Over the past year, fast-shrinking retail icon Sears Holdings (SHLD +0.00%) has launched a number of flashy partnerships with e-commerce juggernaut Amazon.com (AMZN +0.76%). Amazon now sells products from two of Sears' three most powerful private brands (Kenmore and DieHard).
On Wednesday, Sears announced the latest expansion of this partnership. It will soon team up with Amazon to sell tires, with installations being handled at Sears Auto Center locations. News of this deal caused Sears Holdings stock to spike 16% on Wednesday, recovering the deep losses of the previous two days.
Sears Stock Performance. Data by YCharts.
However, Sears' partnerships with Amazon aren't likely to have a meaningful impact on its near-term financial results. And with Sears Holdings burning cash at a phenomenal rate, the company isn't likely to be around to capture any future upside from working with Amazon.
Ties between Sears and Amazon have been growing
Last July, Sears and Amazon announced their first collaboration, which covered the appliance market. Amazon became one of the first third-party retailers to carry Kenmore appliances, with Sears Home Services handling delivery and installation. Sears also agreed to incorporate Amazon's Alexa virtual assistant into all of its Kenmore smart appliances.
In December, Sears decided to make its DieHard brand available through Amazon as well. Amazon started by selling DieHard jump starters and vehicle battery chargers and maintainers. More recently, Amazon has added DieHard batteries and tires to its merchandise selection.
Under the partnership announced on Wednesday, Amazon customers will be able to buy tires from any brand and have them shipped directly to Sears Auto Center locations. Installation scheduling will be integrated into the Amazon checkout process. This service will initially be available for 47 Sears Auto Centers in eight of the top U.S. metropolitan areas, but it will soon be expanded to more than 400 locations across the country.
Sears is expanding its collaboration with Amazon. Image source: Sears Holdings.
Sears Holdings' management describes this as a "game-changing partnership" that will provide growth opportunities for Sears and allow it to reach new customers.
None of these deals will move the needle
The few remaining Sears Holdings bulls have tried to make the company's partnerships with Amazon seem more significant than they really are. It's important to remember that Amazon allows hundreds of thousands of small businesses to hawk their wares on its e-commerce site, so Amazon's willingness to work with Sears doesn't mean all that much.
Selling Kenmore products on Amazon.com didn't allow Sears to slow its sales declines in the second half of fiscal 2017. That isn't very surprising, given that brick-and-mortar retailers still rule the appliance market.
Of course, neither company has offered any data about the popularity of Kenmore appliances on Amazon. However, it's notable that the number of reviews for each of the Kenmore appliances sold by Amazon ranges from a handful to a few dozen. For comparison, most of the top Samsung TVs have hundreds of reviews -- and some have more than 1,000. The lack of reviews for Kenmore appliances on Amazon probably indicates that sales have been modest.
There's no reason to believe that the new tire sales and installation partnership will be any more popular. While the ship-to-store option will make it somewhat more convenient to buy tires from Amazon, it's still not as convenient as going straight to a tire shop to buy the tires.
Bankruptcy is still virtually inevitable
For the past several years, Sears Holdings has burned an average of nearly $2 billion of cash annually. The only reason the company is still in business is that it has received huge cash infusions from selling real estate and other assets (such as the Craftsman brand).
Sears is readying more asset sales for 2018, which could even include Kenmore and parts of its home services unit. This may be enough to keep the company afloat through the end of the year, but it will leave Sears Holdings with hardly any further assets to offset future losses.
Meanwhile, it will take years (at best) for Sears Holdings' partnerships with Amazon to pay off. If Kenmore, DieHard, and the Sears Auto Center chain are sold to raise cash, the new owners may eventually profit from working with Amazon -- but it won't do Sears Holdings shareholders any good. By then, they will almost certainly have been wiped out in bankruptcy court.
