7% of net sales compared with $704.1 million or 43.5% of net sales for the three months ended November 25, 2006. Gross profit for the nine months ended December 1, 2007 was $2.126 billion or 41.6% of net sales compared with $1.972 billion or 42.7% of net sales for the nine months ended November 25, 2006.

·      The effective tax rate was 33.6% and 35.0% for the three and nine months ended December 1, 2007, respectively, and 35.8% and 36.3% for the three and nine months ended November 25, 2006, respectively.

·      For the three and nine months ended December 1, 2007, the Company’s net earnings per diluted share increased to $0.52 (or $138.2 million) and $1.44 (or $389.9 million), respectively, as compared to $0.50 (or $142.4 million) and $1.36 (or $388.4 million), respectively, for the corresponding periods last year. The increases in net earnings per diluted share include the impact of the Company’s repurchases of its common stock.

Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a nationwide chain of retail stores, operating under the names Bed Bath & Beyond (“BBB”), Christmas Tree Shops (“CTS”), Harmon and buybuy BABY (See “Acquisition,” Note 11). The Company sells a wide assortment of merchandise principally including domestics merchandise and home furnishings as well as food, giftware, health and beauty care items and infant and toddler merchandise. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of its infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors, including but not limited to, consumer preferences and spending habits, general economic conditions, unusual weather patterns, competition from existing and potential competitors and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

For the three and six months ended September 1, 2007, the Company’s consolidated net sales increased by 10.0% and 10.6%, respectively, as compared to the corresponding period last year. These increases in net sales were primarily attributable to the continuing BBB store expansion program, an increase in comparable store sales and the recent acquisition of buybuy BABY. Comparable store sales for the fiscal second quarter of 2007 increased by approximately 2.2%, as compared with an increase of approximately 4.8%, for the comparable period last year. Comparable store sales for the fiscal first half of 2007 increased by approximately 1.9%, as compared with an increase of approximately 4.8%, for the comparable period last year.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks). Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period. In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

For the three and six months ended September 1, 2007, the Company’s net earnings per diluted share increased to $0.55 and $0.92, respectively, as compared to $0.51 and $0.86 per diluted share for the corresponding period last year. The increase in net earnings per diluted share includes the impact of the Company's repurchases of its common stock.

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Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a nationwide chain of retail stores, operating under the names Bed Bath & Beyond (“BBB”), Christmas Tree Shops (“CTS”), Harmon and buybuy BABY (See “Acquisition”, Note 11).  The Company sells a wide assortment of merchandise principally including domestics merchandise and home furnishings as well as food, giftware, health and beauty care items and infant and toddler merchandise.  The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of its infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors, including but not limited to, consumer preferences and spending habits, general economic conditions, unusual weather patterns, competition from existing and potential competitors and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

For the three months ended June 2, 2007, the Company’s consolidated net sales increased by 11.3% as compared to the corresponding period last year. This increase in net sales was primarily attributable to the continuing BBB store expansion program, an increase in comparable store sales and the recent acquisition of buybuy BABY.  Comparable store sales for the fiscal three months of 2007 increased by approximately 1.6%, as compared with an increase of approximately 4.9%, for the comparable period last year.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks).  Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period.  In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

For the three months ended June 2, 2007, the Company’s earning per share increased to $0.38 per diluted share as compared to $0.35 per diluted share for the corresponding period last year.

Fiscal 2007 will be a 52 week period ending March 1, 2008.

Review of Equity Grants and Procedures and Related Matters

As described in a Form 8-K dated October 10, 2006, in June 2006, the Company’s Board of Directors appointed a special committee of independent directors to carry out a review with respect to the setting of exercise prices for employee stock options and  related matters.  The review identified various deficiencies in the process of granting and

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documenting stock options and restricted shares, as a result of which the measurement dates for various grants were revised.  As a consequence, as described in the Company’s Form 10-K for fiscal 2006, the Company (i) recorded an adjustment for unrecorded expense over the affected period (fiscal year 1993 through 2005) of $61.8 million, and pursuant to Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements in Current Year Financial Statements,” decreased beginning retained earnings for fiscal 2006 by such amount, and (ii) recorded $8.2 million of expense for fiscal 2006.  As described in a Form 8-K dated December 28, 2006 and the Company’s 2006 Form 10-K, the Company’s  Board of Directors also approved during fiscal 2006 a remediation program intended to protect over 1,600 employees from certain potential adverse tax consequences arising under Section 409A of the Internal Revenue Code.  No executive officers received any payments under such remediation program.  The Company continues to cooperate with the inquiries of the SEC and United States Attorney’s office for the District of New Jersey regarding the Company’s stock option grant practices.

Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a nationwide chain of retail stores, operating under the names Bed Bath & Beyond (“BBB”), Christmas Tree Shops (“CTS”) and Harmon. The Company sells a wide assortment of merchandise principally including domestics merchandise and home furnishings as well as food, giftware and health and beauty care items. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of its infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors, including but not limited to, consumer preferences and spending habits, general economic conditions, unusual weather patterns, competition from existing and potential competitors and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

For the three and six months ended August 26, 2006, the Company’s consolidated net sales increased by 12.3% and 12.2%, respectively, as compared to the corresponding period last year. These increases in net sales were primarily attributable to the continuing BBB store expansion program and an increase in comparable store sales.  Comparable store sales for the fiscal second quarter of 2006 increased by approximately 4.8%, as compared with an increase of approximately 4.5%, for the comparable period last year.  Comparable store sales for the fiscal first half of 2006 increased by approximately 4.8%, as compared with an increase of approximately 4.4%, for the comparable period last year.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks).  Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period.  In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

The Company’s consolidated net earnings, which include expenses associated with stock option accounting rules from the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”) in the fiscal third quarter of 2005 and related compensation plan changes, increased to $145.5 million for the three months ended August 26, 2006 and to $246.0 million for the six months ended August 26, 2006 compared to $141.4 million and $240.3 million for the corresponding periods last year, respectively.

Beginning with the fiscal third quarter of 2006, the changes in stock option accounting and our compensation plan will be comparable with prior periods.

Fiscal 2006 will be a 53 week period ending March 3, 2007.

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Review of Equity Grants and Procedures

On June 19, 2006, the Company’s Board of Directors appointed a special committee of two independent members of the Board of Directors, with authority, among other things, to conduct an investigation with respect to the setting of exercise prices for employee stock options and related matters as the special committee deemed appropriate. The special committee retained independent legal counsel who engaged outside accounting advisors to assist with the review. This review has been completed and on October 9, 2006, the special committee presented its report to the Company’s Board of Directors.

The review identified various deficiencies in the process of granting and documenting stock options and restricted shares. As a result of the deficiencies, the special committee recommended, among other things, that the Company revise the measurement dates under Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” for 16 annual option grant dates, 26 monthly grant dates and 2 special grant dates (revisions of  2 annual, 4 monthly and 1 special grant dates have no accounting impact because prices on the revised dates were lower than on the measurement dates previously recorded by the Company). As a result of these new measurement dates and the correction of various other errors relating to the accounting for equity-based compensation, the Company has determined that from fiscal year 1993 through the second quarter of fiscal 2006, it had certain unrecorded non-cash equity-based compensation charges associated with its equity-based compensation plans. The Company believes, however, that these charges are not material to its financial statements in any of the periods to which such charges would have related and therefore, has not recorded such charges and will not revise its historic financial statements.

The Company will, however, in accordance with the transition provisions of Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements,” record a reclassification, within the equity section of the consolidated balance sheet to be included in its Form 10-K for the fiscal year ending March 3, 2007, of approximately $66 million, excluding any related tax effect.  This reclassification represents the effect of the adjustment resulting from the non-cash charges discussed above that relate to fiscal 2005 and prior years.   The Company also expects to record a year-to-date non-cash selling, general and administrative expense charge in its consolidated statement of earnings of approximately $8 million in fiscal third quarter. This approximately $8 million pre-tax charge represents the total of the first and second quarter charges related to the impact of the revised measurement dates (and the correction of various other immaterial errors referred to above), and the applicable charge for the third quarter. The Company is reviewing any potential tax implications relating to the Company’s stock option grants and restricted share awards, but believes that such matters will not have a material impact on the Company’s financial position.

On September 20, 2006, prior to the public announcement of the review, counsel to the special committee notified the Securities and Exchange Commission (the “SEC”) of the review. Following such self-reporting, the Staff indicated that it would commence an informal inquiry.  The Company intends to cooperate fully with the SEC.

The Company has filed a Form 8-K dated October 10, 2006, which provides further details regarding the special committee’s review.

Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) is a nationwide chain of retail stores, operating under the names Bed Bath & Beyond (“BBB”), Christmas Tree Shops (“CTS”) and Harmon. The Company sells a wide assortment of merchandise principally including domestics merchandise and home furnishings as well as food, giftware and health and beauty care items. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of its infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors, including but not limited to, consumer preferences and spending habits, general economic conditions, unusual weather patterns, competition from existing and potential competitors and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

For the three months ended May 27, 2006, the Company’s consolidated net sales increased by 12.2% as compared to the corresponding period last year. This increase in net sales was primarily attributable to the continuing BBB store expansion program and an increase in comparable store sales. Comparable store sales for the fiscal three months of 2006 increased by approximately 4.9%, as compared with an increase of approximately 4.4% for the comparable period last year.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks). Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period. In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

For the three months ended May 27, 2006, the Company’s consolidated net earnings, which include expenses associated with stock option accounting rules from the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”) in the fiscal third quarter of 2005 and related compensation plan changes, increased to $100.4 million from $98.9 million for the corresponding period last year. The changes in our compensation plans and stock option accounting will continue to impact earnings comparisons through the fiscal second quarter ending on August 26, 2006.

Fiscal 2006 will be a 53 week period ending March 3, 2007.

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Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) operate specialty retail stores nationwide, including stores of Bed Bath & Beyond (“BBB”), Harmon Stores, Inc. (“Harmon”) and Christmas Tree Shops, Inc. (“CTS”), primarily selling better quality domestics merchandise and home furnishings. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of our infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors, including but not limited to, general economic conditions, consumer preferences and spending habits, competition from existing and potential competitors, unusual weather patterns and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

For the three and nine months ended November 26, 2005, the Company’s consolidated net sales increased by 11.0% and 12.1%, respectively, as compared to the corresponding periods last year.  These increases in net sales were primarily attributable to the continuing BBB store expansion program and an increase in comparable store sales.  Comparable store sales for the fiscal three and nine months of 2005 increased by approximately 3.1% and 4.0%, respectively, as compared with an increase of approximately 3.1% and 4.2% for the comparable periods last year.  The increases in comparable store sales reflected a number of factors, including but not limited to, the continued consumer acceptance of the Company’s merchandise offerings and a strong focus on customer service with an emphasis on responding to customer feedback.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks).  Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period.  In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

For the three and nine months ended November 26, 2005, the Company’s consolidated net earnings increased by 10.4% and 15.7%, respectively, as compared to the corresponding periods last year.  These increases were primarily a result of relative increases in gross profit as a percentage of net sales.

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Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) operate specialty retail stores nationwide, including stores of Bed Bath & Beyond (“BBB”), Harmon Stores, Inc. (“Harmon”) and Christmas Tree Shops, Inc. (“CTS”), primarily selling better quality domestics merchandise and home furnishings. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of our infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors including but not limited to, general economic conditions, consumer preferences and spending habits, competition from existing and potential competitors, unusual weather patterns and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

For the three and six months ended August 27, 2005, the Company’s consolidated net sales increased by 12.3% and 12.7%, respectively, as compared to the corresponding periods last year.  These increases in net sales were primarily attributable to the continuing BBB store expansion program and an increase in comparable store sales.  Comparable store sales for the fiscal three and six months of 2005 increased by approximately 4.5% and 4.4%, respectively, as compared with an increase of approximately 4.8% and 4.9% for the comparable periods last year.  The increases in comparable store sales reflected a number of factors, including but not limited to, the continued consumer acceptance of the Company’s merchandise offerings and a strong focus on customer service with an emphasis on responding to customer feedback.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks).  Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period.  In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

For the three and six months ended August 27, 2005, the Company’s consolidated net earnings increased by 17.8% and 18.9%, respectively, as compared to the corresponding periods last year.  These increases were primarily a result of relative increases in gross profit as a percentage of net sales.

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Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) operate specialty retail stores nationwide, including stores of Bed Bath & Beyond (“BBB”), Harmon Stores, Inc. (“Harmon”) and Christmas Tree Shops, Inc. (“CTS”), primarily selling better quality domestics merchandise and home furnishings. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of our infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors including but not limited to, general economic conditions, consumer preferences and spending habits, competition from existing and potential competitors, unusual weather patterns and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

For the three months ended May 28, 2005, the Company’s consolidated net sales increased by 13.0% as compared to the corresponding quarter last year.  The increase in net sales was primarily attributable to the continuing BBB store expansion program and an increase in comparable store sales of approximately 4.4% as compared with an increase of approximately 5.1% for the fiscal first quarter of 2004.  The increase in comparable store sales reflected a number of factors, including but not limited to, the continued consumer acceptance of the Company’s merchandise offerings and a strong focus on customer service with an emphasis on responding to customer feedback.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks).  Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period.  In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

For the three months ended May 28, 2005, the Company’s consolidated net earnings increased by 20.5% as compared to the corresponding quarter last year.  This increase was primarily a result of a relative increase in gross profit as a percentage of net sales and a relative decrease in selling, general and administrative expenses (“SG&A”) as a percentage of net sales.

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Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) operate specialty retail stores nationwide.  The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of our infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors including, but not limited to, general economic conditions, consumer preferences and spending habits, competition from existing and potential competitors, unusual weather patterns and the ability to find suitable locations at reasonable occupancy costs to support the Company’s expansion program.

For the three and nine months ended November 27, 2004, the Company’s consolidated net sales increased by 11.1% and 15.7%, respectively, as compared to the corresponding periods last year.  The three month net sales increase was primarily attributable to the continuing Bed Bath & Beyond (“BBB”) store expansion program and an increase in comparable store sales.  The nine month net sales increase was primarily attributable to the continuing BBB store expansion program, the inclusion of the results of Christmas Tree Shops, Inc. (“CTS”) since its acquisition in June 2003 and an increase in comparable store sales.

Comparable store sales for the fiscal three and nine months of 2004 increased by approximately 3.1% and 4.2%, respectively. As of the beginning of the fiscal third quarter of 2004, CTS was included in the calculation of comparable store sales.  The increase in comparable store sales reflected a number of factors, including, but not limited to, the continued consumer acceptance of the Company’s merchandise offerings and a strong focus on customer service with an emphasis on responding to customer feedback.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks).  Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period.  In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

For the three and nine months ended November 27, 2004, the Company’s consolidated net earnings increased by 21.3% and 26.9%, respectively, as compared to the corresponding periods last year.  These increases were primarily a result of relative increases in gross profit as a percentage of net sales and relative decreases in selling, general and administrative expenses (“SG&A”) as a percentage of net sales.

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Overview

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) operate specialty retail stores nationwide.  The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of our infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors including, but not limited to, general economic conditions, consumer preferences and spending habits, competition from existing and potential competitors, unusual weather patterns and the ability to find suitable locations at reasonable occupancy costs to support the Company’s expansion program.

For the three and nine months ended November 27, 2004, the Company’s consolidated net sales increased by 11.1% and 15.7%, respectively, as compared to the corresponding periods last year.  The three month net sales increase was primarily attributable to the continuing Bed Bath & Beyond (“BBB”) store expansion program and an increase in comparable store sales.  The nine month net sales increase was primarily attributable to the continuing BBB store expansion program, the inclusion of the results of Christmas Tree Shops, Inc. (“CTS”) since its acquisition in June 2003 and an increase in comparable store sales.

Comparable store sales for the fiscal three and nine months of 2004 increased by approximately 3.1% and 4.2%, respectively. As of the beginning of the fiscal third quarter of 2004, CTS was included in the calculation of comparable store sales.  The increase in comparable store sales reflected a number of factors, including, but not limited to, the continued consumer acceptance of the Company’s merchandise offerings and a strong focus on customer service with an emphasis on responding to customer feedback.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks).  Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period.  In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

For the three and nine months ended November 27, 2004, the Company’s consolidated net earnings increased by 21.3% and 26.9%, respectively, as compared to the corresponding periods last year.  These increases were primarily a result of relative increases in gross profit as a percentage of net sales and relative decreases in selling, general and administrative expenses (“SG&A”) as a percentage of net sales.

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