Sears Holdings (SHLDQ) CEO Eddie Lampert has maintained a brave face and a positive message as his company has steadily declined around him. He has insisted that Sears has a viable plan as it has shrunk from 2,601 stores in Q3 2012 to 1,104 (and shrinking) in Q3 2017.

Through the first three quarters of 2017, the retailer, which owns Kmart and Sears, had lost over $1.6 billion. That followed a $2.2 billion loss in 2016 and a $1.1 billion loss in 2015. The chain has also gotten to the point where its $12 billion in debt exceeds its $8.1 billion in assets.

Sears Holdings is experiencing death by a thousand paper cuts while it's also dying from more grievous wounds. Lampert doesn't see it that way, but his attempt to highlight the positive is a bit like someone with terminal cancer learning that his athlete's foot has cleared up.

The exterior of a Sears store.

Sears has been closing stores and losing sales. Image source: Sears.

More stores are closing

As retail changes due to the rise of the internet, a number of struggling chains have decided that smaller is better. That strategy has yet to be proven successful, though there are some signs that closing some stores has worked for Macy's, which reported comparable-store sales growth of 1% in November and December.

Fewer stores seems to make sense for a chain like Macy's, which often had multiple locations in the same area. For Sears, however, getting smaller hasn't driven business to other stores in the chain or online. It has simply made the money-losing company smaller and that's continuing with the company telling employees in early January that it plans to shut 64 more Kmart stores and 39 Sears locations in March and April, CNBC reported.

The company has once again tried to explain this as being part of a plan.

"We will continue to close some unprofitable stores as we transform our business model so that our physical store footprint and our digital capabilities match the needs and preferences of our members," the company said in a statement.

There is no happy ending

Having fewer stores would make sense if Sears had shown that customers are flocking to its Shop Your Way (SYW) digital platform. The company does not break out its digital sales, but its steadily declining overall numbers suggest that customers are not flocking to the service.

In Q3, same-stores sales dropped 17% at Sears, 13% at Kmart, and 15.3% across the company. Overall sales fell from $5 billion in Q3 2016 to $3.7 billion in the same period in 2017, a 26% drop. The company claims that over half of that came from stores closing, but that doesn't mean things are looking up.

Sears is a ship full of holes that's taking on water and the captain's plan is bailing out with thimbles.

You need customers

Getting smaller may work for brands that still have a devoted customer base that will drive to a new location or shop online, but it's hard to see Sears fitting that bill. The company no longer owns its Craftsman tool lines and the company lost its long-standing relationship with the company that manufactures Whirlpool, KitchenAid, Maytag, and Jenn-Air appliances.

As the company has shrunk and sold off assets to survive, it has lost much of its identity. There's no reason to join SYW because Sears no longer offers any sort of unique shopping proposition. That's not going to improve as it slowly continues its march to zero stores.