Bed Bath & Beyond Inc (BBBY) Q4 2020 Earnings Call Transcript

Bed Bath & Beyond Inc (NASDAQ:BBBY) Q4 2020 earnings call dated Apr. 14, 2021.

Corporate Participants:

Janet Barth — Vice President, Investor Relations

Mark J. Tritton — President and Chief Executive Officer

Joe Hartsig — Executive Vice President, Chief Merchandising Officer; President, Harmon Stores, Inc.

John Hartmann — Executive Vice President, Chief Operating Officer; President, buybuy BABY

Gustavo Arnal — Executive Vice President, Chief Financial Officer & Treasurer

Analysts:

Bobby Griffin — Raymond James — Analyst

Brad Thomas — KeyBanc Capital Markets — Analyst

Jenna Giannelli — Goldman Sachs — Analyst

Steven Forbes — Guggenheim — Analyst

Curt Nagle — Bank of America — Analyst

Seth Basham — Wedbush Securities — Analyst

Atul Maheswari — UBS — Analyst

Anthony Chukumba — Loop Capital — Analyst

Carla Casella — JP Morgan — Analyst

Alex Arnold — Odeon Capital Group — Analyst

Simeon Gutman — Morgan Stanley — Analyst

William Reuter — Bank of America — Analyst

Jonathan Matuszewski — Jefferies — Analyst

Presentation:

Operator

Welcome to Bed Bath & Beyond’s Fiscal 2020 Fourth Quarter Earnings call. [Operator Instructions]

At this time, I would now like to turn the conference over to Janet Barth, Vice President of Investor Relations. Please go ahead.

Janet Barth — Vice President, Investor Relations

Thank you and good morning everyone. Welcome to our fiscal 2020 fourth quarter earnings call. On the call with us today is President and CEO, Mark Tritton; Chief Merchandising Officer and President of Harmon Face Values, Joe Hartsig; Chief Operating Officer and President of buybuy BABY, John Hartmann; and Chief Financial Officer and Treasurer, Gustavo Arnal.

Before we begin, let me remind you that our fiscal 2020 fourth quarter earnings release and slide presentation can be found in the Investor Relations section of our website at www.bedbathandbeyond.com and as exhibits to the Form 8-K we just filed ahead of this call.

This conference call and the slides we refer to may contain forward-looking statements, including statements about or references to our outlook regarding the company’s performance, our internal models and our long-term objectives. All such statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say during the call today. Please refer to our most recent periodic SEC filings for more detail on these risks and uncertainties, including the risk factors section in our annual report on Form 10-K. The company undertakes no obligation to update or revise any forward-looking statements.

Additionally, the information we will discuss today contains certain financial measures that exclude amounts or are subject to adjustments that have the effect of excluding amounts that are included in the most directly comparable measure prepared in accordance with Generally Accepted Accounting Principles. For a reconciliation to the most comparable measures presented in accordance with GAAP, please refer to the table in our earnings release available on our website and included as an exhibit to our Form 8-K filed today.

It is now my pleasure to turn the call over to Mark.

Mark J. Tritton — President and Chief Executive Officer

Thank you, Janet, and good morning everyone. Fiscal 2020 was a year of Fast-Paced Transformation in which we reform the past, overcame extraordinary circumstances of the present and established a firm foundation for the future. Despite the challenges created by COVID-19, we have relentlessly focused on taking purposeful and bold steps to transform our entire organization and remain true to our plans to rebuild our authority in-home and restore this iconic company.

Throughout 2020, we achieved a great deal. We established an entirely new leadership team with world-class retail and digital experience to help design and shape the growth strategy that will define our future. We accelerated change in our operations to create a more competitive omni-always shopping experience with the introduction of new services like BOPIS, Curbside Pickup, Same Day Delivery and over 100 meaningful improvements to our digital experience. With this improved omnichannel offering in 2020, we registered more than 1 billion visits to our websites and more than 3 million downloads of our apps. Our online conversion rate increased by 30% and repeat purchases 34% of customers placed two or more digital orders. We drive digital sales growth of over 80% on the year and surpassed $3 billion in digital sales.

2020 was a pivotal year for our company. We returned to comp sales and adjusted EBITDA margin growth as of Q2, after four years of decline and sustained this positive momentum consistently throughout the rest of the year. At the same time, we showed our agility by securing and substantially improving our financial position through diligent and agile cash management and expense control as well as a laser focus on driving gross margin improvement. We also streamlined our portfolio unlocking capital from non-core asset sales, which added even more cash to our war chest. We also significantly reduced our debt. We capped the year with strong fourth quarter results which enhanced our strategic position for 2021 and further strengthened our three-year growth plan.

Importantly, the company ended the year net cash positive in a much stronger financial position than we started. We now have a refined and strategically aligned portfolio of retail banner and a very healthy cash position to invest, where it fuels our growth and where it supports our customers and our people. We have exciting strategic and impactful initiatives for fiscal 2021 that will create a platform for sustainable long-term growth. These include, moving beyond transactional private label offerings to launching strategic new own brand that can drive differentiation and preference for our enterprise, introducing new and unique digital services designed to enhance our omni-always experience and further accelerate growth, upgrading and remodeling stores under our store network optimization program to elevate our omnichannel shopping experience, modernizing our technology and operations and reinventing our supply chain to support our digital first omni-always growth strategy, investing to further strengthen our buybuy BABY and Harmon banners to broaden our customer base and build cost better engagement and continuing to build a foundation for long-term growth and unlock shareholder value.

As we turn the page on a year of unprecedented change, I would like to take this opportunity to thank our team of talented associates for their extraordinary efforts throughout this past year in delighting our customers and restoring growth in the business. Our recovery is real and shows the strength of our own efforts and output rather than reliance on outside factors such as stimulus spend. We know this, because by and large the demographic of our core customer base is not eligible to stimulus benefits. In addition, data shows the stimulus spend is primarily occurring in categories such as food, technology and apparel, which are not core offerings for us. Our current momentum fortifies our customer inspired data driven approach as we reestablish authority in our core home, baby and beauty wellness markets.

I will now turn the call over to Joe Hartsig, Chief Merchandising Officer and President of Harmon Face Values who will speak about the quarter from a commercial perspective and then John Hartmann, Chief Operating Officer and President, buybuy BABY who will do the same for our baby and our operation. Finally Gustavo Arnal, Chief Financial Officer and Treasurer will review about our strong fourth quarter financial results and our outlook for fiscal 2021. We will then take questions. Joe?

Joe Hartsig — Executive Vice President, Chief Merchandising Officer; President, Harmon Stores, Inc.

Thank you, Mark. Our digital first omni-always strategy is working and was the key driver of our fourth quarter performance. We elevated the customer experience across all of our channels to make it easier to shop with us and create a more inspirational and more productive assortment that delivered growth in both comp sales and product margin.

Today, let me start with some highlights on the quarter from a commercial perspective, including our strong performance in digital and within our top product categories. Then I will talk about our own brands including the recent launch of Nestwell. Our positive comp sales this quarter were again driven by strong digital growth of 86%, marking our fourth consecutive quarter of greater than 75% growth this year. This was led by our Bed Bath & Beyond banner which posted digital comp sales growth of 99%, practically doubling last year’s sales.

During the quarter we gained 3.1 million new digital customers of which the Bed Bath banner alone added 2.4 million. Year-to-date, we have gained approximately 11 million new online customers, an increase of 95% over last year. In the quarter, we experienced more than 300 million visits to our digital channels, including 162 million unique visitors and we had more than 1 billion visits for the year with conversion up by 30%. And not only are we attracting new customers, we are also seeing a return at a higher rate than ever before.

In the fourth quarter 22% of our customers placed more than one online order compared to about 17% last year. We’ve also seen tremendous growth in mobile, representing more than half of our digital sales in the quarter. The new Bed Bath & Beyond mobile app was launched over 21 million times during the quarter and mobile revenue more than doubled versus last year.In our top destination product categories in which we had double-digit comp growth in the quarter, we are developing category experiences by room and implementing new integrated room reset merchandising programs. By leveraging new data driven category line or new processes, we are overhauling our merchandising assortment to focus on more productive items eliminating redundancies and adding newness in own brands. In addition to having less inventory in a more curated assortment online and across our store fleet, we have enhanced the in-store experience by creating more open isle space, better sight lines and new signage throughout the store to clearly communicate value and price. These improvements are already complete across most of the chain. This is a revolutionary change. We are taking an omnichannel approach here, aligning both stores and digital experiences to make it easier for our customers to shop and feel at home. Our associates also benefit from these changes because there is less inventory to manage, which makes it easier to restock and leaves more time to provide great customer service.

Now turning to category performance. Sales in our Top 5 destination categories collectively grew 12% in the quarter with four of the five categories posting double-digit comp growth with the exception of Bath. The Bath category was impacted by a planned assortment transition in preparation for the launch of our new own brands, which resulted in higher category markdowns and temporary out of stocks. Early in the first quarter, we are already seeing the category return to solid growth.

During the fourth quarter pandemic related product needs continue to dominate with a focus on home decor and organization. Customer preferences were also driven by colder weather during the holidays. To that end, we saw strength in warm and cozy products which became a holiday gifting of choice as people stayed indoors. This included comforters, flannel sheets and electric blankets. With increased working and dining at home there was continued strength in the kitchen and food prep category, which grew 16% in the quarter. Toaster, ovens and air fryers were standouts showing strong growth of 60% and 70%, respectively.

As I referenced earlier, following the holidays and start of the year we also achieved success in the Home Organization category, which grew 17% in the fourth quarter. As customers were focused on cleaning out process and getting more organized, we leaned into this trend with a new and exciting storage and organization shop in the front of our store and online. The successful event was supported by 360 marketing campaign to create strong awareness and excitement.

Another growth area for us was Wellness. Including products such as juicers and blenders. Other products such as air and water purifiers and bedding basics also performed well as customer is committed to healthy resolutions for the new year. In home furnishings, Indoor Decor was strong this quarter with comp growth of approximately 16%. We are seeing customers have a deeper connection with their homes as they continue to spend money to fix up their spaces. We believe this is a sustainable muscle there has been built which will support continued growth in the home furnishings category.

Turning now to one of my favorite topics, which is our own brands. As we have said in our press statement last month, the introduction of own brands is the biggest change in Bed, Bath & Beyond product assortment in the generation. And it’s critically important for us to drive growth, build differentiation and customer preference in the marketplace. By introducing brands that can only be found at Bed, Bath & Beyond we create a unique reasons for customers to shop with us. We plan to introduce eight own brands this fiscal year, including six in the first half with three in the first quarter alone.

Overall, our own brands assortment will include thousands of new products across bed, bath, kitchen and dining, storage and organization and home decor available only at Bed, Bath & Beyond. As we drive to win differentiation, preference and authority we anticipate own brands will go from about a 10% penetration rate to approximately 30% within the first three years. As such, we expect to further enhance our gross margin as a result for being able to strategically design the cost, source at scale and provide great everyday value to ensure the great authority and differentiation.

We’re off to an excellent start with Nestwell, our new line of everyday bedding and bath product essentials, inspired by the way our customers live Nestwell features a line-up of nearly 1,200 stylish, high quality and solution-oriented bedding and bath products, all at affordable price points. The Nestwell line includes a variety of sheet beds, pillows, blankets and comforters, bath towels and much more. All of our products incorporate high quality, modern fabrics in colorations designed to blend well with the customers own design study. Nestwell will help customers find their perfect sleeping solution with bedding options that cater to an array of sleep styles and bedtime routines.

By using the interactive Nestwell’s rest well guide customers can identify their unique style and receive recommendations, as well as design tips from our decorative team and sleep wellness advice from renounced sleep and wireless expert Dr. Shelby Harris. This launch has being supported by a robust omnichannel marketing program that has already reached millions of customers online and in our stores. The campaign include content across social media, print, digital, email registry and SMS text notifications. Feedback from customers is very positive and early sales results are very encouraging.

Nestwell is just the start of our amazing brand, and I’m so excited to share more with you in the weeks and months ahead. Later this month, we will introduce Haven, a spa-inspired assortment of organic cotton products. In the May, we will introduce Simply Essential, a new value based brand including 1,000 home essential products across multiple categories and rooms, offered at opening price points. Simply Essential will be a very powerful brand in helping us attract those customers drawn to opening price point brands across many categories.

As Mark said, it has been an unprecedented year. And I’m both proud and grateful to our teams who have worked tirelessly in response to the pandemic to ensure we are there when customers need us most. At the same time, our teams are driving significant merchandising and marketing transformational performance improvements aligned to our three year plan across the company and are fully committed to our business transformation. As part of this commitment we are rebuilding authority in destination categories such as bed, bath, kitchen, indoor decor and storage and organization and our fourth quarter performance demonstrates the tremendous progress we have made to make it easier to our customers to feel at home at the new Bed, Bath & Beyond.

Now, I will turn the call over to John Hartmann, Chief Operating Officer and President of buybuy BABY. John?

John Hartmann — Executive Vice President, Chief Operating Officer; President, buybuy BABY

Thank you, Joe. Today, I will first provide some perspective on the quarterly performance of our buybuy BABY business and then continue with an update on our enterprise operations.

To expand on Joe’s commercial update, our buybuy BABY banner showed significant improvement in the fourth quarter, returning to positive growth of low single digit comp sales led by strong growth in digital of over 50%. On a full year basis, BABY sales were over $1 billion. As we discussed on our last call, BABY was disproportionately impacted in the third quarter by COVID related headwinds. We then made key pivots in November and December, including crisper customer communications, collaborative partnerships with our vendors in targeted digital marketing, which produced positive sales and category trends that sustained throughout the fourth quarter and our continuing into the current quarter.

Top performing categories in the quarter included baby and toddler safety, feeding, toys educational and playroom, as well as apparel. In 2020, BABY gained 2.5 million US online customers, an increase of 45% versus prior year, including more than 600,000 in the fourth quarter alone. Nearly two-thirds of those customers shopped only online. We had an over 40% increase in visits this quarter to 51 million, including 24 million unique visitors and an 8% increase in conversion. 19% of US customers placed more than two orders, compared to 15% in the prior-year period and more than 200,000 customers placed the BOPIS order, including almost 20% from mobile.

BOPIS represented 14% of our digital sales in the quarter and approximately 87% of orders were ready for pickup within two hours. There were 150,000 buybuy BABY mobile app downloads in the quarter, which contributed to significant mobile growth, representing more than 60% of total digital sales. We are excited to begin the transformation of the BABY banner this year and unlock the value of this brand. We previously outlined our six point strategy to accelerate growth, which includes investments to scale our store footprint nationwide.

In fiscal 2021, we expect to open seven BABY stores, bringing the total store count to 139 by fiscal year-end. In preparation for this transformation we have taken a deep dive into understanding who our customer is and how we can exceed their expectations. This work has manifested into a new customer value proposition, which states we build trust with parents by supporting them with what they need next, so families can celebrate every milestone, big and small together.

We know that parenting looks different for every person and the journey is unique to every family, but there are experiences that are shared by all. We want buybuy BABY to be the destination of choice for all new parents and young families and to help guide them on their journey and grow with them. We will continue to share our progress in future conference calls.

Pivoting now to an update on our whole enterprise operations. We remain focused on modernizing our operations and optimizing our use of data in analytics to meet our customer and business expectations. The advancements made across our real estate network, supply chain operations and technology roadmap during the fourth quarter reflect these strategic objectives. We continue to make substantial progress with our store network optimization program and remain on pace to achieve our targeted closings of approximately 200 stores by the end of fiscal 2021. Through the end of fiscal 2020, we have closed a total of 144 Bed, Bath & Beyond stores, including 118 stores closed during the fourth quarter. The program is tracking to plan and it is now about 70% complete. The remaining store closings will occur in fiscal 2021 and be weighted toward the second half.

As we move through the year, we will continue to review our plans and assess the evolving real estate market and conduct further negotiations with our landlord partners. We also remain on track with our previously communicated $100 million EBITDA contribution target for this program. And importantly, while still early, transference from these closed stores to other store locations and/or our digital channels is measuring above 20% versus our previously communicated goal of between 15% and 20%.

Turning now to our Bed, Bath & Beyond store remodel program. We recently completed our proof of concept store remodels in the Houston market which consisted of four type A full store remodels and three type B remodels, which involve the room reset and updates to about half the store. This represents the first full designated market area we have addressed in the country.

Above and beyond the general store improvements Joe mentioned, including room resets and new signage, we are now beginning the next wave of remodels by applying the learnings from the New Jersey test store and the Houston market to iterate and continuously improve. As we have said previously, we plan to invest approximately $250 million over the next three years to remodel a total of approximately 450 stores, which together represent about 60% of our revenue.

In fiscal 2021 we are targeting about 130 to 150 stores across the country covering nearly 30 states, including 26 stores during our first quarter. We applied a similar level of focus in execution with our supply chain during the fourth quarter, which included the Christmas holiday sales period. As expected, our comp sales growth in the quarter was led by digital, which nearly doubled in size versus the last year to approximately 40% of our total comparable sales. Throughout this year, we’ve been moving with agility to optimize our store network to support this rapid growth.

Earlier in the year we converted about 20% of Bed, Bath and Beyond and buybuy BABY stores in the United States and Canada into regional fulfillment centers to use our bath inventory resources to assign orders locally and deliver even faster. In the fourth quarter our stores fulfilled 41% of total digital sales including, 17% in BOPIS orders. And as we got closer to the holiday, BOPIS accounted for 48% of our Bed, Bath & Beyond digital demand during Christmas week. As we highlighted the ease and convenience of these services and customers chose to avoid third party shipping constraints and ensure they would have their gifts in time. More than 80% of BOPIS orders were ready within our two our promise window.

We’ve experienced about a six-fold increase in BOPIS penetration since first launching the service in April 2020 driven by nearly 4 million customers. In addition, customer feedback is highly positive and our net promoter score has increased further from 79 to 81. We have had very similar strong customer adoption and satisfaction with our new same-day delivery services. In Q4, over 220,000 same-day delivery orders were placed with 78% of orders coming directly from our websites and 22% through a combination of shipped and Instacart marketplaces, which have access to over 80% of American households.

We also launched Harmon Face Values on Instacart, enabling same-day delivery for everyday health and beauty care essentials. In other supply chain activity we kicked off our search for a third-party logistics partner as I mentioned last quarter. We plan to establish four regional distribution centers to more efficiently and cost effectively manage the flow of merchandise to our stores. We believe this is a key first step in vastly improving our store replenishment approach. During the quarter, we conducted a thorough RFP evaluation process, which included many market-leading third-party logistics company. Ultimately, our partner selection will be based on what we believe yields the best strategic partner and long-term economic outcome for the business.

We are working now through the final stages of selection and anticipate being able to make a public announcement soon once we have signed an agreement. The initial focus of the strategic partnership will be to establish two RDC’s [Phonetic] both in key trading areas. One in the Northeast and the other in the West. Once in place, we expect to achieve many operational and business benefits over time, including reducing the store replenishment time from a non-competitive period of 35 days currently to under 10 days, which will yield improved sales based on reduced out of stocks, as well as lower store inventory levels.

Turning now to an update on our technology roadmap. Having the right retail technology in place is fundamental to our business transformation. Over the past year we’ve been laying the foundation for this change, including our expanded partnership with Google to leverage their cloud technologies and personalize the shopping experience for our customers, enhance fulfillment capacity and optimize merchandise planning and demand forecasting. In February, we announced the selection of Oracle as our enterprise resource planning or ERP technology provider to replace our legacy suite of technology systems and deliver new data insights and planning capabilities. This ERP deployment is the first key component in our planed $250 million technology investment roadmap over the next three years to deploy industry leading solutions that enhance the experience for our customers and drive efficiencies across the enterprise.

Last month we announced another technology partnership, this one to help modernize our inventory management systems. We selected RELEX Solutions to deliver automated forecasting, replenishment and allocation planning in order to improve inventory productivity and our ability to respond to customer demand. Our technology transformation effort is expressly focused on building proficiencies to reconstruct and modernize, stabilize and optimize, invest in and construct and operationalize. This technology transformation is further enabling our business transformation and the building blocks for all of our fulfillment, forecasting, inventory management and sourcing proficiencies. Alongside these transformations in real estate, stores, supply chain and technology, there is also a cultural transformation underway.

For example, we have put in place a business operating structure to manage all of our transformation initiatives. Having this formalized structure have strengthened our foundation, contributed to our progress to date and will guide us as we continue on our commitments. I look forward to sharing our progress on these important investments in the future call.

Now, I will turn the call over to Gustavo Arnal, our Chief Financial Officer and Treasurer. Gustavo?

Gustavo Arnal — Executive Vice President, Chief Financial Officer & Treasurer

Thank you, John. And good morning, everyone. I will provide additional perspective on the strong results of our fourth quarter and will also discuss our outlook for fiscal 2021 including some visibility on the current first quarter.

Before I go on, I’d like to highlight a few key messages. First, our strategies are working. We deliver our third consecutive quarter of comparable sales and adjusted EBITDA growth, with positive free cash flow generation. Second, we showed exceptional business agility and financial discipline during a year of unprecedented challenges. We delivered positive comp sales growth, optimize our cost structure, divested non-core assets, reduce debt, invested in the business and at the same time return capital to shareholders, while increasing liquidity. And third, in a year of fast pace transformation we strengthened our strategic positioning to deliver on our three year financial plan. We are reaffirming our fiscal 2021 outlook on sales and EBITDA, while further investing in the business.

We are improving our projection of gross debt to EBITDA ratio to below 3 times this year. And we have increased our three year share repurchase program to $1 billion above what we communicated at Investors Day.

Now looking at the fourth quarter. Total enterprise comparable sales grew 4%, led by continued strong digital growth of 86%. Our digital first omni always strategy continues to be a key driver of our results. Sales from our digital channels represented approximately 40% of total net sales for the full year and surpassed $3 billion, almost doubling in size versus the prior year. In our Bed, Bath and Beyond banner comp sales grew 6%, fueled by 99% growth in digital, partially offset by store declines of 20%. Comp sales were positive each month of the quarter with high single-digit growth in January and February combined. And this was in-spite of industry-wide weather impacts during February. Growth was strong and broad-based across key destination categories, which grew 12% in total and represented almost two-thirds of revenue. Importantly, our buybuy BABY banner returned to delivering positive comp sales growth, led by strong digital growth of over 50%. As previously communicated, our reported net sales will continue to be impacted from our banner portfolio transformation as well as our fleet optimization program. As expected, total enterprise net sales of $2.6 billion reflected these impacts and declined 16%. This was at the health year-end of the 15% to 20% range of decline we communicated on our earnings call in January.

In terms of the bridge from net sales to core banner sales, we saw an approximately 12% unfavorable impact from the non-core banner divestitures. Therefore excluding divestitures, core banner net sales were down only 3% on a rounded basis. On these, store closures reduced sale by approximately 8%, in line with expectations, thus resulting in comparable sales growth of 4%. On a GAAP basis, we delivered net earnings per diluted share of $0.08 compared to a net loss of $0.53 in the prior year. Reported net income results include approximately $38 million from unfavorable impacts from special items, which are excluded from adjusted results to provide better perspective on the underlying performance of our business. These special items include the net loss of the sale of businesses, non-cash impairment charges related to certain store level assets and charges recorded in connection with the restructuring and transformation initiatives. Excluding these impacts adjusted EPS was $0.40, which was also an increase over last year.

As planned, we drove significant adjusted EBITDA margin improvement in the quarter. EBITDA margin expanded approximately 160 basis points to 6.4%, as we said, we increased adjusted EBITDA on an optimized and healthier revenue base. Adjusted gross margin improved approximately 20 basis points to 32.8% in line with our guidance. Gross margin drivers included, 60 basis points of favorable product mix from higher margin categories, 90 basis points of favorable margin on promotion optimization, 190 basis points of leverage from distribution and fulfillment cost efficiencies, partially offset by 170 basis points unfavorable impact from channel mix due to the anticipated larger proportion of digital sales versus prior year. And lastly, as expected, we saw an unfavorable impact of around 150 basis points from higher shipping costs given industry-wide freight rate cost increases.

Adjusted SG&A expense declined $190 million versus the prior year. This was driven by reduction from the non-core banner divestitures and lower occupancy expense on more efficient stores. As a percent of net sales, SG&A declined approximately 160 basis points to 29.1%. As mentioned, a stronger top line coupled with gross margin expansion and SG&A reduction, resulted in another quarter of EBITDA growth. Fourth quarter adjusted EBITDA increased 13% to $168 million.

Turning now to some cash flow and balance sheet highlights. Operating cash flow was $76 million, given working capital improvements from lower inventory balances. Free cash flow was $62 million. We reduced inventory in our core banners by approximately $110 million versus the prior quarter, primarily from seasonal selling and product transitions in preparation for the introduction of own brands as well as store closures related to our network optimization program. Capital expenditures were $66 million, nearly doubled the average in prior quarters as our transformation investments accelerate according to plan. We maintain a strong cash balance of $1.4 billion with even stronger liquidity of $2.1 billion, including our ABL. We’re managing cash including our planned investments to fund our growth on our healthier, more focused and stronger business.

We also returned significant capital to shareholders through accelerated share repurchases. Since Investor Day in October, we have repurchased approximately 16 million shares, 13% of our shares outstanding at an estimated average price of $23. Our first accelerated share repurchase program of $225 million was completed at the end of January and our second ASR of $150 million will be fully completed next week. We continue to be diligent and agile stewards of cash with our data driven and balanced approach to capital allocation. After having fully funded our capital investment for growth, today we’re announcing another increase in our three-year share repurchase program to $1 billion versus the previous $825 million plan.

Our fiscal 2020 performance reflects our commitment to unlocking shareholder value. We have been and will continue being focused on driving comparable sales growth, expanding margins and generating cash flow. We will continue deploying cash to attractive investments for our business and also to our shareholders.

Turning now to our fiscal 2021 outlook. On a macro level, our financial performance in fiscal 2021 will continue to be influenced by pandemic related headwinds, including uncertainty around the vaccine rollout and the subsequent impact of customer demand and shopping patterns, especially relating to store traffic and digital sales. Our financial models assumes that our store will remain open and that the current environment will continue in the short-term with gradual improvement as the year progresses. We anticipate in-store traffic trends to begin to recover throughout the year, but we continue seeing previously communicated industry-wide headwinds from freight costs. We have strengthened our positioning as we start fiscal ’21 and embark on our three-year transformation plan.

Our significant portfolio transformation is leading to fewer yet better performing stores, which we believe will include a healthier core revenue base with a larger proportion of a faster growing digital business. And with the consistent execution of our transformation strategy, we remain well positioned to achieve our long-term financial objectives. Also we are reaffirming our previously provided fiscal 2021 modeling assumptions. We continue to project net sales to be in the range of between $8 billion and $8.2 billion. Net sales assumptions include the impacts of the recent non-core banner divestitures as well as ongoing store closures under the previously communicated network optimization program.

On a quarterly basis in the first quarter, we expect to recapture sales that were lost in the prior year from temporary store closures due to COVID. Because of this, we have said, first quarter sales will not be comparable. In quarters two through four, we expect to sustain comp sales relative to the solid base we experienced in those same three quarters of fiscal 2020. We continue to assume for financial planning purposes that total enterprise comparable sales in Q2 through Q4 will be flat versus a strong fiscal 2020 base as we started delivering positive comps as of the second quarter of 2020. We continue to project full year adjusted gross margin to be approximately 35%. Our model reflect sequential improvement during the year from several key positive drivers including product sourcing savings from negotiated vendor contracts, higher sales penetration of newly launched own brands in our product mix and more effective data driven promotion and markdown strategies.

We continue to model full year SG&A to be approximately 31% of total net sales, driven by favorable impacts from store closures under the network optimization program and savings from prior year cost restructuring. And finally, we continue to model adjusted EBITDA to be in the range of between $500 million and $525 million.

Turning to some balance sheet and cash flow assumptions. We plan to invest approximately $400 million in capex, including key projects supporting our IT transformation, supply chain reinvention and store remodels. We now expect to achieve our improved leverage ratios faster than anticipated. In fiscal 2021, we project our gross debt to EBITDA ratio to be below 3 times. This is significantly better than our previously stated goal of below 3.5 times for this year. We also plan to increase cash return to shareholders. As mentioned, our three-year plan for share repurchases has increased to $1 billion. We are now planning up to $325 million share repurchases in fiscal 2021. Together with the two already completed ASRs totalling $375 million, we will have repurchased $700 million in shares by this fiscal year. Again, we’re doing this while generating cash and funding our business transformation. We remain committed to our capital allocation principles, namely, investing in our business, maintaining financial resilience and returning capital to shareholders.

I will now provide some visibility on the current first quarter, which includes the month of March, April and May. As you may recall, this was the period last year when most of our stores were closed and sales were depressed. In addition to the comparisons, when the majorities of our stores were closed, our reported net sales will continue to be impacted by completed divestitures and fleet optimization. To provide further perspective on this portfolio transformation and the quarterly comparisons of our core go-forward banners, we have included a table in our press release and slide presentation with the quarterly summary of fiscal 2019 and 2020 net sales, on both a reported GAAP and a core go-forward basis. The latter includes Bed Bath & Beyond, buybuy BABY, Harmon Face Values and Decorist.

On the core basis, first quarter sales last fiscal year were $1.1 billion, directionally in Q1 this year, we would expect core banner sales to be significantly higher than last year, by approximately 65% to 70%. Core banner sales in March, the first month of the quarter, showed a strong growth and the year-on-year growth will accelerate in April and May as we lap the prior-year period when more stores were closed. In terms of total net sales, directionally we expect them to increase by over 40% on a year-on-year basis. This growth is building to the fiscal year guidance mentioned earlier. In terms of gross margin, we expect to show sequential improvement as this year progresses. Directionally, we would expect adjusted gross margin in the first quarter to be in the 34% range.

In terms of adjusted EBITDA, we expect to deliver between $18 million and $19 million in Q1. In 2021, we will continue to manage the business diligently, leveraging data and analytics to drive performance and deliver on what we say. We remain confident in our future as we embark on the first year of our three-year transformation journey.

I will now turn the call over to Mark for some closing remarks. Thank you.

Mark J. Tritton — President and Chief Executive Officer

Thank you, Gustavo. As we enter our 50th year of business in our Bed Bath & Beyond banner, our focus remains on being customer inspired and everything we do as we build authority in our core home, baby and beauty wellness markets. With COVID headwinds expected to subside and having our full omnichannel suite of options available to us this year, we will be able to truly complete fairly and openly with our peers, unlike during 2020. In addition to our internal strategic growth drivers, we believe we are well positioned to benefit from the favorable macro environment expected to support continued growth in home-related categories through 2021. These include high consumer confidence, a strong housing market, continue work-from-home trends and the newly found appreciation for the comfort, safety and value of our homes.

As you’ve heard today, we’re excited and confident about our business. We have reaffirmed our fiscal 2021 guidance and are well poised to activate and drive that transformation initiatives to fuel our growth. We have the capital, the plan and the talent to deliver on our three financial objectives. As our transformation continues to take hold, we will shop differently for our customers with enhanced omnichannel experiences, modern stores, new communications and differentiated own brand, all improved capabilities that will elevate the shopping experience and make it even easier to shop with the new Bed Bath & Beyond.

Earlier this week, we launched our new Home, Happier brand campaign which exemplifies our strategic focus on helping our customers realize each room’s potential, so they can embrace the possibility in every day, helping them to Home, Happier. We will deliver the products, values and experiences to inspire our customers to celebrate the important role their homes play in their lives. We are excited to debut this fully integrated campaign which will be anchored by a 30 second Anthem TV spot airing nationally today, April 14, and featuring a suite of creative assets supported by an omnichannel tied video plan, including national broadcast and cable TV, streaming online video, paid social, print, in-store, e-mail and display. In 2021, we will continue to make bold pivots to reconstruct, renovate and restore our company and deliver on what we said we would do. We look forward to sharing our transformation progress with you in future quarterly calls. We will now take questions.

Questions and Answers:

Operator

Thank you. I’ll begin the question-and-answer session. [Operator Instructions] And our first question is from Bobby Griffin from Raymond James.

Bobby Griffin — Raymond James — Analyst

Good morning, everybody. Thank you for taking my question.

Mark J. Tritton — President and Chief Executive Officer

Hey Bobby.

Bobby Griffin — Raymond James — Analyst

Mark and Gustavo — hey guys. A lot of moving parts inside gross margin with shipping and distribution and things like that, but could you maybe unpack what’s going on and what you’re seeing, inside the core merchandise margin and what some of those drivers and expectations are for fiscal year ’21?

Mark J. Tritton — President and Chief Executive Officer

Yes, I think that some of the core drivers is definitely we’ve improved our mix, we’ve improved our negotiated base costs, we’re starting to see the work that we’ve done on cost negotiations really start to filter through and we see that moving through 2021. What you didn’t see in the quarter was the improvement from our brand, because that’s a March onward investment and we see that incremental benefit occurring quarter-by-quarter with the investments we’ve made with over eight brands for the full year. But also a big part of that has been, Joe and team really reengineering the markdown process and the promotional process and getting more effectiveness out of our marketing dollars as well as their promotional spend and that’s helped really reengineer in this quarter and going forward that margin, and that’s despite us getting ready for the own brands coming in and taking additional markdowns to do our room reset as well as absorbing some of those impacts of a freight. So we feel well poised with prior work and the ongoing rolling work through 2021 that we’ll see incremental benefits to gross margin.

Bobby Griffin — Raymond James — Analyst

Okay. So is it fair to say that the — we saw the sequential slowdown in the year-over-year growth in gross margin, but shipping and different things were different headwinds in the fourth quarter. Is it fair to say that the core performance of the merchandise margin was similar in 4Q as it was in F2Q and F3Q of this year?

Mark J. Tritton — President and Chief Executive Officer

Yes, I think another big differential in that Bobby, is the mix of digital versus stores and the impact that had in the interim on margin and so we’re continuing to double down there, but as we move through to Q1 and beyond, clearly we see a different balance in that margin proposition between increasing our stores velocity and balancing out our digital sales in the associated margin.

Operator

And our next question is from Brad Thomas from KeyBanc Capital Markets.

Brad Thomas — KeyBanc Capital Markets — Analyst

Yes, hi, good morning. Thanks for all the details and thanks for taking my questions. I just wanted to follow-up on some of the margin puts and takes there, because that tends to be one of the most important things we find investors asking us about. And I was hoping, again, just follow-up on what Bobby was asking about and how you’re thinking about some of those puts and takes on margins and how much of an opportunity there may be as these category resets take hold and what they may be able to add for you? Thanks.

Gustavo Arnal — Executive Vice President, Chief Financial Officer & Treasurer

Brad, Gustavo here. Just to give you some perspective, we see sequential improvement in gross margin from Q1 and as the fiscal year progresses. As Mark mentioned before, we expect the penetration of own brand to improve quarter-after-quarter. So expect the 34% we’re guiding for in Q1 to improve as the year progresses. Also it’s important to keep in mind that we’ve accounted into our estimates the headwinds that we’ve continued seeing in terms of cost shipping freight increases and so we will continue to manage that. And we are getting better and better on the processes that Joe is leading in terms of optimizing promotion markdowns, doing more promotions that drive both revenue and margin increase. So you will see that improvement has the fiscal year goes.

Mark J. Tritton — President and Chief Executive Officer

And Brad you just mentioned there about resets and Joe’s work there, I think that is part of that overall plan, divesting, underperforming products and lower margin products, resetting that with new national brands, but definitely featuring Home, Happier [Phonetic] brand and their margin rich potential.

Operator

Our next question is from Jenna Giannelli from Goldman Sachs.

Jenna Giannelli — Goldman Sachs — Analyst

Hi there. Thanks for taking the question. I was just curious, when you think about your excess liquidity on hand and some of your bond trading below par, if that might be an opportunity to manage that leverage or get down to that below 3 times goal. If we could see you being opportunistic again with your debt stack? Thank you.

Gustavo Arnal — Executive Vice President, Chief Financial Officer & Treasurer

Hi Jenna, Gustavo here. First let me reinforce that we will be already in Q1 below the gross debt to EBITDA ratio of 3 times without taking any additional action on our capital structure. Now, as you say, we have some tranches trading below par, we also have some of the closer maturities trading above par. That is all in our mix. We will remain focused on what we said in terms of capital allocation. First thing investing in the business and we have the capital — capital spending allocated to that in the business. We’re doing the share buybacks, as you saw, we’re increasing it this year and we will continue monitoring during the year on how to optimize our debt structure and certainly bond, it’s part of that equation.

Jenna Giannelli — Goldman Sachs — Analyst

Excellent. Thank you so much.

Operator

Our next question is from Steven Forbes from Guggenheim.

Steven Forbes — Guggenheim — Analyst

Good morning. Hey, Mark, I wanted to sort of focus on the new digital customer trends, the 11 million customers you called out. Curious if you could sort of just give us a nice review here right? What categories do they transact, understanding their customer journey, transacting during 2020? How often are they repeating maybe a timeframe. Is it one month, one quarter? And just your overall thoughts on how that greater base of new customers entering 2021. How the evolution of the — their spending trends will impact the guide, but as we think about this path to a flat core comp, what is happening in the — those 11 million customers and how do you incorporate that into the guidance here?

Mark J. Tritton — President and Chief Executive Officer

Yes, it’s a great question Steve, and I think we’ve incorporated conservatively into the plan, but there is no doubt that we have been acquiring new customers and they have been behaving differently coming to being a digital first and then an omni-always customer. We’re seeing them trade within the quarter and we shared some of those ratios in terms of their increase — the increase that we’ve seen in the secondary item purchase within the quarter.

Good news is that they are on average younger and they are less likely to buy promotionally. And in category-wise, we’re really seeing them kind of delve into all our categories, our core categories in particular and some growth in the indoor decor area, which for us is really on the rise and it’s something we haven’t doubled down in the past and we’re starting to invest in growing now, which is terrific. So we are seeing younger, we’re seeing stickier and for us, we see this is a great avenue to connect with a wider customer base and particularly because of digital focus, we’re able to kind of use the data and the store retailing to share a plethora of details of revenue Bed Bath & Beyond including the launch of the newer brands to a wider constituencies. So the kind of trouble of COVID as actually generated new avenue of growth for us. But to your point, we’ve baked that in conservatively. We want to see things really settle with the vaccines and the return to the new normal, and how that plays into our mix. So some potential upside there.

Operator

Our next question is from Curt Nagle from Bank of America.

Curt Nagle — Bank of America — Analyst

Good morning, guys. Thanks very much. So just quick one for you Gustavo. Just curious what’s driving — give some specificity I guess to what’s driving the faster deleveraging 2021 EBITDA guidance is the same. Is this primarily, I guess, on working capital. And I guess just what should we expect for working capital gains for this year?

Gustavo Arnal — Executive Vice President, Chief Financial Officer & Treasurer

Yes, a couple of comments there Curt. Thanks for the question. Look we — couple of things improved. First is, we completed — versus Q4, we completed and signed the diversity of Cost Plus War Market, that has an impact on the operating lease liabilities and it is a reaffirmation for us saying now as we start the fiscal year and look at the debt in the balance of the year and look at the EBITDA and adjusted EBITDA on the balance of the year to reaffirm. That’s why we’re below 3 times already, if we look at the math in Q1.

Your question on working capital, you saw sequential improvement in the fourth quarter relative to the third quarter, $110 million of inventory improvement on the core banners. We expect to continue improving inventory as we go along. Recall a few months ago, we said, we will reduce inventory by $1 billion of retail versus the closing position of 2019. That would take us to about $1.6 billion of inventory. We’re now at $1.7 billion. So we’re well on track with what we’ve said in terms of working capital improvements. It could vary quarter-to-quarter, but our objective remains, driving working capital improvements and on our way to 3.5 times inventory turns.

Operator

Our next question is from Seth Basham from Wedbush Securities.

Seth Basham — Wedbush Securities — Analyst

Thanks a lot and good morning. My question is around market share performance. You gave some comments last quarter on your performance for core categories. Can you talk about the trends this category — this quarter. In addition, if we think about the non-core categories in your business, they seem to decline pretty materially this quarter that one-third of your business that’s not core. What are you doing to improve performance in those categories? Thank you.

Mark J. Tritton — President and Chief Executive Officer

Yes, thank you for the question. Look, I think in some of those, they pertain to key areas like personal care for — which for us is really dependent on store base traffic. And we know that the digital is returning stronger than stores, we’re still in the entry point of 2021, the COVID new normal. So we have plans to see that stabilize and contribute more. But that is going to be dependent on store traffic. So again, great compensation and strength to reduce the share declines that we’ve seen. We do know that we’re up against with the store closures a more compact market that we are going to be working in. So we continue to focus on that mix of store and digital throughout the year end and focus on share increases.

Seth Basham — Wedbush Securities — Analyst

But just to follow-up on that, if I may. How do your core categories perform market share wise this quarter than compared to last quarter. It doesn’t seem like you made as much improvement and might have slipped backwards a little bit?

Mark J. Tritton — President and Chief Executive Officer

Yes, I think that it was definitely — what we’re excited about that is, is that we had positive comps consistently while we were really readjusting in the fourth quarter in getting readiness for our 2021 plan and focusing on those all important room and assortment reset, reducing overall inventory, curating them down, so that we can be more powerful in key categories. So we knew that we would take a dip in a couple of spaces as we have readjusted our assortment, taking markdowns and having some out of stocks in some key areas to get back in to completely new set a new merchandise. So I think a quarter of reestablishment and foundation getting ready for 2021, yet still creating growth, so we would feel comfortable about that, but definitely more work to be done with share growth throughout 2021.

Operator

Our next question is from Michael Lasser from UBS.

Atul Maheswari — UBS — Analyst

Good morning. This is Atul Maheswari on for Michael Lasser. Thanks a lot for taking my questions. Gustavo on the private brand penetration going from 30% — going to 30% from 10%, how much gross margin expansion can that contribute over time? Are you able to size that in any which way?

Gustavo Arnal — Executive Vice President, Chief Financial Officer & Treasurer

Yes, good morning. We’ve said and we’re looking at about N percentage margin point improvements in our own brand assortment. So think about 1,000 basis points and that is part of our gross margin algorithm. This is very important. It is part of our gross margin of 35% percent in fiscal ’21 and 38% in fiscal ’23. We look at continued driving own brand penetration, improve gross margin with that and while continue optimizing pricing and promotion and continue driving cost savings. It’s crucial element of our strategy, crucial element of differentiation and its a crucial element of underlying gross margin expansion.

Atul Maheswari — UBS — Analyst

Understood. Thank you. And as my follow-up, you’ve guided to it is on a Core Banner 65% to 70% of comp for — of sales growth for the first quarter, where are you tracking relative to that expectation right now?

Mark J. Tritton — President and Chief Executive Officer

We’re just tracking very well relative to that expectation. Keep in mind, we’re not going to give revenue performance month by month. Keep in mind, this is versus the base last year, March, April, June. In March, we closed our stores — majority of our stores as of March, 13. In May — in April and May — March, April and May, in April and May the revenues are much, much more depressed. That’s why we said in the prepared remarks, we have a growth rate in March, the growth that will be much higher in April, much higher in May. Overall in the quarter 65% to 70%. And I’m very glad you’re picking up on core performance. That’s what we’re focused on the quarter.

And I might say that Q1 — that Q1 core growth, it’s a low single-digit growth rate on a two year stack basis. So when we compare Q1 versus Q1 ’19, it’s positive comp sales growth versus 2019.

Operator

Our next question is from Anthony Chukumba from Loop Capital.

Anthony Chukumba — Loop Capital — Analyst

Good morning, and thanks for taking my question. You’ve talked a fair amount about the change in private label penetration that you’re projecting over the next few years, but I was wondering about the other merchandising changes that you had talked about, particularly in terms of rationalizing SKU count. And I was just wondering kind of where you are there in terms of what inning we are with the other merchandising changes aside from our increasing private label penetration? Thank you.

Joe Hartsig — Executive Vice President, Chief Merchandising Officer; President, Harmon Stores, Inc.

Anthony. Hi, it’s Joe Hartsig. A few things, you saw the growth in our destination categories, which is really great for us to speak, it has been a focus. I think we’ve been pretty clear in our Investor Day that we didn’t have category line reviews so we’re well on our way on using data, both internal and external to drive better decisions. We’ve done the bed, bath kitchen resets and we’re taking that capability across other categories. Now, we’re coupling this up with a lot of the room resets that you’re starting to see. So if you look at the introduction of Nestwell, our new own brand, that was part of the category line review work and we removed a lot of unproductive SKUs that were cluttering up our assortment at common price points that we’re helping the customer shop and we’re bringing that to the newly remodeled stores both in Houston that John talked about, but across the banner, across the chain we’re really working on a new reset program. So very excited about coupling all this together, product and proposition using our new go-to-market integrated planning process that we call Blueprint to deliver a unified centralized plan to our stores and our digital channels at the same time.

So if you can see, you really see things are coming together from a common view, our customer value proposition that Mark talked about, that’s launching today is really emblematic of kind of the new Bed, Bath. So very excited about the progress. More work to be done, but very, very happy about the new muscle that we are building.

Operator

Our next question is from Carla Casella from JP Morgan.

Carla Casella — JP Morgan — Analyst

Okay. Hi. I’m wondering if you could give us the same-store sales for the stores only? Or the digital percentage of sales in fourth quarter. I think you said the 40% was for the full year?

Mark J. Tritton — President and Chief Executive Officer

Yeah. Hi, Carla. It was 40% for the full year. It was also 40% for the fourth quarter. And the store comp was minus 20%. We saw a minus 20% on stores, 86% digital, 4% total comp growth.

Carla Casella — JP Morgan — Analyst

Okay, that’s great. And then, just given the cost cuts that you’ve made to date, are you done implementing cost and the remainder is just a flow-through. And have you given the amount that’s remaining on the program? And then I’m also wondering what the additional asset sales, if you’ll — if you’re really looking at a new cost cutting program for going forward?

Mark J. Tritton — President and Chief Executive Officer

Yeah. So in terms of cost cutting, we constantly look at optimizing our cost structure, so we’re looking at zero-based approach to optimize costs, we’re working on rent reduction, we will continue working with our vendors on reducing our input costs that is going all as plan. In terms of additional restructuring, etc, we’re capitalizing on all the savings of the restructuring done last year.

Operator

And our next question is from Alex Arnold from Odeon Capital Group.

Alex Arnold — Odeon Capital Group — Analyst

Hey, guys. Thanks for taking my question. Mine’s pretty easy one. If — could you just give us any sort of granularity or update on the relative performance of remerchandised remodeled stores?

Mark J. Tritton — President and Chief Executive Officer

No. I think what we would say to you is that, that’s really embarking at the moment and we’re very pleased, as John said with the initial response we’ve seen. On the store closures, the transparency ahead of our plan. And on the remodel, we’re really happy with the results we’re seeing in a preliminary. Why — the reason why I’m saying now Alex is, it’s really going to be quarter-by-quarter from here on in that we come and share that, because we’re in the very early stages and we need the stores to get remodeled and settled. So we’re going to be looking forward to sharing the progress of those results.

Early indications are very strong and in line with our plans or a little bit above. So we’re feeling good about that, but stay tuned for Q1 onwards. And we look forward to sharing more on that horizon and we’re very positive.

Alex Arnold — Odeon Capital Group — Analyst

Okay, great. And how about an update on just recent — very recent traffic trends. Are you seeing any sort of shift as vaccinations start to roll out more aggressively into the marketplace?

Mark J. Tritton — President and Chief Executive Officer

Overall, we would say that it’s generating a higher level of consumer confidence. So think about spend in total as people can see maybe a new horizon and it’s definitely affecting our traffic trends, but we’ll look at areas like Michigan and we know that there is still work to be done. So overall, I think consumer confidence is stronger and we are seeing some positivity in the market. The home trend continuing I think here and we see that as a multiyear moment. And so, I think that’s overall positive trend.

Operator

And our next question is from Simeon Gutman from Morgan Stanley.

Simeon Gutman — Morgan Stanley — Analyst

Hi, everyone. Good morning. Couple of questions on sales. First the Core BBB comp in the fourth quarter 4%. I assume it’s being helped or lifted by store closures and some transfer of comp and I don’t know if there is an assumption that it’s reasonable to make there. Is that a fair way to look at it? And then second of all, if you look at your business sequentially and adjust it on a core basis, can you comment or help us think about, is the business underlying from fourth quarter to the first quarter sequentially accelerating, again, looking at it on a — trying it on a core basis and it looks like — well, I guess, I don’t know the answer.

Mark J. Tritton — President and Chief Executive Officer

Yeah. So, Simeon, thanks for the question. I think it’s not, the transparency in stores is not a key generator of it. I just want to clarify with you the core Bed, Bath and Beyond banner grew 6%, not 4%. 4% was our enterprise growth. So 6% growth really generated by our core strategic assets, so we don’t see any one-time event, including stimulus checks, which for us really focuses — we’ve done the math and we’ve our passed it, they’ve really been more about essential, bill paying, some investments in technology, they’re not playing into the wider market and the subsequent checks are focusing more on savings. So our growth is actually predicated on our strategic intent and how we’re reaching out to the customer, with marketing, connecting with the customer in their life moments into premise that’s truly paying dividends. And so we see the growth as really strategic against our effort as opposed to any transparent or one time moment. That means that we are seeing a loss in that growth and then ongoing increment of linear growth where we think we will express that clearly by quota going through 2021.

Simeon Gutman — Morgan Stanley — Analyst

Okay. And then if I can ask just a quick follow-up. The launch of some of the new private brands, is it too soon to have already seen an impact or what the reception like, anything you could share?

Mark J. Tritton — President and Chief Executive Officer

Yeah. Look, I mean, it’s similar to the previous question, we will kind of come back with a more robust detail. By the end of Q1, we will have launched three brands in substantial categories, as well as across the Company, across banner opening price point brand, which is going to focus on, I think, bring in an incremental customer and incremental sales. But what we would say so far is, sales exceeding our expectation and the customer acceptance of this brand has been terrific. I think the way that we approached it in terms of product and messaging and storytelling and engagement is something you’ll see with every one of the brands going forward and is really worked incredibly well. So online in-store, in social, the brand is resonating really clearly. It’s being accepted and the run rate is a little higher than we expected. So good news so far, but again we’re only beginning our journey and we really look forward to sharing more about the growth rates, the penetration and the acceptance as we complete our Q1 period.

Operator

Our next question is from William Reuter from Bank of America.

William Reuter — Bank of America — Analyst

Good morning. Can you remind us what percentage of your products come from Asia? And then if you’re seeing any impacts of out-of-stocks due to the port disruption on the West Coast, particularly in light of some of the category resets and if some of those new private brands that you’re bringing in, whether any of those have had such challenges?

Mark J. Tritton — President and Chief Executive Officer

Yes. So, thanks, William. We won’t be kind of sharing percentage of Asian production, right. I think that’s a little too specific. What I would say to you is that the port issues, they were well factored into our plan. And I think they are obviously affecting the total industry. And as it relates to Owned Brand, the team did a really good job of thinking through demand and upside potential of these brands and so we got them in earlier, we got them in which room to set up a key learning from past experiences, make sure we have it early, and we’re ready to set and then we can manage that accordingly. And they’ve also built capacity yield for upside. So at this point, we feel really comfortable about our pre-planned subset and protected our own brand launches. Look, we’re working really closely with our vendor base to bring store, a large chunk of our business is in national brand and in replenishment of key items and they are getting back into stock and therefore we’ve been getting into back the stock throughout the end of Q4 and into Q1, really, really well. We want to maintain that and so communication and partnership with our vendor base is really critical.

Operator

And our last question comes from Jonathan Matuszewski from Jefferies.

Jonathan Matuszewski — Jefferies — Analyst

Hey guys. Thanks for taking my questions. First one, Mark, I think you mentioned recently acquired customers are less likely to use discounts and buy on promotions. Curious the degree to which you think the backdrop is may be influencing that dynamic. Do you think this newly acquired customer will be predisposed to shop more full price without coupons as the backdrop normalizes a bit? And if you could just refresh us on your latest view of where you think this newly acquired customer is coming from? Thanks.

Mark J. Tritton — President and Chief Executive Officer

Yes, look, I think for us, we focused a lot on our value, everyday value here Jonathan and we had some work to do. When I first joined, good news is that we are showing incredible parity on everyday prices that’s pre-coupon, everyday prices to the general market and I think that’s really important. All customers, but particularly young customers are very adept on looking online first. And so they want to look at your first true price, and they will compare to your competition. And for us we think they’re coming and seeing that price comparing and knowing that we are strong and that’s where they’re investing. So I think there’s a lot of recognition of what is this every day price in the marketplace and people shopping accordingly. So we think that’s sticky.

Now to what, what level that penetrates promotional activity with this younger customer or this newly acquired customer, we have to continue to see that play out, but we feel positive about the metric indicators we’re seeing so far. In terms of where we’re acquiring the new customer from, it’s a great question. We’re just happy to be acquiring them and I think we’re doubling down on who they are and then how to deepen the connection with them. We also see that there is an opportunity for us to expand our cross banner shopping and therefore cultivate a customer from wherever they shop with inside our banner. So what you’ll see online now is we’ve just launched on our Bed Bath & Beyond website that there is direct connectivity at the top to buybuy BABY and reverse from buybuy BABY to Bed Bath & Beyond, it’s already starting to create a link. So where those customers might have been separate by providing more of an ecosystem. So growth in that we know metric-wise generate really positive return and higher average unit sales. So we’re going to continue to cultivate these kind of customers, but we’re reaching out and I think that our marketing efforts has been incredibly strong, and we are really tapping into social and new avenues. I think that’s helping to bring a new customer to Bed Bath & Beyond.

Operator

And ladies and gentlemen, that is all the time we have today for questions. I will now turn the call back over to Janet Barth for closing remarks.

Janet Barth — Vice President, Investor Relations

Thank you John, and thank you all for participating in our call today. Please feel free to contact me or Felix with any additional questions. Have a great day. Stay safe. Bye-bye.

Operator

[Operator Closing Remarks]