Bed Bath & Beyond Inc.

Q3 2021 Earnings Conference Call


spk_0: welcome to the bed bath and beyond fiscal twenty twenty one third quarter earnings conference call my name is john have your operator for today's call at this time all participants arnold and only mode later we will conduct the question unanswered that them during the question unanswered that than if have a by spin faster than one on your touch on phone please note the conference is the record it and i will not turn to call over to sue the kim
spk_1: thank you and than one hobby one welcome to our fiscal twenty twenty one third quarter earnings call joining us today or my titan a president and ceo of gustavo not a chief financial officer before was again let me remind you that our fiscal twenty twenty one third quarter earnings release and slide presentation can be found and mean best a relation section about website at bed bath and beyond dot com and as exhibits two are related for a kid this conference call him a five year for to may contain forward looking statements including statements about why references to our outlook regarding the company's performance or internal models and our long term objectives offered statements are subject to risks and uncertainties that cause actual results to differ materially from what we say during the call today please refer to her most recent periodic ftc filing for more detail on these risks and uncertainties including the risk factors section and an annual report on for ten k and are quarterly reports on form ten que the company undertake no obligation to update or revise and forward looking statements additionally the information we will discuss today and think certain financial measures that exclude amounts are subject to adjustment that had the effect of excluding out that are included in the most directly comparable measure prepared in accordance with general accepted accounting principles for reconciliation to the most comparable measures presented in accordance with gap please refer to the table and our earnings release available on our website and included as an exhibit to are form eight k filed today it is now my pleasure to ten the pall over to mark
spk_2: thank you to the on good morning everyone we hope you had a safe and healthy holiday season during these turbulent times during this first year our comprehensive tests emotion or most recent results demonstrate the complexity that exit to the a long term updated to drop lab wild managing a business in a highly unpredictable couch short term barb unprecedented macro forces continue to permeate operating conditions living to a new term that his long term bifurcation and alcopop while we affectively offset high costs that have been at the core of global supply chain pressures increasing inventory destruction the impact your ability to meet demand during the holiday season these conditions like to south demonstrated be and volatility despite progress on a multiyear transformation we continued to execute a long term strategic initiatives to modernize our infrastructure and an aunt or agility in any future operating and bargains more specifically during the third quarter our revenue momentum was below our expectations with net sales to one point nine billion dollars and seven percent cop decline as share but he previously we experienced a slow start the south in september and october in preparation for the holiday season and against the backdrop of the challenging supply chain bob we fortified our plants secure the wide breadth and depth of product overall out imagery position remain healthy or with great a relevant padlock to and in november we drive improvement and arrested comp decline unfortunately despite strong customer demand operational challenges such as bend the constraints locked in the tree once in a position and a cowardly illiquid legacy infrastructure impacted our ability to drive better improvement in sales trends she's a receipt flow and on shelf availability affected our top two hundred items such as kitchen appliances and peasant like tonics as well as our key categories such as bed and bought the customer experience was compromised as strong demand was have made with strong product availability this resulted in approximately one hundred mean dollars and lot filed that the demand or lead single digit impacted the quota and an even higher impact on december operational issues were not limited to our imagery we also took steps to recorded or rebel job marketing resources and correct the disproportionate reduction about secular circulated which are a truck driver for our business as context a disproportionate amount of sales are generated from our circular at stores and direct key trip driver lol able to activities no plans for distribution in october type of supply and library she's been intended it painted i believe you reach full scale circulation ah deliberately say to his by of and of is also an issue that prevented to return to start levels of circular distribution and further impacted our ability to drive traffic to generate sales yet admit some what normalize conditions with them better traffic a bit except except lead both install on online for example we deliver with a high single digit south company us of the black friday decide the monday period underscoring bed bath and beyond as a top destination for customer we're also pleased to see customers return to brick and mortar shopping this year as our us dollars delivered need single cells comps oh that this five day holiday period during the quarter when he delivered by margin as thirty five point nine said well above our plans despite sharp increases in inflation and pervasive frightened supply chain cause prices stemming from that experience last quarter once we diagnose the fight cost pressures that impacted thing to to were swiftly implement pricing actions commercial optimization and product mix plans to achieve margin recovery will a surgical in our price on a ski by ski basis to are also ensure we make to pay added with the market and still remain so we also optimized my promotional activity increasing our regular price penetration throughout the quarter that his last year despite the highly competitive a month of november as evidenced by our higher gross margin performance we have an arsenal of preflight machines that we can now use strategically to drive engagement with that customers profitably keep on exclusions less clearance discount an adventure even coupons during peak chopping periods i just some of the examples of how we can diversify our value that stage without being more promotional in totality these decisive action and strategies lead to an adjustable much like not only that he expectation significantly but above add twenty twenty and twenty nineteen levels as you know this is active financial problems about three you transformation strategy our own brands continue to produce high much not margin at increase penetration right despite the supply chain related imagery environment we launched the final two of our a total plane i brands for fiscal twenty twenty one stay at three be an h for happy enables that customers to i'm happier with options for modern and contemporary key items to assist with everyday moments of this season or of the tree name in accordance with our long term strategy although i braves helped create a lifelong memories and are t cornerstone about three me a profit algorithm we're pleased to see progress continue quarter after quarter in just a thirsty of launching the initiative a progress is even more evident in our newly remodeled stores they going faster than the chain with i brains penetration and accordingly i'll throw product margin right right high as well just as we delivered unless margins are in the corner a holistic focuses on elevating up top and bottom line almonds as we continue to transform in the near term lead to stay conditions to remain complex and we're defining solutions to navigate each quarter way implementing claims that will enable sailed toleration over the be at baby ten and we will constantly leverage modeling to two sisters in strengthening and driving traffic further a number one parodies continue to change our current systems and processes to unlock imagery in a faster and more efficient way to meet demand above and beyond our me to long term investments to improve our top in suppositions we'll which with a vendors to target constrained imagery and improve flight that dc than stores concurrently we must and heads or ability for fill out store demand want imagery is with in the opposition from shipping containers to warehouses to stores in the near term we've created new trains prices that increase the party logistics for badly and decrease way households to assist with flow we're also adding digital supply tank and abilities to automatically shift demons resources between our own been a direct and marketplace availability our legacy him for structure and mind our response times to off the holiday in the tree pediments as disability with limited ahead about plants supply chain if it to create a more nimble operating model enabled month through better tools prices are the basis of our ongoing supply chain and technology transformation it's reformation will help us mitigate miss alignments and supply and demand and prevent interruption slap plan in the future we believe these were streams will add unnecessary reinforcements to alleviate constraints in fiscal twenty two and beyond given our largely season was a day for resilient imagery the short term disruptions we're experiencing will therefore normalize supply chain imbalances eventually brewed with our enhanced clan as always will monitor broader category to ban and market share to and for operational plan we can tell my manager compared the code and bottom six and categories as someone on the account management or liked most web business recently with say to trends buses this other market continues to normalize in the post over the and compared to the high demand upon the last year secondly the spot the total market decrease in nesting dynamics from twenty twenty and day that in the bed bath and kitchen taghi still show our much she is sequentially skype or way of knowing the gap in decline that apply year and a disco twenty twenty two weeks picked up market to stabilize bad that good the conclusion about store fleet optimization and is it furthermore our customer acquisition strategy for the bed bath been a day traction during the quarter as evidenced by our beyond pot wealthy program the grief of one point eight to two point two million members after one about largest new subscriber subscribing to november leading to one of them a successful membership acquisition quarters of be on plug in years will leverage has been mentioned throughout twenty twenty two as we spoke plants brand new loyalty program later this year spending all our banners and the program will be designed to restablishing is the perfect channels for our customers home and baby needs while building authority trust and long term value across our ecosystem of bennett another key highlight to the colada was the continued improvement in iraq like about bye bye bye be better baby continues to live a double digit growth with an additional benefits to the title great as more than sixty five percent of our new digital you the bezel caught capability a same clair something between bed bath and baby as well as harmon as a result of that toggle efforts to improve this business since last year we are on track to achieve approximately one point three billion dollars in sales and head about invested i goal all while improving profitability and market share we achieve these result even before the initial strategic transformation of this business which is planned to begin in the new fiscal year we now intend to expand own brains to baby and twenty twenty two as we look at margin optimized based strategies given sounds result in the been says that have now stabilized at cause will continue drive by the seltzer exciting new partnership opportunities that by the power of the bed bath beyond and bye bye bye be offered for example baby is an important corner started out recently announced koga publish it as well as our own digital marketplace finally as you saw in today's announcement are always committed to making a bit responsibly and responsibly we're extending our his dna expense up to my by images of approximately one hundred million dollar any lights for next year that will explore areas such as though the stokley optimization fixed cost and discretionary savings opportunities we will ensure an appropriate expense to cells ratio the reflects our current business while not at the expense about long term initiatives during his first about three year transformation the has been no shortage of activity from our new on the channel and much dodgy nested to the reformation about supply chain and technology we are paving a path towards greater profitability and great for the feature we are focused on plants to deliver gross margin expansion with files that was a snag right to by the media apps and plan and our unwavering execution of the transformational in the seat we outlined in our invested i now onto gustavo are now a chief financial officer who are the you ask third quarter financial results and outlook for the next corner and four year gustavo
spk_3: thank you mark and good morning everyone i would also like to underscore our commitment to the long term transformation were make despite the shorter term headwinds we currently faith at i look back over a year ago we have overcome several challenges and we recalibrated our business with agility for example at for a coughing treated began a twenty twenty he was hard to have predicted the breadth and depth of the developments that have materialized think that despite this i gross smart
spk_2: an expansion underscores that an organization we can and will adapt quickly as we navigate are ongoing transformation
spk_3: further we're managing their business responsible
spk_2: in addition to edgy and the expense of limitation we also we need and on utilizing catch according to our capital allocation principles
spk_3: which includes supporting or transformation initiative and returning excess cash to shareholders
spk_2: earlier this quarter we announcing patience to complete a one billion to the you share repurchase plan ahead of schedule underscoring are ongoing confident in our turn around and our commitment to maximise and capital deployment
spk_3: maybe now review our fiscal third quarter results which covers the period ending on saturday nov twenty seven twenty twenty one
spk_2: even the saturday of the and giving weekend was the final day of our quarter i will also disconcerted calendar metrics to provide greater insight into a holiday trip
spk_3: it will include our calendar november and are black friday to side of monday performance as well as the trance we saw in december particularly in the context or fourth quarter outlook as a reminder and have anticipated report in itself continued to reflect the back from expect that noncore banner divestitures completed last year as well as our ongoing plant store fleet of education program total net sales were one point nine billion dollars representing a fourteen percent decline in our core banners that included a standard percent feedback from our ongoing fleet of innovation program for the fiscal quarter comparable sales were down seven percent versus last year and down four percent versus twenty nine p
spk_2: a smart fast we fall sequentially prove me would be the quarter and in fiscal two member or councils sales were down me think of it encouragingly on a calendar november bases we saw flat comparable sales in the you have it and growth of low single digits into a stores comparable sales group hi single digits over the thanksgiving to cyber monday people
spk_3: for the fiscal quarter store comps were down five percent any proof sequentially each month reflecting a return to stores following last year and damage related tropical this was most everything in november when store trump's would down just like the overall and poverty in you a source our digital channel where defendant thirty five percent of total midfield a or penetration rate the twenty twenty despite and nine percent decline in sales compared to the strain we period last year and the vendetta a digital business can see needs to be very important particularly weak compared to twenty nine p by banner bed bath and beyond comparable sales decreased ten percent versus last year and five percent versus twenty nine p bye bye baby continue to deliver strong results with me caves comparable sales growth versus last year adjusted gross margin was thirty five point nine percent pp basis points higher than last year and three hundred and fifty basis points above twenty nine three we're nice to have driven three hundred and twenty basis point of merchandise margin expansion primarily from our own brands and successful pricing action get more than offset two hundred and seventy basis points of increase spray costs compared to laugh you as gm a dollar expense was in line with our eternal plans i'll go higher percentage of outcome of sales given a lower than expected revenue base in the court if i touched on on last quarter we're committed to enabling our long term transformation boost investments while remaining focus on managing expenses appropriate to ensure a dna alignment were overall performance were any further bit of a can be safe and plans to target a hundred million dollars of analyze expensive across areas such as it up and mutations fixed costs and discretionary spending the savings will be your like starting next year and we will share more details next quarter with the context of our fiscal twenty twenty two blast
spk_2: we reported adjusted he did that forty one million dollars driven by lower sales during the quarter
spk_3: yeah be as was a loss of two dollars and seventy eight cents per diluted share which reflects approximately two dollars and fifty three sense of a special items for the court these were predominantly driven by a dollar eighty two sets associated with the accounting effect of a non cash income tax charge related to evaluation allow allowance against certain of the companies the for that's passage the valuation allows does not impact the company's ability to utilize any different tack thousand in the future i would like to know that during the third quarter there were significantly lower adjustments to gross profit and specifically there was only for the basis points difference between our gap and adjusted gross margin of thirty five point nine percent
spk_2: as a shared on or to wanted you to cause we plan for be the just missed victory over time as we continue to progress to the initial stages of our transformation on an adjusted basis excluding a special items e b s was the last twenty five cents reflecting are lower sales and therefore either done special items are excluded from a just a result to provide a more representative picture of the underlying perform but er bis turning to our balance sheet and castle
spk_3: during the third quarter consistent with the finale the up a business we reported use of approximately three hundred million dollars operating cash equivalent to the creeps up predominantly not feet and or even tory as we prepare for the holiday period in anticipation of a challenging supply chain and bar additionally in accordance with a capital allocation principles mean best at approximately eighty three million dollars of capital in remodels supply chain and ip system our cash any better balance at the end of the quarter was approximately six hundred million dollars and totally qui a quarter and was one point five billion dollars more currently posts quarter or grief and pro for my cash balance was seven hundred million even up their share repurchases this was driven by popular operating cash will have more than two hundred billion in december as expected we remain committed to return in cash and shareholders by following a balance data driven approach on november second we announced the advancement of our one billion dollars three years share repurchase program would be acceleration of our twenty twenty two and twenty twenty three plan accordingly during the quarter we exit cute at approximately one hundred and twenty million dollars from share repurchases or approximately five million shares
spk_2: broken to date to the third quarter or we purchased activity has taking a total shared come from one hundred and twenty seven million shares to ninety six million shares more than a twenty four percent reduction in our shares outstanding
spk_3: i will not discuss our fourth quarter or your outlook we continue to act if you monitor the development of the colbert nine keys button particularly given the thirteen qaeda related to the army grown bear hen we're diving based on a kind of ability including quarter today times our self in december followed a highly volatile pattern on like any prior ranging from no single digit growth to double digit declines depending on the week of the month due to the pool forward of we killed business as customers shopped earlier as well as on shelf availability of inventory taking even to account for the fourth quarter we're estimating a comparable sales decline of high single digits net sales are expected to be approximately two point one billion dollars again that creditors and fleet of innovation will continue to eat that give get paris base our ability to offer increased rate cause we expect just a gross margin in the range of thirty two point five to thirty three percent given our sales and margin expectations a deputy the dice estimated to be in a range of eighty two hundred million dollars leading to an adjusted he be a range of zero to fifteen cents as a result of our third quarter results and expectations for due for we're updating our full your guidance to the following we now expect net sales of approximately seventy point nine billion dollars for not only purpose of this translates to a high single digit pumped for the full fiscal year
spk_2: adjusted gross margin for the year is now expected to been a range of approximately thirty four to thirty four point five percent
spk_3: also an expansion vs of last year and twenty nine p as a result of a sales assumptions and he in a is now expected to be in a range of thirty four percent of total net sales however each note or dollar assumptions have not changed
spk_2: a line with a revised estimate adjusted ebitda is now expected to be a range of two hundred and ninety two three hundred and ten million dollars
spk_3: these translates to an adjusted he be as range of negative fifteen cent to zero sense
spk_2: or balance sheet and castle essential include authentic operating cash flow by year and catholics of approximately three hundred and fifty million dollars and plans for a total of approximately six hundred and twenty five million dollars a share repurchase
spk_3: the next quarter we expect to have accelerated are one billion share repurchase program
spk_2: we have also provided additional assumptions of depreciation and amortization interest and tax rate in today's presentation to assist with bps modem as not discuss in detail were advocating strategies to pivot are near term results so we're position well for fiscal twenty twenty two particularly as we anniversary many of the dynamics we face it we look forward to sharing our plans and expectations for the new fiscal year water i will now turn to call over to mark for some closing remarks if anything has remained constant and fact that joined the company it it reminded that we're executing a full scale transformation and symbol technically running a business in a highly unpredictable environment that said as aspects about their quarter results demonstrate we had diagnostic issues implementing solutions and delivering on the long term structural transformation quarterback order to ensure sustainability for out for your goals while we continue to fight challenge it were improving our ability to respond to any macro forces this past quarter it was evident in our pricing strategy a customer acquisition strategy by the business and more than two hundred and fifty million cutler visits to our group of that has in store and online we look for to unlocking further progress in the area that i've been at the require greater support while we have concluded just the third quarter about multiyear plan we continue to execute as to td transformation by reforming our legacy business to achieve our long term goals remain in the very early stages of a multifaceted translation that it's foundational a changing a bath and beyond to become a digital first omni always retailer target are more productive stuff like that it's optimized everybody lives robbery models change our product principles to offer customer the more inspirational much not saltman god mix of national plan and unique own brands it's the needs to every man a lot throughout bye bye baby in common then all enabled by a modernized supply chain and technology capability as we prepare for twenty twenty two we look for operating on normalized environment with a base of business upon which to grow
spk_0: we will now take your questions thank you enough begin to question and answer back and if you get a question please protect our than one hundred had come home if used to be run from the queue please press the pound fine where the has repeatedly before the first question of them out if using a speakerphone you may need to pick up the handset first before posting a number once again if you have a question for thousand one on your own phone
spk_4: and our first question is from even forbes from guggenheim security
spk_5: good morning
spk_4: mark of our the focus maybe on the start of a defamation category performance
spk_2: it carries it he gets expand on the pricing and promotional plan that were implemented during the quarter it does provide them collar on on how the customer responded these changes eight and if you noticed any difference in customer behaviors among loyalty members versus non wealthy members ah yeah my and the i'm dead putting types were the gun the into to and million implemented and boss or two three and consistently it's ricky or said sequential changes we've been monitoring those prices as well as our average baskets as a competitive of the say that ah through price griping etc way in line with the market and access my with think is responding accordingly so we'd say no tension with the price increases ah and so that's incredibly stable environment where women behind a competitive enterprise and trades with that caught up and that obviously it did did that majid issue in tabs on their customers on between loyal customers and general customers sweet actively engaged in a customer acquisition strategy at target was actually a half a million customers on with actually cheap that over the oc of forty three and december arm to introduce them to be on plots and tree eight
spk_5: the about huge recent sticking enough an engagement door at the beginning of that process but and some good engagement there are real issue the queen the what i was around connecting with our regular customers with key our assets like that can i which gets with a deficit to check traffic generation specifically affecting stores thanks and images a quick follow up against the salary he reiterated read the share repurchase coming in here during the quarter despite right sort of would transpire here that an you could just help us better understand a conviction
spk_6: if your why that sort of the the right use of capital right now and maybe to provide some color on where you see free cash flow for the year the whole i did you mention positive operating cash flow but any color on free cash flow ah as we think about sort of modeling the next couple years here
spk_2: sure good morning look up there's two key principles a guide our share repurchase insurgency to the discussions between back and i have the bought the first one is in terms of capital allocation ensuring that the business is funded and ensuring that that right be quitting and we have that we have continued funding the capital investment need in the business and we continue having strong cash balance and strong liquid beyond that we don't see share repurchase as a short term ah he deletion because about the long term and we continue seeing the intrinsic value of our stock in long term much higher than when we ought to look when we're done with eight billion dollar shave purchase program we would have taken out more than a third of the company shares of outstanding probably on an average of close to twenty lot to share long time is more potential know on your question around have forgotten hopper and what you said we continue projecting operating casual pop of operating cash will for the fiscal the fourth quarter it's crucial on that free cash flow might be slightly negative just because of the prevention we talk in terms of increasing inventory had holiday season and therefore are operating cash go
spk_0: slightly lower than initially anticipated and our next question from christopher harvest from completely morgan
spk_7: thanks good morning ah itself first the near term question are far with some the more long term to can it can you talk about where you are in a more specifically and quarter to day basis recognize him that time you know there there's been a lot of volatility and also the fact that you have stimulus coming up
spk_3: so you know where he recorded eight and sort of what do you became in for out for the bouncer the quarter to get to the guide
spk_2: yeah so look for today to december thirty first were high single digit champa klein and that a consistent with the guidance and we're providing for the food fourth quarter of i think we've that into burberry mark be the month of december was very volatile there were weeks that we saw growth there were weeks that we saw decline and clearly the consumer pattern nearing terms of purchasing habits earlier or later as well if the challenge it would seeing on supply chain availability of fast rotating and key with engine items in it's the if a janitor weekend navigating so
spk_7: the quarter guidance is consistent with a trend that we see quoted do that understood and then you know as it as you think about the new are one hundred million dollar cost savings plan for for next year just i one to understand is that something ak it executes over the yeah i know you'll give us more details on that and that fourth quarter call but you know what drives the urge nc for another cost out plan or is it that you know the investments that you have to make our are come in and higher or than you originally thought and if so where are they in a where do you see the pressures as at wages that technology that supply chain infrastructure that you need a team reinvest in
spk_2: in and ultimately i do think any of that hundred million dollars on it does dropped the bomb bottom line vs been completely reinvested
spk_3: short look it's not about urgency about managing the business responsible
spk_2: our or revenues had falling a bit short this quarter right and we just want to ensure that our as dna of percentage of sales remains in check for our long term algorithms so this is about just constantly managing cost constantly managing any opportunity go because looking deeper into our fleet of innovation program and up will have you just said of we will provide more perspective on that when we provide guidance fiscal twenty two in april yeah christopher decide to reinforce like know gustavo i've looked at numbers and may take a conservative estimate on twenty two to ensure that we balance either as tonight that is that no point to make the direct application he remained completely in place to invest in in that the the existing plan a distance we want to make to further in
spk_0: edmonton around the business or fundamental to our performance going forward a separate from us to be prudent an hour ago cause management thank you as a reminder all participants to limit yourself to one question
spk_1: our next question is on keep nickname from goldman sachs
spk_8: the morning and for taking your question i'm you mentioned that i you are looking at introducing more own brands at buy buy baby we were carried out with the penetration of own brand is now in the banner how quickly can ramp rampage and is there a goal for of penetration or gc penetration
spk_2: of own brand think similar to that of that that that banner yeah take a morning and the the penetration is very low in bye bye bye dumb and it has a predominant national brand and good national brand business as well discretionary libel been there is an opportunity there and carries like apparel ah or furniture and across the board in the the business to create on a multifaceted on rampart ram we were excited about what would put together there and will
spk_0: be launched in a second half with twenty twenty two sucks we do have penetration god's will share more that as we get into at twenty two plan
spk_9: and or next question is from nothing managers key from jeffrey a good morning thanks for taking my question noted on what are your promotional email yesterday it highlighted new subscription plan for sure things like coffee product pet trade or other replenishment item ah similar in nature to what some other econ players are doing today given he goes around utilization usage
spk_2: from a consumer standpoint and how should we think about that is that the contributor to ecommerce are still going to our thing yeah jonathon i think this is something that we've had our in the digital art mods we've been average to get capabilities and working with and national brand vendors on there
spk_0: supply capabilities and they are in fact that been provided so this is a lot of new program need arrival develop and see how that performs about that that bar business and what it's transfer values to babies or early stages in their the pipe on the part about digital optical fiber will
spk_10: our next question from michael lesser from you been the morning big floppy going to like him soon his new account for the in the inventory challenges that you had in in the quarter you top is still down to percent on a any suggest that the year record is into the transformation is very difficult to drive
spk_11: hopes to use the word into your website all to to sell them products without ah you promoting very heavily or or have use your your coupon for as you look in the next year when arguably the environment can get a little tougher did you expect to see better down and
spk_5: between being able to drive
spk_2: deposited feels road without having to work through gross margin aggressively or to to to be able to guy that feels go yeah michael let me be clear on that death as you're absolutely right that narrows down the l y to me around noted that each point where we did also have updating it says with articulated and kikuyu and so play actually three years we had a fundamental rhythm in connection with our customer to recirculates and while that does contain tip on the back and also is that connection point that for customers a trigger for them to explore the website and coming store and and at large percentage of the the of generated by that secular which is substantial are manifested stole level we artificially caught off that like and that regular rhythm of communication to a customer and it was a big mistake and impacted on our business by to cutest have you had a tricky three be on so what we see there is if we just returned to the fundamentals about what we're doing with custom connectivity and first meeting supply and demand we would have exceeded last and so that's where we arrived to compartmentalize short term a neat and plane vs our long term opportunity outside of what transformation brain that doesn't mean that were resting on using those told a like we are have active plant and twenty two for customer engagement the customer experience ah led by a new customers out your custom officer up in the sword on how we can read our ecosystem of engagement of communication some through multi pass my station on using our army chaplain barn and
spk_0: a foundations more weekend during these last quarters really going to reinstate those and that's just the fundamentals and the rest of our
spk_12: our next question is from the mean up and from morgan stanley i every one am on f one question with a couple part i'm first on the fourth quarter guide i think the third quarter proved a little aggressive why why are you confident i guess that this fourth quarter or be okay and then just connecting the dots of the narrative
spk_2: if there were problems with getting inventory it looks like some of the promotions got more aggressive coming into the last legs of the holiday so i get more aggressive there if you didn't have the inventory and then how come it doesn't sound like this hard bye bye baby maybe it did but how can buy buy baby was not impacted a a bed doubtless thanks let me start with the high see me let me start with the second part i think bye bye baby was like affected for two reasons one is when he saw which thing very strong apparel ah an accessory trained in the market versus the the softening ugh fine trains or buses twenty twenty or so it took advantage that we're we have a strong a powell business and a strong sensory business ah and as we saw nesting really kicking in in a baby in bomb it's of the great powder connection between short term baby and long term hi i'm neither a day and a strand their up so we were better police a gym tomorrow ago imagery be pre purchased a lot of the else a product that that helped to start the when we also had some performance issues you might remember eatery read baby last year are and that we've anniversary damn with real strength and conviction coming into this said but quarter i'm in terms of the questioner around the preparations for a shoot three and expectations that we were always really clear that september and october had been soft bought that november represented a disproportionate amount of the court his performance an hour image he plans working with our vendors ah and and while we had laid down shut it's will guide been a good position which is could realize that in real time through the month of november so on while we actually change the trajectory of style family get it to bargain even know them by it wasn't enough in terms of the supply chain restrictions to offset while we'd originally planned the promotional place that you mention it interesting i'm we had said that we actually had higher rig rig price sales i am in the quarter than the prior year so we actually increased our regular price penetration i think up evidenced in the gross margin what you may see and websites need not reality is that the deficit for we had a the communications out to customers we offset with a couple of additional promotions to offset because we were using the money and and making it effective on
spk_0: the one side so we actually implemented other traffic driving opportunity opportunities light it is backwater so again let let less promotional ah as intend to the south outcome and some commentators factors to get to the end goal
spk_13: and or next question is from taken off from bank of america
spk_2: very good morning and take my question i could you talk about the gross margin drivers they expect for for you i think they've got a consistent jason i think you know we see ongoing and brain strength and in that in the mix contributing i think up product mix continue to be the same and i think promotional optimization so in a while we know that that gross margin in key for is different than in kittery midst of year we still see stability and promote growth in key for arm and that's despite judgment i would say as ongoing supply chain pressures not abiding and off upsetting though so when that starts to condemn in your posts twenty two and beyond we see some real upside to our margin
spk_0: the projections and knowing that that's the strongest barometer about three year plan ah we feel really confident about the minutes for liking it
spk_11: next expression from bobby griffin from raymond james
spk_14: the morning a body than should take my question mark in the suburbs a a maybe understand the inventory supply chain challenges just a little better and where exactly they showed up cause you know when i when i see inventory for store just totally majority of pretty notably sequentially so as the issue getting him into a from dcc stores or any
spk_2: additional color to help me better understand that aspect yeah thanks bobby a it's a a multipart issue and again the perfect storm in the near term issues i think that you know we know that we're starting off with legacy supply chain infrastructure an hour and bit into a mighty now we're really take hold more insect up twenty twenty two such it's getting it's a little earlier than our preparation ah but what we do see the to pot at top two hundred items salter very well we talked about high level of demand at the above and beyond arrived but at meet some demand but not all of it and in our initial plans with key vendors are we had disappointment in terms of the receipt slightly so we had constraints on top fellow as the industry did ah and then the second part about was that we had imagery ah on ships in the seas and the just with the transportation wise we could not flow that effectively drag the bottom so you know we had the right imagery the custom responded the imagery we had it's quality imagery and as we mentioned it's high he was going
spk_0: because it's like the than all but just the timing of flown availability well off in the quota that still a short term issue such a pain point that we look to rectify out
spk_15: and our an ex husband is from the fashion from wedbush
spk_2: thanks a lot and good morning or my questions around market share mark you mention that you aren't is gaining at the same level of market share performance sequentially i think when you look to to dad and twenty two do you expect be able to gain market share your core categories yeah definitely the goal set that mean it's been a turbulent years to optimization line takes a lot of admin eat a land mood and at the plan reduction in our penetration in the marketplace about it for higher profit goals and benefit to our bottom line or we see that stabilizing three twenty two that we still some activity but i'll be back lots of it's died lives our goal is to really generate that the green shoots of the reformation in the second year that transformation plan to stabilize and optimize by growth sounds right the nipple shale ah my doubling that down inaptly categories with been experiencing a three baby
spk_0: they bob is al key focus of money
spk_5: an expression is from to think labour from baird
spk_16: yeah hey guys thanks for taking the question was one of the follow up on the baby business
spk_2: and you mentioned marking proving profitability their could you provide any more collar on the margin profile that business know how it compares to the core bad bad business and then just how meaningful his baby as a customer acquisition vehicle for the broader enterprise yeah up there is a differential between the bed bath and a baby boomers i think what's really exciting about that opportunity they just a nice we've yet to implement com the the story model plans arm and the product assortment plans or that helped us suck hyperbole in bed bob on to in the baby business or that lies ahead for arts i think and we manage makes how we manage i'm brand and we were panama with our national brands ah and is it has some really good early signs the green shoots they they were going to cap lie down to the next two years of a transformation in a it it is important i think we think about the ecosystem of life moments that we operate in and connect with customers way that we we engage with a customer when they planning if a child or or having that as child or if you skimp forward to when made send them to college or when they moving when they downsizing we can capture a lot of died or in a lot of engagement really personalize i'm our relationship with our customer by utilizing the the engagement authority instead
spk_0: family and the engagement or on already in harm and as these two things are very strong that been diagram because i bought and hence while used to of ecosystem the power of the to is very very strong
spk_17: an expression of anthony to come from luke capital markets the morning thank you so much for taking my question so i had a question in the you meant the press release that you pick them nearly half a million beyond plus some subscribers am i guess when i was wondering because i gotta an email and text messages well saying that if i found up for beyond plus which is twenty dollars here we get a gift card for twenty down so it's from his preferred to be free and i guess i'm just trying to figure out how much of a benefit of a tailwind i was that promotion for beyond plus
spk_2: new subscriptions thank you yeah thanks have any i think know that is a longer a and longer term strategy about connect connecting with half a million additional customers inviting him the program see the benefit and and doubling back with them
spk_0: we were forecasting a level of the sticky notes with that cops were not all of them so we can be tracking that but it's got great gateway to create engagement and specifically told to a teacher customer
spk_18: our next question from carla casella from jp morgan i am he talked about buffets or rationalization program and and is the first quarter we saw harm and source close on is that now part of the
spk_3: two hundred store rationalization or that part of a new the new program
spk_2: have mic will you get the two hundred to pull them out predominantly that bath and beyond banner bad i will look at the war was popular video every single store and i do know is could be pretty good the example you mentioning harlan that one example it's not
spk_0: he brought program for that banner
spk_2: an expression is from bread thomas from keybank capital markets i think smoking gustavo am i was hoping to just see the get all more color are you all from here thank you for twenty twenty two and are you not made a formal each arm but specifically to think about some of these kind of transitory issues like a mentor a like the right past ah i guess is we take about twenty two on the whole how do you think it lets out at this point you know some of these items obvious in a rap until the beginning of the year but are you thinking that on the whole you get net tell when from a sales and marketing standpoint or that that perhaps it it's a little i did out or the next year there may be still some some headwinds just curious and a broad strokes of this point thanks he yeah well you're limiting our comments on twenty two obviously yellow combating get more color key for results and old year twenty two expectation know i think that would seem pretty much in the industry brad you know communication why that supply chain issues will persist ah true half one but wait i believe that our issues ah want to sit through have one because we've taken my media action have made me so we'll see about question of our results not on a mac market issues but how we manage that internally i think what we see is good tab wind on things like the armband penetration the gross margin management the continuing strength of baby arm i think optimizing our an athlete but also to ah where was thing story model program pay dividends at that expanding now quoted by quota of twenty twenty two remembering this year to point with only remodeled eighty one stores and will do approximately one hundred and thirty by the ended the quota the completion of the next couple of months we'll see sequentially more the story models which are adding positive comment that says that the rest of the plate so we got a number of cumulative benefits as well as the underpinnings of that transformation technology supply chain it's old men so again i year civilizations ross we believe after lot of or yeah
spk_0: engineering in twenty to twenty and twenty twenty one
spk_19: as admit from cristina fernandez from tokyo advisory group
spk_2: good morning i'm about to ask about the the truth winning strategy or not earlier in your remarks you mentioned that you weren't able to spend as much as you the wanted any can you expand on bad in on and how are you thinking about rectify him bouncing that going forward yeah i think that that and you know if you start up with we've always been committed to having a more balance of arrangement with the on it was either blind in the past with doug be able to manage that in the play we just took to severe and action christina so i think what we want to do with this rebalance that equation grip on is a great tool for customer engagement traffic it's not a drug it's an opportunity which need to manage a better and
spk_0: and so we we kind of need great the balance but i still permitted to poop on as a strategic advantage in outbid business
spk_20: and we have time for one final question and i'll be from sweden anderson from be riley
spk_21: hey my name thanks for taking like i said i'm i'm just curious on the traffic in the store story how that perform year by year and then also sequentially and then also are you still thing better metrics and they remodeled story then what are your expectations for the number of remodeled choices your next thanks
spk_2: yes so doesn't incomes of traffic we saw a traffic below that you have a nephew three i think of a good no double digit eighty proof sequentially to the quarter and no agreed shared earlier in the month of november he was politics of poverty failed cocktails at the store level so traffic was a challenge but eat food the side is the conversion improved year on year and therefore are trying faction value also a booty or near as our average age you are wanting to even the promotional immigration and the new pricing plan that would be taken on your second question about stole a model
spk_3: we can tv on track with our four hundred and fifty store remodel over a three year period for this good school we are targeting one hundred and thirty two hundred and fifty or given some of the supply can challenge is probably will end is near closer to the hundred and thirty stores
spk_0: kanda were beast with the big one of the beast or so far we've completed model over eighty stores and we're seeing mid single digit sales growth ahead of the banner of the chain he goes models doors with i've been into a annotation of own brand and higher martin

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