Bed Bath & Beyond Inc  (NASDAQ: BBBY) Q4 2019 Earnings Call Transcript

Bed Bath & Beyond Inc  (BBBY) Q4 2019 earnings call dated Apr. 15, 2020

Corporate Participants:

Janet M. Barth — Investor Relations

Mark J. Tritton — President and Chief Executive Officer

Robyn D’Elia — Chief Financial Officer & Treasurer

Analysts:

Bobby Griffin — Raymond James — Analyst

Michael Lasser — UBS — Analyst

Curtis Nagle — Bank of America — Analyst

Simeon Gutman — Morgan Stanley — Analyst

Seth Sigman — Credit Suisse — Analyst

Steve Forbes — Guggenheim — Analyst

Jonathan Matuszewski — Jefferies — Analyst

Christopher Horvers — JP Morgan — Analyst

Peter Benedict — Baird — Analyst

Brad Thomas — KeyBanc — Analyst

Seth Basham — Wedbush — Analyst

Carla Casella — JP Morgan — Analyst

Presentation:

Operator

Welcome to the Bed Bath & Beyond’s Fourth Quarter Fiscal 2019 Earnings Call. All participants will be in a listen-only mode until the Q&A portion of the call. Today’s conference call is being recorded. A rebroadcast of the conference call will be available beginning on Wednesday, April 15, 2020 at 8:00 PM Eastern Time through 8:00 PM Eastern Time on Friday April 17, 2020. To access the rebroadcast, you may dial 1-888-843-7419 and enter passcode ID number 6105417#.

At this time, I’d like to turn the conference call over to Janet Barth, Vice President, Investor Relations. Please go ahead.

Janet M. Barth — Investor Relations

Thank you and good afternoon everyone. Welcome to our fiscal 2019 fourth quarter earnings call. Today we are coming to you from different locations as we are strictly adhering to the recommended social distancing guidelines, please bear with us if you experience any minor delays or mixed audio quality on the call. On the line with me today is President and CEO, Mark Tritton and Chief Financial Officer and Treasurer, Robyn D’Elia.

Before I hand you over to Mark for opening remarks, I will as usual, take you through the legal Safe Harbor and Cautionary declaration. I want to remind you that our fiscal 2019 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 filed just 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 contain 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 measures prepared in accordance with Generally Accepted Accounting Principles. For reconciliation to the most comparable measures presented in accordance with GAAP, please refer to the table at the end of our earnings release available on our website and included as an exhibit to our Form 8-K filed today.

I will now turn the call over to Mark.

Mark J. Tritton — President and Chief Executive Officer

Thank you, Jenet, and good afternoon everyone.

As Janet said, we are coming together tonight from a remote locations, and I’d like to thank all of you for joining us under these unprecedented circumstances. Frankly, it seems like a different place and time. Life as we knew it before March is a distant memory. We are in the moment now and I’d like to start by discussing our response to the COVID-19 pandemic. Then I’ll talk about the strategic actions we are taking in this moment to build momentum around our transformation plans. Then Robyn will review our fourth quarter financial results and provide some further context around the potential impacts from the pandemic.

Our top priority is for health and safety of our customers and our team. We are providing essential infant, health and personal care items to local communities through our buybuy BABY and Harmon stores, as well as serving the rest of our loyal customers online through our digital channels. Our teams are working around the clock to provide these essential products to our customers and to ensure the supply chain is operating as efficiently as possible. I would like to take a minute to personally thank our associate teams on behalf of management and the Board. We thank you for your above and beyond service, attitude and dedication to our company and our loyal customers, despite this extremely challenging situation. Making it easy to feel at home means different things to different people. And our teams have been working incredibly hard to support our customers.

I also want to say thank you to our loyal customers and assure you that we will continue to work hard to help you access the essential products we sell as you manage through these very difficult times. In this moment, we are focused on facilitating the coordinating our ongoing response to the current pandemic. There is no historical book for this situation, but we have a remarkable team, robust contingency plans and a very strong balance sheet, allowing us to navigate this unprecedented challenge with confidence. We quickly initiated our contingency plan, creating an essential response unit with emergency task force groups to focus on several priority areas including our people, operations, customers, technology and our finances.

While the situation is like nothing we’ve seen before, we are adapting as necessary and taking decisive actions to keep our people safe, deliver for our customers, and strengthen our liquidity and financial flexibility. This is an important time for us now and moving forward. Bed Bath & Beyond can play an important role in supporting customers and their families in making it easy to feel at home.

All but [Phonetic] approximately 170 of our buybuy BABY and Harmon stores now temporarily closed at least until May 2, we continue to provide essential products such as infant, health and personal care items in-store subject to state and local regulations, and online throughout various digital channels. We are rapidly evolving to meet the changing needs of our customers. They are relying on us more than ever to deliver essential product directly to their home. All four of our e-commerce fulfillment centers are currently operating. And by the end of this week, we will have converted approximately 25% of our Bed Bath & Beyond and buybuy BABY stores in the US and Canada into regional fulfillment centers to use our vast inventory resources to assign orders locally and deliver quickly.

With these conversions, we expanded our fulfillment capacity significantly. The regional fulfillment stores have doubled the capacity of our entire fulfillment network, facilitating approximately 44% of our overall value orders with almost 40% of these orders being fulfilled within 50 miles of the customer’s home. This has been an incredible learning curve for us, and we continue to optimize our regional fulfillment capabilities to deliver faster and at lower cost. Our supply chain is moving quickly to support our digital business in real time, re-routing products from the chain to DCs [Phonetic] and regional fulfillment stores. Our technology team is sorted up [Phonetic] 24-hour group to continuously refine the order allocation logic between the fulfillment stores and DCs. Our buying team is re-routing store and orders to original fulfillment locations and DCs, while at the same time canceling purchase orders and modified people cost to reduce store inventory levels.

On the consumer-facing side, our teams are closely monitoring top sellers and adjusting quickly to get products that our customers need and partnering with our vendors to help keep us in-stock and well positioned. I want to thank all of our business partners for their efforts and collaboration during this time. This kind of strategic action and innovation has allowed us to quickly implement curbside pickup, which was launched April 1 at buybuy BABY. In the first full week alone, we completed more than 11,000 curbside orders. We’re also introducing curbside pickup for the Harmon stores later this week. Also this week we are rolling out Buy Online Pick Up In Store at our BABY stores. We are quickly learning how our customers want to shop with us and we will continue to evolve the process digitally to create a best-in-class experience.

Both BOPIS and curbside pickup will be rolled out to our Bed Bath & Beyond stores as a new service offering for our customers when we can reopen. These new services were fast tracked during this period and will significantly enhance our fulfillment capabilities to meet the growing needs of our customers. With the vast majority of our stores temporarily closed, our customer-facing digital channels continue to service our customers and we are seeing an online demand growth significantly.

For example, the Bed Bath & Beyond digital business is seeing net sales growth of more than 90% for the month of April to date, further strengthening our omnichannel strategic direction. This demand is being facilitated by our agile digital and marketing teams, who are working together, responding to consumer data, creating newness and freshness across our sites, highlighting items customers need to make it easy to feel at home, and communicating important information about changes in store hours, closures, as well as safety measures, so that our customers are clear on how we are operating and how they can shop with us. As the current phase of this pandemic has taken hold. We are seeing consumer purchasing demand focus on categories such as waterfall, air purifiers vaporizers and humidifiers, as well as kitchen electrics, cleaning and coffee needs. Over the past month, we sold the equivalent of 10 million cups of coffee and 400% more bread makers over the last year. And last week, we sold over 100% more vacuums compared to the same period of time last year. This action to temporary close our stores has of course fundamentally changed the nature of our business in the short to mid-term. Impact on our stores is obvious, but this decision affects the entire company. From IT to merchandising, finance to HR, the shape and structure of our business is radically different in this new environment across concepts and across the country.

So in this moment, we are taking a holistic approach to managing our financial position including larger efforts to reduce operating costs and strengthen our liquidity. In conjunction with the recent decision to extend the temporary store closures, we implemented several additional cost reductions, including a furlough of the majority of our store associates and a percentage of our corporate associates until at least May 2. Salaries were also reduced to myself and the executive team, as well as the Board. We put an immediate stop to $150 million in capex spend and put a hold on share repurchases and future dividends. Robyn will provide further detail on our proactive measures in a minute.

We are balancing our ability to provide jobs and financial support for our associates in the short, medium and long term, as well as prioritizing investments designed to strengthen our business. We believe these actions will help us further weather the storm and preserve our financial health, for the good of our associates, customers and shareholders. If there is a silver lining, I would say that given the monumental changes we’ve made to our business over the past four weeks, our ability to act decisively, partner up and move with speed and agility has been greatly enhanced. I’m very proud of the ideas, inspiration and commitment that all our associates have made to serve our customers and our business. It’s been incredible to come together as one united virtual team across the company to work together in ways perhaps it would have not be possible even thought of in the past. We are leveraging this planning opportunity to be more collaborative and flexible in our focused priorities and then move more quickly, so that we are ready to welcome our customers back when we can safely reopen our stores. We have also provided much needed support for local communities serving food and care packages to seniors, military personnel and their families, children in need from our Christmas Tree Shop stores across the country and we donated more than half a million Easter chocolates, candy, cookies, baskets and toys to dozens of local charities, shelters, schools and community organizations nationwide from over 250 of our Cost Plus World Market stores.

Now turning to the fourth quarter, which just seem like a lifetime ago. In short, the pressures of store traffic trends and heavy promotional activity coupled with inventory management issues around the holiday selling period hampered our efforts to stabilize the business in the fourth quarter. These trends are consistent with the information we provided on February, 11 when we issued preliminary financial data for the first two months of the fourth quarter.

Product availability with certain key commercial categories such as kitchen electrics, leading into the holiday period was either too low or just out of stock. We just didn’t have enough of the right stuff, we should have. We are confident this is fully rectifiable in terms of letting plan and implementation from now onto the back half of fiscal 2020. Our fourth quarter results were also pressured by heavier clearance activity during the quarter as we rapidly action on our strategic inventory reduction program. Now we surpassed the halfway mark with this initiative and are pleased with our progress. It’s important to note the prior to this current business environment, we were sharpening our focus on inventory, ending the fourth quarter with approximately 16% less retail inventory at cost on an adjusted basis versus a year ago. So, operating leaner and on a lower skier base. We are now focusing our attention on optimizing our merchandising mix, which of course is a key focus of our new Chief Merchant, Joe Hartsig.

For the full fourth quarter, we also reported a positive shift in sales across our digital channel with a return to strong growth of about 16%. Sales in our mobile channels for both Bed, Bath & Beyond the buybuy BABY each grew more than 30% [Phonetic] year-over-year in the fourth quarter and orders taken through our mobile app were up over 75%. This quarterly results strengthen our resolve to continue to make necessary bold and broad based changes needed to modernize our business and gives us confidence about our ability to improve upon this quarterly performance. This includes the strategic restructuring program we implemented in late February to reduce annual SG&A expense by approximately $85 million and reset our cost structure.

Prior to COVID-19, we had solid strategic plans for fiscal 2020. In this moment we need to be agile and focused on simplifying and strengthening our business where it matters most to our customers and re-establish our authority in the home space. Let me now address the issues at hand and what we are working on. First, recruiting talent remains a top priority. We have an extensive interview process underway for the open roles. We have made bold moves. We have a robust process and have identified key caters [Phonetic] with Joe Hartsig being the first major appointment as our new Chief Merchandising Officer. There will be more news on other great talent to come in the coming weeks, I’m excited to welcome Joe to the team. He has more than 30 years of experience in consumer brand development and retail merchandising with well-known consumer businesses like Walgreens, Walmart, Motorola, and SC Johnson. To me Joe is a merchants, merchant, and I’m looking to him to be a leader and a teacher as we rebuild our business including improving key items in stocks and improving the curation and the differentiation of our assortment, which is our number one priority.

Second, we remain focused on generating funds from the sale of assets and simplifying our business. In addition to the previously announced sale leaseback transaction, we recently sold the One Kings Lane business to a third-party for an undisclosed amount. As previously disclosed, we entered into a definitive agreement to sell our personalizationmall.com business to 1-800-Flowers for $252 million, 1-800 was required to close the transaction on March 30, but breached its obligation to do so. Accordingly, we filed an action to require them to close and intend to vigorously enforce outright. While we can make no assurances, we will continue to pursue other portfolio adjustments and evaluate the remaining owned real estate in an effort to create a stronger and more focused portfolio.

Lastly, and most importantly, we are driving our strategic growth plans. Under the current business environment, we have modified our capital investments, but will continue to invest with confidence where it matters most. We now plan to invest about $250 million, focusing on our core business and key projects that support the omni channel future of our company in 2020 and beyond, which are more relevant than ever such as our digital and omni fulfillment capabilities, including BOPIS, curbside pickup, omni inventory management as well as digital marketing and personalization.

At a high level, we are reengineering of supply chain and our vendor relationships, as well as further strengthening our own brand strategy. We are postponing store remodel due to the coronavirus situation and the timing issues it created as we don’t want to interfere with the critical third quarter and fourth quarter holiday period in 2020. We will also continue to review our store footprint. As we have nearly 250 leases that are up for renewal in 2020 alone, which gives us added financial flexibility.

In technology, we will continue to invest in order allocation logic to better leverage our stores fulfillment centers and improve our site speed and checkout experience in addition to simplifying the process. Now we have postponed our plans for share repurchases, future dividends and debt reduction to preserve our financial position and retain financial flexibility. The company remains committed to its capital return program over the mid to longer term and we will reevaluate when appropriate. Now is the time to stay liquid, until we have more clarity on the global situation surrounding COVID-19.

All the steps we’ve taken since I arrived in the company five short months ago, including this COVID-19 moment reinforce our preliminary strategic plan focused on a singular purpose to make it easy to feel at home. Our strategy will deliver against five key pillars, namely product, price, promise, place, and people. We believe this strategy is more relevant today than ever and will support a significant improvement in our financial performance and a deeper connection with our loyal customers. In this time when home is even more central to our lives and being safe at home with family is essential, Bed, Bath & Beyond takes on an even more important role supporting customers and their families by making it easy to feel at home. We will provide inspiration and a curated affordable assortment so that our customers can create a home they love.

Now, before turning the call over to Robyn, I just wanted to mention that we had previously plan to host an investor event this spring and now under these circumstances, we are exploring other options including potentially a virtual event to take place at a more suitable time. We want to introduce you to the new team, showcase some of our new capabilities and early results and lay out our longer-term strategic growth objectives for the business. We’ll keep you updated on our plan.

While we deal with the immediate priorities we continue our work to drive the company forward. We have robust contingency plans and I am confident that we were able to navigate this crisis. We have an iconic brand with great consumer brand loyalty and we’re taking this opportunity to deepen our connection with our customers as we strengthen our omni always approach. I believe that Bed, Bath & Beyond will emerge from this even stronger, given the strength of our brand, our people and our balance sheet.

Robyn will now review our fourth quarter results and then provide some context around the potential impacts from the COVID-19 pandemic and the measures that we have taken to date to protect our financial position and maintain flexibility. I will then come back for some closing remarks. Robyn?

Robyn D’Elia — Chief Financial Officer & Treasurer

Thank you, Mark. And good afternoon everyone. I hope you’re all faring well under these very unusual circumstances.

On a GAAP basis, we reported a net loss per diluted share of $0.53 for the fourth quarter of fiscal 2019 compared to a net loss per diluted share of $1.92 in the prior year period. Our reported net loss in the fiscal 2019 fourth quarter includes an unfavorable impact of $0.91 per diluted share for special items including $41 million in severance costs related to the strategic restructuring program initiated in February 2020 and the extensive leadership changes announced in December 2019. A non-cash charge of approximately $35 million for the impairment of certain store-level assets, a non-cash charge of approximately $33 million for the impairment of certain trade names and other assets and an expense of $33 million related to the loss on the sale-leaseback transaction announced in January 2020. On an adjusted basis, our fourth quarter non-GAAP earnings per diluted share was $0.38.

The remainder of my review of our quarterly results will be on a non-GAAP basis as applicable, consistent with our prior disclosures to better represent year-over-year performance of the business during the comparative periods. From this year’s fourth quarter, we exclude the items I just mentioned, along with the related impact on the provision for income taxes and from last year’s fourth quarter we exclude the $510 million pre-tax goodwill impairment charge and the related impact on the provision for income taxes. As a reminder, our fourth quarter this year consisted of the 13-weeks ending February 29 and included the Cyber Monday holiday week, while our fourth quarter last year consisted of the 13-weeks ending March 2 and did not include the Cyber Monday holiday week.

On February 11, we reported preliminary unaudited financial performance data for the first two months of the fiscal 2019 fourth quarter. We shared this update to provide visibility into the then current pressures on our business, including store traffic declines combined with inventory management issues and the impact on revenue and margin resulting from increased promotional activity and markdowns.

Net sales in the quarter were $3.1 billion, a decrease of 6.1% from the fourth quarter of last year. Comp sales for the quarter decreased 5.6%, reflecting high single-digit decline in the number of transactions partially offset by a low single-digit increase in the average transaction amount. On a directional basis, comp sales from our stores declined about 10% while comp sales from our digital channels increased by approximately 16%. Similar to last quarter, our sales in the fourth quarter were positively modified by the calendar shift of the Cyber Monday holiday week. Adjusting for this calendar shift to exclude the Cyber Monday holiday week in both periods, our comp sales for the quarter declined 11% with a decline in store sales of 13.6% and growth in digital sales of 1.1%.

Moving to gross margin. Our gross margin for the quarter was 32.6% of net sales as compared to 34.7% in the fourth quarter of last year. The 210 basis point decline was primarily due to an unfavorable impact on merchandise margin from promotional activity and markdowns. In addition, we had an increase in net direct-to-customer shipping expense due to the higher penetration of digital sales within the total mix of quarterly sales.

Moving to SG&A. Adjusted SG&A expense for the quarter was 30.7% of net sales as compared to 28.2% of net sales in the prior year period. This 250 basis point increase in SG&A in order of magnitude was primarily due to about 100 basis points of consulting expense associated with our efforts to expedite the ongoing transformation initiatives and review of assets and an increase in advertising expense including digital marketing related to the heavy promotional activity in the quarter and to a lesser extent the effect of fixed costs such as occupancy and technology related expenses including depreciation on a lower sales based.

Our quarterly effective tax rate was a benefit of 3.3% on an adjusted basis and included $8.3 million of net after tax benefit due to distinct events occurring during the quarter. As a result of the lower pre-tax earnings base in the fourth quarter, these net after tax benefits to have a greater impact on the effective tax rate. Our effective tax rate in the fourth quarter last year, on an adjusted basis was 19.7% and included approximately $8.9 million of net after-tax benefit due to distinct events occurring in that quarter.

Now looking to our balance sheet, we ended the year in a strong cash position, with about $1.4 billion in cash and investments, including over $250 million in net proceeds from the sale leaseback transaction that was completed during the quarter. Adjusted retail inventories of $2.1 billion at cost, excluding a charge for markdowns associated with our inventory reduction initiative reflected a significant reduction of about 16% or over $400 million at cost at the end of the quarter compared to the end of the prior year period. We continue to action against our previously communicated $1 billion inventory reduction program at retail and we are now about halfway through the program and plan to continue to work down the remaining inventory in fiscal 2020.

Moving to capex. Our capital expenditures for the year were $277 million, with nearly 50% of the expense related to technology projects primarily focused on logistics, digital capabilities and analytics. The remaining capex expense was primarily related to investments in stores including remodels and new store openings. We closed 26 stores and opened two stores during the quarter.

Regarding share repurchase activity, there were no open market repurchases during the fourth quarter. As a reminder, we had suspended repurchasing of our shares while conducting the review of our retail portfolio and real estate asset. The company currently remains committed to its capital return program over the mid to long term, and will re-evaluate when appropriate. To clarify, our previously announced first quarter dividend was paid on April 14 and was not impacted by the temporary suspension.

Moving on to fiscal 2020. Our first quarter and full year 2020 results will of course be unfavorably impacted by the COVID-19 pandemic. The duration and extent of the pandemic is highly uncertain and our results could be impacted in ways we are not able to predict today. We’re monitoring the situation closely regarding our associates, customers, business partners and supply chain. We ended fiscal 2019 with cash and investments of $1.4 billion and while we feel we are well positioned to manage through these uncertain times, subsequent to the end of the fiscal year, we plan to take or are taking proactive steps to preserve liquidity and financial flexibility, such as drawing down the additional $236 million of available funds remaining from our revolving credit facility, suspending our plans to spend up to $600 million in fiscal 2020 for share repurchases, future dividends and debt reduction, postpone $150 million in planned capital expenditures out of fiscal 2020 including some store remodels, furlough the majority of our workforce including store and corporate associates until at least May 2, temporarily reduce the salaries of our executive team, including myself and Mark by 30%, temporarily reduce the quarterly cash compensation of our Independent Board of Directors by 30%, reducing discretionary spend such as business travel, advertising, and expense associated with maintenance of stores that are temporarily closed, renegotiating extensions of payment terms for goods and services and rent, managing to lower inventory levels and implementing applicable benefits of the CARES Act such as deferring employer payroll taxes and utilizing the ability to carry back and deduct losses to offset prior income in previously filed tax returns. Considering these circumstances, while we have trimmed capex by $150 million, we are now prioritizing approximately $250 million in essential capital expenditures to drive our strategic growth plans as Mark described a few minutes ago.

In addition, our capital structure provides further flexibility, including the potential to utilize significant balance sheet assets to generate incremental liquidity if needed. As of the end of the fiscal fourth quarter, we had approximately $2 billion of quality primarily non-seasonal inventory on our balance sheet, which has not been pledged as collateral under our existing debt arrangements. These actions together with our strategic efforts to reset the organization’s cost structure, including the recent restructuring program and our strong balance sheet, put us in a better position to manage through this period of uncertainty. We remain committed to keeping our shareholders informed about the business and our strategy to reestablish our authority in the home space.

Now I would like to provide some context around the potential impacts from the COVID-19 pandemic. Clearly, the full impact of this situation won’t be known for months. However, what’s important right now is that we are proactively managing the immediate challenges and playing an important role for our customers. As of Friday March 20, we had temporarily closed over 50% of our stores across all banners until April 3. The approximately 700 stores that remained open in operations were stores that sell essential items such as health care, personal care, infant care, cleaning supplies, or food and beverages. The following week, the company announced that it was temporarily closing all retail banners across the US and Canada, other than buybuy BABY and Harmon stores subject to state and local regulations.

This left about 170 of our 1,500 stores in operation, to provide the essential items we sell to customers. On April 2, we extended the temporary store closures until May 2. For the month of March, while we have not yet finalized our monthly results, we do have visibility to our sales performance. For the March period, we are able to share preliminary unaudited financial performance data.

Overall, net sales across all banners were down approximately 31% versus the prior-year March period. This was led by a decline of about 41% in-store sales as expected due to less customer in-store shopping resulting from self-quarantine guidelines and the initiation of temporary store closures and limited store hours. Net sales from our digital channels, however, were strong in March, up about 16% benefiting from an increase in digital shopping due to COVID-19 and further enhancements we have made in our fulfillment capabilities, including converting about 25% of our temporary closed stores to regional fulfillment stores as Mark spoke about earlier. The sales performance for both buybuy BABY and Harmon Face Values stores, which remained open to provide essential items, was better than the overall company for the March period.

Through the first two weeks of April, the fiscal quarter-to-date overall decline in our total net sales is around 42% primarily due to the additional temporary store closures. However, net sales from our digital channels have further strengthened with year-over-year growth of more than 35%. Due to the level of market uncertainty, we will not provide further financial guidance for fiscal year 2020 at this time. As we work through 2020, we believe our financial discipline will help us take advantage of the opportunities available to us to withstand the current pressures on our business and emerge from the crisis well-positioned to build and manage a modern durable business model to capture long-term sustainable growth.

Our strong cash position, along with our near-term actions, provide the company with continued financial resilience and ample short and mid-term liquidity to fund the operations of the business. To reiterate what Mark said earlier, we do believe that Bed Bath & Beyond will emerge from this even stronger given the strength of our brand, our people and our balance sheet.

I’ll now turn the call back over to Mark for some closing remarks.

Mark J. Tritton — President and Chief Executive Officer

Thank you, Robyn.

As Robyn shared, we have tremendous opportunities to build and manage a modern durable business model to capture long-term sustainable growth. We will be driving meaningful and inspiring engagements with our customers, we’re finding and amplifying an exciting omnichannel assortment, providing compelling value through price and differentiation, and delivering an omni-always shopping experience that serves our customers’ needs. And we will continually look for ways to optimize our business model, whether through the supply chain or through other operating efficiencies across the business. We’ll also take advantage of the market dislocation that has already occurred and that will likely to continue resulting in changes in the competitive landscape and opportunities for us to grow market share in the home, baby and personal care spaces.

This time has been a test for all retailers. We believe Bed Bath & Beyond is positioned to come out stronger as we have the cash, the talent, the right plan and great loyal customers. I would like to finish where I started, by giving my heartfelt thanks to our teams, who are going above and beyond to serve our company and our loyal customer base during this critical moment. I also wish all of you listening today continued safety and good health.

Janet, we are now ready for questions.

Questions and Answers:

Operator

[Operator Instructions]

And our first question comes from Bobby Griffin with Raymond James. Your line is open.

Bobby Griffin — Raymond James — Analyst

Good afternoon, everybody.

Mark J. Tritton — President and Chief Executive Officer

Hey Bobby.

Bobby Griffin — Raymond James — Analyst

If you can [Speech Overlap] hear me all right.

Mark J. Tritton — President and Chief Executive Officer

Yeah.

Robyn D’Elia — Chief Financial Officer & Treasurer

Yeah.

Bobby Griffin — Raymond James — Analyst

I appreciate the update on March and April sales. Can you maybe give a little commentary and update on where the cash balance and liquidity stands today, and maybe the debt balance? Good cash flow in the fourth quarter, but that was as of the end of February. So any updated figures around that would be helpful.

Mark J. Tritton — President and Chief Executive Officer

Yeah, I think, Bobby, this is a really forward moment. And we are really pleased with the work we’ve done to date. What Robyn has outlined earlier is in terms of the compensation decisions for the renegotiation on terms, managing receipt flow, postponing capex and the suspension on shares and repurchases. We’ve got hundreds of millions of dollars that we’ve saved. So our cash burn to date has been controlled and we’re really happy with that. But we see even further activity in the subsequent weeks that we’re able to action as we’re now on furlough. And this is before we’ve even drawn down on any other potential facilities. So we are liquid to start with. We have further liquidity available. And our cash burn has been really controlled. One of the things we did do early on was bring in a third party consultant to really help us with the scenario plannings, all short, mid and long-term closures, due to COVID, and to manage our cash flow proposition by day, by week.

So it’s been a significant focus very early on in this moment. We feel really good about where we stand.

Bobby Griffin — Raymond James — Analyst

Okay. Appreciate that, Mark. And I just — Robyn, I just want to make sure I heard your comments correctly. For the consulting fee for the quarter, it was — you were talking about 1% of total sales. So about $30 million was the increase in consulting fees in SG&A for the fourth quarter?

Robyn D’Elia — Chief Financial Officer & Treasurer

Yes.

Bobby Griffin — Raymond James — Analyst

Okay. [Speech Overlap] on the 1% roughly, what — go ahead. I’m sorry, Mark. [Indecipherable]

Mark J. Tritton — President and Chief Executive Officer

No. Yeah, what we want to outline is, is that we had some very unique fees that we’re focusing our transformation efforts and that we’re really centered around fourth quarter expenditure. So we don’t see them being heavily repeated in subsequent quarters.

Bobby Griffin — Raymond James — Analyst

Okay. And then if I can sneak one in, it’s more on your comments of exiting a better — better performing company. Can you maybe just expand on it? Is there an opportunity to exit more streamlined from a labor organization model or from a store model, where you can accelerate some closures? What could you do during this kind of shutdown period from either renegotiating new leases, or not coming back at the same level of labor that could really benefit the company on the rebound, once we get stores back open again?

Mark J. Tritton — President and Chief Executive Officer

Yeah, I think every retailer with this hold is looking at that, Bobby. I think we’re going to anticipate a tougher environment moving forward. And we were really fortunate to put in place a major SG&A announcements and changes in late February, which has really set us up further to win. And we took those costs in ’19, which Robyn outlined. So we are already under that way. But we’d already begun and continue to deepen our commitment to a real-time portfolio review. And I think for profitability and location and needs really do change going forward and we’ll have ongoing data to look at that more deeply. So that’s work in flight. We’re not ready to share that yet. We’re still doing assessment and the situation is very fluid. I think labor is something that we also had taken a hard look at and made big adjustment in, that’s every period in anticipation of better SG&A management. Again, continuing to look at it, but we feel like we made good preliminary strides.

Robyn D’Elia — Chief Financial Officer & Treasurer

And I would just add on the occupancy front, we do have over 250 leases coming up for renewal in the next year.

Operator

And our next question comes from Michael Lasser from UBS. Your line is open.

Michael Lasser — UBS — Analyst

Good evening. Thanks a lot for taking my question. So you’re still down 31% in March and quarter-to-date 42%. So that implies that April, for the last two weeks of April, sales are running down 60%. A, is that right? And B, should we use that as a run rate number for how to think about your sales moving forward over the next few weeks as you keep your stores closed?

Mark J. Tritton — President and Chief Executive Officer

Yeah. Michael, look, we’re not going to comment further on Q1 results. And I think it’s a very fluid moment. What we’re saying is, our are closed, except for Harmon and buybuy BABY stores, where we’re able to open. Our digital business in April is flying. And so the run rate that you see for March is not necessarily applicable, because we’ve seen some significant shifts in consumer behavior with digital. But we’re going to be coming back at the end of Q1. We’ll outline the outcomes there. Very fluid moment at the moment. So we’ll press pause on that.

Michael Lasser — UBS — Analyst

And Mark, what is your plan for reopening your stores? Do you have an expectation when you’ll be able to do that? It seems like, the most likely case is it’s going to be state by state. When do you think you’ll be able to open your first one and when will that process be completed? And what is a realistic cash burn number as your stores are closed at this point, just we can calibrate our models properly?

Mark J. Tritton — President and Chief Executive Officer

Yeah. Look, Michael, on the opening, no crystal ball here for Mark Tritton, but here is what I would say to you. We’ve moved from now to next to a future proposition in terms of our strategic planning. And while we are securing our current scenario and managing our teams, we are working on the reemergence and the re-entry into the market and how that that plays out. We don’t have that time bound, but we have multiple scenarios. We’re really tapped into major groups like Reila [Phonetic] who are doing a fantastic job in terms of sharing data and working with government to establish what reentry looks like. And to your point, Michael, I do think that it will be region by region based response. We’ll be part of a variety of retailers that follow the guidelines of government and come back into the market only when it’s safe for our teams and our customers. And we’re following those guidelines strictly.

Now, when that is, we factored in our financial models on multiple scenarios, including a very elongated period. We feel really comfortable in terms of our cash burn and our liquidity, as a result, without touching any further available funds. And so, we’ve looked at the math and we’ve looked at the time frame. The actual date, we will be ready. And as we’ve talked about, we’ve already accelerated a number of capabilities during this downtime like BOPIS, like curbside pickup, and like store fulfill, that we think are actually going to really sustain and benefit our total business, including the digital growth we’ve been seeing through the fourth quarter and now into Q1.

So our model will be geared and ready to go, but we are watching this by week, by month, by moment, so that we can play it out.

Operator

And our next question comes from Curt Nagle from Bank of America.

Curtis Nagle — Bank of America — Analyst

Good morning. Sorry, good afternoon. Hey Mark, how are you doing? Thanks for taking the question. So kind of hate to beleaguer a point here, but I think it is important in terms of the cash balance. I know you just said that — look, you obviously do have a lot of cash on the books, additional liquidity, you said you’ve taken through multiple scenarios where even on a long-dated basis, you’re pretty comfortable. But could you give a little more detail in terms of what the timeline is? And given the things that you’ve done like probably getting concessions on the rents, furloughing 80% of the labor force, halting some capex, all those things, that’s got to put you in at least a reasonable position to manage. So anymore detail on that is important. And again, I’ll just kind of stress given just looking at where the enterprise value of the company is at the moment, it would imply — the market doesn’t think that maybe the liquidity or the management of that liquidity is there. So that’s my first.

Mark J. Tritton — President and Chief Executive Officer

Yeah. Look, that’s why we’re sharing a lot of these points, but liquidity is definitely there. And we took really early steps to control our cost to move forward. To kind of lean into a little bit more, Curt, I would tell you that while we have been still working on the exit towards furlough and the negotiation, we’re immediately able to cap off more than 40% of our weekly cash burn rate immediately, and we are implementing further plans through by some what Robyn and I shared. So we’ve got strong controls there. Our modeling, we like everybody, I mean, we’ve been talking to our financial advisers as well as Reila and the people I shared with. We’ve looked at April scenario, and May scenario, and August scenario, and an indefinite scenario. And in all of those, we got really clear math about our sustainability and our liquidity, plus the availability to draw down another facilities.

So we’ve got controlled cash burn, we have cash and we have a plan. Now this is not something that is years and years and years in the making. I think everyone is looking at this in these very short synopsis, but also looking at the worst-case scenarios. When we sat down with our Board and shared the worst-case scenarios, we have good liquidity and we have stability in our business with the right actions taken to take us through. And I think we’re in a really unusual position, Curt, in that we don’t have rotting fruit in terms of our merchandise. We’re primarily seasonless. We’re not in apparel business. And we have sustainable product that we can leverage upon re-entry and we’re not going to be in a bloodbath in terms of costs.

So there’s some real benefits to this space. And there is no doubt that the home business has become very fruitful in this period. We just need the customers to be able to access us and other retailers and products in a more fluid way, which is an omnichannel environment of true digital and physical stores. So we’re looking forward to reopening but we won’t be doing anything until it’s safe and appropriate.

Curtis Nagle — Bank of America — Analyst

Understood. And then just as a quick follow-up. As you said, February and 4Q are very much in the rear view, but I just wanted to, if you could possibly hash out some of the math in terms of what was implied for the February comp. I think it improved relative to what was going on in the two prior months, but if you could comment on that, would be great.

Mark J. Tritton — President and Chief Executive Officer

Yeah, I think, for us, it was tough to hit the COVID moment when we just saw some pivots happening in February. We knew we were plagued by issues in December and January would be transparent around that. Some of it was self-inflicted. When we don’t have bestsellers in stock, we’ve got discounting and we don’t have our inventory. Some of the sales decline we saw in our stores wasn’t necessarily traffic. We did some intel work on that, and saw the customers were coming in and they just couldn’t find the product in stock. So we were shooting ourselves in the foot. That is easily rectified when we started to do that straight at the end of January. We saw positive comps coming through, or more positive comps in terms of churn rate in February.

And as we stated, we saw an acceleration of our digital business. It was doing well during the period, by that accelerated even further. So we’ve been seeing our full-year ’19 business, we were about 19% penetration in digital in total. For the fourth quarter alone, that was up to 21.3% and we had double-digit comps there. Now, we’ve seen that digital business even more deeply accelerate. With a lot of new customers, about 31%, 33% of our customers in this Q1 period being new to the Bed Bath & Beyond website, buybuy BABY website, etc. So we are garnering new business and we’re building plans with BOPIS, curbside, personalization, to sustain those relationships. So we’re excited, if that’s a word I can even use in this moment, about what lies ahead, but it definitely was some general momentum coming our way that was positive in February that belied the December-January trend, and then we hit this pause moment. So more to follow as we reopen up.

Operator

And our next question comes from Simeon Gutman from Morgan Stanley. Your line is open.

Simeon Gutman — Morgan Stanley — Analyst

Thank you. Good afternoon.

Mark J. Tritton — President and Chief Executive Officer

Hey Simeon.

Simeon Gutman — Morgan Stanley — Analyst

And good luck navigating. How are you doing?

Mark J. Tritton — President and Chief Executive Officer

Good.

Simeon Gutman — Morgan Stanley — Analyst

I wanted to ask first on the e-commerce business, can you tell us what the size of, I guess, the ongoing business at the end of ’19? And then, I thought I caught in the prepared remarks, 90% digital, and I think Mark you said the business was flying I heard a 90% and 35% and I just wanted to reconcile those numbers?

Mark J. Tritton — President and Chief Executive Officer

Yeah. So remember I provide the total number, but I just shared something like Q4 were 21.3% of total sales. And so we’re getting that digital engagement and follow through with the customer. What we’ve seen is the very sharp synapses and one of the things that Robyn was outlining, the periods in which we — we were partially opened, then closed and then at particularly Bed, Bath and then relying heavily on the digital business. We’ve seen strong conversion never going to map out to be full coverage of our stores based business, but we are seeing both demand and total sales in the 70%, 80% and 90% mark when we move into the April period. And as we mentioned, really ramping up and flexing with agility our capability to fulfill those orders but in the stores that we’re using as regional fulfillment centers as well as our DCs has been tremendous. So we’re meeting guest needs. We’re working with them, we are fulfilling orders, we are working through our inventory and we are building equity in our omni-always business, so some strong growth there. What you were hearing in the 35 is just the aggregate at the total business beforehand, but it’s definitely these kind of two week synapsis as the world changed and the amount of stores that we had open was changing as well.

Simeon Gutman — Morgan Stanley — Analyst

Got it. My follow-up in this temporary period until we restart, can you talk about anything surprising you about the complexion of what’s being sold online? And I guess if you can about the margin mix, if there is a wide difference in margin among your product categories? And then if online becomes more normal for the foreseeable future, I think you suggested there is always different scenarios you’re planning for, what does that mean for the margin I guess complexion of the overall business?

Mark J. Tritton — President and Chief Executive Officer

Yeah, I think you know our mix is very fluid at the moment. Clearly people leaning into cleaning, into kitchen, into baking, into home care, and so this is a great time for us. Our textile business is not as strong and that’s something that we see coming forward as people look to refresh their home, we think there is going to be — people have staring at the same four walls for a month or two now. I mean I think the idea of refreshing your bathroom, your bedroom, your kitchen that’s going to be pivotal in terms of some of the engagement of customers and how they return into the market more than maybe in apparel purchase or definitely a travel purchase. So discretionary spending, I think will be focused and we maybe a strong beneficiary there. So margin is balanced and what we see is, is that our digital business always performs at a much lower coupon rate. And therefore at this point, we’re getting a really balance response there.

I think that the, we see online acceleration. I think lot of people are talking around that and I think the great thing about that is, is that some of the changes we most recently made in terms of fulfillment and support. I mean not having BOPIS versus the rest of the industry has been Achilles heel. We were set to launch that in full in May in stores and we’ve maintained that spend and commitment to be ready when we our doors do open. And then I have also added in curbside side. And now we’ve stood up, store fulfilled, which was something that we had on our agenda, but we wanted to get through the other piece first. We’ve accelerated those and as you talked about that in terms of the impact, I’m no stranger with previous employers on the margin mix that a store fulfill via order or BOPIS can do in terms of the math on the margin on digital. So we will start to model that out, now is not the time to get accurate about that, but we believe that’s positive things that lie ahead for us. And then we’d already begun to convert some discretionary merchandise into more of a brand platform ahead of a major relaunch in 2021 at the start. So will see some margin benefits with those products in the back end that digital fulfill benefits in the back end, but it will be a new journey.

Operator

And your next question comes from Seth Sigman from Credit Suisse. Your line is open.

Seth Sigman — Credit Suisse — Analyst

Hey guys, thanks for taking the question. Just wanted to start with pricing. Mark, it see med like you were pleased with some of the results as you sharpen price over the holiday period. What are you learning about in terms of Bed Bath’s best pricing today, what changes should we expect in the current environment and I guess, beyond that?

Mark J. Tritton — President and Chief Executive Officer

Yeah, look, I mean I think that we entered into promotional activity in a way that we hadn’t ever before say, I think that you know if you go back to the end of third quarter start of fourth quarter, it was the first time we’d ever really been truly promotional outside of coupon and we really didn’t lay down the plans to get there in the right way. So we burnt some margin and burn a lot of inventory and weren’t prepared to get back into stocks, so they are kind of tough learnings, but they are also redeemable moments that we can translate into a new actions. I think that one thing that I’ve noticed coming into the business and have been working with the team on is the role of value and price value equation.

I think that we know the customers don’t want to do the math and they want to have simple readable affordability and I think that what we have been missing from our equation, but in store and online we haven’t been making value and I don’t mean just shop price. I mean the resonating true value to the customer has been a little bit difficult, in places and how we’ve operated. And so we’ve learned a ton of what to do and as a result, you’re going to see coming through in our digital channel a refresh of how be presenting value and talking to I guess with clarity and simplicity, you’ll see that roll through secular and then when we open up, you’ll start to see it manifested things like end caps and price point presentation a real clear understandable everyday value. So we — there is no doubt that as we come out of this COVID-19 moment and with unemployment and some tough times ahead, customers want to be able to get value, see value, understand value, and have it resonate with them quickly and we think we’ve got some great plans in place to really step into that. And that doesn’t mean giving away the margin, it just means being really clear on our intent upfront. So with ton of learnings from our strengths and opportunities that we have already begun to channel through to our plans moving forward.

Seth Sigman — Credit Suisse — Analyst

Got it. Okay, that’s helpful and then just in terms of the need to pair back on spending this year. Can you elaborate on the programs that are getting pushed out and how important where those to the stability that I guess you were expecting as we move through this year? Thanks.

Mark J. Tritton — President and Chief Executive Officer

Yeah, look, I mean I think it’s less about the stability and more about the — the long-term benefits. And really we would talk about postponing when we are talking about canceling. The major one really is around the store remodel program. So I’ve been working on since I joined on a program with the team we’ve got three test stores that is showing really positive signs of growth from the core model and that was without any assortment changes, just any of the price point changes and clarity that we talked about. So refreshment of the stores is something we then fast-tracked and we’re ready to roll out 25, 26 stores to really give us a model to accelerate our spend in subsequent years. Now that was going to take place and be ready all before the beginning of the back to college periods that would interrupt with our key selling periods and then into Q3, Q4 we would have been done. Having to ice those at the moment was really tough because we had some good work that we want to put into play, but it would have been crazy to spend that money disrupt Q3 and Q4 and wanting to preserve some capex. So we’ve got the plans, we’ve got the info, and we’ve got the dream, we are just going to finance [Phonetic] that further as we get ready to implement that in early 2021. So it’s postponed not canceled, but you know it really helps us with liquidity and it helps us to be focused on the right things in this interim position.

Operator

And your next question comes from Steve Forbes from Guggenheim. Your line is open.

Steve Forbes — Guggenheim — Analyst

Good evening. [Indecipherable] Hi Mark. So I wanted to focus maybe on to start the 250 leases that are up for renewal this year. So if you can maybe discuss how many of those are the core Bed, Bath & Beyond brand? And then provide some color right around the discussion with those landlords given the leverage situation that you’re in, is there a particular quarter that is heavy with expirations and or has the digital strength in the business sort of impacted your perception as you enter these discussions?

Mark J. Tritton — President and Chief Executive Officer

Yeah look, I would slightly say there was still mid-flight in really getting the clarity on the perception change we believe there will be some, we already had a preliminary view of it. Look, I think this is — I’m not going to get heavy on detail here because I would say it is work in flight, and this is where we really work. We really work out who are great partners are and how we can work together. We have a stage of it across the portfolio, clearly we have more weight in Bed Bath, because we have more stores, but we’re going to be looking at each region, each concept and each time frame to really map out what is the best sustainable pathway and portfolio moving forward. And we’re going to be working really closely with our real estate partners. A lot of pressure on them at the moment, as well as us. We’re all in it together. So we want to sit with them and I don’t want to kind of break out and disclose anything ahead of time because we need to do our analysis and then work on those very plans. But it won’t be a one size fits all. We’re really looking at the menu of options. But it’s clear that this is pressuring the moment for what really does generate profitability, but we will also take into consideration as we think about store fulfillment from those stores, how it changes the benefit and model at each of the locations.

Steve Forbes — Guggenheim — Analyst

And then maybe just a quick follow-up on inventory management. It’s sort of interesting here given your comments around not having enough inventory this holiday, around holiday 2019, but all the uncertainty that exists today. Maybe just give us an update or discuss how you’re planning your inventory buys this year, in particular for holiday 2020? What sort of the typical time frame when you have to make those decisions and commit to those POs? And how important is it that you’re open by the time those commitments occur?

Mark J. Tritton — President and Chief Executive Officer

Yeah, look, I mean a couple of things there. I think that we’d been — Joe has been leading the charge here and having deep conversations with all our majors and our general vendor bases about flow. If you go back to the inventory position that we had, there’s kind of two things going there. Good news was that overall we reduced our inventory by about 16% at the close of the quarter. And so we were working mainly on that. But inside of that, we did have big misses, not by having more inventory. We think that’s a good level that we can come down to, but we could have traded some of our mix to be more in-stock about key items and generated more sales and gross margin by having the right merchandise.

So again the level to be coming down is a positive. The curation within the level becomes critical. Joe is really leaning into that charge, getting it back in stock about top 100, 250, 500 items and making sure that we can draw that down. I think also getting the flexibility to draw the stock from different places, it helps us to kind of speed up sales and get clarity and delivery to the customer on time. In terms of the point around the commitments, we quickly moved into an evaluation of high-risk merchandise, seasonal merchandise and anything that kind of. If we looked at our long-term plan of what could have been close at hold, really looking at minimizing and quantification of risk and adjusting flow. So that’s a very fluid discussion, and they’re real discussion. And that began on day one, when we started to see the problem emerge. So it is a real strength in having Joe on board, focusing on this, and our overall inventory plans are really highlighted by being in stock with bestsellers, getting our pre-plan with our vendors in place so that we could get that in stock as we play out the third and fourth quarters in a different way. And keeping close eye on seasonality inflow merchandise from offshore vendors.

Operator

And our next question comes from Jonathan Matuszewski from Jefferies. Your line is open.

Jonathan Matuszewski — Jefferies — Analyst

Yeah, thanks for taking my question.

Mark J. Tritton — President and Chief Executive Officer

Hi Jonathan.

Jonathan Matuszewski — Jefferies — Analyst

Hi, how are you?

Mark J. Tritton — President and Chief Executive Officer

Good.

Jonathan Matuszewski — Jefferies — Analyst

Just a follow-up question on reopening. Clearly dependent on state and local laws, and obviously your own discretion. Should we expect some type of throughput constrained to be in the cards when stores reopen?

Mark J. Tritton — President and Chief Executive Officer

You mean in terms of inventory or…?

Jonathan Matuszewski — Jefferies — Analyst

In terms of customer traffic and things like that. I’m trying to get a sense of how quickly these stores could rent to normalized levels considering maybe some health and safety concerns.

Mark J. Tritton — President and Chief Executive Officer

Yeah, I think in general in the industry, the consensus that I’d been seeing, Jonathan, is that everyone is planning for — I mean this is not going to be a light switch moment where everything goes back to the immediate moment. We have got — our financial plans are very conservative when I talked about the modeling in terms of an expectation of a highly reduced sales level so that we can look at our financial plan to be as liquid as possible, no matter what. And so, there’s a number of percentage is being bandied around there, I’m not going to contribute to the dialog, other than to say we have multiple scenarios and some quite deep, to ensure that we’ve got our liquidity in place even if the return is there.

A general — I think there’s going to be different rules here. I think you’ve got to remember that I think that this is — we’re looking a lot of the recessionary moments from the past as models, but you also have to see a factor of safety inside these. So large gatherings, shopping at the mall, those things become more questionable may be for others. So less than 10% of our fleet is mall-based. We’re big box and we’re independent. We think that will work in our favor, and that helps us to do things like curbside pickup and the fluidity of BOPIS much faster than maybe be a mall-based retailer. And we think there’ll be a gradual turn on, but we also think there’ll be categories that come back faster and I think that home will be a beneficiary much faster than the apparel, and we think that there is some positive upside to establishing relationships and transactions with customers early. But we know it’s going to be graded and a lot of that, as you mentioned and I mentioned earlier, will be a phased approach based on safety and regional return to full business.

Jonathan Matuszewski — Jefferies — Analyst

Yeah, that’s super helpful. And then just a quick follow-up. You alluded to continuing to take a look at the portfolio in terms of banner divestitures potentially and evaluating options for owned real estate. Just give us your thoughts on how does this COVID-19 backdrop inform your view on a sense of timing and urgency for banner disposals. And if you could just remind us of how much owned real estate there is left to monetize.

Mark J. Tritton — President and Chief Executive Officer

Well, I’m not going to disclose that number specifically, Jonathan. But what I would say to you is that, clearly, the tougher moment to think about transacting with individuals, so that we do have some good dialog that continues on because we’ve got the businesses. I think the good thing for us is that there is an opportunity to work on other concepts. We don’t have to do that to maintain the strong level of liquidity. We’ve built our plans for these things in place, and all of that just remains potential positive upside. So there is no pain, or pressure, or push, to have to complete these within a time frame. They’re all just future opportunities. So time will tell.

And as I said, we’ve just completed one deal right in the middle of this. We’re still negotiating with others. So it’s a fluid moment.

Operator

And our next question comes from Christopher Horvers from JP Morgan. Your line is open.

Christopher Horvers — JP Morgan — Analyst

Thanks. Good evening. And so, a couple, just clarification questions. So first, jumping back to that 90% e-commerce growth number. You are saying that’s the core Bed Bath comp once all the stores had closed? Is that right?

Mark J. Tritton — President and Chief Executive Officer

Yes. And that’s in the month, that’s what we’re seeing accelerating in the month of April.

Robyn D’Elia — Chief Financial Officer & Treasurer

Right. The 90% relates to Bed Bath for the month of April.

Christopher Horvers — JP Morgan — Analyst

Bed Bath. Got it. And then in terms of, you mentioned improving the cash burn rate 40%. It sounds like obviously your biggest costs are inventory, payroll and rent. So is that 40% a good proxy in terms of the sort of what the benefit of the furloughing was that you did recently?

Mark J. Tritton — President and Chief Executive Officer

No, I think what I was expressing there, Bed Bath when I was sharing is, to date that has been, those — we still have payroll and we still have rent in those numbers. Subsequent to that, we’ve taken these additional actions. So we were able to control several outgoing that we’re in a transition for — during the period. That’s kind of an all-in moment where we were still in transition. We see further benefits to controlling the burn rate. And clearly being on furlough, looking at our payment terms and looking at our rent status is only going to add hundreds of millions of dollars worth of benefit by month to how we can operate.

Christopher Horvers — JP Morgan — Analyst

And so the two follow-ups to that is, as you think about the total SG&A dollars, we have rent that’s disclosed as — I’ve always thought a rule of thumb that 40% of SG&A or so is payroll within the SG&A reporting. Is that fair? And then related to the rents, one of the questions that we’re asking is, have you paid all of your April rents and how are you thinking about May? I mean you’ve seen other retailers talk about declaring force majeure. There is an article on The Wall Street Journal today about retailers not paying rent. So how are you thinking about overall your need to pay rent on closed stores and from a contractual perspective?

Mark J. Tritton — President and Chief Executive Officer

Yeah, look, just — I think it’s prudent not to comment on that, Christopher, as that discussion is in flight. And as I mentioned earlier, we want to be respectful with our partners to work through solutions together. We’re all taking a look at this and we know that this is pain for both sides. And so we’re seeing multiple scenarios and we’re negotiating with different partners on how to manage rent, both in the April period immediately, but also going forward. So I’m not — we’re not going to be commenting on that today other than to say we are robustly engaging both heads and working with our partners to resolve multiple scenarios that we can both support.

Christopher Horvers — JP Morgan — Analyst

And then the SG&A payroll portion?

Robyn D’Elia — Chief Financial Officer & Treasurer

In terms of the SG&A, we haven’t broken those component pieces out. But in terms of sizing them in order, payroll is the most significant followed by occupancy.

Christopher Horvers — JP Morgan — Analyst

Awesome. Best of luck. Thanks so much.

Mark J. Tritton — President and Chief Executive Officer

Thanks Chris.

Operator

And your next question comes from Peter Benedict from Baird. Your line is open.

Peter Benedict — Baird — Analyst

Hi guys, thanks for taking the question. Most of mine have been answered, but I just I wondered — Hi Mark, I just wanted to ask you about the status of this Pmall transaction. I mean, first of all is Pmall operating right now? I don’t know what their status is in this environment. And then just how do you expect that the play out. I mean is this something that’s just kind of more of a question of when, not if, or is it more severe than that or more serious in that?

Mark J. Tritton — President and Chief Executive Officer

Well, Peter you know I think that we filed based on the lack of completion. So you have to respect my tentativeness in terms of saying too much. I think that they are still operational, it’s a highly profitable business and it does really well. It’s a great asset and we had a good deal. And so, you know the [Indecipherable] got passed, we try to negotiate through that and we found that we were forced into the situation. You know we are going to vigorously pursue the completion. It’s a great business and its operating well and in a nut shell, I can really say about at this point.

Peter Benedict — Baird — Analyst

Okay, that’s fair. Understood. And then just back to the — in the fourth quarter, can you give us, how much of that of the 210 basis point hit the gross margin, how much was that was from the digital fulfillment headwinds?

Robyn D’Elia — Chief Financial Officer & Treasurer

The majority was really on related to markdowns and promotional activity, so more heavily weighted there. It was just a lesser extent was the shift in the mix to digital.

Mark J. Tritton — President and Chief Executive Officer

Yeah, we really saw some time points there based on the promotional activity and how we managed it. And that as I said earlier, Peter is been tight learning there is some impact of the digital sale, but it was outweighed by the margin impact that we took with markdowns and permit.

Peter Benedict — Baird — Analyst

Okay, understood. Thanks so much guys. Good luck.

Mark J. Tritton — President and Chief Executive Officer

Thank you.

Operator

And your next question comes from Brad Thomas from KeyBanc. Your line is open.

Brad Thomas — KeyBanc — Analyst

Hey, thanks for taking all these questions and running along here. Most of mine have been answered, but — but I guess Mark, I wanted to just follow up on the opportunity in merchandising and your vision ahead here, I know your background is merchandising and it just brought Joe on board. I guess could you talk about how much you think that the assortment in the store leads to change as you think about the next few years and what areas you think you can most quickly address here potentially even this year?

Mark J. Tritton — President and Chief Executive Officer

Yeah, look, I mean we’ve already identified and are moving forward on those strategies. So that remains unchanged with this moment and I want to be really clear around that. Couple of things that Brad, I think the first thing that we noticed and we just talked about value earlier on the call is that we have some — we have some real gaps in opening price point and the clarity of communication around value to our customers. So we’re leaning into that space. I think the second piece is around really reducing a high level of duplication in items and we really want to focus on a curation of differentiation and relevance to our customer and where we’ve done that, we’ve seen real wins. In some of these — the stores that that I was talking about earlier that I was playing with the models on, we reduced the SKU count by 20% to 30% and we were seeing double-digit comps at the same time. So when we curate, we make our assortment more focused and understandable. And then I’ve just been working even today on with Joe on a number of really great own brands that we’re cultivating in getting ready to launch at the start of next fiscal year because these things take time, and we’re developing units there, which will help reframe out each of the key rooms and categories and occasions that we are currently dominant in and have strong market share, but also one that we want to cultivate. So I think that there is [Indecipherable] and a freshness and a relevant and affordability in that home and personal care space as well as our effort inside BABY, which we’re well underway that could really create more relevant, not this moment so we are up turning a lot of rock there. We’re renegotiating costs across the board, which has already been done and worked on. So there is a margin upside, there is a mix upside and then there is a perception upside including value that we see coming and that will be evolutionary throughout the rest of 2020 and you really going to see some, some strong green shoots in late 2020, early 2021.

Brad Thomas — KeyBanc — Analyst

Got you. That’s helpful. Thank you, Mark, and good luck.

Mark J. Tritton — President and Chief Executive Officer

Thank you.

Operator

And your next question comes from Seth Basham from Wedbush. Your line is open.

Seth Basham — Wedbush — Analyst

Thanks a lot and good evening. My question is first on the e-commerce business for Bed Bath & Beyond in the current environment. You noted that really strong growth there 9% in April. What do you think the potential is for growth in that business, if you had been able to meet all of the demand that you’re seeing?

Mark J. Tritton — President and Chief Executive Officer

Yeah, it’s a great question. I mean, look, I mean I think we really would have been hitting on some high double-digit comps and I think though we had to restrain some demand based our availability of inventory, especially in key items, and so those items are strong, they not markdown driven, that would have been real boom for us Seth. And I think that bodes well for where we can cut and paste those experiences into benefits in third quarter and fourth quarter in 2020. The upside of it, I think is also going to be distorted by the current behavior in COVID-19 and that’s why I’m really excited about the fact that we’ve built background capabilities very quickly to sustain that as the total market open back up and then we’ve been seeing where we have really changed at the cadence of our communication dialog and the way we’ve set up our digital website to be more relevant to weekly guest needs we’re really connecting with customers and driving high double-digit comps in those categories that were leading into and building real engagement and data with these customers. So I think it’s too early to say how high is high. I think the industry in total believes that penetration rates will be increased. We are already on that pathway and we know when I’m saying 21% of our business in Q4 was already digital we see a lot of upside in that, but we also want to balance out that with growth in our stores.

Seth Basham — Wedbush — Analyst

Got it. And as a follow-up. Of course, you’ve only been in this state home scenario for a few weeks now, but have you started to see a material change in the mix of products being demanded. For example, a shift away from demand for cleaning products or anything like that, that would be notable surprising?

Mark J. Tritton — President and Chief Executive Officer

No, I mean I mentioned a little earlier in my comments, I mean we’ve definitely seen the stay at home moments in terms of cooking and cleaning and supporting the family and this early piece have been really exceptional. I mean bread makers, blenders, and vacuums and cleaning products, water filtration, coffee, coffee, coffee like people like hell, they’re just going to make the best of it at home. Now that’s a boon for us and we think we actually think that as people come out at this moment, we think that some of the data that we’re seeing very early and it is preliminary, there’s going to be some discretionary spend move away from specific categories, but we believe that people will want to celebrate their home, reinforce it, refresh it, invite friends for smaller moments and build equity and entertaining and start to celebrate the home and then leading into a back to college moment, which we’re really primed which is your home away from home, we’re really ready to take on that. So I think this kind of new cocooning, nesting, new love for home and valuing the environment while we all want to step outside, clearly I think there’s going to be safety into consideration and I think there is going to be love and respect for the home that we’re really to take advantage of. So we see different categories rolling through and we’re watching that real closely.

Operator

And our last question comes from Carla Casella from JP Morgan. Your line is open.

Carla Casella — JP Morgan — Analyst

Hi, just a couple of that weren’t addressed. One, you’re making a lot of changes you mentioned with the merchandising and working with your vendors on that, have you changed any of your terms with your vendors during COVID or been able to extend terms something that might help you on the working capital front in the near term?

Mark J. Tritton — President and Chief Executive Officer

Absolutely Carla. I think that was one of the first things that Joe and team and Robyn really worked on was like, having great partners, this is going to be tough, but we all are in a situation we know we’re going to be it in for the long term. We know we’re liquid, we know we’re strong and we have a plan and just let’s everybody work together on what we can do here. And so without going into great detail, know that those conversations are very robust. And we’ve asked for a level of support. It’s just short to mid term. It’s not standard way we will operate, and we’ll all work on that together and we’ve seen some really good leanings there to change that liquidity. And as I said, some of the burn rates we talked about earlier were not inclusive of those actions taking hold yet. So that’s a further benefit to cash flow. But yeah, look, it was on our to-do list very early on, and we began in earnest to sit with our partners and renegotiate just in the short to mid how we can play with terms and how we can work. And that goes for both our product vendors as well as our key supply partners.

Carla Casella — JP Morgan — Analyst

Okay, great. And then, you’ve talked in the past about using your strong balance sheet and asset base. But I just want to clarify, the way I calculate, it doesn’t look like you have any additional stores or distribution assets that you could use for sale leasebacks. Is that right? You pretty much sold everything that you owned?

Mark J. Tritton — President and Chief Executive Officer

No, we still have DC facilities, offices, etc. They’re in the mix. We’re not focused on the stores piece. There are still assets that we had to review and play with.

Carla Casella — JP Morgan — Analyst

Okay, great. Thank you.

Mark J. Tritton — President and Chief Executive Officer

Thanks, Carla.

Operator

And that concludes our question-and-answer session. I’ll turn the call back over to Janet Barth for closing remarks.

Janet M. Barth — Investor Relations

Thank you all for participating on our call today. Feel free to contact me with any additional questions or comments. Have a good night and stay safe, everyone.

Operator

[Operator Closing Remarks]