Bed Bath & Beyond Inc. operates specialty retail stores nationwide, including Bed Bath & Beyond stores (“BBB”), Harmon stores (“Harmon”) and Christmas Tree Shops stores (“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 28, 2004, BBB operated 575 stores in 44 states and one territory: Alabama (7), Arizona (9), Arkansas (3), California (67), Colorado (14), Connecticut (10), Delaware (1), Florida (48), Georgia (19), Idaho (3), Illinois (25), Indiana (12), Iowa (5), Kansas (6), Kentucky (4), Louisiana (10), Maine (2), Maryland (13), Massachusetts (10), Michigan (24), Minnesota (8), Mississippi (2), Missouri (10), Nebraska (1), Nevada (5), New Hampshire (4), New Jersey (26), New Mexico (2), New York (31), North Carolina (16), North Dakota (2), Ohio (21), Oklahoma (4), Oregon (7), Pennsylvania (22), Rhode Island (3), South Carolina (10), Tennessee (13), Texas (47), Utah (6), Vermont (1), Virginia (19), Washington (15), Wisconsin (6), and Puerto Rico (2).  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 low prices in many categories including home décor, giftware, housewares, food, paper goods, and seasonal products. As of February 28, 2004, CTS operated 24 stores in 6 states.

Harmon is a health and beauty care retailer, which operated 30 stores in 3 states as of February 28, 2004.

History

The Company was founded in 1971 by Leonard Feinstein and Warren Eisenberg, the Co-Chairmen of the Company. Each has more than 40 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.

3

The Company has been engaged in an ongoing expansion program involving the opening of new BBB stores (including 85 in fiscal 2003, 95 in fiscal 2002, and 85 in fiscal 2001) and the expansion and relocation of existing BBB stores (including 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 19,353,000 square feet at the end of fiscal 2003.  The Company intends to continue its expansion program and currently plans to open new BBB, Harmon and CTS stores in fiscal 2004.

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, Cannon, Conair, Croscill,

4

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 great emphasis on customer service and satisfaction 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

5

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

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 twelve year period from the beginning of fiscal 1992 to the end of fiscal 2003 the BBB chain has grown from 34 stores to 575 stores.  Total BBB square footage grew from approximately 917,000 square feet at the beginning of fiscal 1992 to approximately 19,353,000 square feet at the end of fiscal 2003.  During fiscal 2003, BBB opened 85 new stores and relocated two stores which resulted in the addition of approximately 2,098,000 square feet of store space.  Harmon has grown from 27 stores, upon acquisition , to 30 stores, with the addition of one store in fiscal 2003, and occupied approximately 204,000 square feet at the end of fiscal 2003. CTS has grown from 23 stores, upon acquisition, to 24 stores, with the addition of one store in fiscal 2003, and occupied approximately 915,000 square feet at the end of fiscal 2003.

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

(1)    A relocated store is an existing store that was either expanded or relocated to a new store 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

6

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 2004.

The Company has built its management structure with a view towards 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 more than 3,900 suppliers.  In fiscal 2003, the Company’s largest supplier accounted for approximately 5% of the Company’s merchandise purchases and the Company’s 10 largest suppliers accounted for approximately 23% of such purchases.  The Company purchases substantially all of its merchandise in the United States, the majority from domestic manufacturers 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

7

is also stored at nearby supplemental storage space leased by the Company.  At present, the warehouse space included in BBB’s stores provides approximately 88% 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 78,000 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 28, 2004, the Company employed approximately 29,000 persons, of whom approximately 15,000 were full-time employees and approximately 14,000 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 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.

8

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 portion of the product lines carried by BBB stores, and (iii) discount and mass merchandise stores. In addition, BBB stores compete, to a more limited extent, with factory outlet stores that typically offer limited quantities or limited lines of better quality merchandise at discount prices.

The Company believes that it is the largest operator of stores selling predominantly better quality domestics merchandise and home furnishings typically found in better department stores, and that it is well positioned to compete successfully in its markets as measured by several factors, including pricing, breadth and quality of product selection, in-stock availability of merchandise, effective merchandise presentation, customer service and store locations.

The visibility of the Company has encouraged competitors to imitate BBB stores’ format and methods.  Other retail chains continue to introduce new store concepts that include many of the product lines carried by BBB stores.  There can be no assurance that the operation of store competitors, including those companies operating stores similar to those of BBB, will not have a material effect on the Company.

Tradenames and Service Marks

The Company uses the nationally recognized “Bed Bath & Beyond” name and logo and the “Beyond any store of its kind” tag line as service marks in connection with retail services.  The Company has registered these marks and others, including names and logos of Harmon and CTS, with the United States Patent and Trademark Office. The Company also has registered or has applications pending with the trademark registries of several foreign countries.  Management believes that its name recognition and service marks are important elements of the Company’s merchandising strategy.

Available Information

The Company makes available as soon as reasonably practicable after filing with the SEC, free of charge, through its website, www.bedbathandbeyond.com, the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, electronically filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

9

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, 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, 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.

10