It seems we go through this same exercise every quarter whenever Sears Holdings (SHLDQ) releases its earnings: The stock shoots higher, and then the market sobers up, causing the retailer's shares to retreat, eventually trading even lower.

The latest bounce -- and subsequent return to earth -- occurred after Sears' third-quarter earnings report showed the department store chain significantly narrowed its losses for the period, reporting a net loss of $558 million, or $5.19 per share, which was much better than last year's loss of $748 million, or $6.99 per share. Adjusted earnings before interest, taxes, depreciation, and amortization also improved, and Sears noted it was the second consecutive quarter the measure improved by at least $100 million, which it credited to its restructuring plan.

SHLD Chart

SHLD data by YCharts.

While these numbers are better year over year, Sears Holdings remains in free fall and the outlook for survival still doesn't look any better.

Still spiraling down

Total revenue for the period plunged 27% to less than $3.7 billion, and while that was largely a result of having closed nearly 400 stores over the past year, same-store sales look like they are reaching terminal velocity. Total comparable sales fell 15.3% for the quarter, with comps at the Kmart chain down 13% and those at Sears dropping 17%.

Chart of same store sales at Sears and Kmart

Data source: Sears quarterly SEC filings. Chart by author.

Although Sears is pointing to its new specialty stores that focus on appliances, mattresses, and car services as the means by which it will turn itself around, the fact remains that not only do Sears' cumulative losses keep piling up, but its customers continue to drain away.

And while losses may be slowing somewhat (though a third-quarter net loss of more than a half-billion dollars is still substantial), the consumer exodus now looks like it is accelerating.

Running naked

Yet it's perhaps a wise move for Sears to minimize the role apparel plays on its business. is poised to surpass Macy's this year as the largest clothing retailer, and Wal-Mart (WMT 0.09%) sells some $23 billion worth of apparel every year. Clothing also represents 21% of Target's (TGT 0.76%) revenue.

With the industry reeling and most retailers closing stores, reducing their footprint, and firing workers to remain viable, Sears continuing to have apparel represent some 30% of its business is out of whack with trends.

At some point, however, it needs to begin attracting more customers to its stores, and regardless of chairman and CEO Eddie Lampert's deep pockets, a retailer needs to produce a profit eventually. Sears Holdings is failing on both counts.

A woman with shopping bags

Image source: Getty Images.

A grim future

Rather than reflexively cheer every headline number only to recoil in fear and dread upon looking closer at Sears' numbers, investors should understand that despite many smart moves made this year, the retailer is still facing seemingly insurmountable odds in overcoming years of neglect.

It may be that at some point Sears does reach a size where it will be able to turn a profit, but it has not reached that level and still has a long way to go. Whether there will be any customers left to shop those stores remains to be seen, but with the increased rate of abandonment we're seeing, those two points may never cross paths again.