Bed Bath & Beyond Inc. (NASDAQ:BBBY) reported second quarter results after the bell on Tuesday, and the stock is dropping big in response. BBBY stock is down more than 14% in early Wednesday morning trade.

Why? Comparable sales fell 2.6%. That is much worse than the 0.7% decline analysts were looking for. Earnings also missed. And the big hit was that the full-year earnings guide missed analyst expectations by a whopping 25%.

Overall, the results underscore that the changing shopping habits of US consumers do not favor brick-and-mortar retail.

That’s bad news for BBBY stock.

But is there opportunity in this sell-off?

Not yet. Here’s why.

Bed Bath Has Lots Of Competition

For a long time, there was an idea in the market that furniture and home goods shopping was protected from Amazon.com, Inc. (NASDAQ:AMZN) and e-commerce encroachment. Sure, consumers could buy clothes and other knickknacks online, but furniture and home goods? Don’t consumers want to touch and feel that stuff before buying it?

Apparently not.

At BBBY, digital sales are soaring (up more than 20%). In-store sales? Not so much. They’re down mid single-digits. This has been the trend for the past two quarters.

As furniture and home goods shopping migrates online, Bed Bath is entering a hyper-competitive marketplace where it doesn’t have any real advantage. Amazon has a huge size advantage. Pure e-commerce player Wayfair Inc (NYSE:W) has really competitive prices and free shipping on orders over $49. Meanwhile, upstarts like Houzz offer a more comprehensive home goods shopping experience.

This is exactly why digital sales growth at BBBY isn’t enough to offset declines in the brick-and-mortar business. Shoppers are leaving Bed Bath stores. Some are going to Bed Bath’s online channel. But others are going to Amazon, Wayfair, or Houzz.

In other words, Bed Bath is losing customers they probably won’t ever recapture.

Consequently, investors should expect comparable sales growth to remain negative. This dynamic of Bed Bath losing customers to Amazon, Wayfair, Houzz, and others will continue. Because BBBY isn’t opening a whole bunch of new stores, this negative comparable sales growth should lead to flattish sales growth over the next several years.

Meanwhile, gross margins are eroding due to an increase in the online business (higher shipping expense). BBBY is also using more coupons to drive sales, so merchandise margins are falling as well. These two factors are expected to continue and management is modeling for gross margin deleverage for the full year. Management expects supply chain enhancements to stabilize gross margins, but shipping expenses will only continue to rise as the online business scales (customer-facing digital sales comprise only 15% of the business).

Overall, then, gross margins should continue to erode into the foreseeable future.

The operating expense rate is up, and it’s being driven by higher expenses across the board. Payroll expenses are up. Advertising expenses are up. Technology related expenses are up.

Operating expenses are expected to deleverage for the full year, but management is doing a bunch of things, like focusing of inventory optimization and supply chain enhancement, to take costs out of the system.

BBBY management expects $150 million in savings over the next few years. Those cost-savings should help bring the operating expense rate down some and partially offset gross margin deleverage.

Overall, BBBY is a company with flattish top line growth prospects, gross margin compression problems that are here to stay, and an elevated operating expense rate which should fall some. Putting that all together, net income should be flat (at best) over the next several years, meaning any earnings growth will be driven by share buybacks.

Earnings are expected to be $3 this year. That means BBBY stock is trading around 7 to 8-times this year’s earnings estimate.

Is that really good value for a no-growth company facing serious operational headwinds?

Bottom Line on BBBY Stock

Lets go back to the good old duck test.

If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.

BBBY stock is a dead duck.

I think BBBY stock has value, but $23 per share feels extended. All else equal, I like the asymmetry this stock offers below $20.

But here and now? I say avoid BBBY. It looks more like a falling knife than a potential bounce back story.

As of this writing, Luke Lango was long AMZN.