The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the related notes included elsewhere in
this Quarterly Report on Form 10-Q, as well as the financial and other
information included in the fiscal 2021 Form 10-K. This section, as well as
other parts of this Form 10-Q, contain forward-looking statements, such as the
Company's plans, estimates and expectations, that involve risks and
uncertainties. The Company's actual results or other events could differ
materially from those discussed in or implied by these forward-looking
statements. Factors that could cause or contribute to those differences include,
but are not limited to, those discussed below in "Risk Factors" and in
"Forward-Looking Statements" and elsewhere in this report and also in "Risk
Factors" under Part I, Item 1A of our 2021 Form 10-K.

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 Update

Beginning in the third quarter of fiscal 2022, the Company began to execute
significant strategic and management 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. Beginning in the third
quarter of fiscal 2022, the Company began to execute a comprehensive strategic
plan led by our new President and Chief Executive Officer, Sue Gove, who was
appointed in October 2022 after serving as Interim Chief Executive Officer. This
plan is focused on strengthening the Company's financial position through
additional liquidity and a reduction of its cost structure, better serving its
customers through merchandising, inventory and customer engagement, and
regaining our authority in the Home and Baby markets. To accelerate these
strategic initiatives, the Company realigned its organizational structure, which
included the creation of Brand President roles for Bed Bath & Beyond and BABY to
lead merchandising, planning, brand marketing, site merchandising and stores for
each banner.

In conjunction with the Company's new strategic focus areas, the Company
executed plans to rebalance its merchandise assortment to align with customer
preference by leading with National Brands inventory and introducing new,
emerging direct-to-consumer brands. Consequently, we announced the exiting of a
third of our Owned Brands, including the discontinuation of three of our nine
labels (Haven™, Wild Sage™ and Studio 3B™). We also expect to reduce the breadth
and depth of inventory across our six remaining Owned Brands (Simply Essential™,
Nestwell™, Our Table™, Squared Away™, H for Happy™ and Everhome™).

Although we moved quickly and effectively to change the assortment and other
merchandising and marketing strategies, inventory and in-stock levels were lower
than anticipated due to supplier constraints and vendor credit line decreases.
This resulted in lower levels of in-stock presentation within the assortments
than our customers expect. Consequently, net sales for the three months ended
November 26, 2022 were $1.259 billion, a decrease of $618.8 million, or
approximately 33.0%, compared with net sales of $1.878 billion for the three
months ended November 27, 2021. Net sales for the nine months ended November 26,
2022 were $4.160 billion, a decrease of approximately 28.5% as compared with the
nine months ended November 27, 2021.

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To right-size our cost structure and store fleet based on lower volumes, we have
implemented significant SG&A reductions. 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 associates.

•The planned closure of approximately 150 lower-producing Bed Bath & Beyond banner stores, of which six closed in the quarter.

See further discussion of restructuring and transformation initiative expenses in the "Results of Operations" section herein.

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 November 26, 2022 were $1.259 billion, a
decrease of approximately 33.0% as compared with the three months ended November
27, 2021. Net sales for the nine months ended November 26, 2022 were $4.160
billion, a decrease of approximately 28.5% as compared with the nine months
ended November 27, 2021.

•Comparable Sales* for the three months ended November 26, 2022 decreased by
approximately 32.0% compared to a decrease of approximately 7.0% for three
months ended November 27, 2021. For the nine months ended November 26, 2022,
Comparable Sales decreased by approximately 27.0%. Comparable Sales was not a
meaningful metric for the nine months ended November 27, 2021 as a result of the
impact of the extended closure of the majority of our stores due to the COVID-19
pandemic during a portion of the comparable period in fiscal 2020.

* 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 November 26, 2022 was $393.0 million, or
4.33 per diluted share, compared with net loss of $276.4 million, or $2.78 per
diluted share, for the three months ended November 27, 2021. Net loss for the
three months ended November 26, 2022 included a net unfavorable impact of $0.68
per diluted share associated with restructuring and other transformation
initiatives, and non-cash impairment charges, partially offset by gain on
extinguishment of debt of $1.04 per diluted share. Net loss for the three months
ended November 27, 2021 included a net unfavorable impact of $2.53 per diluted
share associated with non-cash impairment charges, charges associated with
restructuring program and transformation initiatives, loss on sale of business,
and the impact of recording a valuation allowance against the Company's U.S.
federal and state deferred tax assets.

•Net loss for the nine months ended November 26, 2022 was $1.117 billion, or
$13.40 per diluted share, compared with net loss of $400.5 million, or $3.90 per
diluted share, for the nine months ended November 27, 2021. Net loss for the
nine months ended November 26, 2022 included a net unfavorable impact of $3.65
per diluted share associated with inventory markdown reserves, restructuring and
other transformation initiatives, and non-cash impairment charges, partially
offset by gain on extinguishment of debt. Net loss for the nine months ended
November 27, 2021 included a net unfavorable impact of $3.74 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, and the impact of recording a valuation
allowance against the Company's U.S. federal and state deferred tax assets.

•In connection with our restructuring and transformation initiatives, during the
three and nine months ended November 26, 2022, we recorded total expenses of
$54.1 million and $131.4 million, respectively, including $8.6 million and $7.4
million in cost of sales for the three and nine months ended November 26, 2022.
In addition, approximately $45.5 million and $123.8 million, respectively, is
recorded in restructuring and transformation initiative expenses in the
consolidated statement of operations, as well as $100.7 million and $182.9
million, respectively, of impairments.

•During the nine months ended November 26, 2022, we launched 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.

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•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.

Results of Operations

Net Sales
                                             Three Months Ended                                                             Nine Months Ended
                    November 26,        November 27,                                           November 26,        November 27,
(in millions)           2022                2021                       Change                      2022                2021                           Change
Net sales           $  1,259.1          $  1,877.9          $ (618.8)           (33.0) %       $  4,159.5          $  5,816.4          $ (1,656.9)           (28.5) %



Net sales for the three months ended November 26, 2022 were $1.259 billion, a
decrease of $618.8 million, or approximately 33.0%, compared with net sales of
$1.878 billion for the three months ended November 27, 2021. Net sales for the
nine months ended November 26, 2022 were $4.160 billion, a decrease of $1.657
billion, or approximately 28.5%, compared with net sales of $5.816 billion for
the nine months ended November 27, 2021. The decrease in net sales for the three
and nine months ended November 26, 2022 was predominantly due to the decrease in
Comparable Sales driven by lower customer traffic and conversion, in part due to
consumer spending patterns and demand, a lack of inventory availability and
assortment in key product areas, specifically within the Company's Owned Brands
and National Brands product mix.

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 33.0% and 37.0% of our sales
for the three and nine months ended November 26, 2022, respectively, compared
with approximately 35.1% and 35.8% of our sales for the three and nine months
ended November 27, 2021, respectively.

Comparable Sales* for the three and nine months ended November 26, 2022
decreased by approximately 32.0% and 27.0%, 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 to vendor
constraints and credit line decreases. Comparable Sales the three months ended
November 27, 2021 decreased by approximately 7.0%. For the nine months ended
November 27, 2021, Comparable Sales was not a meaningful metric as a result of
the impact of the extended closure of the majority of our stores during a
portion of the comparable period in fiscal 2020 due to the COVID-19 pandemic.

* 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
36.0% and 64.0% of net sales, respectively, for the three months ended November
26, 2022, and approximately 37.6% and 62.4% of net sales, respectively, for the
three months ended November 27, 2021. Sales of domestics merchandise and home
furnishings accounted for approximately 36.4% and 63.6% of net sales,
respectively, for the nine months ended November 26, 2022, and approximately
38.4% and 61.6% of net sales, respectively, for the nine months ended November
27, 2021.
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Gross Profit
                                             Three Months Ended                                                             Nine Months Ended
                     November 26,       November 27,                                           November 26,        November 27,
(in millions)            2022               2021                      Change                       2022                2021                          Change
Gross profit         $   278.8          $   668.9          $ (390.1)            (58.3) %       $  1,026.4          $  1,903.7          $ (877.3)            (46.1) %

Gross margin              22.1  %            35.6  %          (13.5) %          (37.9) %             24.7  %             32.7  %           (8.0) %          (24.5) %



Gross profit for the three months ended November 26, 2022 was $278.8 million, or
22.1% of net sales, compared with $668.9 million, or 35.6% of net sales, for the
three months ended November 27, 2021. Gross profit for the nine months ended
November 26, 2022 was $1.026 billion, or 24.7% of net sales, compared with
$1.904 billion, or 32.7% of net sales, for the nine months ended November 27,
2021. Gross profit margin as a percentage of net sales for the three months
ended November 26, 2022 includes the unfavorable impact of the acceleration of
inventory clearance activity resulting from actions taken to rebalance Owned
Brands inventory levels in response to consumer preference as well as higher
promotional activity.

Gross profit margin as a percentage of net sales for the nine months ended
November 26, 2022 includes $91.6 million associated with the unfavorable impact
of the acceleration of inventory clearance activity resulting from actions taken
to rebalance Owned Brands inventory levels in response to consumer preference as
well as higher promotional activity.

Gross profit for the three and nine months ended November 26, 2022 also includes higher freight expenses, both for inbound product shipments and direct-to-customer fulfillment.

Selling, General and Administrative Expenses


                                             Three Months Ended                                                             Nine Months Ended
                     November 26,       November 27,                                           November 26,        November 27,
(in millions)            2022               2021                      Change                       2022                2021                          Change
Selling, general and
administrative
expenses ("SG&A")    $   583.6          $   698.0          $ (114.4)            (16.4) %       $  1,856.0          $  2,009.7          $ (153.7)             (7.6) %

SG&A as a percentage
of net sales              46.4  %            37.2  %            9.2  %           24.7  %             44.6  %             34.6  %           10.0  %           28.9  %



SG&A for the three months ended November 26, 2022 was $583.6 million, or 46.4%
of net sales, compared with $698.0 million, or 37.2% of net sales, for the three
months ended November 27, 2021. SG&A for the nine months ended November 26, 2022
was $1.856 billion, or 44.6% of net sales, compared with $2.010 billion, or
34.6% of net sales, for the nine months ended November 27, 2021. The decrease in
SG&A for the three months ended November 26, 2022 compared with the three months
ended November 27, 2021 was primarily attributable to the Company's cost
reduction initiatives, primarily a decrease in payroll and payroll-related
expenses of approximately $66.7 million (primarily salaries), a decline of
approximately $19.9 million in rent and occupancy expenses driven by a lower
store base as a result of the Company's real estate and store fleet optimization
initiatives as well as cost reductions in marketing spend of approximately $15.7
million.

The decrease in SG&A for the nine months ended November 26, 2022 compared with
the nine months ended November 27, 2021 was primarily attributable to the
Company's cost reduction initiatives, primarily a decrease in payroll and
payroll-related expenses of approximately $132.0 million (primarily salaries)
and a decline of approximately $18.3 million in rent and occupancy expenses
driven by a lower store base as a result of the Company's real estate and store
fleet optimization initiatives.

The increase in SG&A as a percentage of net sales for the three and nine months
ended November 26, 2022 was primarily due to the impact of de-leveraging of SG&A
due to the declines in net sales noted above.

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Impairments

Impairments for the three and nine months ended November 26, 2022 were $100.7
million and $182.9 million, respectively, compared with $1.8 million and $18.5
million, respectively, during the comparable periods last year. Impairment
charges for the three months ended November 26, 2022 and November 27, 2021
included $100.7 million and $1.6 million, respectively, relating to certain
store-level assets (including leasehold improvements and operating lease assets)
and tradename impairments of $0.2 million for three months ended November 27,
2021. There were no tradename impairment charges for three months ended November
26, 2022. Impairment charges for the nine months ended November 26, 2022 and
November 27, 2021 included $180.0 million and $15.6 million, respectively,
relating to certain store-level assets (including leasehold improvements and
operating lease assets) and tradename impairments of $2.9 million and $2.9
million, respectively.

Restructuring and Transformation Initiative Expenses



The Company recorded $54.1 million and $131.4 million in its consolidated
statements of operations for the three and nine months ended November 26, 2022,
respectively, for costs associated with restructuring and other transformation
initiatives, of which approximately $8.6 million and $7.4 million is included in
cost of sales for the three and nine months ended November 26, 2022,
respectively. In addition, for the three and nine months ended November 26,
2022, approximately $45.5 million and $123.8 million, respectively, was recorded
in restructuring and transformation initiative expenses in the consolidated
statements of operations, which included approximately $7.9 million and $42.9
million, respectively, of severance costs related to workforce reduction, store
closures and leadership changes. The Company also recorded approximately $11.5
million and $18.3 million, respectively, for lease related and other costs,
including in connection with store closures, and approximately $26.1 million and
$62.6 million, respectively, of costs for other transformation initiatives for
the three and nine months ended November 26, 2022.

As part of the Company's ongoing business transformation, on August 31, 2022,
the Company announced the planned closure of approximately 150 lower-producing
Bed Bath & Beyond banner stores as part of its real estate and store fleet
optimization. During the three months ended November 26, 2022, the Company
closed 6 Bed Bath & Beyond stores and recorded $3.9 million of severance costs
and $1.4 million of lease-related and other costs associated with planned store
closures for which the store closing process has commenced, in restructuring and
transformation initiative expenses in the consolidated statements of operations
and included above. The Company also recorded $8.6 million within cost of sales,
as discussed above, related to the store closures. At this point, the Company is
unable to reasonably estimate the amount or range of amounts expected to be
incurred for future store closures in connection with these restructuring
activities, both with respect to each major type of cost associated therewith
and with respect to the total cost or estimated range of total cost.

Loss on Sale of Businesses



During the three and nine months ended November 27, 2021, we recognized a loss
of approximately $14.1 million and $18.2 million, respectively, primarily
related to a $13.5 million charge associated with the fiscal 2021 settlement of
the Christmas Tree Shops ("CTS") pension plan, as well as certain working
capital and other adjustments related to the divestiture of certain banners in
fiscal 2020.

Operating Loss
                                            Three Months Ended                                                               Nine Months Ended
                    November 26,       November 27,                                                                     November 27,
(in millions)           2022               2021                      Change                    November 26, 2022            2021                         Change
Operating Loss      $  (450.9)         $   (86.1)         $ (364.8)            423.7  %       $       (1,136.3)         $  (242.1)         $ (894.2)            369.4  %

As a percentage of
net sales               (35.8) %            (4.6) %          (31.2) %          678.3  %                  (27.3) %            (4.2) %          (23.1) %          550.0  %



For the three months ended November 26, 2022, operating loss was $450.9 million,
or 35.8% of net sales, compared with an operating loss of $86.1 million, or 4.6%
of net sales, for the three months ended November 27, 2021. Operating loss for
the three months ended November 26, 2022 included the unfavorable impact of the
acceleration of inventory clearance activity resulting from actions taken to
rebalance Owned Brands inventory levels in response to consumer preference as
well as higher promotional activity, $45.5 million associated with restructuring
and other transformation initiatives, and $100.7 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 November 26, 2022 was primarily
due to the decline in gross margin, as discussed above, as well as higher
impairment charges compared to the three months ended November 27, 2021.
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For the nine months ended November 26, 2022, operating loss was $1.136 billion,
or 27.3% of net sales, compared with an operating loss of $242.1 million, or
4.2% of net sales, for the nine months ended November 27, 2021. Operating loss
for the nine months ended November 26, 2022 included $91.6 million associated
with the unfavorable impact of the acceleration of inventory clearance activity
resulting from actions taken to rebalance Owned Brands inventory levels in
response to consumer preference as well as higher promotional activity,
$123.8 million associated with restructuring and other transformation
initiatives, and $182.9 million for non-cash impairment charges (each as
discussed above). The change in operating loss as a percentage of net sales for
nine months ended November 26, 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 nine months
ended November 27, 2021.

Interest Expense, net

Interest expense, net for the three and nine months ended November 26, 2022 was
$33.5 million and $68.6 million, respectively, compared with $15.8 million and
$47.9 million, respectively, for the three and nine months ended November 27,
2021. For the three and nine months ended November 26, 2022, the increase in
interest expense, net was primarily driven by an increase in borrowings and
higher interest rates against our ABL and FILO facilities and finance lease
liabilities.

(Gain) Loss on Extinguishment of Debt



Gain on extinguishment of debt for the three and nine months ended November 26,
2022 of $94.4 million related to the gain of approximately $102.8 million
recorded for the privately negotiated exchange offers completed in November
2022, partially offset by third-party costs of approximately $8.0 million
incurred with the Exchange Offers and $0.4 million of unamortized debt financing
costs written-off related to the extinguished notes. Loss on extinguishment of
debt for the nine months ended November 27, 2021 of $0.4 million related to
partial repayment of senior unsecured notes. We did not record a gain or loss on
extinguishment during the three months ended November 27, 2021.

Income Taxes



The effective tax rate for the three and nine months ended November 26, 2022 was
(0.7)% and (0.6)%, respectively, compared with (171.3)% and (37.9)%,
respectively, for the three and nine months ended November 27, 2021. For the
three and nine months ended November 26, 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
nine months ended November 27, 2021, the effective tax rate reflects the impact
of a charge to record a valuation allowance in the fiscal third quarter of
$181.5 million, charges for restructuring and transformation initiatives, as
well as a benefit under the provisions of the CARES Act.

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 taxable 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.

During the three and nine months ended November 26, 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 the Company's assertion for the need of
a full valuation allowance remains as of November 26, 2022.

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.

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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
November 26, 2022 was $393.0 million, or $4.33 per diluted share, compared with
net loss of $276.4 million, or $2.78 per diluted share, for the three months
ended November 27, 2021. Net loss for the three months ended November 26, 2022
included a net unfavorable impact of $0.68 per diluted share associated with
charges for restructuring and other transformation initiatives, and non-cash
impairment charges, partially offset by gain on extinguishment of debt (each as
discussed above), as well as the associated tax effects. Net loss for the three
months ended November 27, 2021 included a net unfavorable impact of $2.53 per
diluted share associated with non-cash impairment charges, charges associated
with restructuring program and transformation initiatives, loss on sale of
business, and the impact of recording a valuation allowance against our U.S.
federal and state deferred tax assets.

As a result of the factors described above, net loss for the nine months ended
November 26, 2022 was $1.117 billion, or $13.40 per diluted share, compared with
net loss of $400.5 million, or $3.90 per diluted share, for the nine months
ended November 27, 2021. Net loss for the nine months ended November 26, 2022
included a net unfavorable impact of $3.65 per diluted share associated with
inventory markdown reserves, restructuring and other transformation initiatives,
and non-cash impairment charges, partially offset by gain on extinguishment of
debt, as well as the associated tax effects. Net loss for the nine months ended
November 27, 2021 included a net unfavorable impact of $3.74 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, and the impact of recording a valuation allowance against our U.S.
federal and state deferred tax assets (each as discussed above).

Liquidity and Capital Resources



The Company's net cash used in operating activities was $307.6 million and
$890.0 million for the three and nine months ended November 26, 2022. Cash, cash
equivalents and restricted cash were $225.7 million as of November 26, 2022, a
decrease of approximately $245.2 million as compared with February 26, 2022. On
or around January 13, 2023, certain events of default were triggered under the
Company's Credit Facilities as a result of the Company's failure to prepay an
overadvance and satisfy a financial covenant, among other things. As a result of
the continuance of such events of default, on January 25, 2023, the
administrative agent under the Amended Credit Agreement notified the Company
that (i) the principal amount of all outstanding loans under the Credit
Facilities, together with accrued interest thereon, the FILO Applicable Premium
and all fees (including, for the avoidance of doubt, any break funding payments)
and other obligations of the Company accrued under the Amended Credit Agreement,
are due and payable immediately, (ii) the Company is required, effective
immediately, to cash collateralize letter of credit obligations under the Credit
Facilities, and (iii) effective as of January 25, 2023, all outstanding loans
and obligations under the Credit Facilities shall bear interest at an additional
default rate of 2% per annum. See "Item 1A. Risk Factors - Certain events of
default have occurred under our Amended Credit Agreement, as a result of which
loans outstanding thereunder have been accelerated, among other things, and our
lenders may exercise remedies against the collateral securing our obligations
under the Credit Facilities." As a result of these events of default, the
Company classified its outstanding borrowings under its asset-based revolving
credit facility (the "ABL Facility) and its FILO Facility as current in the
consolidated balance sheet as of November 26, 2022. The Company's outstanding
borrowings under its ABL Facility and FILO Facility were $550.0 million and
$375.0 million, respectively, as of November 26, 2022. In addition, the Company
had $186.2 million in letters of credit outstanding under its ABL Facility as of
November 26, 2022. The Company also had $1.030 billion in senior notes
(excluding deferred financing costs) outstanding as of November 26, 2022. For
information regarding the Company's borrowings, see Note 12.

At this time, the Company does not have sufficient resources to repay the
amounts under the Credit Facilities and this will lead the Company to consider
all strategic alternatives, including restructuring its debt under the U.S.
Bankruptcy Code. The Company is undertaking a number of actions in order to
improve its financial position and stabilize its results of operations including
but not limited to, cost cutting, lowering capital expenditures, and reducing
its store footprint including related distribution centers. In addition, the
Company will continue to seek reductions in rental obligations with landlords in
its determination of the appropriate footprint, seek additional debt or equity
capital, reduce or delay the Company's business activities and strategic
initiatives, or sell assets. These measures may not be successful.

The Company's key drivers of cash flows are sales, management of inventory
levels, vendor payment terms, and capital expenditures. Macro and micro economic
challenges increased since the end of the second quarter of fiscal 2022 causing
an acceleration of vendor payment terms and credit line constraints. This led to
lower inventory receipts than anticipated in the third quarter of fiscal 2022,
resulting in lower than required stock levels ahead of the holiday selling
season. Additionally, certain service providers and vendors required
prepayments.

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Based on recurring losses from operations and negative cash flows from
operations for the nine months ended November 26, 2022 as well as current cash
and liquidity projections, the Company has concluded that there is substantial
doubt about the Company's ability to continue as a going concern for the next 12
months. The consolidated financial statements do not include any adjustments
that may result from the outcome of this going concern uncertainty.

ATM Program



On August 31, 2022, we established an at the market equity distribution program
(the "ATM Program") (see "Shareholders' (Deficit) Equity," Note 13 to the
accompanying consolidated financial statements), under which we offered and sold
12 million shares of common stock for net proceeds of $72.2 million pursuant to
the prospectus supplement dated August 31, 2022. On October 28, 2022, we filed a
prospectus supplement to register additional shares of our common stock to offer
and sell under the ATM Program at an aggregate sales price of up to $150.0
million. The net proceeds, after commissions and offering costs, from the ATM
Program were used for a number of general corporate purposes, which include
immediate strategic priorities such as rebalancing the Company's assortment and
inventory. As of November 26, 2022, we have sold approximately 22.2 million
shares for approximately $115.4 million of net proceeds under the Company's ATM
Programs. Shares having an aggregate offering price of $105.6 million remained
unsold under the ATM program as of the end of fiscal December 2022.

Exchange Offers



During the third fiscal quarter of 2022, the Company commenced exchange offers
(the "Exchange Offers") with eligible holders for each series of Existing Notes
as follows: (i) 2024 Notes for new 3.693% Senior Second Lien Secured
Non-Convertible Notes due November 30, 2027 (the "New Second Lien
Non-Convertible Notes") and/or new 8.821% Senior Second Lien Secured Convertible
Notes due November 30, 2027 (the "New Second Lien Convertible Notes"); (ii) 2034
Notes for new 12.000% Senior Third Lien Secured Convertible Notes due
November 30, 2029 (the "New Third Lien Convertible Notes" and, together with the
New Second Lien Non-Convertible Notes and the New Second Lien Convertible Notes,
the "New Notes"); and (iii) 2044 Notes for New Third Lien Convertible Notes (see
"Long-Term Debt," Note 12 to the accompanying consolidated financial
statements).

In November 2022, the Company completed privately negotiated exchange offers
with existing holders of approximately $69.0 million, $15.3 million, and
$70.2 million aggregate principal amount of 2024 Notes, 2034 Notes, and 2044
Notes, respectively, under which the Company issued an aggregate of
approximately 13.6 million shares of common stock to the existing holders in
exchange for the exchange notes, including accrued and unpaid interest, and
0.9 million shares in exchange for a cash payment from an existing holder of
$3.5 million. The exchange notes were cancelled and no longer outstanding upon
completion of the exchange.

On January 5, 2023, upon the expiration of the Exchange Offers, the Company
announced the termination of the offer and consent solicitations with respect to
its Existing Notes, as a result of the conditions applicable thereto not being
satisfied. As a result of the termination of the Exchange Offers, none of the
Existing Notes that had been tendered in the Exchange Offers were accepted for
purchase and no consideration will be paid or become payable to holders of the
Existing Notes who have tendered their Existing Notes in the Exchange Offers.

Capital Expenditures



Capital expenditures for the nine months ended November 26, 2022 were $322.1
million, which includes the entering into use of accrued capital expenditures of
$63.4 million which were recorded in fiscal 2021. As the Company executes its
new strategic plans and refine capital resources to improve liquidity, capital
expenditures are related to maintenance, and investments in technology and
digital offerings.

Stock Repurchases



During the three and nine months ended November 26, 2022, we repurchased
approximately 0.3 million and 2.9 million shares, respectively, of our common
stock, at a total cost of approximately $2.7 million and $45.9 million,
respectively. For the nine months ended November 26, 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 nine months ended November 27, 2021, we repurchased
approximately 5.3 million and 14.0 million shares, respectively, of our common
stock, at a total cost of approximately $118.9 million and $358.9 million,
respectively, which included approximately 5.1 million and 13.4 million shares,
respectively, at a total cost of approximately $113.4 million and $344.6
million, respectively, repurchased under our share repurchase programs as
authorized by our Board of Directors.
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Additionally, during the three and nine months ended November 26, 2022, we
repurchased approximately 0.3 million and 0.6 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 $2.7 million and $5.5 million, respectively. During
the three and nine months ended November 27, 2021, we repurchased approximately
0.2 million and 0.6 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
$5.5 million and $14.3 million, respectively.

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
265.0 million shares for a total cost of approximately $11.7 billion. We had
approximately $1.2 billion remaining of authorized share repurchases as of
November 26, 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 12 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 nine months ended
November 26, 2022. During the nine months ended November 27, 2021, we purchased
approximately $11.0 million aggregate principal amount of our outstanding 3.749%
senior unsecured notes due August 1, 2024. There were no debt repurchases made
during the three months ended November 27, 2021.

Cash Flow

Fiscal 2022 compared with Fiscal 2021



Net cash used in operating activities for the nine months ended November 26,
2022 was $890.0 million, compared with net cash used in operating activities of
$264.7 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 decreases in accounts payable and accrued expenses and other
current liabilities, partially offset by decreases in inventory.

Retail inventory, which includes inventory in our distribution facilities for
direct to customer shipments, was approximately $1.436 billion at November 26,
2022, a decrease of 16.8% compared with retail inventory at February 26, 2022.
We continue to focus on our inventory assortment changes and other merchandising
strategies. In the fiscal third quarter of 2022, the Company's in-stock levels
were lower than anticipated due to supplier constraints and vendor credit line
decreases.

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Net cash used in investing activities for the nine months ended November 26,
2022 was $322.1 million, compared with net cash used in investing activities of
$227.5 million in the corresponding period of fiscal 2021. For the nine months
ended November 26, 2022, net cash used in investing activities included $322.1
million of capital expenditures, which includes the entering into use of accrued
capital expenditures of $63.4 million which were recorded in fiscal 2021. For
the nine months ended November 27, 2021, net cash used in investing activities
was comprised of $232.5 million of capital expenditures partially offset by $5.0
million in proceeds from the sale of property.

Net cash provided by financing activities for the nine months ended November 26,
2022 was $968.4 million, compared with net cash used in financing activities of
$374.5 million in the corresponding period of fiscal 2021. Net cash provided by
financing activities in the nine months ended November 26, 2022 was comprised of
$1.225 billion of borrowings under the Credit Facilities, partially offset by
repayments of $300.0 million, net proceeds from issuances of common stock and
ATM Program offerings of $119.0 million, repurchases of common stock of $45.9
million, of which $40.4 million is related to our share repurchase program,
payments of deferred financing costs of $19.5 million, payments of Exchange
Offer costs of $8.0 million, repayments of finance leases of $1.8 million and
dividend payments of $0.3 million. Net cash used in financing activities in the
nine months ended November 27, 2021 was comprised of repurchases of our common
stock of $358.9 million, of which $334.6 million is related to our 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 $0.8 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").

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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, as amended, including,
but not limited to, our progress and anticipated progress towards our long-term
objectives and our turnaround plan, as well as more generally the status of our
future liquidity and financial condition and our outlook for our 2022 fiscal
fourth quarter and 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: our ability to deliver and
execute on our turnaround plan; the result of the evaluation of strategic
alternatives, including restructuring or refinancing of our debt, seeking
additional debt or equity capital, reducing or delaying our business activities
and strategic initiatives, or selling assets, other strategic transactions
and/or other measures, including obtaining relief under the U.S. Bankruptcy
Code, and the terms, value and timing of any transaction resulting from that
process; our ability to finalize or fully execute actions and steps that would
be probable of mitigating the existence of "substantial doubt" regarding our
ability to continue as a going concern; our ability to increase cash flow to
support our operating activities and fund our obligations and working capital
needs; general economic conditions including 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, the failure of our suppliers to supply us with the necessary volume
and types of products; the impact of cost-savings measures; our inability to
generate sufficient cash to service all of our indebtedness or our ability to
access additional capital; 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;
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 strategic transactions
and realize the benefits of any, 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, 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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