Overview

Bed Bath & Beyond Inc. and subsidiaries (the "Company", "we", "our", "us", or
"ourselves") is an omni-channel retailer that makes it easy for our customers to
feel at home. We sell a wide assortment of merchandise in the Home, Baby, Beauty
& Wellness markets and operate under the names Bed Bath & Beyond, buybuy BABY
("BABY"), and Harmon, Harmon Face Values, or Face Values (collectively,
"Harmon"). In addition, we are a partner in a joint venture, which operates
retail stores in Mexico under the name Bed Bath & Beyond. We account for our
operations as one North American Retail reporting segment.

We are driving a digital-first, omni-always growth strategy and optimizing our
digital and physical store channels to provide our customers with a seamless
omni-channel shopping experience. Digital purchases, including web and mobile,
can be shipped to a customer from our distribution facilities, directly from
vendors, or from a store. Store purchases are primarily fulfilled from that
store's inventory or may also be shipped to a customer from one of our
distribution facilities, from a vendor, or from another store. Customers can
also choose to pick up orders using our Buy Online Pickup In Store ("BOPIS") and
contactless Curbside Pickup services, as well as return online purchases to a
store. Customers can also make purchases through one of our customer contact
centers and in-store through The Beyond Store, our proprietary web-based
platform. These capabilities allow us to better serve our customers across
various channels.

Across our banners, we carry a wide variety of domestics and home furnishings
merchandise. Domestics merchandise includes categories such as bed linens and
related items, bath items and kitchen textiles. Home furnishings include
categories such as kitchen and tabletop items, fine tabletop, basic housewares,
general home furnishings (including furniture and wall décor), consumables and
certain juvenile products.

Business Transformation and Restructuring



In the second quarter of fiscal 2022, we have begun to undertake significant
changes to transform our business and adapt to the dynamic retail environment
and the evolving needs of our customers in order to position ourselves for
long-term success. In 2022, the Company has realigned its management team, which
is being led by our Interim Chief Executive Officer, Sue Gove, who was appointed
in June 2022, to execute on strategic priorities and changes. These strategic
priorities and changes are focused on driving an omni-always, customer-inspired
strategy to re-establish our authority in the Home, Baby, Beauty & Wellness
markets. We have created a more focused portfolio through the divestiture of
non-core assets and continue to focus on key actions such as corporate
restructurings and operating expense control to re-set our cost structure and
support our ongoing business transformation.

We are focused on implementing strategic changes to regain our authority in the
market as the destination for customers, with the products they want and the
experiences they seek across our core banners (Bed Bath & Beyond, buybuy BABY,
and Harmon) in an enterprise-wide plan to accelerate our omni-channel
transformation. In conjunction with these changes, in the second quarter of
fiscal 2022, the Company created Brand President roles for Bed Bath & Beyond and
BABY to lead the teams focused on merchandising, planning, brand marketing, site
merchandising and stores for each banner. Our strategy is underpinned by five
key pillars of strategic focus and investment: product, price, promise, place
and people. Through this approach, we are bringing back more of our customers'
favorite national brands and products while leveraging value and promotion and
will be building stronger relationships with customers through programs such as
Welcome Rewards™.

On August 31, 2022, subsequent to the end of the second quarter of fiscal 2022,
we announced that we would be reducing the number of our Owned Brands by
discontinuing three of our nine labels (Haven™, Wild Sage™ and Studio 3B™) We
expect that the breadth and depth of inventory across our six remaining Owned
Brands (Simply Essential™, Nestwell™, Our Table™, Squared Away™, H for Happy™
and Everhome™) will be reduced to approximately 30%, which will allow us to
rebalance our inventory and bring back popular national brands and introduce
new, emerging direct-to-consumer brands.

In addition, we have begun to implement significant SG&A reductions to right-size our cost structure and our store fleet. Key components of these reductions include:



•Reduction in SG&A by focusing on immediate priorities of merchandising,
inventory, and traffic to align with changes in our store footprint, lower Owned
Brands development and support, and deferral of longer-term strategic
initiatives. Also, we have had a reduction in force, including an approximately
20% reduction across corporate and supply chain.

•Reduction in planned capital expenditures from $400 million to $250 million in
fiscal 2022, which is expected to provide sufficient strategic investments in
technology, digital capabilities and offerings, and store maintenance.

•The planned closure of approximately 150 lower-producing Bed Bath & Beyond banner stores.


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The Company recorded $54.2 million and $77.3 million in its consolidated
statements of operations for the three and six months ended August 27, 2022,
respectively, for costs associated with restructuring and other transformation
initiatives, of which a benefit of $1.2 million is included in cost of sales for
the six months ended August 27, 2022. There were no restructuring and other
transformation expenses included in cost of sales for the three months ended
August 27, 2022. In addition, for the three and six months ended August 27,
2022, approximately $54.1 million and $78.3 million, respectively, is recorded
in restructuring and transformation initiative expenses, which included $35.0
million of severance costs related to workforce reduction and leadership changes
for both the three and six months ended August 27, 2022. The Company also
recorded approximately $1.6 million and $6.8 million, respectively, of lease
related and other costs and approximately $17.5 million and $36.5 million,
respectively, of costs and other transformation initiatives, including
technology transformation and business strategy and operating model
transformation programs across core functions including merchandising, supply
chain and finance for the three and six months ended August 27, 2022.

Executive Summary

The following represents a summary of key financial results and related business developments for the periods indicated:



•Net sales for the three months ended August 27, 2022 were $1.437 billion, a
decrease of approximately 27.6% as compared with the three months ended August
28, 2021. Net sales for the six months ended August 27, 2022 were $2.900
billion, a decrease of approximately 26.4% as compared with the six months ended
August 28, 2021.

•Comparable sales* for the three and six months ended August 27, 2022 decreased by approximately 26.0% and 24.0%, respectively.

* See "Results of Operations - Net Sales" in this Management's Discussion and Analysis for the definition and further information related to Comparable Sales.



•Net loss for the three months ended August 27, 2022 was $366.2 million, or 4.59
per diluted share, compared with net loss of $73.2 million, or $0.72 per diluted
share, for the three months ended August 28, 2021. Net loss for the three months
ended August 27, 2022 included a net unfavorable impact of $1.37 per diluted
share associated with restructuring and other transformation initiatives and
non-cash impairment charges. Net loss for the three months ended August 28, 2021
included a net unfavorable impact of $0.76 per diluted share associated with
non-cash impairment charges, charges associated with restructuring program and
transformation initiatives, loss on sale of business, and loss on extinguishment
of debt, partially offset by a gain on the sale of property, as well as the
associated tax effects.

•Net loss for the six months ended August 27, 2022 was $723.8 million, or $9.09
per diluted share, compared with net loss of $124.1 million, or $1.19 per
diluted share, for the six months ended August 28, 2021. Net loss for the six
months ended August 27, 2022 included a net unfavorable impact of $2.39 per
diluted share associated with inventory markdown reserves and supply
chain-related port fees, restructuring and other transformation initiatives, and
non-cash impairment charges. Net loss for the six months ended August 28, 2021
included a net unfavorable impact of $1.27 per diluted share associated with
non-cash impairment charges, charges associated with restructuring program and
transformation initiatives, loss on sale of business, and loss on extinguishment
of debt, partially offset by a gain on the sale of property, as well as the
associated tax effects.

•In connection with our restructuring and transformation initiatives, during the
three and six months ended August 27, 2022, we recorded total expenses of $54.2
million and $77.3 million, respectively, including a benefit of $1.2 million for
the six months ended August 27, 2022 in cost of sales. There were no
restructuring and other transformation expenses included in cost of sales for
the three months ended August 27, 2022. In addition, approximately $54.1 million
and $78.3 million, respectively, is recorded in restructuring and transformation
initiative expenses in the consolidated statement of operations, as well as
$55.5 million and $82.2 million, respectively, of impairments.

•During the six months ended August 27, 2022, we launched certain key initiatives, including:


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•Product Initiatives. The following key product initiatives launched in the first quarter of fiscal 2022:



•Our Bed Bath & Beyond banner kicked off Back-to-College season with its
"Decision Day" campaign, helping college-bound students and their parents
prepare for the transition to a campus residence with the products and services
needed to create a comfortable, functional, personalized, and happy home away
from home.

•Our buybuy BABY banner expanded its assortment through an exclusive retail
partnership with Primary, a leading direct to consumer gender-neutral children's
clothing brand, and expanded its "buzzworthy brands" portfolio of parent-founded
brands with the introduction of Ahimsa, Monica + Andy, Gro To, Ready.Set.Food!,
Snuggle Me Organic and Waterful Baby Wipes products in select stores and
buybuybaby.com. Both of these initiatives build on the "welcome to parenthood"
initiative launched in fiscal 2021.

•Strategic Collaboration with The Kroger Co. As part of our strategic
collaboration with The Kroger Co. in April 2022, we announced the launch of our
e-commerce collaboration with Kroger Co. to directly offer Kroger customers an
extensive selection of the most sought-after goods for the Home & Baby products
carried by the Bed Bath & Beyond and buybuy BABY banners through Kroger.com. A
small-scale physical store pilot at select Kroger Family of Companies stores
commenced in the second quarter of fiscal 2022.

•Welcome Rewards™. The Company plans to leverage its recently introduced,
cross-banner loyalty program, Welcome Rewards™ to drive traffic, sales, and
customer retention. Welcome Rewards™ brings valuable savings, more benefits, and
special perks to customers who shop online and in stores nationwide at Bed Bath
& Beyond, buybuy BABY, and Harmon. Customers earn and redeem points across the
retail banners with every purchase.

•During fiscal 2021, we announced plans to complete our $1 billion three-year
repurchase plan by the end of fiscal 2021, which was two years ahead of schedule
and resulted in the repurchase of $950.0 million of shares under this plan as of
February 26, 2022. During the first quarter of fiscal 2022, we completed this
program, repurchasing approximately 2.3 million shares of our common stock under
the share repurchase plan approved by our Board of Directors, at a total cost of
approximately $40.4 million.

Impact of the COVID-19 Pandemic



The COVID-19 pandemic continues to present potential disruptions to our
business. As the COVID-19 pandemic evolves, national and local governments in
regions in which we operate have enacted various measures, including travel
restrictions, restrictions on events and gatherings, temporary closure of
non-essential businesses, "social distancing" requirements, vaccine and mask
mandates and various other requirements designed to slow the spread of COVID-19.
While many of these measures have been eased, the extent, severity and overall
duration of the COVID-19 pandemic, including its phases of resurgence and the
introduction of new variants, some of which may be more transmissible or
virulent, are unknown, and COVID-19 has had, and may continue to have, a
material adverse effect, on our business. The full extent of the impact of the
COVID-19 pandemic on our business, financial position, and results of operations
will depend on future developments, many of which are outside of our control,
including the duration and spread of the COVID-19 pandemic, the emergence of
variant strains, the availability, adoption, and effectiveness of the COVID-19
vaccines and COVID-19 testing, and government actions, which are uncertain and
cannot be predicted.

Further discussion of the risks and uncertainties posed by the COVID-19 pandemic is included in "Risk Factors" under Part I, Item 1A of our 2021 Form 10-K.



Results of Operations

Net Sales
                                             Three Months Ended                                                              Six Months Ended
                     August 27,          August 28,                                             August 27,          August 28,
(in millions)           2022                2021                       Change                      2022                2021                           Change
Net sales           $  1,437.0          $  1,984.7          $ (547.7)           (27.6) %       $  2,900.4          $  3,938.5          $ (1,038.1)           (26.4) %


Net sales for the three months ended August 27, 2022 were $1.437 billion, a
decrease of $547.7 million, or approximately 27.6%, compared with net sales of
$1.985 billion for the three months ended August 28, 2021. Net sales for the six
months ended August 27, 2022 were $2.900 billion, a decrease of $1.038 billion,
or approximately 26.4%, compared with net sales of $3.939 billion for the six
months ended August 28, 2021. The decrease in net sales for the three and six
months ended August 27, 2022 was primarily due to the decrease in comparable
sales, which were negatively impacted by continued downward trends in customer
traffic reflective of consumer spending patterns and demand, lack of inventory
availability and assortment in
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key product areas, as well as the effect of the closure of certain stores in fiscal 2021 in connection with our store fleet optimization project.



Sales consummated on a mobile device while physically in a store location and
BOPIS orders are recorded as customer facing digital channel sales. Customer
orders taken in-store by an associate through The Beyond Store, our proprietary,
web-based platform, are recorded as in-store sales. Prior to implementation of
BOPIS and contactless Curbside Pickup services, customer orders reserved online
and picked up in a store were recorded as in-store sales. Sales originally
consummated from customer facing digital channels and subsequently returned
in-store are recorded as a reduction of in-store sales. Net sales consummated
through digital channels represented approximately 37.0% and 39.0% of our sales
for the three and six months ended August 27, 2022, respectively, compared with
approximately 34.0% and 36.0% of our sales for the three and six months ended
August 28, 2021, respectively.

Comparable sales* for the three and six months ended August 27, 2022 decreased
by approximately 26.0% and 24.0%, respectively. Management attributes a portion
of this decline to the impact of lower traffic due to macro-economic factors,
such as steep inflation, and fluctuations in purchasing patterns of the
consumer. Also contributing to the comparable sales decline was the lack of
inventory availability and assortment in key product areas, due in part to
supply chain challenges.

* Comparable sales normally includes sales consummated through all retail
channels that have been operating for twelve full months following the opening
period (typically six to eight weeks), excluding the impact of store fleet
optimization program. We are an omni-channel retailer with capabilities that
allow a customer to use more than one channel when making a purchase, including
in-store, online, with a mobile device or through a customer contact center, and
have it fulfilled, in most cases, either through in-store customer pickup or by
direct shipment to the customer from one of our distribution facilities, stores
or vendors.

Sales of domestics merchandise and home furnishings accounted for approximately
37.9% and 62.1% of net sales, respectively, for the three months ended August
27, 2022, and approximately 39.8% and 60.2% of net sales, respectively, for the
three months ended August 28, 2021. Sales of domestics merchandise and home
furnishings accounted for approximately 36.6% and 63.4% of net sales,
respectively, for the six months ended August 27, 2022, and approximately 38.9%
and 61.1% of net sales, respectively, for the six months ended August 28, 2021.


Gross Profit
                                            Three Months Ended                                                             Six Months Ended
                     August 27,        August 28,                                            August 27,
(in millions)           2022              2021                      Change                      2022            August 28, 2021                      Change
Gross profit         $  398.3          $  601.1          $ (202.8)            (33.7) %       $  747.6          $      1,234.8          $ (487.2)            (39.5) %

Gross margin             27.7  %           30.3  %           (2.6) %           (8.6) %           25.8  %                 31.4  %           (5.6) %          (17.8) %



Gross profit for the three months ended August 27, 2022 was $398.3 million, or
27.7% of net sales, compared with $601.1 million, or 30.3% of net sales, for the
three months ended August 28, 2021. Gross profit for the six months ended August
27, 2022 was $747.6 million, or 25.8% of net sales, compared with $1.235
billion, or 31.4% of net sales, for the six months ended August 28, 2021. Gross
profit margin as a percentage of net sales for the three months ended August 27,
2022 includes the unfavorable impact of the acceleration of inventory clearance
activity resulting from actions taken to rebalance inventory levels in response
to consumer trends and transient supply chain-related port fees, partially
offset by higher product margin due to the continuation of greater Owned Brand
levels within our assortment.

Gross profit margin as a percentage of net sales for the six months ended August
27, 2022 includes $91.6 million, associated with the markdown of inventory being
removed from our assortment in connection with clearance of certain Owned Brands
merchandise and the acceleration of inventory clearance activity resulting from
actions taken to rebalance inventory levels in response to consumer trends as
well as the impact of transient supply chain-related port fees, partially offset
by higher product margin due to the continuation of greater Owned Brand levels
within our assortment.

Gross profit for the three and six months ended August 27, 2022 also includes
higher freight expenses, both for inbound product shipments and
direct-to-customer fulfillment and in part due to industry wide, global supply
chain challenges, compared with the prior year.

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Selling, General and Administrative Expenses
                                            Three Months Ended                                                               Six Months Ended
                     August 27,        August 28,
(in millions)           2022              2021                      Change                   August 27, 2022         August 28, 2021                      Change
Selling, general and
administrative
expenses ("SG&A")    $  634.9          $  653.0          $ (18.1)             (2.8) %       $      1,272.4          $      1,311.7          $ (39.3)             (3.0) %

SG&A as a percentage
of net sales             44.2  %           32.9  %          11.3  %           34.3  %                 43.9  %                 33.3  %          10.6  %           31.8  %



SG&A for the three months ended August 27, 2022 was $634.9 million, or 44.2% of
net sales, compared with $653.0 million, or 32.9% of net sales, for the three
months ended August 28, 2021. SG&A for the six months ended August 27, 2022 was
$1.272 billion, or 43.9% of net sales, compared with $1.312 billion, or 33.3% of
net sales, for the six months ended August 28, 2021. The decrease in SG&A for
the three and six months ended August 27, 2022 compared with the three and six
months ended August 28, 2021 was primarily attributable to the Company's cost
reduction initiatives, primarily a decrease in payroll and payroll-related
expenses, and lower rent and occupancy expenses due to a lower store base as a
result of the Company's fleet optimization program in fiscal 2021. These cost
reductions were partially offset by higher marketing spend. The increase in SG&A
as a percentage of net sales for the three and six months ended August 27, 2022
was primarily due to the impact of de-leveraging of SG&A due to the declines in
net sales noted above.

Impairments

Impairments for the three and six months ended August 27, 2022 were $55.5
million and $82.2 million, respectively, compared with $7.6 million and $16.7
million, respectively, during the comparable periods last year. Impairment
charges for the three months ended August 27, 2022 and August 28, 2021 included
$55.5 million and $7.0 million, respectively, relating to certain store-level
assets (including leasehold improvements and operating lease assets) and
tradename impairments of $0.6 million for three months ended August 28, 2021.
There were no tradename impairment charges for three months ended August 27,
2022. Impairment charges for the six months ended August 27, 2022 and August 28,
2021 included $79.3 million and $14.0 million, respectively, relating to certain
store-level assets (including leasehold improvements and operating lease assets)
and tradename impairments of $2.9 million and $2.7 million, respectively.

Restructuring and Transformation Initiative Expenses



During the three and six months ended August 27, 2022, restructuring and
transformation initiative expenses were $54.1 million and $78.3 million,
respectively, which included $35.0 million of severance costs for workforce
reduction and leadership changes for both the three and six months ended August
27, 2022. The Company also recorded approximately $1.6 million and $6.8 million,
respectively, of lease related and other costs and approximately $17.5 million
and $36.5 million, respectively, of costs in connection with our technology
transformation and business strategy and operating model transformation programs
across core functions, including merchandising, supply chain, and finance for
the three and six months ended August 27, 2022. During the three and six months
ended August 28, 2021, restructuring and transformation initiative expenses were
$24.5 million and $58.2 million, respectively, primarily related to costs
recorded in connection with the store network optimization program as well as
costs associated with other transformation initiatives (see "Restructuring and
Transformation Initiative Expenses," Note 18 to the accompanying consolidated
financial statements).

Loss on Sale of Businesses

During the three and six months ended August 28, 2021, we recognized a loss of approximately $0.1 million and $4.1 million, respectively, associated with certain working capital and other adjustments related to the divestiture of certain banners in fiscal 2020.


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Operating Loss
                                              Three Months Ended                                                                Six Months Ended
                                            August 28,
(in millions)        August 27, 2022           2021                      Change                    August 27, 2022         August 28, 2021                      Change

Operating Loss $ (346.2) $ (84.1) $ (262.1)

311.7 % $ (685.4) $ (156.0) $ (529.4)

            339.4  %

As a percentage of
net sales                    (24.1) %           (4.2) %          (19.9) %          473.8  %                (23.6) %                 (4.0) %          (19.6) %          490.0  %



For the three months ended August 27, 2022, operating loss was $346.2 million,
or 24.1% of net sales, compared with an operating loss of $84.1 million, or 4.2%
of net sales, for the three months ended August 28, 2021. Operating loss for the
three months ended August 27, 2022 included the unfavorable impact of the
acceleration of inventory clearance activity resulting from actions taken to
rebalance inventory levels in response to consumer trends and transient supply
chain-related port fees, $54.1 million associated with restructuring and other
transformation initiatives, and $55.5 million for non-cash impairment charges
(each as discussed above or below). The change in operating loss as a percentage
of net sales for three months ended August 27, 2022 was primarily due to the
decline in gross margin, as discussed above, as well as higher restructuring and
transformation initiative expenses and higher impairment charges compared to the
three months ended August 28, 2021.

For the six months ended August 27, 2022, operating loss was $685.4 million, or
23.6% of net sales, compared with an operating loss of $156.0 million, or 4.0%
of net sales, for the six months ended August 28, 2021. Operating loss for the
six months ended August 27, 2022 included the impact of $91.6 million related to
inventory markdown reserves, the acceleration of inventory clearance activity
resulting from actions taken to rebalance inventory levels in response to
consumer trends and transient supply chain-related port fees, $78.3 million
associated with restructuring and other transformation initiatives, and
$82.2 million for non-cash impairment charges (each as discussed above). The
change in operating loss as a percentage of net sales for six months ended
August 27, 2022 was primarily due to the decline in gross margin, as discussed
above, as well as higher restructuring and transformation initiative expenses
and higher impairment charges compared to the six months ended August 28, 2021.

Interest Expense, net



Interest expense, net for the three and six months ended August 27, 2022 was
$18.6 million and $35.1 million, respectively, compared with $16.1 million and
$32.1 million, respectively, for the three and six months ended August 28, 2021.
Interest expense, net includes interest costs attributable to our revolving
credit facilities and our senior unsecured notes.

Income Taxes



The effective tax rate for the three and six months ended August 27, 2022 was
(0.4)% and (0.5)%, respectively, compared with 27.0% and 34.2%, respectively,
for the three and six months ended August 28, 2021. For the three and six months
ended August 27, 2022, the effective tax rate reflects the impact of continuing
to record a valuation allowance against the Company's U.S. federal and state
deferred tax assets (discussed below). For the three and six months ended August
28, 2021, the effective tax rate reflects the impact of charges for
restructuring and transformation initiatives, as well as a benefit under the
provisions of the CARES Act, to a year in which the tax rate was 35%.

In assessing the recoverability of our deferred tax assets, we evaluated the
available objective positive and negative evidence to estimate whether it is
more likely than not that sufficient future taxable income will be generated to
permit the use of existing deferred tax assets in each taxpaying jurisdiction.
For any deferred tax asset in excess of the amount for which it is more likely
than not that we will realize a benefit, we established a valuation allowance. A
valuation allowance is a non-cash charge, and does not limit our ability to
utilize our deferred tax assets, including our ability to utilize tax loss and
credit carryforward amounts, against future taxable income.

In the third quarter of fiscal 2021, we concluded that, based on our evaluation
of available objective positive and negative evidence, it was no longer more
likely than not that our net U.S. federal and state deferred tax assets were
recoverable. In assessing the realizability of deferred tax assets, the key
assumptions used to determine positive and negative evidence included our
cumulative loss before income taxes for the past three years, current trends
related to actual taxable earnings or losses, and expected future reversals of
existing taxable temporary differences, as well as timing and the cost of our
transformation initiatives and their expected associated benefits. Accordingly,
in the third quarter of fiscal 2021, we recorded a valuation allowance against
substantially all of our net U.S. federal and state deferred tax assets.
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During the three and six months ended August 27, 2022, we concluded that it
continues to not be more likely than not that our net U.S. federal and state
deferred tax assets are recoverable, and have recorded a valuation allowance
against any deferred tax assets generated in the quarter. As of August 27, 2022,
the total valuation allowance relative to U.S. federal and state deferred tax
assets was $224.3 million.

The amount of the deferred tax assets considered realizable, and the associated
valuation allowance, could be adjusted in a future period if estimates of future
taxable income change or if objective negative evidence in the form of
cumulative losses is no longer present and additional weight is given to
subjective evidence such as projections for future growth.

Potential volatility in the effective tax rate from year to year may occur as we are required each year to determine whether new information changes our assessment of both the probability that a tax position will effectively be sustained and the appropriateness of the amount of recognized benefit.

Net Loss



As a result of the factors described above, net loss for the three months ended
August 27, 2022 was $366.2 million, or $4.59 per diluted share, compared with
net loss of $73.2 million, or $0.72 per diluted share, for the three months
ended August 28, 2021. Net loss for the three months ended August 27, 2022
included a net unfavorable impact of $1.37 per diluted share associated with
charges for restructuring and other transformation initiatives, and non-cash
impairment charges (each as discussed above), as well as the associated tax
effects. Net loss for the three months ended August 28, 2021 included a net
unfavorable impact of $0.76 per diluted share associated with non-cash
impairment charges, charges associated with restructuring program and
transformation initiatives, loss on sale of business, and loss on extinguishment
of debt, partially offset by a gain on the sale of property (each as discussed
above), as well as the associated tax effects.

As a result of the factors described above, net loss for the six months ended
August 27, 2022 was $723.8 million, or $9.09 per diluted share, compared with
net loss of $124.1 million, or $1.19 per diluted share, for the six months ended
August 28, 2021. Net loss for the six months ended August 27, 2022 included a
net unfavorable impact of $2.39 per diluted share associated with inventory
markdown reserves, the acceleration of inventory clearance activity and
transient supply chain-related port fees, restructuring and other transformation
initiatives, and non-cash impairment charges (each as discussed above), as well
as the associated tax effects. Net loss for the six months ended August 28, 2021
included a net unfavorable impact of $1.27 per diluted share associated with
non-cash impairment charges, charges associated with restructuring program and
transformation initiatives, loss on sale of business, and loss on extinguishment
of debt, partially offset by a gain on the sale of property, (each as discussed
above), as well as the associated tax effects.

Liquidity and Capital Resources



We had cash, cash equivalents and restricted cash of $166.7 million as of
August 27, 2022, a decrease of approximately $304.2 million as compared with
February 26, 2022, driven by working capital investments in inventory, as well
as $226.5 million in capital expenditures and $43.2 million in share
repurchases, partially offset by borrowings under our ABL Facility of $550.0
million and net cash used in operating activities of $582.4 million for the six
months ended August 27, 2022. As of August 27, 2022, we had approximately
$315.0 million of available borrowing capacity under its ABL Facility.
Subsequent to the end of the second quarter of fiscal 2022, we entered into an
amendment, which expanded its ABL Facility to $1.130 billion and entered into a
new FILO Facility of $375.0 million (see "Long-Term Debt", Note 13). As of the
end of fiscal September 2022, our current available borrowing capacity was
approximately $690.0 million.

We are required to perform a two-step analysis of our ability to continue as a
going concern. It must first evaluate whether there are conditions and events
that raise substantial doubt about our ability to continue as a going concern
(Step 1). If we conclude that substantial doubt is raised, it is also required
to consider whether our plans alleviate that doubt (Step 2).

Management's assessment included the preparation of cash flow forecasts.
Management has implemented or expects to implement various strategic actions
including permanently closing stores that are deemed to be performing below
expectations, reducing its workforce, deferring or eliminating certain capital
expenditures and reducing other operating expenses to ensure alignment with
customer demand and its go-forward strategy.

We believe that available cash and cash equivalents, the cash provided by future
operating activities, and availability under its recently increased ABL credit
facility and its new FILO credit facility should enable us to meet presently
anticipated cash needs for at least the next 12 months after the date that the
financial statements are issued. If we encounter unforeseen circumstances that
place further constraints on its capital resources, management will be required
to take various additional measures to conserve liquidity, which could include,
but not necessarily be limited to, reducing capital expenditures, and
controlling
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overhead expenses. Management cannot provide any assurance that our efforts will
be successful. The consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of these uncertainties.

We have the ability to continue to borrow under our ABL Facility, subject to
customary conditions, including no default, the accuracy of representations and
warranties, and borrowing base availability. The ABL Facility matures on August
9, 2026. Our ability to borrow under the ABL Facility is based upon a specified
borrowing base consisting of a percentage of our eligible inventory and credit
card receivables as defined in the ABL Facility, net of applicable reserves (see
"Long-Term Debt," Note 13 to the accompanying consolidated financial
statements).

In addition, on August 31, 2022, subsequent to the end of the second quarter of
fiscal 2022, we established an at the market equity distribution program (the
"ATM Program") (see "Shareholders' (Deficit) Equity," Note 14 to the
accompanying consolidated financial statements), under which we may offer and
sell up to a maximum of 12 million shares of common stock. The potential
proceeds from the ATM Program are expected to be used for a number of corporate
purposes, which may include the repayment, refinancing, redemption or repurchase
of existing indebtedness, working capital or capital expenditures, acquisitions
and other investments. Since the end of the fiscal second quarter, we have sold
approximately 3.0 million shares for approximately $30.0 million of proceeds
under the ATM Program.

We are considering liability management transactions with particular focus on
the 2024 bonds. Transactions could be launched in the third quarter of fiscal
2022 and could include offers to exchange our current debt for new longer
tenured debt or equity at exchange ratios related to the then-current value of
the current debt. However, the transactions could take other forms or might not
be launched at all.

Capital Expenditures

Capital expenditures for the six months ended August 27, 2022 were $226.5
million, and for fiscal 2022 are projected to be approximately $250 million. Our
capital expenditures are related to digital and omni-channel capabilities, store
remodels and investments in technology across a number of areas including supply
chain, merchandising, and finance.

We continue to review and prioritize our capital needs and remain committed to
making the required investments in our infrastructure to help position us for
continued growth and success. Key areas of investment include: continuing to
improve the presentation and content as well as the functionality, general
search and navigation across our customer facing digital channels; improving
customer data integration and customer relations management capabilities;
continuing to enhance service offerings to our customers; continuing to
strengthen and deepen our information technology, analytics, marketing,
e-commerce, merchandising and finance capabilities; and creating more flexible
fulfillment options designed to improve our delivery capabilities and lower our
shipping costs. These and other investments are expected to, among other things,
provide a seamless and compelling customer experience across our omni-channel
retail platform.

Stock Repurchases

During the three and six months ended August 27, 2022, we repurchased less than
0.1 million and approximately 2.5 million shares, respectively, of our common
stock, at a total cost of approximately $0.2 million and $43.2 million,
respectively. For the six months ended August 27, 2022, the stock repurchases
included approximately 2.3 million shares at a total cost of approximately
$40.4 million, repurchased under our share repurchase programs as authorized by
our Board of Directors, which was completed in the first quarter of fiscal 2022.

During the three and six months ended August 28, 2021, we repurchased
approximately 3.5 million and 8.7 million shares, respectively, of our common
stock, at a total cost of approximately $101.3 million and $240.0 million,
respectively, which included approximately 3.4 million and 8.3 million shares,
respectively, at a total cost of approximately $100.8 million and $231.2
million, respectively, repurchased under our share repurchase programs as
authorized by our Board of Directors.

Additionally, during the three and six months ended August 27, 2022, we
repurchased less than 0.1 million and approximately 0.2 million shares,
respectively, of our common stock, to cover employee related taxes withheld on
vested restricted stock, restricted stock unit awards, and performance stock
unit awards at a total cost of approximately $0.2 million and $2.8 million,
respectively. During the three and six months ended August 28, 2021, we
repurchased approximately 0.1 million and 0.4 million shares, respectively, of
our common stock, to cover employee related taxes withheld on vested restricted
stock, restricted stock unit awards, and performance stock unit awards at a
total cost of approximately $0.5 million and $8.8 million, respectively.

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During fiscal 2021, we announced that we intended to complete our $1 billion
three-year share repurchase plan by the end of fiscal 2021, two years ahead of
schedule. During the first quarter of fiscal 2022, we completed this program,
repurchasing approximately 2.3 million shares of our common stock.

In January 2021, we entered into an accelerated share repurchase agreement to
repurchase an aggregate $150.0 million of our common stock, subject to market
conditions. This resulted in the repurchase of 5.0 million shares in the fourth
quarter of fiscal 2020, and an additional 0.2 million shares received upon final
settlement in the first quarter of fiscal 2021.

Between December 2004 and April 2021, our Board of Directors authorized, through
several share repurchase programs, the repurchase of up to $12.950 billion of
our shares of common stock. We also acquire shares of our common stock to cover
employee related taxes withheld on vested restricted stock, restricted stock
units and performance stock unit awards. Since the initial authorization in
December 2004, the aggregate total of common stock repurchased is approximately
264.7 million shares for a total cost of approximately $11.7 billion. We had
approximately $1.2 billion remaining of authorized share repurchases as of
August 27, 2022.

Decisions regarding share repurchases are within the discretion of the Board of
Directors, and are influenced by a number of factors, including the price of our
common stock, general business and economic conditions, our financial condition
and operating results, the emergence of alternative investment or acquisition
opportunities, changes in business strategy and other factors. Our share
repurchase program could change, and could be influenced by several factors,
including business and market conditions, such as the impact of the COVID-19
pandemic on our business operations or stock price. We review our alternatives
with respect to its capital structure on an ongoing basis. Any future share
repurchases will be subject to the determination of the Board of Directors,
based on an evaluation of our earnings, financial condition and requirements,
business conditions and other factors, including the restrictions on share
repurchases under the ABL Facility (see "Long-Term Debt," Note 13 to the
accompanying consolidated financial statements). We do not currently have plans
to engage in stock repurchases as this time.

Debt Repurchases



There were no debt repurchases made during the three and six months ended August
27, 2022. During the three and six months ended August 28, 2021, we purchased
approximately $3.1 million and $11.0 million, respectively, aggregate principal
amount of our outstanding 3.749% senior unsecured notes due August 1, 2024.

Cash Flow

Fiscal 2022 compared with Fiscal 2021



Net cash used in operating activities for the six months ended August 27, 2022
was $582.4 million, compared with net cash provided by operating activities of
$46.0 million in the corresponding period in fiscal 2021. The year-over-year
change in operating cash flow was primarily due to higher net loss, adjusted for
non-cash expense, which included the impact of higher impairments in fiscal
2022, as well as investments in inventory as a result of lower than anticipated
sales, partially offset by a decrease in accrued expenses and other current
liabilities.

Retail inventory, which includes inventory in our distribution facilities for
direct to customer shipments, was approximately $1.576 billion at August 27,
2022, a decrease of 8.6% compared with retail inventory at February 26, 2022. We
continue to focus on our inventory optimization strategies.

Net cash used in investing activities for the six months ended August 27, 2022
was $226.5 million, compared with net cash used in investing activities of
$174.5 million in the corresponding period of fiscal 2021. For the six months
ended August 27, 2022, net cash used in investing activities included $226.5
million of capital expenditures. For the six months ended August 28, 2021, net
cash used in investing activities was comprised of $149.5 million of capital
expenditures and $30.0 million of purchases of held-to-maturity investment
securities, partially offset by $5.0 million in proceeds from the sale of
property.

Net cash provided by financing activities for the six months ended August 27,
2022 was $505.6 million, compared with net cash used in financing activities of
$255.4 million in the corresponding period of fiscal 2021. Net cash provided by
financing activities in the six months ended August 27, 2022 was comprised of
$550.0 million of borrowings under the ABL Facility, offset by repurchases of
common stock of $43.2 million, of which $40.4 million is related to our share
repurchase program, repayments of finance leases of $0.8 million and dividend
payments of $0.3 million. Net cash used in financing activities in the six
months ended August 28, 2021 was comprised of repurchases of our common stock of
$240.0 million, of which $231.2
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million is related to the Company's share repurchase program, repayments of
long-term debt of $11.4 million, payments of deferred financing costs of $3.4
million and dividend payments of $0.6 million.

Seasonality



Our business is subject to seasonal influences. Generally, our sales volumes are
higher in the calendar months of August, November and December, and lower in
September and October.

Critical Accounting Policies



See "Critical Accounting Policies" under Item 7 of our Annual Report on Form
10-K for the fiscal year ended February 26, 2022 ("2021 Form 10-K"), filed with
the Securities and Exchange Commission ("SEC").

Forward-Looking Statements



This Form 10-Q and Management's Discussion and Analysis of Financial Condition
and Results of Operations contain forward-looking statements within the meaning
of Section 21 E of the Securities Exchange Act of 1934 including, but not
limited to, our progress and anticipated progress towards our long-term
objectives, as well as more generally the status of our future liquidity and
financial condition and our outlook for our 2022 fiscal year. Many of these
forward-looking statements can be identified by use of words such as may, will,
expect, anticipate, approximate, estimate, assume, continue, model, project,
plan, goal, preliminary, and similar words and phrases, although the absence of
those words does not necessarily mean that statements are not forward-looking.
Our actual results and future financial condition may differ materially from
those expressed in any such forward-looking statements as a result of many
factors. Such factors include, without limitation: general economic conditions
including the recent supply chain disruptions, labor shortages, wage pressures,
rising inflation and the ongoing military conflict between Russia and Ukraine;
challenges related to our relationships with our suppliers, including the
failure of our suppliers to supply us with the necessary volume and type of
products; the impact of cost-saving measures; our inability to generate
sufficient cash to service all of our indebtedness or our ability to access
additional capital; our inability to complete our expected credit financings;
changes to our credit rating or the terms on which vendors or others will
provide us credit; the impact of strategic changes, including the reaction of
customers to such changes; a challenging overall macroeconomic environment and a
highly competitive retailing environment; risks associated with the ongoing
COVID-19 pandemic and the governmental responses to it, including its impacts
across our businesses on demand and operations, as well as on the operations of
our suppliers and other business partners, and the effectiveness of our and
governmental actions taken in response to these risks; changing consumer
preferences, spending habits and demographics; demographics and other
macroeconomic factors that may impact the level of spending for the types of
merchandise sold by us; challenges in executing our omni-channel and
transformation strategy, including our ability to establish and profitably
maintain the appropriate mix of digital and physical presence in the markets we
serve; our ability to successfully execute our store fleet optimization
strategies, including our ability to achieve anticipated cost savings and to not
exceed anticipated costs; our ability to execute on any additional strategic
transactions and realize the benefits of any acquisitions, partnerships,
investments or divestitures; disruptions to our information technology systems,
including but not limited to security breaches of systems protecting consumer
and employee information or other types of cybercrimes or cybersecurity attacks;
damage to our reputation in any aspect of our operations; the cost of labor,
merchandise, logistical costs and other costs and expenses; potential supply
chain disruption due to trade restrictions or otherwise, and other factors such
as natural disasters, pandemics, including the COVID-19 pandemic, political
instability, labor disturbances, product recalls, financial or operational
instability of suppliers or carriers, and other items; inflation and the related
increases in costs of materials, labor and other costs; inefficient management
of relationships and dependencies on third-party service providers; our ability
to attract and retain qualified employees in all areas of the organization;
unusual weather patterns and natural disasters, including the impact of climate
change; uncertainty and disruptions in financial markets; volatility in the
price of our common stock and its effect, and the effect of other factors,
including the COVID-19 pandemic, on our capital allocation strategy; changes to
statutory, regulatory and other legal requirements or deemed noncompliance with
such requirements; changes to accounting rules, regulations and tax laws, or new
interpretations of existing accounting standards or tax laws; new, or
developments in existing, litigation, claims or assessments; and a failure of
our business partners to adhere to appropriate laws, regulations or standards.
Except as required by law, we do not undertake any obligation to update our
forward-looking statements.

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