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Executives

Eugene A. Castagna – Chief Financial Officer & Treasurer

Warren Eisenberg – Co-Chairman of the Board

Steven H. Temares – Chief Executive & Director

Bed Bath & Beyond, Inc. (BBBY) Q1 2009 Earnings Call June 24, 2009 5:00 PM ET

Operator

Welcome to the Bed Bath & Beyond first quarter of 2009 results conference call. All participants are in a listen only mode for the duration of the call. This call is being recorded. A rebroadcast of the conference will be available beginning on Wednesday, June 24, 2009 at 6:30 pm eastern time through 6:30 pm eastern time on Friday June 26, 2009. To access the rebroadcast you may dial 1-888-203-1112 with a pass code ID of 2480651. Now at this time it is my pleasure to turn the conference over to Gene Castagna, Chief Financial Officer and Treasurer of Bed Bath & Beyond.

Eugene A. Castagna

Welcome to Bed Bath & Beyond’s first quarter of fiscal 2009 conference call. Within the past hour we issued a press release announcing Bed Bath & Beyond’s results for the three month period ended May 30, 2009. During this call we will comment on some of the first quarter’s highlights, provide our second quarter planning assumptions and update our fiscal 2009 planning assumptions.

Before proceeding I will read the following statement, Bed Bath & Beyond’s fiscal first quarter press release and comments made during this call may contain forward-looking statements within the meaning of Section 21E of the Securities & Exchange Act of 1934 as amended. Many of these forward-looking statements can be identified by the use of words such as may, will, expect, anticipate, estimate, assume, continue, project, plan and similar words and phrases.

The company’s actual results and future financial position may differ materially from those expressed in any such forward-looking statements as a result of many factors that may be outside the company’s control. Please refer to Bed Bath & Beyond’s SEC filings including its Form 10K for the year ended February 28, 2009. The company does not undertake any obligation to update its forward-looking statements.

Warren Eisenberg, Co-Chairman of Bed Bath & Beyond leads off today’s call. Steven Temares, Chief Executive Officer and Member of the Board of Directors will follow Warren. Some additional financial commentary will conclude today’s call. I’m now very pleased to introduce Warren Eisenberg.

Warren Eisenberg

Our press release issued within the last hour showed that our company earned $0.34 per diluted share in the fiscal quarter ended May 30, 2009 compared with $0.30 per diluted share last year. Despite the challenges of the current macroeconomic environment we were pleased that we continued to outpace the performance reported by others.

During the fiscal first quarter we opened six new Bed Bath & Beyond stores including our fifth store in Canada, on Christmas Tree Shop store and one buybuy BABY store. We also added fine china departments in additional Bed Bath & Beyond stores as well as added Harmon Face Values health and beauty care departments in additional Bed Bath & Beyond stores, Christmas Tree Shops and buybuy BABY stores.

Consolidated store space at May 30, 2009 was approximately 32.2 million square feet. Including the three Bed Bath & Beyond stores we’ve opened since the beginning of the fiscal second quarter and two stores we have closed in fiscal 2009, we currently operated 937 Bed Bath & Beyond stores in 49 states, the District of Columbia, Puerto Rico and Canada as well as 53 Christmas Tree Shop stores, 16 buybuy BABY stores and 40 stores under the names Harmon or Harmon Face Value. In addition, through a joint venture, we operate two stores in Mexico City market under the name Home & More.

In fiscal 2009, including stores already opened to date, we anticipate opening approximately 57 new stores across our concepts including approximately 35 Bed Bath & Beyond stores in the United States and Canada, approximately seven Christmas Tree shops, approximately 12 buybuy BABY stores and approximately three Harmon Face Value stores. This reflects our continued prudent approach to growth in the current challenging macroeconomic environment including our stringent standards in approaching opportunities in the current real estate market.

We also plan to continue to add Harmon Face Value health and beauty care departments within additional Bed Bath & Beyond, Christmas Tree Shops and buybuy BABY locations as well as to continue to add fine china departments within additional Bed Bath & Beyond stores. We believe that within the United States and Canada there is an opportunity to open in excess of 400 additional Bed Bath & Beyond stores and we also strive overtime to become the leading home furnishing retailer in the other countries in which we do business.

We continue to strive to increase the productivity of our stores by introducing new merchandising initiatives as well as by expanding, renovating, remodeling and/or relocating stores to enhance our customer’s shopping experience. Our ability to leverage the breadth and depth of our merchandise offerings, grow our bridal, baby and gift registries and continue the development of our online sales capabilities affords us additional opportunities to attract new customers to the Bed Bath & Beyond experience.

As we repeatedly said, we will continue to capitalize on the unique strength of our decentralized culture which has enabled us to build the strong, exciting business we have today. This culture which takes advantage of the knowledge, independence and customer focus of our associates has always been the foundation of our long term performance. In today’s difficult times, the benefits of decentralization have become even more apparent. We fully expect that despite the challenging macroeconomic environment we will be able to look back on this period as one which afforded us an exceptional opportunity to solidify and enhance our position in the merchandising categories we offer our customers.

We are confident that we have the people, the resources and the capability to achieve our near term and long term goals. Now, I’ll turn the call over to Steven Temares.

Steven H. Temares

In the sector of retailing that has been broadly affected by the current economic, our operating results though never satisfactory to us, continue to significantly outpace on a comparative basis the performance reported by others. During the second half of fiscal 2008 we intensified our focus on managing expenses. We have made and continue to make progress in our expense control initiatives and are continuing to systematically review the scope and frequency of services we receive from third parties as well as reduce the cost associated with running our corporate offices. At the same time we remain committed to making the required investments in our company’s infrastructure to help position us for our continued success.

Despite the economic challenges that we are facing, we have not changed our fundamental business strategy to offer a broad assortment of merchandise at everyday low prices with superior customer service. Our balance sheet and overall financial health are extremely strong and we remain focused on building a business that stands the test of time. We continue to look for ways to enhance our customer’s overall shopping experience and remain committed to becoming our customers first choice for the merchandise products we offer domestically, interactively and over the longer term internationally.

We continue to believe strongly that the current retailing environment though difficult provides an excellent opportunity for us to strengthen our long term prospects. Our capital spending in the first quarter of fiscal 2009 was approximately $27 million. As always, we continue to scrutinize and prioritize our capital needs while making investments in our company principally for new stores, existing store improvements and other projects who’s impact is viewed as essential to our future.

In taking a long term approach in building our Bed Bath & Beyond, Christmas Tree Shop, buybuy BABY and Harmon Face Value concepts and through the ongoing efforts to cross merchandise and leverage the best practices of each of our concepts, we expect over time to do more for and with our customers.

Turning to our first quarter performance, while we believe our recent operating results continue to set the standard for the home furnishing industry, we are not satisfied and we continue to work hard to achieve improved results over time. As reported earlier today, net earnings per diluted share for the quarter were $0.34 compared to $0.30 a year ago. Net sales for the fiscal first quarter were approximately $1.7 billion, approximately 2.8% higher than the corresponding fiscal 2008 period. First quarter comp store sales were down approximately 1.6%, at the favorable end of our comp store sales planning assumption.

We believe net sales and comp sales continue to be negatively affected by the economic slowdown including issues specific to the housing industry. Gross profit for the fiscal first quarter was approximately 39.4% of net sales compared with approximately 39.8% of net sales during the first quarter of 2008. The approximately 40 basis point decrease in the gross profit margin resulted from an increase in inventory acquisition costs, an increase in coupon redemption and a shift in the mix of merchandise sold to lower margin categories.

Selling, general and administrative expenses for the fiscal first quarter were approximately 31% of net sales which compared to approximately 32.6% in last year’s first quarter. The decrease of 160 basis points in SG&A resulted from a relative decrease in payroll, a relative decrease in advertising expenses that was due to a decrease in distribution in advertising pieces and a relative decrease in other controllable expenses. Reflecting the movement in gross profit margin and SG&A expenses, the operating profit margin for the fiscal first quarter was higher than in the period a year ago by approximately 120 basis points.

Our tax rate continues to fluctuate as taxable events occur and exposures are reevaluated. For the fiscal first quarter our tax rate was approximately 39.5% compared to approximately 37.8% for the comparable quarter last year. Though challenging, as we have consistently stated, we are confident that we will be able to look back at this period as one which afforded us an exceptional opportunity to continue to gain market share and to improve our competitive position. By providing the best shopping experience for our customers our entire organization remains dedicated to accomplishing our long term goals.

For the annual meeting of shareholders schedule to take place on Tuesday, June 30th we would like to thank our shareholders in advance for supporting the recommendations of our board of directors with respect to the proxy proposal. We encourage shareholders who have not yet voted to take advantage of electronic voting either via the Internet or by telephone. We again want to thank our associates for their ongoing efforts which produced Bed Bath & Beyond’s long term success. Through their efforts we look forward to meeting the challenges presented in 2009 and seizing the opportunities to satisfy our customers and by doing so continuing to widen the gap between Bed Bath & Beyond and our competitors in the merchandise categories that we offer.

I’ll now turn the call back to Gene.

Eugene A. Castagna

As you heard from Warren and Steve, we earned $0.34 per diluted share in our fiscal first quarter. Looking ahead to the remainder of our fiscal year 2009 we have assumed consistent with what economists and other government officials are predicting that the overall business climate will not show significant improvement. While we will continue to assess our prospects as the year develops and will reflect changes in our outlook, if any, in future conference calls, the following are our major planning assumptions for the remainder of fiscal 2009.

One, including the 11 stores opened so far this year, we expect to open approximately 57 new stores across our concepts including approximately 35 new Bed Bath & Beyond stores throughout the US and Canada, approximately seven Christmas Tree Shops, approximately 12 buybuy BABY stores and approximately three Harmon Face Value stores. We also plan to continue to add Harmon Face Value health and beauty care departments within additional Bed Bath & Beyond, Christmas Tree Shops and buybuy BABY locations as well as continue to add fine china departments within additional Bed Bath & Beyond stores. New store openings will occur throughout the year with the majority in our fiscal second half.

Two, we continue to model a low single digit percentage decline in consolidated comparable store sales for the second quarter and full fiscal year 2009. Three, consolidated net sales are expected to increase by a low single digit percentage in the second quarter and for all of fiscal 2009. Four, the operating profit margin is expected to deleverage in the second quarter and for all of fiscal 2009.

Five, interest income is expected to be lower than in fiscal 2008 as a result of anticipated lower interest rates. Six, the full year tax provision is now estimated to be in the high 30 percentage range with variability as much as 200 to 300 basis points in quarterly tax rates as taxable events occur. Seven, capital expenditures for fiscal 2009 principally for new stores, existing store refurbishment and information technology enhancements continue to be planned at approximately $250 million and will continue to be reviewed on an ongoing basis.

Eight, depreciation for fiscal 2009 is estimated to be approximately $180 million. Nine, our share repurchase program will continue to be influenced by several factors including business and market conditions and developments in the auction rate securities market. 10, we expect to continue to generate positive cash flow in fiscal 2009 and entirely fund operations from internally generated sources.

The uncertainly of the overall macroeconomic environment makes it difficult to forecast future results however, using the assumptions previously mentioned, the current consensus estimates for net earnings per diluted share of approximately $0.42 for the fiscal second quarter ended August 29, 2009 and $1.59 for the 2009 fiscal year appear reasonable.

Before concluding this afternoon’s call, a few additional comments relative to our recently concluded fiscal first quarter; our balance sheet remains strong and debt free. We ended the fiscal first quarter with cash and cash equivalents and investment securities of approximately $1.1 billion. This includes approximately $212 million of investments related to auction rated securities. These securities have an estimated temporary valuation adjustment of approximately $2.4 million to reflect the current lack of liquidity. Since this valuation adjustment is deemed to be temporary it does not reflect the company’s earnings.

During the first quarter we had redemptions of approximately $8 million at par. As we have said in the past and as we have experienced to date, we believe that given the high credit quality of these investments, we will ultimately recover at par all amounts invested in these securities. Inventories continue to be tailored by store to meet the anticipated demands of our customers and are in good shape. As of May 30, 2009 inventories were approximately $1.7 billion or about $52.90 per square feet a reduction of approximately 6.7% on a per square foot basis versus last year.

Consolidated shareholders equity at May 30, 2009 was approximately $3.1 billion which is net of share repurchases including approximately $13 million repurchased during the fiscal first quarter. As a reminder, our next conference call to review operating results for the fiscal second quarter ending on August 29, 2009 will be on Wednesday, September 23, 2009. If you have any questions, Ken and Lisa will be in their offices this evening, June 24th to take your calls. As always, we appreciate your interest in Bed Bath & Beyond.

Operator

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

Question-and-Answer Session

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