On Wednesday, Bed Bath & Beyond (NASDAQ:BBBY) will report its results for the first quarter of fiscal 2020. There's no question that the upcoming earnings report is going to be awful, as the vast majority of the company's stores were closed for most of the period, which roughly corresponds to the months of March, April, and May. Moreover, Bed Bath & Beyond was barely profitable in the first quarter of its 2019 fiscal year, earning a meager $15.5 million adjusted profit.

Still, there are degrees of awful. The key questions coming into Bed Bath & Beyond's earnings report are just how much money the company lost last quarter and whether management can give investors any comfort that earnings and cash flow will return to break even soon.

The first quarter: what we know so far

Bed Bath & Beyond has already shared some information that sheds light on its first-quarter performance. During the company's Q4 earnings call in mid-April, management disclosed that net sales had plunged 42% year over year in the first half of the quarter, including a 31% decline in March.

Digital sales have surged in recent months, including 85% year-over-year growth in the first few weeks of April and roughly 100% growth in May. However, Bed Bath & Beyond was starting from a fairly weak base, with digital sales likely accounting for less than 20% of revenue a year ago. Meanwhile, nearly all of its 1,500 stores were closed in April and May, with the exception of about 170 Harmon Face Values and buybuy BABY stores that sell essential products.

Two people's hands holding a Bed Bath & Beyond gift card

Image source: Bed Bath & Beyond.

As a result, revenue likely fell by close to 60% year over year in the last two months of the quarter. The average analyst estimate calls for total Q1 sales of $1.38 billion, down 46% year over year. Even that looks a little too optimistic.

Bed Bath & Beyond also disclosed recently that it ended the first quarter with approximately $1.2 billion of cash and investments on its balance sheet. Given that it entered the period with about $1.4 billion of cash and borrowed $236 million from a revolving credit facility early in the quarter, this suggests that the company burned at least $400 million of cash. Furthermore, like many peers, Bed Bath & Beyond delayed payments to landlords, suppliers, and other vendors as the pandemic crushed its business, which could point to additional cash burn in the quarters ahead as it catches up on its bills.

What will the second quarter be like?

With the state of the COVID-19 pandemic still evolving rapidly, Bed Bath & Beyond isn't likely to provide detailed guidance for the second quarter. However, management may offer some insight into quarter-to-date business trends.

About half of Bed Bath & Beyond's stores had reopened by mid-June, and most of the rest have reopened in recent weeks. Between its recent digital sales momentum and the return of in-store shopping -- presumably with lower traffic -- the company is likely to post much better sales results this quarter than it did in the first quarter.

That said, comparable sales fell 6.8% last year with no pandemic to blame, so even with stores starting to reopen, Bed Bath & Beyond is likely to post a substantial sales decline this quarter. Rising COVID-19 case numbers in many parts of the country could also weigh on store traffic. Furthermore, the shift toward digital sales could weigh heavily on gross margin, particularly for orders that are shipped to customers' homes.

Is there any path to breakeven?

Under new CEO Mark Tritton, Bed Bath & Beyond has moved quickly in recent months to modernize its business. It has expanded its fulfillment capacity by shipping some orders from stores. It has also rolled out BOPIS (buy online, pickup in store) and curbside pickup to nearly all of its stores. These long-overdue moves are helping to boost digital sales, mitigating the pressure on Bed Bath & Beyond's top line.

However, the home-focused retailer's profitability has been in free fall for most of the past decade. Last year, the company's adjusted pre-tax margin was just 0.5%. Three years earlier, it was 8.7% -- and three years before that, Bed Bath & Beyond was still routinely posting mid-teens pre-tax margins. As more business shifts to the ultra-competitive, low-margin e-commerce channel, it will be extremely difficult for Bed Bath & Beyond to break even without a stunning turnaround in its overall sales trajectory.

Thus, Tritton and his management team will have to convince investors that they can quickly reverse years of market share losses. If not, Bed Bath & Beyond stock is likely to continue heading lower as investors come to grips with the company's downward spiral.