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Dismal Outlook for Bed Bath, Slicing Fair Value Estimate

E-commerce is growing at a more than 20% clip, but that’s not enough to protect the firm from total market share erosion.

Shares of no-moat Bed Bath and Beyond plunged Wednesday after the firm’s second-quarter results continue to relay the competitive state of retailing, with the company struggling to move back into positive same-store sales generation.

While we anticipated weakness in same-store sales performance, projecting a quarter with around 1% same-store declines, the magnitude of the actual slowdown was wider than we anticipated, with same store sales contracting 2.6%. And while the company’s e-commerce continues to grow at a more than 20% clip, we don’t think it’s meaningful enough to protect the firm from total market share erosion considering current brick-and-mortar prognosis.