Bed Bath & Beyond Inc BBBY

We plan to raise our $22 fair value estimate for no-moat Bed Bath & Beyond by a high-single-digit rate after lifting our full-year 2021 sales outlook from $8.0 billion closer to the firm’s updated guidance of $8.2 billion-$8.4 billion. The primary change is higher same-store sales expectations over the last three quarters of the fiscal year as the firm now expects them to rise at low-single-digit rates, better than a flattish initial outlook and lapping 4% average comps over the back three quarters of 2020. It’s clear that Bed Bath is on an improving cash flow trajectory, helped by better mix and merchandising, as evidenced by an adjusted gross margin in the quarter that expanded 820 basis points to 34.9% from last year (up 40 basis points over the first quarter of 2019). But the adjusted operating margin remains depressed on an absolute level, coming in at 1.1%, down from the 1.9% Bed Bath delivered in the same period of 2019.