SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the fiscal year ended February 26, 2005

Commission File Number 0-20214

BED BATH & BEYOND INC.

(Exact name of registrant as specified in its charter)

New York		11-2250488
(State of incorporation)		(IRS Employer Identification No.)

650 Liberty Avenue, Union, New Jersey 07083
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: 908/688-0888

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
None		None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock (par value $ 0.01 per share)

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act).
Yes ý No o

As of August 28, 2004, the aggregate market value of the common stock held by non-affiliates (which was computed by reference to the closing price on such date of such stock on the NASDAQ National Market) was $10,709,706,013.*

The number of shares outstanding of the issuer’s common stock (par value $0.01 per share) at March 24, 2005: 294,106,233.

Documents Incorporated by Reference

Portions of the Registrant’s definitive proxy statement for the 2005 Annual Meeting of Shareholders pursuant to Regulation 14A are incorporated by reference in Part III hereof.

* For purposes of this calculation, all outstanding shares of common stock have been considered held by non-affiliates other than the 15,109,927 shares beneficially owned by directors and executive officers, including in the case of the Co-Chairmen trusts and foundations affiliated with them. In making such calculation, the Registrant does not determine the affiliate or non-affiliate status of any shares for any other purpose.

PART I

Unless otherwise indicated, the term “Company” refers collectively to Bed Bath & Beyond Inc. and its subsidiaries as of February 26, 2005. The Company’s fiscal year is comprised of the 52 or 53 week period ending on the Saturday nearest February 28. Accordingly, fiscal 2004, 2003 and 2002 represented 52 weeks and ended on February 26, 2005, February 28, 2004 and March 1, 2003, respectively. Unless otherwise indicated, all references herein to periods of time (e.g., quarters and years) are to fiscal periods.

ITEM 1 - BUSINESS

Introduction

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) operate specialty retail stores nationwide, including stores of Bed Bath & Beyond (“BBB”), Harmon Stores, Inc. (“Harmon”) and Christmas Tree Shops, Inc. (“CTS”). The Company believes it is the nation’s largest operator of stores selling predominantly better quality domestics merchandise and home furnishings.

BBB stores are almost exclusively of a “big box” format. BBB offers a wide assortment of merchandise at everyday low prices that are substantially below regular department store prices and generally comparable to or below department store sale prices. BBB’s domestics merchandise line includes items such as bed linens, bath accessories and kitchen textiles, and BBB’s home furnishings line includes items such as cookware, dinnerware, glassware and basic housewares. BBB believes that it offers a breadth and depth of selection in most of its product categories that exceeds what is generally available in department stores or other specialty retail stores and that this enables it to offer customers the convenience of one-stop shopping for most household items.

As of February 26, 2005, BBB operated 660 stores in 44 states and one territory: Alabama (8), Arizona (12), Arkansas (3), California (75), Colorado (16), Connecticut (12), Delaware (1), Florida (51), Georgia (19), Idaho (3), Illinois (29), Indiana (14), Iowa (6), Kansas (7), Kentucky (5), Louisiana (10), Maine (2), Maryland (15), Massachusetts (14), Michigan (27), Minnesota (9), Mississippi (3), Missouri (10), Nebraska (2), Nevada (5), New Hampshire (6), New Jersey (28), New Mexico (3), New York (42), North Carolina (18), North Dakota (2), Ohio (26), Oklahoma (4), Oregon (8), Pennsylvania (25), Rhode Island (3), South Carolina (12), Tennessee (14), Texas (55), Utah (9), Vermont (1), Virginia (21), Washington (15), Wisconsin (7), and Puerto Rico (3). These stores principally range in size from 20,000 square feet to 50,000 square feet, with some exceeding 80,000 square feet, and carry BBB’s full line of both domestics merchandise and home furnishings.

CTS is a retailer of giftware and household items selling a broad assortment of domestics merchandise and home furnishings at value prices in many categories including home décor, giftware, housewares, food, paper goods and seasonal products. As of February 26, 2005, CTS operated 26 stores in 7 states.

Harmon is a health and beauty care retailer, which operated 35 stores in 3 states as of February 26, 2005.

History

The Company was founded in 1971 by Leonard Feinstein and Warren Eisenberg, the Co-Chairmen of the Company. Each has more than 45 years of experience in the retail industry.

The Company commenced operations in 1971 with the opening of two stores, one in New York and one in New Jersey. These stores sold primarily bed linens and bath accessories. In 1985, the Company introduced its first store carrying a full line of domestics merchandise and home furnishings. The Company began using the name “Bed Bath & Beyond” in 1987 in order to reflect the expanded product line offered by its stores and to distinguish its stores from conventional specialty retail stores offering only domestics merchandise or home furnishings. In March 2002, the Company entered the health and beauty care market with the acquisition of Harmon and in June 2003, the Company added to its domestics merchandise and home furnishings market offerings with the acquisition of CTS.

The Company has been engaged in an ongoing expansion program involving the opening of new BBB stores (including 85 in fiscal 2004, 85 in fiscal 2003, and 95 in fiscal 2002) and the expansion and relocation of existing BBB stores (including one in fiscal 2004, two in fiscal 2003 and two in fiscal 2002). As a result of its expansion program, BBB’s store space has increased from approximately 917,000 square feet at the beginning of fiscal 1992 to approximately 21,691,000 square feet at the end of fiscal 2004. The Company intends to continue its expansion program and currently plans to open new BBB, Harmon and CTS stores in fiscal 2005.

Merchandising and Marketing

BBB’s strategy for merchandising and marketing is to offer better quality merchandise at everyday low prices; to maintain a breadth and depth of selection in its product categories that exceeds what is generally available in department stores or other specialty retail stores; to present merchandise in a distinctive manner designed to maximize customer convenience and reinforce customer perception of wide selection; and to emphasize dedication to customer service and satisfaction.

BBB stores primarily offer domestics merchandise and home furnishings, which include:

Domestics Merchandise

• bed linens and related items: sheets, comforters, duvet covers, bedspreads, quilts, window treatments (such as curtains and valances), decorative pillows, blankets, dust ruffles, bed pillows and mattress pads.

• bath items: towels, shower curtains and liners, waste baskets, mirrors, hampers, robes, slippers, scales, bathroom rugs, wall hardware and other bath accessories.

• kitchen textiles: tablecloths, placemats, cloth napkins, dish towels and chair pads.

Home Furnishings

• kitchen and tabletop items: cookware, cutlery, kitchen gadgets, dinnerware, bakeware, flatware, drinkware, serveware, glassware, food storage containers, tea kettles, trash cans and cleaning supplies.

• fine tabletop and giftware: formal dinnerware china, fine crystal stemware and barware, crystal giftware, metal giftware, flatware, decanters and carafes, and decorative vases and bowls.

• basic housewares: storage items, closet-related items (such as hangers, organizers and shoe racks), general housewares (such as brooms, garbage pails and ironing boards), lifestyle accessories (such as lamps, chairs, ready to assemble furniture, furniture covers, accent rugs, and clocks) and small electric appliances (such as blenders, food processors, coffee makers, vacuums, irons, toaster ovens, hair dryers, heaters and humidifiers).

• general home furnishings: gift wrap, candles, personal care products (such as soaps, lotions and other health and beauty care items), picture frames, wall art, juvenile items (such as toys and children’s books), artificial plants and flowers and seasonal merchandise (such as summer and holiday-related items).

BBB, on an ongoing basis, tests new merchandise categories and adjusts the categories of merchandise carried in its stores and may add new departments or adjust the size of existing departments as required. BBB believes that the process of adding new departments and expanding or reducing the size of various departments in response to changing conditions is an important part of its merchandising strategy.

BBB’s merchandise consists primarily of better quality merchandise typically found at better department stores. For those product lines that have brand names associated with them, BBB generally offers leading brand name merchandise (including Aero, All-Clad, American Pacific, Braun, Calphalon, Conair, Croscill, Cuisinart, J.A. Henckels, Homedics, KitchenAid, Krups, Laura Ashley, Lenox, Mikasa, Nambe, Nautica, Nicole Miller, Noritake, Oxo, Portmeirion, Rowenta, Rubbermaid, Springs, Villeroy & Boch, Wamsutta, Wedgewood, Westpoint Stevens and Yankee Candle).

BBB offers a breadth and depth of product selection that enables customers to select among a wide assortment of styles, brands, colors and designs within each of BBB’s major product lines. BBB also generally maintains consistent in-stock availability of merchandise in order to reinforce customer perception of wide selection and build customer loyalty.

Pricing Policy

BBB’s pricing policy is to maintain everyday low prices that are substantially below regular department store prices and generally comparable to or below department store sale prices. BBB regularly monitors price levels at its competitors in order to ensure that BBB’s prices are being maintained in accordance with its pricing policy. BBB believes that the application of its everyday low price policy is essential to maintaining the integrity of this policy and is an important factor in establishing its reputation among customers.

Because BBB has an everyday low price policy, BBB does not run sales. However, BBB uses periodic markdowns and semi-annual clearances for merchandise that it has decided to discontinue carrying. In addition, BBB’s full-color circulars and mailing pieces include a coupon, which may be redeemed at the point-of-sale. BBB also honors competitor coupons.

Merchandise Presentation

BBB has developed a distinctive style of merchandise presentation. In each store, groups of related product lines are presented together in separate areas of the store, creating the appearance that a BBB store is comprised of several individual specialty stores for different product lines. A “racetrack layout” that runs throughout the store facilitates moving between areas and encourages customers to shop the entire store. BBB believes that its format of merchandise presentation makes it easy for customers to locate products, reinforces customer perception of wide selection and communicates to customers that BBB stores offer a level of customer service generally associated with smaller specialty stores.

Merchandise is displayed in each of these separate areas from floor to ceiling (generally 10 to 14 feet high) and, in addition, seasonal merchandise and impulse items are prominently displayed in the front of the store. BBB believes that its extensive merchandise selection, rather than fixturing, should be the focus of customer attention and, accordingly, typically uses simple modular fixturing throughout the store. This fixturing is designed so that it can be easily reconfigured to adapt to changes in the store’s merchandise mix and presentation. BBB believes that its floor to ceiling displays create an exciting and attractive shopping environment that encourages impulse purchases of additional items.

Customer Service

The Company places a strong focus on customer service, with an emphasis on responding to customer feedback, and has made this a defining feature of its corporate culture. All managers provide leadership by example in this area by regularly spending time assisting customers on the selling floor.

The Company seeks to make shopping at its stores as pleasant and convenient as possible. Each area within a BBB store is staffed with knowledgeable sales associates who are available to assist customers in choosing merchandise, to answer questions and to resolve any issues that may arise. In order to make checking out convenient, checkout lines are continually monitored and additional cashiers are added as necessary in order to minimize waiting time. Most BBB stores are open seven days (and six evenings) a week in order to enable customers to shop at times that are convenient for them.

BBB’s website, www.bedbathandbeyond.com, which customers can generally access 24 hours a day, seven days a week, offers a broad range of online services and features, including online shopping and gift registry. BBB believes that its E-Service efforts have been well received by its customers.

Advertising

In general, the Company relies on “word of mouth advertising” and its reputation for offering a wide assortment of quality merchandise at everyday low prices, supplemented by the use of paid advertising. The Company mails full-color circulars and other advertising pieces as its primary vehicles of paid advertising. Also, to support the opening of new stores, the Company uses “grand opening” full-color circulars and newspaper advertising. The Company believes that its ability to rely primarily on “word of mouth advertising” will continue and that its limited use of paid advertising permits it to spend less on advertising than a number of its competitors.

Expansion Program

The Company is engaged in an ongoing expansion program involving the opening of new stores in both new and existing markets and the expansion or relocation of existing stores. In the thirteen year period from the beginning of fiscal 1992 to the end of fiscal 2004 the BBB chain has grown from 34 stores to 660 stores. Total BBB square footage grew from approximately 917,000 square feet at the beginning of fiscal 1992 to approximately 21,691,000 square feet at the end of fiscal 2004. During fiscal 2004, BBB opened 85 new stores and relocated one store which resulted in the addition of approximately 2,338,000 square feet of store space. Harmon has grown from 27 stores, upon acquisition in 2002, to 35 stores, with the addition of five stores and the relocation of one store in fiscal 2004, and occupied approximately 240,000 square feet at the end of fiscal 2004. CTS has grown from 23 stores, upon acquisition in 2003, to 26 stores, with the addition of two stores in fiscal 2004, and occupied approximately 1,014,000 square feet at the end of fiscal 2004.

The table below sets forth information concerning BBB’s expansion program for the periods indicated:

				Store Space		Number of Stores
	Relocated	New	Closed	Beginning	End	Beginning	End
Year	Stores (1)	Stores (2)	Stores	of Year	of Year	of Year	of Year
				(in square feet)

1992	5	4	0	917,000	1,128,000	34	38
1993	4	9	2	1,128,000	1,512,000	38	45
1994	4	16	0	1,512,000	2,339,000	45	61
1995	2	19	0	2,339,000	3,214,000	61	80
1996	2	28	0	3,214,000	4,347,000	80	108
1997	3	33	0	4,347,000	5,767,000	108	141
1998	3	45	0	5,767,000	7,688,000	141	186
1999	4	55	0	7,688,000	9,815,000	186	241
2000	2	70	0	9,815,000	12,204,000	241	311
2001	0	85	0	12,204,000	14,724,000	311	396
2002	2	95	1	14,724,000	17,255,000	396	490
2003	2	85	0	17,255,000	19,353,000	490	575
2004	1	85	0	19,353,000	21,691,000	575	660

(1) A relocated store is an existing store that was relocated to a new location in the same area.

(2) Excludes any relocated store.

The Company intends to continue its expansion program and believes that the continued growth of the Company is dependent, in large part, on the success of this program. As part of its expansion program, the Company expects to open new stores and, in addition, expects to expand existing stores as opportunities arise.

The Company expects to open new stores in new and existing markets. In determining where to open new BBB stores, the Company evaluates a number of factors, including the availability of prime real estate and demographic information (such as data relating to income and education levels, age and occupation). The Company believes that because BBB does not use central distribution centers, and since BBB relies on paid advertising to only a limited extent, it has the flexibility to enter a new market with only one or two BBB stores. The Company will consider opening additional stores in that market after the stores have been proven successful. The Company currently plans to open new BBB, Harmon and CTS stores in fiscal 2005.

The Company has built its management structure with a view toward its expansion and believes that, as a result, the Company has the management depth necessary to support its anticipated expansion program. Each of BBB’s area managers typically supervises up to three BBB stores and district managers typically supervise four to ten stores.

Store Operations

Merchandising

BBB maintains its own central buying group. The merchandise mix for each BBB store is initially selected by the central buying group, in consultation with store managers and other local store personnel. The central buying group is generally responsible for the procurement of merchandise, including: selecting the merchandise, ordering the initial inventory required upon the opening of each BBB store, ordering the first shipment of any new product line that may be subsequently added to a store’s merchandise mix and ordering seasonal merchandise.

After a BBB store is opened, local store personnel are primarily responsible for monitoring inventory levels and reordering merchandise as required. In addition, local store personnel are encouraged to monitor local sales trends and market conditions and tailor the merchandise mix as appropriate to respond to changing trends and conditions. The Company believes that its policy of having the reordering function for BBB stores performed at the local store level, rather than centrally, and having local store personnel determine the appropriate quantity to reorder, encourages entrepreneurship at the store level. In addition, this better ensures that in-stock availability will be maintained in accordance with the specific requirements of each store. The factors taken into account in selecting the merchandise mix for a particular BBB store include store size and configuration and local market conditions such as climate and demographics.

The Company purchases its merchandise from approximately 3,700 suppliers. In fiscal 2004, the Company’s largest supplier accounted for approximately 4% of the Company’s merchandise purchases and the Company’s 10 largest suppliers accounted for approximately 21% of such purchases. The Company purchases substantially all of its merchandise in the United States, the majority from domestic sources and the balance from importers. The Company purchases a small amount of its merchandise directly from overseas sources. The Company has no long-term contracts for the purchase of merchandise. The Company believes that most merchandise, other than brand name goods, is available from a variety of sources and that most brand name goods can be replaced with comparable merchandise.

Warehousing

Merchandise is primarily shipped directly to each BBB store from its vendors, making it unnecessary for BBB to maintain central distribution centers. As a result of the floor to ceiling displays typically used by BBB, a substantial amount of merchandise is displayed on the sales floor of each store at all times. Additional merchandise not displayed on the sales floor is stored in warehouse space within or near the store (with an estimated 10% to 15% of the BBB store space dedicated to warehouse and receiving space). In the case of a few stores, merchandise is also stored at nearby supplemental storage space leased by the Company. At present, the warehouse space included in BBB’s stores provides approximately 87% of BBB’s warehouse space requirements and such nearby supplemental storage space provides the balance.

CTS and Harmon maintain central distribution centers of approximately 537,000 and 80,000 square feet, respectively. These distribution centers are responsible for shipping the majority of merchandise to their respective stores.

Management

The Company encourages responsiveness and entrepreneurship at the store level by providing its managers with a relatively high degree of autonomy relating to operations and merchandising. This is reflected in the Company’s policy of encouraging managers to tailor the merchandise mix of each store in response to local sales trends and market conditions.

On average, BBB stores are staffed with two assistant managers, one operations manager, and three to six department managers who all report to a store manager. The store manager, in turn, reports to an area or district manager. Area and district managers report to one of several regional managers or directly to one of five regional Vice Presidents of Stores, who in turn report to the Senior Vice President - Stores.

Training

The Company places great emphasis on the training of store level management. All entry-level management personnel are generally required to work in various departments of the store to acquire an overall understanding of store operations. In addition, all BBB store associates receive formalized training, including sales techniques and product knowledge, through the Bed Bath & Beyond University program.

The Company’s policy is to generally build its management organization from within. Each of the Company’s area, district and regional managers was recruited from the ranks of the Company’s store managers and each of the Company’s store managers joined the Company in an entry-level position. The Company believes that its policy of promoting from within, as well as the opportunities for advancement generated by its ongoing expansion program, serve as incentives to persons to seek and retain employment with the Company, and result in low turnover among its managers.

Employees

As of February 26, 2005, the Company employed approximately 31,000 persons, of whom approximately 16,000 were full-time employees and approximately 15,000 were part-time employees. The Company believes that its relations with its employees are excellent and that the labor turnover rate among its management employees is lower than that generally experienced within the industry.

Seasonality

The Company exhibits less seasonality than many other retail businesses, although sales levels are generally higher in August, November and December, and generally lower in February and March.

Inflation

The Company does not believe that its operating results have been materially affected by inflation during the past year. There can be no assurance; however, that the Company’s operating results will not be affected by inflation in the future.

Competition

The market for domestics merchandise and home furnishings is fragmented and highly competitive. While the Company believes it is the preeminent marketer in its segment of the home goods industry, its BBB stores compete directly with a small number of store chains selling domestics merchandise and home furnishings. In addition, BBB stores compete with many different types of retail stores that sell many or most of the same products. Such competitors include: (i) better department stores, which often carry many of the same product lines as BBB stores but do not typically have the same depth or breadth of product selection, (ii) specialty stores (such as specialty linens or housewares retailers), which often have a depth of product selection but typically carry only a limited

Executive Officers of the Registrant

The following table sets forth the name, age and business experience of the Executive Officers of the Registrant:

Name	Age	Positions

Warren Eisenberg	74	Co-Chairman

Leonard Feinstein	68	Co-Chairman

Steven H. Temares	46	President, Chief Executive Officer and Director

Arthur Stark	50	Chief Merchandising Officer and Senior Vice President

Matthew Fiorilli	48	Senior Vice President – Stores

Eugene A. Castagna	39	Vice President-Finance and Assistant Treasurer, Principal Financial Officer and Principal Accounting Officer

Mr. Eisenberg, a co-founder of the Company, has been a director and officer of the Company since the Company commenced operations in 1971 (serving as President and Co-Chief Executive Officer until 1992, as Chairman and Co-Chief Executive Officer until 1999, as Co-Chairman and Co-Chief Executive Officer until April 2003, thereafter as Co-Chairman).

Mr. Feinstein, a co-founder of the Company, has been a director and officer of the Company since the Company commenced operations in 1971 (serving as Co-Chief Executive Officer, Treasurer and Secretary until 1992, as President and Co-Chief Executive Officer until 1999, as Co-Chairman and Co-Chief Executive Officer until April 2003, thereafter as Co-Chairman).

Mr. Temares joined the Company in 1992. Mr. Temares has been Chief Executive Officer of the Company since April 2003. Additionally, he has been President since January 1999. Mr. Temares served as Chief Operating Officer from 1997 to 2003. Mr. Temares served as Executive Vice President from 1997 to 1999 and previously was Director of Real Estate and General Counsel.

Mr. Stark joined the Company in 1977. Mr. Stark has been Chief Merchandising Officer and Senior Vice President since January 1999. Prior to 1999, Mr. Stark was Vice President - Merchandising from 1998 until 1999 and Director of Store Operations - Western Region from 1994 until 1998.

Mr. Fiorilli joined the Company in 1973. Mr. Fiorilli has been Senior Vice President - Stores since January 1999. Prior to 1999, Mr. Fiorilli was Vice President - Stores from 1998 until 1999 and Director of Store Operations - Eastern Region from 1994 until 1998.

Mr. Castagna, a certified public accountant, joined the Company in 1994. Mr. Castagna has been Assistant Treasurer since 2002, Vice President – Finance and Principal Financial Officer since 2001 and Principal Accounting Officer since 2000. Mr. Castagna was previously Vice President – Controller.

The Company’s executive officers are elected by the Board of Directors for one-year terms and serve at the discretion of the Board of Directors. No family relationships exist between any of the executive officers or directors of the Company.

ITEM 2 - PROPERTIES

The Company’s stores are principally located in suburban areas of medium and large-sized cities. These stores are situated in strip and power strip shopping centers, as well as in major off-price and conventional malls, and free standing buildings.

The Company’s 660 BBB stores are located in 44 states and one territory and range in size from approximately 7,000 to 100,000 square feet, but are predominantly between 20,000 square feet and 50,000 square feet. Approximately 85% to 90% of store space is used for selling areas and the balance for warehouse, receiving and office space.

The Company’s 26 CTS stores are located in the Northeast and range in size from approximately 11,000 square feet to 58,000 square feet, but are predominantly between 30,000 square feet and 50,000 square feet. Approximately 70% of store space is used for selling areas and the balance for warehouse, receiving and office space.

The Company’s 35 Harmon stores are located in New York, New Jersey and Connecticut and range in size from approximately 5,000 square feet to 9,000 square feet. Approximately 85% of store space is used for selling areas and the balance for warehouse, receiving and office space.

The tables below set forth the number of BBB, Harmon and CTS stores located in each state or territory as of February 26, 2005:

BED BATH & BEYOND

Alabama		8
Arizona		12
Arkansas		3
California		75
Colorado		16
Connecticut		12
Delaware		1
Florida		51
Georgia		19
Idaho		3
Illinois		29
Indiana		14
Iowa		6
Kansas		7
Kentucky		5
Louisiana		10
Maine		2
Maryland		15
Massachusetts		14
Michigan		27
Minnesota		9
Mississippi		3
Missouri		10
Nebraska		2
Nevada		5
New Hampshire		6
New Jersey		28
New Mexico		3
New York		42
North Carolina		18
North Dakota		2
Ohio		26
Oklahoma		4
Oregon		8
Pennsylvania		25
Rhode Island		3
South Carolina		12
Tennessee		14
Texas		55
Utah		9
Vermont		1
Virginia		21
Washington		15
Wisconsin		7

Puerto Rico		3
Total		660

CHRISTMAS TREE SHOPS

Connecticut		3
Maine		1
Massachusetts		14
New Hampshire		2
New York		3
Rhode Island		2
Vermont		1
Total		26

HARMON

Connecticut		2
New Jersey		25
New York		8
Total		35

The Company leases primarily all of its existing stores. The leases provide for original lease terms that generally range from five to twenty years and certain leases provide for renewal options, often at increased rents. Certain leases provide for scheduled rent increases (which, in the case of fixed increases, the Company accounts for on a straight-line basis over the expected lease term, beginning when the Company obtains possession of the premises) and/or for contingent rent (based upon store sales exceeding stipulated amounts).

The Company also leases supplemental merchandise storage space in eleven locations totaling approximately 412,000 square feet servicing BBB stores and in one location of approximately 80,000 square feet servicing Harmon stores. This space is used to supplement the warehouse facilities in the Company’s stores in proximity to these locations. One of these locations also provides fulfillment for BBB’s E-Service activities. In addition, the Company owns a distribution center of approximately 537,000 square feet servicing CTS stores. See Item 1 “Business—Store Operations—Warehousing.”

The Company also leases a combined total of 270,000 square feet in three locations (Union, New Jersey; Farmingdale, New York; and South Yarmouth, Massachusetts) for its corporate office and procurement functions.

ITEM 3 - LEGAL PROCEEDINGS

There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company is a party.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders through solicitation of proxies or otherwise during the fourth quarter of the fiscal year ended February 26, 2005.

PART II

ITEM 5 - MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The following table sets forth the high and low reported closing prices of the Company’s common stock on the NASDAQ National Market System for the periods indicated.

	High		Low
Fiscal 2003:
1st Quarter	$	41.79	$	30.30
2nd Quarter	43.80		37.10
3rd Quarter	43.35		38.27
4th Quarter	43.35		39.00

Fiscal 2004:
1st Quarter	$	41.90	$	35.39
2nd Quarter	39.75		33.89
3rd Quarter	44.09		36.72
4th Quarter	41.58		36.99

The common stock is quoted through the NASDAQ National Market System under the symbol BBBY. On March 24, 2005, there were approximately 737 shareholders of record of the common stock (without including individual participants in nominee security position listings). On March 24, 2005, the last reported sale price of the common stock was $35.57.

The Company has not paid cash dividends on its common stock since its 1992 initial public offering and does not currently plan to pay dividends on its common stock. The payment of any future dividends will be determined by the Board of Directors in light of conditions then existing, including the Company’s earnings, financial condition

and requirements, business conditions and other factors. See Item 8 - Financial Statements and Supplementary Data.

The Company’s purchases of its common stock during the fourth quarter of fiscal 2004 were as follows:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)(2)
November 28, 2004 – December 25, 2004	115,000	$	39.09	115,000	$	345,504,805
December 26, 2004 – January 22, 2005	1,163,500	$	39.92	1,163,500	$	299,057,145
January 23, 2005 – February 26, 2005	7,483,800	$	39.96	7,483,800	NONE
Total	8,762,300	$	39.94	8,762,300	NONE

(1) Effective December 15, 2004, the Company announced that the Board of Directors approved a $350 million share repurchase program, authorizing the repurchase of shares of its common stock. The Company was authorized to make repurchases from time to time in the open market pursuant to existing rules and regulations and other parameters approved by the Board. The program was completed prior to the end of the fiscal year.

(2) Excludes brokerage commissions paid by the Company.

ITEM 6 - SELECTED FINANCIAL DATA

Consolidated Selected Financial Data

	Fiscal Year Ended (1)
(in thousands, except per share and selected operating data)	February 26, 2005			February 28, 2004 (2)			March 1, 2003			March 2, 2002			March 3, 2001

Statement of Earnings Data:

Net sales	$	5,147,678		$	4,477,981		$	3,665,164		$	2,927,962		$	2,396,655

Gross profit	2,186,301			1,876,664			1,518,547			1,207,566			986,459

Operating profit	792,414			639,343			480,057			346,100			272,838

Net earnings	504,964			399,470			302,179			219,599			171,922

Net earnings per share - Diluted (3)	$	1.65		$	1.31		$	1.00		$	0.74		$	0.59

Selected Operating Data:

Number of stores open (at period end)	721			629			519			396			311

Total square feet of store space (at period end)	22,945,000			20,472,000			17,452,000			14,724,000			12,204,000

Percentage increase in comparable store sales	4.5		%	6.3		%	7.9		%	7.1		%	5.0		%

Balance Sheet Data (at period end):

Working capital	$	1,223,409		$	1,199,752		$	914,220		$	715,439		$	532,524

Total assets	3,199,979			2,865,023			2,188,842			1,647,517			1,195,725

Long-term debt	—			—			—			—			—

Shareholders’ equity (4)	$	2,203,762		$	1,990,820		$	1,451,921		$	1,094,350		$	817,018

(1) Each fiscal year represents 52 weeks, except for fiscal 2000 (ended March 3, 2001) which represents 53 weeks.

(2) On June 19, 2003, the Company acquired Christmas Tree Shops, Inc. (see Note 2 to the Consolidated Financial Statements).

(3) The net earnings per share amount for fiscal 2000 has been adjusted for a two-for-one stock split of the Company’s common

stock (which was effected in the form of a 100% stock dividend), which was distributed in fiscal 2000. The Company has not

declared any cash dividends in any of the fiscal years noted above.

(4) In fiscal 2004, the Company repurchased approximately $350 million of its common stock.

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Bed Bath & Beyond Inc. and subsidiaries (the “Company”) operate specialty retail stores nationwide, including stores of Bed Bath & Beyond (“BBB”), Harmon Stores, Inc. (“Harmon”) and Christmas Tree Shops, Inc. (“CTS”), primarily selling predominantly better quality domestics merchandise and home furnishings. The Company’s objective is to be a customer’s first choice for products and services in the categories offered, in the markets in which the Company operates.

The Company’s strategy is to achieve this objective through excellent customer service, an extensive breadth and depth of assortment, everyday low prices, introduction of new merchandising offerings and development of our infrastructure.

Operating in the highly competitive retail industry, the Company, along with other retail companies, is influenced by a number of factors including, but not limited to, general economic conditions, consumer preferences and spending habits, competition from existing and potential competitors, unusual weather patterns and the ability to find suitable locations at acceptable occupancy costs to support the Company’s expansion program.

In fiscal 2004, the Company’s consolidated net sales increased by 15.0% and net earnings increased by 26.4%. Contributing to this increase was the expansion of BBB store space by 12.1%, from 19,353,000 square feet at fiscal year end 2003 to 21,691,000 square feet at fiscal year end 2004. The 2,338,000 square feet increase was primarily the result of opening 85 new BBB stores and relocating one existing store.

Also contributing to this increase in fiscal 2004 was an acquisition made by the Company in June 2003. The Company acquired CTS in fiscal 2003 for approximately $194.4 million, net of cash acquired, including the costs of the acquisition, comprising $175.5 million of cash and $18.9 million in deferred payments payable in cash over three years. CTS is a retailer of giftware and household items selling a broad assortment of domestics merchandise and home furnishings at value prices in many categories including home décor, giftware, housewares, food, paper goods and seasonal products. CTS’ results of operations are included in the Company’s consolidated results of operations since the date of acquisition.

Comparable store sales for fiscal 2004 increased by approximately 4.5% as compared with an increase of approximately 6.3% and 7.9% in fiscal 2003 and 2002, respectively. As of the beginning of the fiscal third quarter of 2004, CTS was included in the calculation of comparable store sales. The fiscal 2004 increase in comparable store sales reflected a number of factors, including but not limited to, the continued consumer acceptance of the Company’s merchandise offerings and a strong focus on customer service with an emphasis on responding to customer feedback.

A store is considered a comparable store when it has been open for twelve full months following its grand opening period (typically four to six weeks). Stores relocated or expanded are excluded from comparable store sales if the change in square footage would cause meaningful disparity in sales over the prior period. In the case of a store to be closed, such store’s sales are not considered comparable once the store closing process has commenced.

The Company plans to continue to expand its operations and invest in its infrastructure to reach its long-term objectives.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated (i) selected statement of earnings data of the Company expressed as a percentage of net sales and (ii) the percentage change in dollar amounts from the prior year in selected statement of earnings data:

	Fiscal Year Ended
	Percentage of Net Sales						Percentage Change from Prior Year
	February 26, 2005		February 28, 2004		March 1, 2003		February 26, 2005		February 28, 2004

Net sales	100.0	%	100.0	%	100.0	%	15.0	%	22.2	%

Cost of sales	57.5		58.1		58.6		13.8		21.2

Gross profit	42.5		41.9		41.4		16.5		23.6

Selling, general and administrative expenses	27.1		27.6		28.3		12.7		19.1

Operating profit	15.4		14.3		13.1		23.9		33.2

Earnings before provision for income taxes	15.8		14.5		13.4		24.9		32.2

Net earnings	9.8		8.9		8.2		26.4		32.2

Net Sales

Net sales in fiscal 2004 increased $669.7 million to $5.148 billion, representing an increase of 15.0% over the $4.478 billion of net sales in fiscal 2003, which increased $812.8 million or 22.2% over net sales of $3.665 billion in fiscal 2002. Approximately 56% of the increase in fiscal 2004 was attributable to an increase in the Company’s new store sales, approximately 15% of the increase was attributable to the net sales of CTS (acquired on June 19, 2003) and the balance of the increase was primarily attributable to the increase in comparable store sales. The increase in comparable store sales for fiscal 2004 of 4.5% was due to a number of factors, including but not limited to, the continued consumer acceptance of the Company’s merchandise offerings and a strong focus on customer service with an emphasis on responding to customer feedback. For fiscal 2003, approximately 41% of the increase in net sales was attributable to an increase in BBB’s new store sales, approximately 34% of the increase was attributable to the net sales of CTS and the balance of the increase was primarily attributable to the increase in comparable store sales.

Sales of domestics merchandise accounted for approximately 48%, 51% and 55% of net sales in fiscal 2004, 2003 and 2002, respectively, of which the Company estimates that bed linens accounted for approximately 17%, 16% and 19% of net sales in fiscal 2004, 2003 and 2002, respectively. The remaining net sales in fiscal 2004, 2003 and 2002 of 52%, 49% and 45%, respectively, represented sales of home furnishings. The change in the product mix between fiscal 2004 and 2003 and between fiscal 2003 and 2002 is primarily the result of the acquisition of CTS in June 2003. No other individual product category accounted for 10% or more of net sales during fiscal 2004, 2003 or 2002.

Gross Profit

Gross profit in fiscal 2004, 2003 and 2002 was $2.186 billion or 42.5% of net sales, $1.877 billion or 41.9% of net sales and $1.519 billion or 41.4% of net sales, respectively. The increase in gross profit between fiscal 2004 and 2003 as a percentage of net sales was primarily attributable to the reduction of inventory acquisition costs of the Company’s current merchandise offerings. The increase in gross profit between fiscal 2003 and 2002 as a percentage of net sales was primarily attributable to improvements in both the markup and in markdowns taken.

Selling, general and administrative expenses

Selling, general and administrative expenses (“SG&A”) were $1.394 billion or 27.1% of net sales in fiscal 2004 compared to $1.237 billion or 27.6% of net sales in fiscal 2003. The decrease in SG&A as a percentage of net sales primarily reflects a relative decrease in payroll and payroll related items, occupancy costs and other expenses, which primarily resulted from the comparable store sales increase. The above relative decreases were partially offset by a relative increase in net advertising costs.

SG&A as a percentage of net sales decreased to 27.6% in fiscal 2003 from 28.3% in fiscal 2002 primarily as a result of a relative decrease in occupancy costs, other store expenses and costs associated with new store openings, partially offset by a relative increase in litigation expense and net advertising costs. SG&A in fiscal 2003 was $1.237 billion as compared to $1.038 billion in fiscal 2002.

Operating Profit

Operating profit increased to $792.4 million in fiscal 2004 compared to $639.3 million in fiscal 2003. The improvements in operating profit were a result of the increase in net sales and a relative increase in gross profit as a percentage of net sales and a relative decrease in SG&A as a percentage of net sales, as discussed above.

Interest income

Interest income increased to $18.8 million in fiscal 2004 compared to $10.2 million in fiscal 2003 due to an increase in the cash invested and an increase in the Company’s average investment interest rate as a result of the recent upward trend in short term interest rates. Interest income decreased in fiscal 2003 from $11.3 million in fiscal 2002 due to the decrease in the average investment interest rate partially offset by an increase in the cash invested.

Income taxes

The effective tax rate was 37.75% for fiscal 2004 and 38.50% for fiscal 2003 and 2002. The decrease is due to a reduction in the weighted average effective tax rate resulting from a change in the mix of the business within the taxable jurisdictions in which the Company operates.

EXPANSION PROGRAM

The Company intends to continue its expansion program and currently plans to open new BBB, Harmon and CTS stores in fiscal 2005 (see details under “Liquidity and Capital Resources” below). The Company believes that a predominant portion of any increase in its net sales in fiscal 2005 will continue to be attributable to new store net sales. Accordingly, the continued growth of the Company is dependent, in large part, upon the Company’s ability to execute its expansion program successfully, of which there can be no assurance.

LIQUIDITY AND CAPITAL RESOURCES

The Company has been able to finance its operations, including its expansion program, through internally generated funds. Net cash provided by operating activities in fiscal 2004 was $616.4 million, compared with $548.4 million in fiscal 2003. The increase in net cash provided by operating activities was primarily attributable to an increase in net income and the timing of certain liability payments, partially offset by an increase in merchandise inventories (primarily the result of new store space) and the reduction of the tax benefit from the exercise of stock options.

Inventory per square foot was $50.21 as of February 26, 2005 and $49.45 as of February 28, 2004. The Company continues to focus on optimizing inventory productivity while maintaining appropriate in-store merchandise levels to support sales growth.

Net cash used in investing activities in fiscal 2004 was $363.0 million compared with $687.2 million in fiscal 2003. The decrease in net cash used in investing activities was attributable to an increase in redemptions of investment securities and the payment for the acquisition of CTS in the prior year, partially offset by an increase in purchases of investment securities.

Net cash used in financing activities in fiscal 2004 was $325.7 million, compared with net cash provided by financing activities of $53.4 million in fiscal 2003. The change in net cash resulting from financing activities was primarily attributable to the repurchase of common stock and a decrease in proceeds from the exercise of stock options.

At February 26, 2005, the Company maintained two uncommitted lines of credit of $100 million and $50 million, with expiration dates of September 3, 2005 and February 28, 2005, respectively. Subsequent to the end of fiscal 2004, the Company increased the amount of the $50 million uncommitted line of credit to $75 million and extended the expiration to February 28, 2006. These uncommitted lines of credit are currently used for letters of credit in the ordinary course of business. It is the Company’s intent to maintain an uncommitted line of credit for this purpose. During fiscal 2004, the Company did not have any direct borrowings under the uncommitted lines of credit. As of February 26, 2005, there was approximately $13.4 million of outstanding letters of credit. In addition, under the above uncommitted lines of credit, the Company can obtain unsecured standby letters of credit. As of February 26, 2005, there was approximately $38.1 million of outstanding unsecured standby letters of credit, primarily for certain insurance programs. The Company believes that during fiscal 2005, internally generated funds will be sufficient to fund its operations, including its expansion program.

The Company has contractual obligations consisting mainly of operating leases for stores, offices, warehouse facilities and equipment, purchase obligations and deferred acquisition payments which are payable as of February 26, 2005 as follows:

(in thousands)	Total		Less than 1 year		1-3 years		4-5 years		After 5 years

Operating Lease Obligations	$	2,983,765	$	308,698	$	947,078	$	551,409	$	1,176,580
Purchase Obligations	512,369		512,369		—		—		—
Deferred Acquisition Payments	13,334		6,667		6,667		—		—

Total Contractual Obligations	$	3,509,468	$	827,734	$	953,745	$	551,409	$	1,176,580

As of February 26, 2005, the Company has leased sites for 69 new stores planned for opening in fiscal 2005 or 2006, for which aggregate minimum rental payments over the term of the leases are approximately $459.8 million and are included in the table above.

Purchase obligations primarily consist of purchase orders for merchandise and capital expenditures.

Other significant commitments and contingencies include the following:

• The Company utilizes a combination of insurance and self insurance for a number of risks including workers’ compensation, general liability and automobile liability.

• Some of the Company’s operating lease agreements have scheduled rent increases. The Company accounts for these scheduled rent increases on a straight line basis over the expected lease term, beginning when the Company obtains possession of the premises, thus creating deferred rent.

• The Company has a non-contributory defined benefit pension plan for CTS employees who meet specified age and length of service requirements. The Company intends to make a minimum contribution of approximately $2.3 million during fiscal 2005.

SEASONALITY

The Company exhibits less seasonality than many other retail businesses, although sales levels are generally higher in August, November and December and generally lower in February and March.

INFLATION

The Company does not believe that its operating results have been materially affected by inflation during the past year. There can be no assurance, however, that the Company’s operating results will not be affected by inflation in the future.

RECENT ACCOUNTING PRONOUNCEMENTS

On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R will require companies to measure all employee stock-based compensation awards using a fair value method and record such expense in its consolidated financial statements. In addition, the adoption of SFAS No. 123R requires additional accounting and disclosure related to income tax and cash flow effects resulting from share-based payment arrangements.

On April 14, 2005, the Securities and Exchange Commission delayed the effective date of adoption of SFAS No. 123R to the beginning of the first annual period after June 15, 2005. The Company is currently evaluating the impact of the delayed effective date in determining the timing of adopting SFAS No. 123R.

REVISED APPROACH TO COMPENSATION

On April 20, 2005, the Compensation Committee made awards to executive officers and other executives reporting to the Company’s Chief Executive Officer consisting of a combination of restricted stock and stock option grants. Consistent with past practice, the stock options granted to these executives will vest over time, subject, in general, to the executive’s remaining in the Company’s employ on specified vesting dates. Vesting of the restricted stock awarded to these executives will be dependent on (i) the Company’s achievement of a performance-based test for the fiscal year of grant, and (ii) assuming achievement of the performance-based test, time vesting, subject, in general, to the executive remaining in the Company’s employ on specified vesting dates.

The Company’s other employees who traditionally have received stock option grants have begun to receive awards consisting solely of restricted stock. Vesting of the restricted stock awarded to these employees will be based solely on time vesting with no performance test. The Company will record an expense related to the restricted stock program in fiscal 2005 in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.”

Form 10-K Item No.		Name of Item

		PART I

Item 1.		Business
Item 2.		Properties
Item 3.		Legal Proceedings
Item 4.		Submission of Matters to a Vote of Security Holders

		PART II

Item 5.		Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Item 6.		Selected Financial Data
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.		Quantitative and Qualitative Disclosures About Market Risk
Item 8.		Financial Statements and Supplementary Data
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.		Controls and Procedures
Item 9B.		Other Information

		PART III

Item 10.		Directors and Executive Officers of the Registrant
Item 11.		Executive Compensation
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.		Certain Relationships and Related Transactions
Item 14.		Principal Accounting Fees and Services

		PART IV

Item 15.		Exhibits and Financial Statement Schedules

Title of each class

Name of each exchange on which registered

Advertising

ITEM 3 - LEGAL PROCEEDINGS

PART II

Name of each exchange on
which registered