Struggling home goods retailer Bed Bath & Beyond may be forced to file for bankruptcy protection, and expressed doubt about its ability to continue operations, as it preliminarily reported widening losses and sizable drops in sales.

The Union, New Jersey-based company, a chain with roughly 1,000 stores, on Thursday warned that lower customer traffic and reduced inventory levels were contributing to what has turned out to be a dramatically dismal fiscal third quarter, which ended Nov. 26. As a result, the company said it is considering all strategic alternatives, including obtaining relief under the U.S. Bankruptcy Code, restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying its business activities and strategic initiatives, or selling assets.

"These measures may not be successful," Bed Bath & Beyond said.

And while the retailer is continuing to try to improve its cash position and mitigate any potential liquidity shortfall, based on the past nine months and current projections it said it "has concluded that there is substantial doubt about the company's ability to continue as a going concern."

Bed Bath & Beyond, which owns not only its namesake chain but also Buy Buy Baby, Harmon and Face Value, has been on a downward spiral after a failed turnaround attempt by then-CEO Mark Tritton, who downsized its store fleet. But his strategy of pivoting Bed Bath & Beyond to sell more private-label goods, rather than national brands, flopped. And in 2021 the core chain suffered supply-chain woes that left it bereft of adequate inventory during the holiday season, missing out on $175 million in sales. Tritton was ousted in June last year and has been replaced by new President and CEO Sue Gove.

She vowed to put Bed Bath & Beyond on track by adding national brands back to its shelves and reassuring the company's vendors, but that effort didn't help in the third quarter. The retailer said it expects to report net sales of roughly $1.259 billion compared to $1.878 billion in the year-ago period. In addition, Bed Bath & Beyond said it anticipates a net loss of about $385.8 million for the third quarter, including impairment charges of roughly $100 million, compared to a net loss of $276.4 million in the year-ago period.

"Transforming an organization of our size and scale requires time, and we anticipate that each coming quarter will build on our progress," Gove said in a statement. "Despite more productive merchandise plans and improved execution, our financial performance was negatively impacted by inventory constraints as we partnered with our suppliers to navigate both micro- and macro-economic challenges. Reduced credit limits resulted in lower levels of in-stock presentation within the assortments that our customers expect. Consequently, we have already leveraged the liquidity gained from the holiday season to immediately pursue higher in-stock levels with support from our key vendors."

As a result, "We have seen trends improve when in-stock levels have increased," Gove said.

Neil Saunders, managing director of GlobalData, wasn't optimistic about Bed Bath & Beyond's prospects.

"Today’s update from Bed Bath & Beyond confirms that the turnaround plan put in place last year is not working," Saunders said in a note to clients Thursday. "Despite a desperate attempt to shore up finances and improve the customer experience, sales continue to slump and losses continue to mount. Put bluntly, the business is moving at rapid speed in the wrong direction with bankruptcy the most likely destination."

He said that in the three-month period that ended in November, Bed Bath & Beyond’s sales "slumped" by 33%.

"During a period of elevated activity as consumers ramped up spending for Black Friday and the holidays, this is a completely unsatisfactory outcome that saps any remaining confidence that the business can turn itself around," Saunders said.

With sales down and losses accelerating, "this means that Bed Bath & Beyond has burnt through most of its liquidity and will need to raise further funds to continue operating," according to Saunders.

"With confidence from investors and suppliers at an all-time low, getting the credit needed will become much more challenging, if not impossible," he said.

Bed Bath & Beyond is slated to report its third-quarter results next Tuesday, but it said it has already notified the Securities and Exchange Commission that it will be filing its quarterly report late.

Buy Buy Baby, which sells clothes and goods for infants and kids, has been a bright spot in Bed Bath & Beyond's portfolio and could be sold off.

"However, the time available to execute such a transaction is minimal — even if a willing buyer can be found," Saunders said. "Bed Bath & Beyond could also look to sell itself as a whole, but given the state of the company and the problems of raising finance, we see this as an unrealistic prospect. All of this points to bankruptcy as being the most likely outcome."

Chapter 11 protection would allow Bed Bath and Beyond to restructure and reduce its debt.

"However, it would still need to come up with a credible plan to reinvent the business — something it has simply failed to do to date. It would also need to execute this plan in an increasingly soft consumer economy, which would be very challenging," Saunders said. "In our view, Bed Bath & Beyond is too far gone to be saved in its present form. A catalog of missteps has run the company into the ground and has made it increasingly irrelevant. Only very radical action will allow it to survive and even if it does, it will be a shadow of its former self."