Image source: Sears Holdings.

What happened

Shares of retailer Sears Holdings (OTC:SHLDQ) tumbled 54.8% in 2016, according to data provided by S&P Global Market Intelligence. The company, which operates Sears and Kmart stores, suffered from significant declines in comparable sales throughout 2016. With sales collapsing and losses mounting, investors left the stock for dead last year.

SHLD Chart

SHLD data by YCharts

So what

Sears has been in decline for more than a decade, with total sales more than halved in the past 10 years. Eddie Lampert, who became CEO in 2013, has so far failed to stop the bleeding. The company has sold off many of its valuable assets over the past few years in order to raise cash, including Sears Canada, Sears Hometown and Outlet Stores, and Lands' End. In 2015, Sears spun off some of its real estate into Seritage Growth Properties, and early this year the company announced that it was selling its Craftsman brand.

Through the first three quarters of 2016, Sears posted a net loss of $1.6 billion, more than triple the loss during the same period in 2015. Gross margin tumbled 2.5 percentage points while operating expenses as a percentage of revenue edged up. During the third quarter, Kmart suffered a 4.4% decline in comparable sales, while Sears saw a 10% decline.

With Sears announcing another round of store closings following the holiday season, it now seems like just a matter of time before the company fails. Lampert agreed to loan the company $500 million in January, backed by the company's real estate, and another real estate sale could be in the cards. But all of these maneuvers appear to be delaying the inevitable.

Now what

Even after a steep decline in 2016, the market still values Sears at around $1 billion. The company is running out of assets to sell, and Lampert's plan to stop the sales declines clearly isn't working. The company's book value is deeply negative, although that may not reflect the full value of its remaining real estate.

Retail turnarounds are hard, but they become next to impossible when the balance sheet is distressed and losses show no sign of reversing. If Sears survives 2017, I suspect it will be another rough year for the stock.