What: Iconic retailer Sears Holdings (NASDAQOTH:SHLDQ) has been hemorrhaging sales for a decade, jeopardizing the very survival of the Sears and Kmart brands. The company's troubles have worsened in 2016, sending the stock down 37%, according to data from S&P Global Market Intelligence.
So what: Comparable store sales have been sliding at Sears and Kmart for many years, and conditions worsened last year. Domestic comparable store sales (including both chains) plunged 9.2% for the full year. So far, 2016 hasn't been much better. Domestic comp sales slid 6.1% year over year in Q1.
While Sears has been cutting costs to the bone, its sharp downward sales trajectory has prevented it from improving its profitability. Analysts expect the company to continue posting large losses for the foreseeable future.
For many years, Sears Holdings' management has touted a strategy to focus on its best store locations and increase engagement among customers by getting them to sign up for the Shop Your Way rewards program. Unfortunately, this strategy isn't working. Sears has dumped its worst performing stores and boosted member engagement, but neither action has come close to halting the company's endless comp store sales declines.
Now what: Sears Holdings has burned through more than $5 billion of cash in the past three years. It has used the proceeds from numerous asset sales and spinoffs to stay afloat.
For the moment, Sears has adequate liquidity. Furthermore, it has additional assets that can be sold off to raise cash when necessary. However, this isn't sustainable. Eventually, the money will run out and there will be no assets left to sell.
That being the case, investors should steer clear of Sears Holdings. The stock has lost more than 90% of its value in the past decade, and there's no reason to think it will do any better in the future.
Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.