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Bed Bath & Beyond (NASDAQ:BBBY)
Q3 2017 Earnings Conference Call
Dec. 20, 2017 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to Bed Bath & Beyond's Third-Quarter Fiscal 2017 Earnings Call. All participants will be in a listen-only mode until the Q&A portion the call. Today's conference call is being recorded. A rebroadcast conference call will be available beginning on Wednesday, December 20, 2017, at 8 p.m.

Eastern Time through 8 p.m. Eastern Time on Friday, December 22, 2017. To access the rebroadcast, you may dial 888-843-7419 with the pass code IT46090929. At this time I'm going to hand the conference over to Janet Barth, vice president, investor relations.

Please go ahead.

Janet Barth -- Vice President of Investor Relations

Thank you, Adrienne, and good afternoon, everyone. Joining me on our call today are Steven Temares, Bed Bath & Beyond's chief executive officer and member of the board of directors; Gene Castagna, chief operating officer; and Sue Lattmann, our chief financial officer and treasurer. Before we begin, I'd like to remind you that this conference call may contain forward-looking statements, including statements about or references to 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. The company undertakes no obligation to update or revise any forward-looking statements. Our earnings press release dated December 20, 2017, can be found in the Investor Relations section of our website at www.bedbathandbeyond.com.

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Here's a brief summary. Net earnings per diluted share were $0.44 on net sales of approximately $3 billion. Quarterly comparable sales declined approximately 0.3% and included strong sales growth from our customer-facing digital channels and a low-single-digit percentage decline in sales from our stores. Sue will review our quarterly results in more detail but first I will turn the call over to Steven, who will provide an update on the progress we're making on the transformative initiatives discussed during our last several conference calls.

Steven Temares -- Chief Executive Officer and Board Member

Thank you, Janet. We're focused on our long-term strategy and continue to prioritize initiatives and align resources as we execute our plans to transform many aspects of our business in support of our mission to be the trusted expert for the home and heartfelt life events. During our quarterly conference call in September, we discussed our three strategic customer-centric priorities that we believe will further differentiate our business, deliver on our mission, and position us for long-term profitable growth. First, assortment: We want to present a meaningfully differentiated and complete product assortment for the home of the right quality and at the right value.

Second, services and solutions: We want to provide services and solutions that enhance the usage and enjoyment of our offerings. And third, experience: We want to deliver a convenient, engaging, and inspiring shopping experience that's intelligently personalized over time. Concurrently, we also are driving several internally focused initiatives that are building upon our solid foundation of operational excellence. I'd like to spend the next few minutes highlighting some of the progress we've made in these areas.

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First, let's start with some elements of our assortment strategy. We have developed a multifaceted approach to expedite our growth within the furnishings and decor categories and further establish ourselves as the experts for the home and heartfelt life events. As we've said before, this is an important category for us, not only for building credibility as the expert for the home but also for driving incremental top-line growth. The approach we are taking to accelerate results is to assemble a highly cross-functional dedicated team of internal experts to build and execute against all aspects of growing the furnishings and decor business, including assortment, store, marketing, supply chain, and customer experience.

Some categories for us that continue to see strong growth are rugs, furniture, lighting, and home office. This is reflected in the more than 70% sales growth we've achieved year to date in Bed Bath & Beyond for total furnishings and decor that is fulfilled directly by our vendors. We're excited by our progress as we expand our market share within this category. During this past quarter, we continued to make progress on the development of our business plan, our assortment strategy, and resource needs to deliver on its critical objective.

We also accelerated our efforts in analytics, marketing, the store experience, fulfillment, and SKU onboarding to further support this initiative.

Another part of the assortment strategy is the expansion of our newly evolved AndThat concept with its ever-changing merchandise selection, deep value, and treasure-hunt shopping experience, all of which continue to drive foot traffic and compliment well the growth in digital channels. During the quarter we opened two AndThat stores. This makes three very recent openings, reflecting our latest iterations of our store layout, merchandise assortment, and store operations model. The newness and freshness of the assortment, together with the deep value offered, are important parts of the treasure-hunt shopping experience and encourage more frequent visits.

Each of these new stores is off to a good start.

Another key component of the assortment strategy focuses on how we ensure that the value we offer across all our products is fair, reasonable, and competitive. For example, we are dynamically pricing online and we remain committed to being consistently right-priced in our stores as well. While market-responsive price changes are more challenging to the store-based product, we're taking the operational steps necessary to improve our ability to do so. In the near term, we plan to relaunch our price match promise to our customers to further emphasize that we match competitive prices, including our own online prices where they may differ.

We are building upon our prior investments in pricing by incorporating additional tools and processes to identify pricing opportunities that will drive volume, margin dollars, and enhance our overall value proposition to our customers.

Next, let's turn to services and solutions. Here we remain strategically focused on our core life-stage businesses, including wedding, baby, college, and moving, as well as our newest service offering for decorating, which further support our mission. Over the years, we have grown our leadership and expertise in these areas by helping customers manage through these exciting but oftentimes stressful life stages. In our registry services, enhancements to our digital registry platform provide a simple, more personalized and guided experience to build and manage a registry.

To further differentiate ourselves with service and strengthen our leadership position in registry, we're planning to expand our omnichannel service offerings and leverage our expertise and robust customer data to provide an even more engaging customer experience. For example, we'll have a live chat available for customers to connect online with one of our registry experts to get answers to questions and receive product recommendations. We believe there's a tremendous opportunity to improve how we transition customers to these important heartfelt life events and enhance the lifetime value of our customers.

Within the decorating initiative, we're leveraging Decorist, our newly acquired online interior design firm, and their growing design and networking platform to integrate design services across many of our concepts, including Bed Bath & Beyond, Buy Buy Baby, Cost Plus World Market, and One Kings Lane. We're in the early stages of rolling this out both online and in-store. To start, we have launched a nursery design services landing page on BuyBuyBaby.com and recently introduced interior decorating services on BedBathandBeyond.com, both powered by Decorist. Cost Plus World Market has also introduced Decorist to its customers in an email marketing campaign during the summer and we will launch interior design services on its website in 2018.

In-store, we've been conducting a few test-and-learn experiences to refine our approach as we move forward. For example, we recently watched an initial test which includes custom-built store applications to drive engagement in-store to online. By bringing these services to a broader audience and providing customers with an affordable and convenient solution to interior design, we strive to create a competitive advantage and further enhance our credibility in the furnishings and decor space.

Turning now to our third area of focus: delivering a convenient, engaging, and inspiring shopping experience that's intelligently personalized over time. Experience, a key initiative within this objective, is the development of a modified store format for Bed Bath & Beyond that creates a more engaging environment for our customers. The newly designed format will essentially transition our Bed Bath & Beyond stores to include additional elements of retail that are working well today both in our own stores as well as in the broader bricks-and-mortar retail environment. For example, we know that deep-value product and the treasure-hunt experience are driving foot traffic in-store, encouraging browsing and increased purchases, and promoting frequent visits.

We know this from our own performance across several of our categories within our concepts as well as from seeing the traffic and results of other retailers. Deep value can be represented in consumables such as health and beauty care and food and beverage as well as within the core Bed Bath & Beyond offering. Treasure hunt is represented in the differentiated mix of merchandise consisting of product that is new, fresh, and/or has limited availability. These types of products exist across many of our categories including furnishings and decor and our seasonal department.

Going forward we plan to put a greater emphasis on these elements in Bed Bath & Beyond stores and incorporate our successes from across all of our retail concepts to more fully leverage them. Beginning in March 2018, new Bed Bath & Beyond stores will be noticeably different to our customers as these facets become more significant components of the store. The existing space of the core Bed Bath & Beyond merchandise will be reduced. However, through our "show more, carry less" initiatives, we can show the customer all we offer today in-store and more.

As we continue to enhance the store experience and incorporate new infrastructure within our stores, our associates will have devices that will greatly expand their ability to service our customers. Coupled with an increased emphasis on selling skills training, we will be able to create a better experience for our customers and drive future sales growth. Approximately a dozen newly formatted Bed Bath & Beyond stores, including a combination of relocated and renovated stores, are planned to open by the end of our fiscal 2018 third quarter and then we will assess, refine, and iterate for future openings and rolling back to additional existing stores.

To further deliver a noticeably different and better shopping experience online, we're elevating the shopability of our digital channels. We'll do this by providing a complete and differentiated assortment that is easily searched, having the right information and content to help our customers make confident purchase decisions as well as ensuring that the experience is frictionless at all stages and intelligently personalized. Our investments in digital innovation are both foundational and meant to create further differentiation for us. We are focused on those initiatives that communicate our expertise throughout the online experience, including through content and curation as well as through guided selling tools, idea boards, and interactive checklists, all to help the customer easily find, manage, and purchase the items they are interested in and receive them when and where they want.

For example, on the Bed Bath & Beyond website, we continue to update and refresh our Trends and Ideas tab, where customers can browse curated collections of products for inspiration. We recently added a feature to the site that allows customers to tag items they like and save them to an idea board for future reference. This feature's become very popular very quickly, with thousands of idea boards created every day.

Of course, achieving digital shopability goes hand in hand with ensuring that we have smooth and efficient fulfillment processes for our customers across all of our product categories. With this objective, we are examining all aspects of our logistics network to improve speed and efficiency, convenience, and the overall delivery experience for our customers, especially as we expand our position within the furnishings and decor category. For example, we are comprehensively evaluating our supply chain and utilizing industry-leading optimization software to accomplish this goal. This supply chain study will help us optimize structure and resource our current infrastructure for future business demands.

Our focus on our assortment, our services and solutions, and the shopping experience we provide are, as I mentioned, more customer-facing in nature. In addition to those initiatives, we are driving an integrated portfolio with internally facing projects that will build upon our strong foundation of operational excellence and improve our efficiencies over time. With the assistance of our SPMO, we've identified several strategic priorities, including customer service transformation, gross margin enhancement, inventory optimization, and supply chain. These initiatives are ongoing and for some, we're executing against the road map while for others, we're aligning resources and completing the road map.

Let me give you an example from our customer service transformation initiative since it's farthest along. As we described during our call last quarter, CST is focused on transforming our store operating model to better meet the evolving needs of our customers in an omnichannel environment. During the quarter, industrial engineers completed an assessment of our Bed Bath & Beyond store operations as planned. Over the next several months, we will begin to implement certain of the recommended changes that will drive operational efficiencies.

In addition, we're in the early stages of implementing a new learning-management system to deliver e-learning and training programs. We plan to convert existing content and develop new e-learning material specifically for store-based associates to provide them more efficient and effective product- and sales-training so they can better assist our customers and demonstrate our expertise for the home and heartfelt life events. On a cumulative basis, we continue to project that these SPMO initiatives and other ongoing internally facing initiatives will produce savings in excess of $150 million over the next few years. As we've said previously, we do plan to strategically reinvest a portion of these savings to drive future growth.

While it's too early to say how much will be reinvested, our focus remains on driving customer satisfaction, which should manifest in additional top-line growth.

In this rapidly changing environment, we are moving fast. By leveraging our newly established SPMO team, adding skilled resources both with internal and external expertise where needed, and reprioritizing the efforts of our talented and dedicated associates, we have further advanced our ability to accomplish our mission. We've made considerable progress in our ability to align organizational resources to accelerate our strategic priorities. Each of the initiatives we are working on has its own framework and structure, built around cross-functional coordination to expedite results, to further our mission, and to drive greater efficiencies to achieve operational excellence.

We believe we have the right priorities that will move our business forward and strengthen our position as the trusted expert for the home and heartfelt life events. In closing, I'd like to thank our dedicated associates for their ongoing efforts as well as their enthusiasm in embracing the transformation of our company. We have never had better people and capabilities in our organization to move as aggressively as we are today to satisfy our customers and position our company for long-term success.

I'll now turn the call over to Sue, who will review our quarterly results in more detail and then discuss our modeling assumptions for the year. And for all best wishes for a Merry Christmas, happy holiday season, and a healthy and happy New Year.

Sue.

Sue Lattmann -- Chief Financial Officer and Treasurer

Thank you, Steven, and good afternoon, everyone. During the quarter we experienced better than expected top-line performance benefiting from the opportunistic marketing spend and increased promotional offerings that we had planned going into the quarter, which corresponds to the higher advertising costs and lower margins we incurred this period. As the holiday season approached in our third quarter, the retail environment continued to be more promotional, potentially pulling sales forward. This justified in the short term a more aggressive approach to satisfy customers, which has continued to be necessary as we approach Christmas.

Now I will review our quarterly results in more detail.

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Our net sales were approximately $3 billion, relatively flat to the third quarter of last year, primarily due to 0.3% decrease in comp sales, offset by an increase in non-comp sales, including One Kings Lane, PMall, and new stores. Our third-quarter comp sales reflected a decrease in the number of transactions in stores, partially offset by an increase in the average transaction amount. We have previously said we believe in the integrated and seamless customer experience and, although we cannot tell you through which channel a sale was initiated, we can provide information based on where the sale was consummated. As a reminder of how we characterize certain omnichannel transactions, sales consummated on a mobile device while the customer is physically in a store location are treated as customer-facing digital sales.

Customer orders taken in-store by an associate through the Beyond Store, our proprietary web-based platform, are treated as in-store sales. Customer orders reserved online and picked up in a store are also treated as in-store sales, while purchases made online that are subsequently returned to a store are treated as a reduction in in-store sales. With that said, directionally, comp sales from our customer-facing digital channels continued to have strong growth in the quarter, while comp sales from our stores declined in the low single-digit percentage range. Gross margin for the quarter was approximately 35.2% as compared to approximately 37% of net sales in the third quarter of last year.

In order of magnitude, this decrease as a percentage of net sales was primarily due to a decrease in merchandise margin and increase in coupon expense resulting from increases in redemptions and the average coupon amount and an increase in net direct-to-customer shipping expense.

SG&A in the quarter was approximately 31.6% of net sales as compared to approximately 29.8% of net sales in the prior-year period. In order of magnitude, this increase in SG&A as a percentage of net sales was primarily due to increases in advertising expenses, technology-related expenses, including related depreciation, and payroll and payroll-related expenses. As a reminder, we anniversaried the acquisition of PMall at the end of November which did not have a meaningful impact on our third-quarter operating margin. Net interest expense was approximately $13.6 million, compared to $18.3 million in the prior-year period.

This decrease in net interest expense was primarily the result of a $4.7 million favorable change in the value of our non-qualified deferred compensation plan investments, which was fully offset in SG&A and therefore did not impact net earnings. Our income tax rate for the quarter was approximately 35.3% compared to approximately 34.5% in the prior-year period and reflected net after-tax benefit of approximately $3.3 million and $6 million respectively due to distinct tax events occurring during these quarters. Considering all of this activity, net earnings per diluted share were $0.44 for the quarter.

Now, looking to our balance sheet, we ended the third quarter with approximately $561 million in cash and cash equivalents and investment securities. Retail inventories of $3.1 billion at cost were down approximately 2% and continued to be tailored to meet the anticipated demands of our customers and are in good condition. We are pleased to see some of the early benefits from our inventory optimization initiative that Steven mentioned earlier. Capital expenditures for the first nine months of 2017 were approximately $264 million with more than 40% related to technology projects, including investments in our digital capabilities and the development and deployment of new systems and equipment in our stores.

The remaining CAPEX was primarily related to investments in our stores, our new distribution facility in Las Vegas, which began direct shipments to customers during the third quarter, and a new customer contact center in the Orlando, Florida, area. Also during the quarter we opened 14 stores and closed six stores. Share repurchases under our current $2.5 billion share-repurchase program were approximately $24 million in the quarter, representing a little over 900,000 shares and has a remaining balance of approximately $1.5 billion at the end of our third quarter. In addition, our board of directors today declared a quarterly dividend of $0.15 per share to be paid on April 17, 2018, to shareholders of record as of March 16, 2018.

Before I discuss our outlook for fiscal 2017, I want to address the topic of tax reform. First of all, we are excited and look forward to the future benefits of a lower federal corporate tax rate. Second, we are in the process of reviewing the components of the tax reform plan including, like most companies, evaluating a one-time non-cash expense related to a decrease in the value of our net deferred tax assets. We will have more to discuss on tax reform during our next quarterly conference call.

Now let's turn to our modeling assumptions for fiscal 2017, which do not include any assumptions for tax reform. Given our actual comp for the first nine months plus the fourth quarter comp to date as well as our assumptions for the remainder of the year including the critical days leading up to Christmas, comparable sales for the full year are estimated to decline in the low single-digit percentage range. As a reminder, sales of PMall will now be included in our fourth-quarter comp sales at the one-year anniversary of the acquisitions pact at the end of November. We are modeling consolidated net sales for the full year to be relatively flat to slightly positive, including a slight benefit from the 53rd week.

We continue to model gross margin deleverage for the full year, including a decrease in merchandise margin and increases in net direct-to-customer shipping expense and coupon expense. We continue to model SG&A as a percentage of net sales to deleverage for the full year, including increases in payroll and payroll-related expenses; advertising expense; the store management restructuring charges taken in the second quarter; technology-related expenses, including related depreciation; and the costs related to hurricanes Harvey, Irma, and Maria. We are modeling 2017 depreciation expense to be in the range of approximately $310 million to $320 million. We are estimating net interest expense of approximately $70 million for the full year.

We are modeling our 2017 tax rate to be higher than last year but still within the mid- to high-30s percentage range, primarily due to the impact of adopting the new share-based payment accounting standard. We also anticipate the net-after tax benefits from other distinct tax events will be lower than in 2016. Capital expenditures are modeled to be in the range of $350 million to $400 million, which remains subject to the timing and composition of projects. We continue to believe that for the foreseeable future we are plateauing at about these levels.

In addition, approximately half of the 2017 spend is planned for technology-related projects in support of our growing omnichannel capabilities. We have opened 20 new stores to date with the potential of two or more openings before year-end, and we plan to close approximately 15 stores, all of which would result in a net reduction of five Bed Bath & Beyond stores. We continue to expect our positive cash flow to fund our operations and capital expenditures as well as our quarterly dividends and the share-repurchase program, which is subject to several factors, including business and market conditions. We believe we will end the year with approximately the same or slightly higher cash and investment balances than last year.

All of this considered, we are continuing to model net earnings per diluted share for the full year to be about $3. We are currently working through our financial planning assumptions for fiscal 2018. We will provide further information related to these assumptions during our fourth-quarter conference call on April 11, 2018.

And on behalf of all this year, we wish you a safe and enjoyable holiday and a happy New Year. Adrienne, we can now open the call for questions.

Questions and Answers: 

Operator

Thank you. We will now begin the question-and-answer session. If you have a question, please press *, then 1 on your touchtone phone. If you wish to be removed from the queue, please press the # sign or the # key.

If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have an audio question, please press *, then 1 on your touchtone phone.

And our first question comes from Michael Lasser from UBS. Please go ahead.

Michael Lasser -- UBS -- Analyst

Good evening. Thanks a lot for taking my question. Can you give us a little bit more detail on the merchandise margin decline and how far are you willing to take down your gross margin in order to drive sales?

Sue Lattmann -- Chief Financial Officer and Treasurer

Sure. Hi, Michael. It's Sue. I'll take your question.

Michael Lasser -- UBS -- Analyst

Hey, Sue.

Sue Lattmann -- Chief Financial Officer and Treasurer

Hi. So, regarding merchandise margins for the quarter was your question?

Michael Lasser -- UBS -- Analyst

Yes for the third quarter and then prospectively how far are you willing to take down your gross margins in order to drive sales?

Sue Lattmann -- Chief Financial Officer and Treasurer

Sure. So, for the quarter, in order of magnitude, we did have a decline in merchandise margins, coupons, and net direct-to-customer shipping expense. Merchandise margin includes all kinds of things in order to get the goods to the stores or available for sale through the e-com site. So, it would include things such as mark on, mix of merchandise that's purchased, freight, markdowns.

So, those types of items were included in merchandise margin.

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In terms of margin stabilization, we don't know when the margin pressure will stabilize but there's many factors that go into it -- price transparency, merchandise margin items I just discussed, shrink, whatnot. So, when you consider all of that and knowing that it remains a competitive environment and that we need to continue to be, as Steven talked about, being at the right price at offering services and solutions. We compete with that as well. We continue to have, as Steven talked about, strategic focus from a gross margin enhancement perspective.

We have a team that's focused on that and always looking to continue to see how we improve in that space.

Steven Temares -- Chief Executive Officer and Board Member

Yeah, Michael, I'll also just add to that is that, like Sue said, obviously the objective is to keep our customers and to attract new customers. So pricing is a critical component and we're doing a lot today with regard to dynamically pricing and making sure that we're priced right in our store. But we work harder today, and we have a number of initiatives around meaningfully differentiated product that are the gross enhancement initiatives that we're doing and even around pricing, pricing isn't just one way. We still have opportunities within pricing to drive volume and margin dollars there as well.

So these are significant initiatives. So we're not satisfied with the fact that we should get erosion. That's not a satisfactory conclusion for us, but that is where we are today.

Michael Lasser -- UBS -- Analyst

My follow-up question is, it looks like your fourth-quarter guidance is implying, based on low single-digit decline for the full year and what you've done year to date, looks like it's implying that maybe it's down 2% to 3% comp for the fourth quarter. All the signs have been that holiday spending has been encouraging. So, are you suggesting that maybe Bed Bath hasn't been participating in what's been a better holiday season so far?

Steven Temares -- Chief Executive Officer and Board Member

Now, [Inaudible] the first and second quarters were slightly less than we expected. This quarter was slightly more, and the fourth quarter remains to be seen. So, no, we're not trying to imply anything about the quarter. There's nothing noteworthy really about the quarter today.

We have a lot of the quarter remains in front of us and we have obviously five significant days leading up to Christmas and then thereabouts, about 50% or thereabouts of our sales remain to be achieved for the quarter. So, no, that wasn't the intention.

Operator

And your next question comes from Simeon Gutman from Morgan Stanley. Please go ahead.

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Mr. Gutman, your line is open.

Simeon Gutman -- Morgan Stanley -- Analyst

Sorry about that. Can you hear me?

Operator

Yes, we can.

Simeon Gutman -- Morgan Stanley -- Analyst

OK, thanks. Sorry. Steve, what you're trying to build in terms of omnichannel and sales and transform the company, I think, is a lot bigger down the road than how the business is performing today. How do you get comfortable that you're not teaching sort of bad habits, the gross margin being down more than I guess we had expected or the Street had expected.

Sales improved but, I guess, talk about the trade-off and how you gain comfort that while this transition period is happening, you're not eroding how the customer shops you.

Steven Temares -- Chief Executive Officer and Board Member

It's a great question and there is an element of when the company gets behind something, the spigot's either open or closed. So, first of all, we have a great culture here. We're putting the customer first as certain things don't change. We try to really communicate what the objectives are and what we're trying to achieve and why we're trying to achieve them.

We've redoubled our efforts to really communicate across the company the things we're doing, why we're doing them so that people understand what we're driving today and that we try to remain consistent that they should fit into the big picture. It's a good question. So, I think it comes from really a lot of conversation and a lot of education within the company but I think that fundamentally who we are, that hasn't changed. The things that are the priorities for us in terms of the customer, that remains the same.

We should always be asking ourselves what are we doing to satisfy the customer, to exceed their expectations. So, if their expectations change, we have to be honest with it. So, if they're expecting same-day delivery, if they're expecting transparency in pricing, if they're expecting different prices online and in the stores or the same have to be things that we recognize as part of the retail environment and the customer's expectations. So, we stay grounded in that.

And, again, if we give the customer the best experience and really, truly provide them a differentiated product, the assortment that we're looking to provide them, better services and solutions, and an experience that really excels in all categories and for these heartfelt life events, then we'll be able to turn the dial on these other things.

Simeon Gutman -- Morgan Stanley -- Analyst

OK, and then my follow-up. The top-line run rate certainly improved, if you look at it on a two- or one-year basis this quarter. As you look forward, and granted we can do the math on the guidance, are you confident that any of the improvement you're seeing is from some of these initiatives gaining traction? Sue did mention that we still don't know how much of it might have been pulled forward. So, that kind of left an impression that things have slowed and, I guess, the guidance would suggest it, but curious how you're separating the internal improvement from things you're doing versus sort of the environment.

Steven Temares -- Chief Executive Officer and Board Member

So, you really have to get granular, I think. Certain things you can measure real clearly. I mean, with the AndThat initiative, you could really look at profitability, with growing the decorative furnishings business and what we're doing, there's metrics to everything we're doing so we can really measure to see if they're improving. And when we look at the inventory, we see the things that we're doing and affecting.

There are certain things, like you said, with sales that you're pulling forward or don't pull forward because of heightened activity or being a little bit more promotional. Those are good questions. Those are kind of more to-be-determined types of things but for most of these initiatives, we have very concrete metrics that we're looking at and we're very close to them because we want to be able to turn left or right based upon what we're seeing. So, it's a question, that's an individualized answer to each of the initiatives that we're working on.

Operator

And your next question comes from Steve Forbes for Guggenheim. Please go ahead.

Steve Forbes -- Guggenheim -- Analyst

Good afternoon. Maybe, to start here, can you touch on how the newly hired CTO and CIO are impacting the company's strategic business plans? And, Steve, if you can, where do you think are the greatest opportunities for them to increase the brand's customer value proposition as you go through this transformation?

Steven Temares -- Chief Executive Officer and Board Member

Well, first of all, they've been wonderful, and I say in hoping they're listening. But they truly have been. Yea, we had experience with Kevin before because Kevin, for family reasons, had left us previously but had been here. But Sanjeev and Kevin have done wonderfully well.

They communicate extremely well. Their experiences are right on point for us. Their levels of expertise, the way they manage the group, the way they interact with the company, and how they're driving collaboration within the business, how they're focusing on the big picture, and how they've been able to identify the things we really need to be working on and the things that are blockers, they been able to alleviate a lot of that. They've really been fabulous and even exceeded our very high expectations of them.

So, I'm not sure I've answered the question. If there's something specific, go ahead and let me know.

Steve Forbes -- Guggenheim -- Analyst

No, just curious. You can kind of touch on where you think the greatest opportunity for them is to improve the customer value proposition maybe over a shorter-term duration sooner rather than later. Is there something specific that they're working on that gets you excited or any color you can give?

Steven Temares -- Chief Executive Officer and Board Member

No, we've made this transformation from this Waterfall methodology to an Agile methodology that they sort of walked into. So, the value streams and the work streams that they're now leading and the way we're doing business and the standards that they're involved in and even bringing in and recognizing the talent within the group, I mean, these are all the things that they're able to leverage. So, it's very difficult for any individual to change the movement of a ship but what they've done is that they've really, I think, driven the great talent that we have within the company and a lot of the things that we've been doing, whether it's moving things out to the cloud or whether it's looking to internalize resources or to do something overseas and assets that we have, the opportunity, all these things with their experience that they've identified and really the focus that they're providing on the initiatives that we're working on to say and to help us think through these things to accelerate them, those have been the big wins. So, they're married up to a process that was well under way because we have many talented people in the organization that were really driving these things before but they really provided great leadership and the clearing of decks for us to accelerate the things we're working on and delivering much more quickly.

Operator

And your next question comes Dan Binder from Jefferies. Please go ahead.

Dan Binder -- Jefferies -- Analyst

Thanks. You covered a lot of ground today. I was just wondering if you could comment on a few things. First on store remodels, it sounds like you have a format that you think might be worth rolling back to the rest of the base once you've tested it.

I'm just curious, when you look at the store base today, what percentage of the base would you say is in need of meaningful remodel activity and how quickly can you do that? Is it part of your plan?

Steven Temares -- Chief Executive Officer and Board Member

As we move through bringing in these aspects of retail that are working within our concepts being the deep value, being the commodity product, being what we call treasure-hunt product, we would like to really roll with that. Again, when you ask me what percentage or what numbers of stores would we like to remodel, that really would be something that would be ideal to touch all those stores. It's not really realistic in terms of how we would go about it, how much lease term do we have, does it make economic sense? In some of these cases, there are exclusives that other retailers have in these centers that we might not be able to do certain things. In some cases, the stores are too small and it might not make sense as the things we're doing might not even be as productive as the things we'd be taking out.

So, all those things are part of the thought process but we've laid out a game plan that will allow us to go fairly quickly. It would be a significant capital expenditure but as it's proven over time, it would be iterated and to the degree that we're successful and we will be overseeing the results tied to other use of the capital to a great degree will determine that. So, I guess the big picture answer is that yes, I think that all the stores are candidates to be better in the terms that we've learned and what we're learning and at the same time it's unrealistic to go exceptionally quickly in addressing what is about 1,200 Bed Bath & Beyond stores.

Dan Binder -- Jefferies -- Analyst

Thanks. This is a follow-up question. Can you give us an update on your loyalty, your Beyond Plus program and then also what that extra week is worth this year in terms of dollars?

Sue Lattmann -- Chief Financial Officer and Treasurer

I can take the second part of the question regarding the extra week. It's an average week for us. There is a slight benefit, falls at the end of the quarter, again, the February quarter timeframe. I believe back in [Inaudible] goes well [Inaudible] three weeks and [Inaudible].

Steven Temares -- Chief Executive Officer and Board Member

And as far as Beyond Plus, listen, by all the metrics we're looking at it's been going well. There's many things that are important about the program that aren't there yet because we don't want to just to be about the 20% off. So, a lot of the things that we're working on, and we've rolled out some small wins to the participants, but really we're still in the test-and-learn to understand the lifetime value of the customer and we are developing the bells and whistles around the program so that the program really has deep value to the customer as opposed to just being about a discount.

Operator

And our next question comes from Seth Sigman from Credit Suisse. Please go ahead.

Seth Sigman -- Credit Suisse -- Analyst

Thanks for taking the question. I want to just follow up on pricing. So, as you analyze your pricing, can you give us a sense of where you think you have the biggest gaps today versus some of your competitors and as you think about the price investments you're prepared to make here, how widespread will they be? And then just the final piece of that, thinking about it in relation to the existing couponing strategy, can you help us just balance those two different strategies? Thank you

Steven Temares -- Chief Executive Officer and Board Member

With regard to the pricing, we're dynamically pricing online today and we're changing prices throughout the day on thousands of items. I shouldn't say a number, but I think it's [Inaudible]. Anyway, so it's something that we do every day and it's something that we need to be at the right price and the right value. With stores obviously it's more difficult to be changing back and forth but generally speaking, we tend to be fairly right on price and we are committed over the next months to come to make sure we are, and there's a number of initiatives that will allow us to be closer to dynamically pricing in the stores in the sense that if not every item is priced, we would be able to change more quickly.

If we would have no signage that permitted an area pricing as opposed to every item pricing, that might be easier. If we have the ability to really to identify and to narrow down the right price so that it's something between $16.99 and $17.49 online, if we were $17.19 or $16.99 that we could stay there and be comfortable that we're at the right price. So, that initiative in the stores, which in general is more difficult to tackle, we will be aggressively getting there but we don't think we're that far off. Again, it's funny because if you look at all these pricing studies, they're really beneficial for us, but some [Inaudible] look at one and it says there's 100 items and we're priced wrong.

Some people say we're priced right on 70. Some say we're priced wrong on 70. So, we take a look at it and [inaudible] we give it to our pricing group and they go through the odds and, again, it turns out that there's only 32 items that really match and out of the 32, some of it is secondary goods that we're looking at. It's not really comparative goods.

Now, does the customer understand that? That's a good question but we might be wrong on seven. So, some study might come and suggest that we're way off but when we look at it internally we're not. Then what's the customer seeing? So, again, those are really important because in most cases we communicate better -- why is it a different product? have we really meaningfully differentiated than the goods we're looking at? So, that's all part of the customer understanding. If they are looking at our one set of towels, are they looking at the same towel or a different towel? And why is it a different towel? But we're really not that far off in our line, and we're basically we're there and in the stores there's product that is differentiated, and there's product that because of the vendor base that [Inaudible], so there's price managed by the vendors and then there's prices that we could be wrong on at any given point in time but we want to be right on that as well.

So, I think that in some cases there's a perception that's not matching up with reality but the perception is reality. So, we better change that perception.

Seth Sigman -- Credit Suisse -- Analyst

That's helpful. And just a follow-up on one of your points, are you working with the vendors any differently than in the past to ensure that the value is where it needs to be and that you don't necessarily have to take the full impact from these investments where you're going to make them? Thanks.

Steven Temares -- Chief Executive Officer and Board Member

I think that there's always a heightened awareness when things are changing dramatically and there's great transparency in pricing but our vendor relationships are critically important to us. We talk about some of the things with deep value in the stores. There are opportunities to partner with our vendors to create it. There are opportunities, whether we're looking at transitioning goods.

There's an opportunity to do great buys or whether we decide to work shorte. But those vendor relationships are critical to us and most importantly really to drive with those vendors differentiated products so it's not about price but I would hope that the vendors will tell you, especially if they're in the holiday mood, that their relationship with us is a good one and that we have a common goal and that is to create differentiated product, great value to the customer and really drive the sales of their products.

Operator

And as a reminder, if you have a question, please press *, then 1 on your touchtone phone. If you wish to be removed the queue, please press the # sign or the # key. And our next question comes from Matt Fassler from Goldman Sachs. Please go ahead.

Matt Fassler -- Goldman Sachs -- Analyst

Thanks so much and good afternoon. I have two questions and my first is also on pricing but specifically, Steve, you made mention of the price match offer and the goal you have, I think, and reemphasize it perhaps, remarketing it to the customer. So, can you talk about what you have in mind to make that price match impression stronger?

Steven Temares -- Chief Executive Officer and Board Member

You're right. That's exactly what we said and that's what we intend to do. The execution of it, I think, is messaging in the stores, most importantly, is our associates really being committed to it and understanding it, like I said, the spigot's open or closed, and people think that they're doing the company a service because there's a certain item that might be on a website that they're not aware of, something doesn't seem right to them. Again, those are part of the issues but, I think, in part, it's that as we differentiate product prices online even ourselves from what are in the stores.

It's critically important that everybody understands that we match competitors' prices. And when you look at other retailers who have done well, when you look at what's at Best Buy, I mean, there's models out there but people have done a great job of messaging the price-match promise. And so, I think that messaging that we will do with signage and opportunities there, but this really comes down to our execution in the stores really of our associates really believing and wanting to stand for it and being comfortable with that. So, that's a significant component of it.

Matt Fassler -- Goldman Sachs -- Analyst

My follow-up question relates to tax reform, and for better or worse you might be the first company holding a conference call since this was actually signed into law, and the question I would ask is is there anything that you all have wanted to do as a company where you have felt constrained by capital or by your cost structure where the windfall associated with this in terms of liquidity and relief in the federal tax rate but enabled you to move even more aggressively? And you've been quite aggressive in what you've done.

Steven Temares -- Chief Executive Officer and Board Member

Generally speaking, we've not been limited by capital. However, there are so many initiatives today that we're trying to accelerate and we brought in a lot of talented people, and we want to go faster and it's critically important for us to go faster and we have created an environment where we could fail faster than we've ever done before and test and learn and move forward. So, we already now are in an investment phase. So, the capital to us is really a good thing and, again, our primary focus is investing in our company.

So, we're very favorably disposed toward this opportunity that this is presenting for us.

Operator

And our next question comes from Kate McShane from Citi. Your line is open.

--

Kate, your line is open.

Janet Barth -- Vice President of Investor Relations

Next question, Adrienne.

Operator

Our next question is from Matt McClintock from Barclays.

Matt McClintock -- Barclays -- Analyst

So, good afternoon, everyone. Hey, Steve, just so much talk about price and pricing and all of that. I was wondering, higher-level, taking up to the next level, what is that the consumer actually wants because we look a lot at Amazon, we talk a lot about Amazon but it doesn't seem like they're competing as much on price as they used to and it seems like some of the better-performing retailers today are competing more on service. So, from your perspective today, and I know this question changes in this business [Inaudible] constantly, but from your perspective today, what is it the consumer actually wants?

Steven Temares -- Chief Executive Officer and Board Member

Well, I think that there is not one answer to that because even, of course, the things that we sell and the categories we sell, obviously, we want to excel when it comes to the home and these heartfelt life events and we really want to be trusted as the expert. So, for us, really bringing new product to market and having differentiated product is critically important to us plus to really have the better services and solutions as we look at the registries, as we look at the college, the new movers, as we look at what we're trying to do in decorating, when we look at the experience we're giving the customer, we want it to be personalized, we want it to be targeted to our customer, we want to give them a better digital experience. So, again, that's critically important just for them to think of us first because they're wedded to us, cause we're providing inspiration for them, that we're slightly ahead of them. We talk about in our baby realm the CRM programs that we're dealing.

Internally we refer to it is as that book "What to Expect When You're Expecting." We expect to be that. We expect to be slightly ahead of the customer. We want to be able to suggest things that they're going to need before they realize it. So, those are important to us.

We want to be the expert. So, that's critically important. So, we want to have a voice. Again, that's why our catalogs are so important.

That's why showing the entire room is so important. That's why decorative furnishing is so important. All these things to really be the expert for the customer to look at us as a voice, as somebody they could trust. That's why when we [Inaudible] things we're doing in our registry to get a person when you call that's an expert in registry, the things that we're doing with our checklist and suggesting things and what we're doing, we're targeting personalization and all these things is for the customer to recognize that we provide value to them, that we're an added resource.

That's why they're coming to us. It's not just about price. At the same time, we have to provide. We're not going to accept providing a lesser value than somebody else.

Matt McClintock -- Barclays -- Analyst

And then if I could follow up on that same question is at the end of the day I feel like if I wrote you a blank check, you could spend a lot of money on a lot of things that would provide value to the customer but how do you think about putting a capital allocation framework over that, right? How do you know that if you spend more money and your renovate some of your Bed Bath & Beyond stores that you're going to get the return over a period of time of five to seven to 10 years or whatever it is that you do [Inaudible] analysis on? How do you get comfort with that in today's environment?

Steven Temares -- Chief Executive Officer and Board Member

Well, first of all, we have to recognize the environment and how quickly it's changing. First of all, you have to build it out in a way that you test and learn. You have to build it out in a way that gives you flexibility so that if you're not sure that you're making sure you have a lot of headroom so that if you're wrong by 5% or 10% that you've [Inaudible] yourself that you have the returns and the financial returns that you're looking for but the other thing is that that's always been the case, and nobody wants to hear it, but we've been doing this, I've been here for 26 years that we've been running the business, it's been fairly successful. But we look at a business in an industry that if you were around 26 years ago, you would say don't enter, you would say the department stores all walked away from it.

You look at Linens and Things which [Inaudible], Home Express, Pacific, you've got that JC Penney [Inaudible] brands [Inaudible]. All these people are out of business. They didn't do it. We did the same thing.

We made some of the best returns in retail. So, again, a lot of these things, it's an art, it's not a science. It's about people, it's about judgment, it is about intuitions and then making tracks and not following on the people's past by learning, being informed from the decisions we make. This is what we do and we're committed to being great.

And one thing I would tell you again and again is that we've never had more opportunity in the company, we have never had better people in the company and every day, I'll tell you, a week goes by and we look at what we did and we have been growing both in terms of opportunity and people and you couldn't be more excited. So, yea, there's judgments involved and most of these things, we will be able to test and learn. And again, we should leave ourselves enough room that if they're wrong, we can turn left or right and still be happy with the result and that's the way we move. We've never been somebody that bets the house on something but we've always tried to make deductive, systematic logical decisions.

We've always tried to measure everything we do. That's how we've grown the company but now we have to do those things quicker than ever. So, it's a good question but those rules of engagement are significantly the same and it still remains significantly an art married to the quantitative facts that we have and we're betting on us big time.

Operator

And as a reminder, to get back to the queue, please press *, then 1 on your touchtone phone and your next question is from Laura Champine from Roe Equity.

Laura Champine -- Roe Equity Research -- Managing Director

Thanks. Sue, I wanted to get a better sense of your comments on pull forward of demand in the Q3. Do you see it changing in the cadence of sales in December compared to what you saw in prior years?

Sue Lattmann -- Chief Financial Officer and Treasurer

What I meant by that was that we had an opportunistic marketing spend planned in Q3, which we executed upon that and we saw some good results. Like I said, we potentially may have pulled forward some sales. However, we have five critical days left within Christmas leading up to that and the shopping pattern is different this year compared to prior years. Christmas falls on a Monday.

So, therefore, there's a full Saturday shopping. So, we're really not going to know if we potentially did pull sales forward or not until we have the full picture. We will be able to share more of that with you in the fourth quarter.

Laura Champine -- Roe Equity Research -- Managing Director

Got it. And then, secondly, your share buyback this quarter is less than it has been. Does that just reflect seasonal cash needs or is there something else driving that lesser buyback rate?

Sue Lattmann -- Chief Financial Officer and Treasurer

Well, first of all, our board reviews our capital structure on a regular basis and our cash flow remains strong. I think we've discussed before the priorities of how we take a look at using our cash. First, we look at investing back into the business. Then we take a look at acquisitions.

We obviously have our dividend program and then any excess cash could be used for share repurchases. Keep in mind, I did mention that we want to maintain the same or higher cash balance at the end of the year. So, that factors also into the capital allocation structure and how we're approaching it for this quarter.

Operator

And the next question is from Peter Benedict from Baird. Please go ahead.

Peter Benedict -- Baird -- Analyst

All right, guys. Thanks for taking the question. Just on the arm of 12 stores that are going to be the test stores remodeling [Inaudible], how is the margin profile of those categories, the deep value, the more commodity stuff as well as treasure hunt as they compare to maybe the company average? And then what categories are being replaced or pared back to make room for those?

Steven Temares -- Chief Executive Officer and Board Member

The margin opportunities run the gamut. A lot of that is differentiated product when you look at our seasons department, the ability to buy right and to bring in our treasure-hunt product that is not continuity that's in and out a huge opportunity for us but most importantly, just so that we paint a complete picture, the idea is not that we're going to be doing less Bed Bath & Beyond business. The idea is that we will be generating additional foot traffic so that we could shrink today the Bed Bath & Beyond assortment in most stores and be able to present even more product than we currently present when we don't carry the back stock in certain categories. So, we're able to show more, carry less, now have the associates have tools like tablets to approach our customers, interact with them and conduct beyond store sales with them they can see and touch more product.

So, again, the idea is to be able to shrink the core assortment in terms of back stock, show more, carry less, interact with the customer more often and take advantage of the additional foot traffic we will be seeing from the deep value that we will be presenting and the treasure hunt product.

Peter Benedict -- Baird -- Analyst

OK, that's helpful. Thank you. And then just on a couple of mix questions, can you give us a sense of maybe what the e-commerce was as a percentage of sales in the quarter? And then what are consumable sales at this point? You've been doing that for a while but what percentage of sales could you give us that consumables are for the company? Thank you.

Sue Lattmann -- Chief Financial Officer and Treasurer

I don't believe, Peter, that we shared what the e-com mix was for the particular quarter. We did indicate that we continued to see strong growth in customer-facing digital channels. And the second part of your question was on consumables?

Peter Benedict -- Baird -- Analyst

Yeah, just curious what share of sales that has gotten to at this point because it sounds like it continues to grow?

Sue Lattmann -- Chief Financial Officer and Treasurer

Again, that's not something that we've shared in the past but we continue to obviously sell consumables and we're pleased.

Peter Benedict -- Baird -- Analyst

But I think in the big picture that we are talking about that we bring in now food and beverages, we increased health and beauty as we change, what we're able to do in downsizing assortments, health and beauty, bring it into more stores but we see the opportunity within the commodity product you dive foot traffic.

Steven Temares -- Chief Executive Officer and Board Member

Yea, absolutely.

Janet Barth -- Vice President of Investor Relations

This is Janet. This is a reminder. Last quarter we had given that statistic of roughly 15% on an annualized basis is what our customer-facing digital channels represent. That was not in any particular quarter but we were trying to say that's kind of where it's tracking on an annualized basis.

Peter Benedict -- Baird -- Analyst

All right, good. Thanks for that. OK, thanks, guys. Good luck.

Operator

And your next question comes from Greg Melich from [Inaudible]. Please go ahead.

Greg Melich -- MoffettNathanson -- Analyst 

Hi, thanks. It's Greg from MoffettNathanson. I guess I had two questions but I think it's really one, trying to get our arms around digital. I think last quarter you mentioned digital had been growing 20% for something like three straight years.

Is that still the case or has it gotten to a scale now where that's actually still a strong growth, starting to slow a little bit? Then I have a follow-up related.

Steven Temares -- Chief Executive Officer and Board Member

What did we say?

Sue Lattmann -- Chief Financial Officer and Treasurer

We said that we had strong growth in customer-facing digital channels. We did answer it.

Steven Temares -- Chief Executive Officer and Board Member

Yes. So, it's been strong in actually both the digital experience in this quarter and the in-store experience was as strong this quarter.

Greg Melich -- MoffettNathanson -- Analyst 

So, it's better than 20% still.

Steven Temares -- Chief Executive Officer and Board Member

Good enough.

Greg Melich -- MoffettNathanson -- Analyst

OK, great. And then you talked a lot about shipping costs and how that does to gross margin. Could you remind us how you're actually fulfilling online direct orders? And, I think, the Las Vegas facility, remind me is that pure online or how are you actually fulfilling these orders or is that shipping cost just a simple more free shipping or is there something else going on there from a cost side that could be impacting the margin?

Steven Temares -- Chief Executive Officer and Board Member

We fulfill the direct-to-customer shipments in one of three ways. One is out of one of our distribution centers. The second, we have a large and growing vendor direct-to-customer program online. And then lastly, all our stores have the ability to ship to our customers.

We have certain stores that we call our regional fulfillment stores that have more capabilities than others and staffing but we are able to ship from any of our stores to our customers.

Operator

And our next question comes from Curtis Nagle from Bank of America. Please go ahead.

Curtis Nagle -- Bank of America -- Analyst

Good evening. Thanks very much for taking my question. Sue, I just wanted to go back under the new store format. I guess just what are your thoughts on is there potentially any risk from perhaps losing focus or cohesion with adding some of these, I guess, more value-based products in the stores? Are you testing anything else that could go in? Just curious, your thoughts on that.

Steven Temares -- Chief Executive Officer and Board Member

No, we don't have a concern about losing focus. Actually, we're resourcing this with significant resources to make sure that we accomplish our objectives and, again, I think the focus is on the deep value of the commodity product, deep value across all our categories but significantly we see it in health and beauty care in what we do today. We see it with the opportunity for food and beverage but, again, across all the categories. And when we look at the treasure-hunt experience, we would say the seasonal department and the furnishings and decor is significant opportunities for us.

So, again, these are things that are working within the Bed Bath & Beyond parent company. These aren't things that we don't have great experience with. So, I'm not sure if I answered the question, Curtis. If not, point me in another direction.

Curtis Nagle -- Bank of America -- Analyst

No, that's a fair answer. I appreciate it and good luck with the rest of the quarter.

Steven Temares -- Chief Executive Officer and Board Member

OK, thank you.

Operator

And your next question comes from Seth Basham from Wedbush Securities. Please go ahead.

Seth Basham -- Wedbush Securities -- Analyst

Hi, thanks and good evening. My first question is on CAPEX. You talk plateauing CAPEX but as you think about next year and your investments in store remodels, would we still expect CAPEX to be plateauing?

Sue Lattmann -- Chief Financial Officer and Treasurer

We're working through our fiscal '18 modeling assumptions now but what we've seen is that we've been around the $350 million, $400 million mark for the past few years and that's what we saw for the foreseeable future. Obviously, any impact in terms of new store formats and whatnot would be baked into the modeling assumptions for next year.

Gene Castagna -- Chief Operating Officer

Yea, there's puts and takes every year. This year we opened up a new call center, we opened up a new distribution in Las Vegas, which we probably won't have next year but then we'll have remodels come in. So, they tend to balance out but we will give more of an update in April.

Seth Basham -- Wedbush Securities -- Analyst

That's helpful. And, secondly, just thinking about the guidance implied for the fourth quarter. Obviously, it's a little bit lower than you were expecting before and the bottom line. That change the margin outlook, is that due to the competitive environment or is there any acceleration on your spending on various initiatives as well baked in?

Gene Castagna -- Chief Operating Officer

Well, on the margins and on the baked-in, we didn't give specific guidance for the fourth quarter but we are cognizant of the trends that have been existence and we try to go to build that into what we're forecasting for the future. And the same thing with the initiatives, I mean, the initiatives are under way. We know their costs. So, all that's factored in when we're estimating what we're going to have for the year.

Seth Basham -- Wedbush Securities -- Analyst

OK, thank you.

Operator

And our next question comes from Adrienne Yih from Wolfe Research. Please go ahead.

Adrienne Yih -- Wolfe Research -- Analyst

Yes, thank you. Good afternoon. Steve, I was wondering if you can give us an update on the kind of home vignettes and the small furniture that you had launch last October, I believe, whether you sent out another catalog and if so, how is that going? And then for Sue, can you give us any direction on SG&A dollar growth for 2018? Should we at least expect it to be up in dollars but just not as much as 2017? Thank you very much.

Steven Temares -- Chief Executive Officer and Board Member

Can you clarify, up or down in what? Is that CAPEX higher or lower?

Adrienne Yih -- Wolfe Research -- Analyst

Oh, sorry, SG&A dollar growth for 2018.

Sue Lattmann -- Chief Financial Officer and Treasurer

As I said, we're working through the estimates for fiscal '18. I'd be able to provide that more for you at the end of this year as we provide our assumptions really for the full year. I don't have these figures for you to be able to share that for '18.

Adrienne Yih -- Wolfe Research -- Analyst

OK, fair enough, but the characterization, it remains an investment-based?

Sue Lattmann -- Chief Financial Officer and Treasurer

Yeah it remains investment-based.

Adrienne Yih -- Wolfe Research -- Analyst

OK, thank you.

Steven Temares -- Chief Executive Officer and Board Member

And the question about decorative furnishings. I'm not sure I got it all but for catalogs, we're continuing down the path of the catalog. We have in the last one more than half the merchandise in the catalog. It's not things that we carry in the stores and we're showing in the inspirational room settings and that we were growing the numbers of our customers that are seeing the catalogs.

So, we're expanding that. In terms of the stores, the objective is to make sure that each stores, as we open going forward, whether it be a renovation or a move of a store or whether it be a new store in those few cases, new to a market, I mean, that we express that we're in this business. So, we've done a number of things that are test-and-learn in terms of showing your rooms, product. I'm not sure, Adrienne, where you are but if you have the opportunity to go East Hanover on Route 10 in New Jersey, there's the latest iteration opened last week, two weeks ago now of that and it's already obsolete because we're learning a lot from it, you'll see something that's decidedly different but the objective is that we've got to get to at least neutral, where people walk into our stores and they say we're not in the business, that's not good.

They have to walk into the stores and say, "Oh, they are in the furniture business" or "they might be in the furniture business" but we can't have them walk into our stors thinking we're not in the furniture business. That will be expressed in our stores going forward.

Adrienne Yih -- Wolfe Research -- Analyst

OK, thank you very much. Best of luck and happy holidays.

Steven Temares -- Chief Executive Officer and Board Member

You too. Thank you.

Operator

And our last question comes from Cristina Fernandez from Telsey Advisory Group. Please go ahead.

Steven Temares -- Chief Executive Officer and Board Member

Adrienne, at one point, I think Kate McShane was trying to get through when we had technical issues. I'm not sure if she's the listening or if she's available. We did not get to speak to her.

Operator

Kate, please press *1 to reenter the queue. Kate McShane, press *1.

Steven Temares -- Chief Executive Officer and Board Member

She might not be there. I just noted that because I think, Adrienne, that was also bumped but then she came back. But, OK, Cristina, let's go.

Cristina Fernandez -- Telsey Advisory Group -- Analyst --

Yeah. Hi, good evening. I wanted to ask about your delivery and shipping capabilities. Can you update us where are you in being able to reach the customer in two days across the country? And in addition to price match, are you considering also a faster delivery promise? And also what are your thoughts on the same-day delivery.

Thanks.

Steven Temares -- Chief Executive Officer and Board Member

Yes, I think two days, we're in excess of 90% capability but there will be additional facilities that we're looking at and we're looking to optimize or pulls and consolidation centers and own buildings to make sure that we are able to do better. With regard to same-day delivery, I think we're in six or seven markets, rolling out another seven markets in January. So, that's something that we feel, again, competitively that we need to be doing. And the middle question was?

Sue Lattmann -- Chief Financial Officer and Treasurer

It was on price match and were we seeing a faster delivery [Inaudible].

Steven Temares -- Chief Executive Officer and Board Member

Yea. So, again, we're looking at that because we do have a lot of merchandise that we know that's in stock and where it is, and we're able to get it to the customer quicker. So, the question becomes how do we denote that, say, in the digital experience and the customer knows that it could be delivered quicker and now we can get credit for it.

Cristina Fernandez -- Telsey Advisory Group -- Analyst

Thank you. And then, as a follow-up, any thoughts on speeding up the openings of some of your smaller concepts like [Inaudible], AndThat, or accelerating their addition into the existing Bed Bath & Beyond stores?

Steven Temares -- Chief Executive Officer and Board Member

The first thing, again, is that we're taking the best of these, everything under our umbrella and we're trying to present it to the customer in a sensible way. So, whether that means a freestanding store, a store within a store or taking some departments and aspects of them in a store. So, all those things are happening. What we are seeing is that we're seeing on the one hand that foot traffic is challenged as the world moves to digital.

That's one thing that we do see but at the same time we do see opportunities with these concepts that are not in markets today and that is the importance of having a bricks-and-mortar omnichannel experience for the customer, whether it's that "buy online, pick up in store," whether it's appointment schedule, whether it's return to us things that are bought online in-store, or it's the benefit we get in the marketing because people see the name plate and they go right online or whether they shop you in a store and then go back and buy online. So, there is that opportunity for these concepts that don't have presence in these markets and we are seeing the occupancy cost opportunities come about as those retailers go away and there's pressure in the landlord community to fill space. So, all those things will dictate the rate that we go and that's one of the questions asked earlier, how do we measure these things and how do we know what's the right thing and how do we not get caught five years from now or seven years from now. This goes to the assumptions about will foot traffic continue to decline and at what rate? Our expense structure, what will happen to the wages in these markets? What will we be doing in the stores that will be automated as opposed to what can't be today or what isn't today? And what are we doing with the checkout experience? All these things will dictate the rate in which we open stores going forward but again, we don't have religion about stores or digital experience.

We have religion around satisfying our customer and exceeding their expectations. So, we do believe that having a bricks-and-mortar presence gives us an additional opportunity to do that done correctly.

Operator

And this concludes the question-and-answer session. I'll turn the call back over to Janet Barth for final remarks.

Janet Barth -- Vice President of Investor Relations

Thank you, Adrienne, and thank you all for joining us today. We look forward to speaking with you again on April 11, when we report our fiscal 2017 fourth-quarter and full-year results. Have a good night.

Operator

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Duration: 76 minutes

Call Participants:

Janet Barth -- Vice President of Investor Relations

Steven Temares -- Chief Executive Officer and Board Member

Sue Lattmann -- Chief Financial Officer and Treasurer

Michael Lasser -- UBS -- Analyst

Simeon Gutman -- Morgan Stanley -- Analyst

Steve Forbes -- Guggenheim -- Analyst

Dan Binder -- Jefferies -- Analyst

Seth Sigman -- Credit Suisse -- Analyst

Matt Fassler -- Goldman Sachs -- Analyst

Janet Barth -- Vice President of Investor Relations

Matt McClintock -- Barclays -- Analyst

Laura Champine -- Roe Equity Research

Peter Benedict -- Baird -- Analyst

Greg Melich -- MoffettNathanson -- Analyst

Curtis Nagle -- Bank of America -- Analyst

Seth Basham -- Wedbush Securities -- Analyst

Gene Castagna -- Chief Operating Officer

Adrienne Yih -- Wolfe Research -- Analyst

Cristina Fernandez -- Telsey Advisory Group -- Analyst

More BBBY analysis

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