Bed Bath & Beyond, Inc.

Welcome to Bed Bath & Beyond's fiscal 2021 second quarter earnings conference call. My name is John. I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. During a question-and-answer session, if you do have a question, press star then 1 on your touchtone phone. Please note the conference is being recorded. And now I'll turn the call over to Suzy Kim, VP of Investor Relations. Suzy, you may begin.

Thank you, and good morning, everyone. Welcome to our Fiscal 2021 Second Quarter Earnings Call. Joining us today are Mark Tritton, our President and CEO, and Gustavo Arnal, our Chief Financial Officer. Before we begin, let me remind you that our Fiscal 2021 Second Quarter Earnings Release and slide presentation can be found in the Investor Relations section of our website, bedbathandbeyond.com, and as exhibits for related Form 8Ks. This conference call and the slides we refer to may contain forward-looking statements, including statements about or references to our outlook regarding the company's performance, our internal model, and our long-term objectives. All such statements are subject to risks and uncertainties that could cause results to differ materially from what we say during the call today. Please refer to our most recent periodic SEC filings for more detail on these risks and uncertainties, including the risk factor section in our annual report on Form 10-K and quarterly reports on Form 10-Q. The company undertakes no obligation to update or revise any forward-looking statements. Additionally, the information we will discuss today contains certain financial measures that exclude amounts or subject-to adjustments that have the effect of excluding amounts that are included in the most directly comparable measure prepared in accordance with generally accepted accounting principles. For reconciliation to the most comparable measures presented in accordance with GAAP, please refer to the table in our earnings release available on our website and included as an exhibit to our Form 8 file today. It is now my pleasure to turn the call over to Mark.

Thank you, Susie, and good morning, everyone. After several consecutive quarters of delivering positively on our plan, the second quarter represented a disruptive moment along our multi-year transformational journey. While we continued to make significant progress on our long-term strategies, our immediate results met challenges stemming from both macroeconomic forces and internal execution factors. We delivered net sales of approximately $2 billion, resulting in a 1% comp decline reflective of a choppy quarter following solid growth in June we saw an unexpected and substantial shift towards the end of the period which impacted our financial outcome in August the final and largest sales month of q2 traffic unexpectedly slowed and therefore sales did not materialize as we had anticipated External disruptive forces, such as the resurgence of COVID-19 cases and growing Delta fears, created a challenging and volatile environment. This is particularly evident in large southern states such as Florida and Texas, as well as California, which in aggregate represent approximately 30% of our total sales. From July to August, traffic trends devolved in these states and worsened by double-digit percentages. The rapid decline in traffic was particularly detrimental for us given the inclusion and significance of August in our fiscal quarter versus our competitors. We are cognizant of comparisons to our peers who are on a July end reporting cycle. As a proxy, our comparable sales grew an estimated 24% based on May, June, July, further highlighting the importance of the trading month of August on our Q2 performance. In diagnosing our quarter, in addition to the external forces we faced, we also saw some internal execution issues that we are now addressing. There were opportunities where we should have been more effective in allocating marketing resources to stimulate and support traffic in stores and online. In an effort to diversify and shift our customer engagement towards online and social media channels, we overcorrected and veered too far from the core fundamental historical and current traffic drivers. For example, we disproportionately reduced the distribution of our printed circulars, which are a continuous and critical store in digital traffic driver for our Bed, Bath and Beyond business. Our recently combined brand and digital teams are quickly correcting course to rectify these issues for the end of the third quarter and full year. As lower traffic impacted our ability to deliver sales, we operated under unprecedented supply chain conditions that have continued to increasingly tighten global trade since last year. As the quarter progressed, particularly in August, conditions worsened relative to our thoughtful preparations. The speed of industry inflation and lead time pressures outpaced our plans to offset these headwinds, and as a result, we did not pivot fast enough, especially on price. and margin recovery. In response, we have leveraged our second quarter experience to increase our agility and swiftly activate offsets to these high input costs and lead times. We've taken several crucial steps to improve our second half performance, such as instituting more effective margin controls through more targeted pricing and promotional strategies. We're also pursuing even greater supply chain optimisation. Our second quarter performance, including the factors I've just discussed, have caused us to reframe our outlook for the full year. The challenges we faced in August have not abated in September. Unsurprisingly, the media and Wall Street discourse around worldwide freight shortages and port disruptions seems to have been overtly chronicled in recent weeks. However, we have diagnosed the problems and developed strong plans to change our trajectory. Recovering by November and delivering a strong holiday is our key focus. Furthermore, despite this difficult business environment and moderating home category growth, our market share within the quarter remains steady sequentially month by month. As expected, we continue to be below last year's levels given the planned overall net sales decline due to our strategic closure of 200 stores under our fleet optimization initiative. We have a new baseline for which to grow, which further emphasizes the importance of executing on our long-term objectives in addition to driving our near-term performance. Now, turning to our key long-term initiatives, our OmniAlways principle remains a cornerstone of our evolution. For the group, we continue to leverage our enhanced digital channel, which delivered a significant sales increase above 2019 at nearly double the proportion of sales. We are also building on the underlying foundation of the business. As part of our commitment to enhancing the customer experience, we instituted cross-banner browsing across our entire group of concepts, including Bed Bath & Beyond, My Bay Baby, and Harman's. We look forward to further enabling cross-banner shopping and checkout soon. Our omni-channel presence continues to grow as well. During the quarter, we expanded our same-day delivery reach by our new partnership with Rhody, which is in addition to our existing capabilities with both DoorDash and Shift. We continue to make significant progress against our stall remodel plan. Our bold new remodels are showing early signs of great success. We currently have approximately 70 stores remodeled out of our plan 130 to 150 for 2021, and they are performing above plan. The July reopening of our reimagined New York City flagship store in Chelsea was a celebratory milestone for us on our transformational journey. Our Chelsea store serves as a beacon for the overall redefinition of the new Bed Bath & Beyond. We've enhanced the customer experience on many fronts, including key national brand shop in shops, and upgraded mobile shopping capabilities. Performance at our Chelsea flagship is exceeding expectations on many levels, and it is now our most productive store on the chain per square foot. Momentum within our own brands is growing in this first year of development. With the second quarter, we've now exceeded our own brand penetration goal for fiscal 2021 in total at more than 20% of overall sales, well ahead of schedule. penetration is even higher in our new store remodels. These new higher-margin own brands are driving differentiation for BirdPath and beyond. In these early stages, we are attracting, engaging, converting new and existing customers, and also seeing lower coupon attachment rates. Our next two own brands are slated to launch in early October and November, marking our seventh and eighth brands for 2021. Also, encouragingly, Buy Buy Baby was a shining star for the group this quarter. Building on several periods of consecutive positive momentum, baby comparable sales grew again consistently by a high teens percentage for the second quarter, signaling its fourth consecutive month of share gains versus last year. This performance has been driven by particular growth in apparel and travel gear, similar to trends we're currently seeing across the retail sector. We are proud to be answering the needs of our customers along their parenting journey and plan to build our strengths through our key transformational pillars, including differentiated product strategies such as own brands. Finally, and importantly, our operational transformation remains on track. We enter the next phase of our supply chain modernization through our partnership with Ryder, which we announced at the end of July. In September, we opened our new Northeast Regional Distribution Center. These developments are instrumental to our end-to-end transformational strategy and will help in the long-term control and protection from supply chain stress such as those we are facing today. I will now turn the call over to Gustavo Arnal, our Chief Financial Officer, to review both our second quarter financial results and our outlook for the third quarter and full year. Gustavo? Gustavo?