For most of last year, Sears Holdings (NASDAQ:SHLDQ) and Bon-Ton Stores (NASDAQ: BONT) were high on the list of potential retail bankruptcies. However, both companies managed to hang on despite posting severe sales declines and big losses during the first three quarters of fiscal 2017.

In this episode of Industry Focus: Consumer Goods, Vincent Shen and senior contributor Adam Levine-Weinberg discuss the latest batch of dreadful sales results from the two ailing companies. While their rivals experienced a revival during the holiday season, Sears and Bon-Ton both posted comparable sales declines, including a stunning 16% to 17% plunge for Sears. Bon-Ton could soon have no choice but to file for bankruptcy -- and Sears may not be far behind.

A full transcript follows the video.

This video was recorded on Jan. 16, 2018.

Vincent Shen: Closing out now, some of the companies that did not do as well. Some smaller ones, one of them is not a surprise, can you run through those?

Adam Levine-Weinberg: Yeah. It was definitely interesting that while you saw really good sales numbers for most of the department stores, the ones that have been perennially the laggards continued to be laggards during the holiday season. First of all, you had Sears Holdings, which has just been a complete disaster for many years now. They own both Sears and Kmart chains. They've been closing stores at a pretty remarkable pace. During 2017, they will have closed about a quarter of their entire store base. Even with all those stores closing, they're still seeing double-digit sales declines within their remaining stores. They are on track for a 16% to 17% comp sales decrease during the holiday season, which is really just phenomenally bad. They tried to go back to the well with some of the nostalgia plays. They brought back the Sears Wishbook catalog from decades ago. They brought back Kmart Blue Light specials. They went with the strategy of putting the entire store on sale well before Black Friday to try to get traffic in in advance, and none of it worked. It's just not surprising. Sears is basically dead. The only reason why they're still in business, to be perfectly blunt, is they've had billions and billions of dollars of real estate and valuable brands, which they've been selling off at a steady pace, year after year, for about five years. And that's brought in enough money to keep the company afloat, despite free cash flow that's been negative to the tune of $1.5 to $2 billion every year. At some point in the next couple of years, they're going to run out of things to sell to keep the business afloat, and then it's going to collapse.

The other company that I wanted to talk about today was Bon-Ton. Bon-Ton is a smaller department store chain, but it's still pretty significant. It has about $2.5 billion of annual revenue. They had been posting very, very poor comp sales results, mid to high single digit declines during the first three quarters of 2017. But they said on their conference call back in mid-November that the first two or three weeks of the fourth quarter had been quite good, with comp sales up in the high single digits. By the end of November, they reported that comp sales were actually up about 3% for the full month. And then, when they reported their holiday sales about a week ago, they said, actually, for the full holiday season, November and December combined, comp sales were down about 3% year over year. So you just saw a huge change in trend again, or a return to the previous trend, in December with serious significant comp sales declines.

This is a company that has just a few million dollars of cash in the bank trying to support a $2.5 billion business. It doesn't generate free cash flow, it's losing money every year, doesn't have the kind of properties that Sears has in order to bring in cash. As a result, there have been reports out in the last few days that they're likely to file for bankruptcy in the next couple of weeks or so. And at this point, it's really a question of whether they manage to restructure somehow, or the company gets broken up or they liquidate entirely.

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