Is a buyout the only hope Sears Holdings (OTC:SHLDQ) investors have left?

A brick facade may be all that's left of the once-venerable retailer.

The two once-great retailing concepts of Sears, Roebuck and Kmart have been reduced to empty shells of their former selves following nine straight quarters of losses; 30 consecutive quarters of falling sales; a reliance upon assets sales and spinoffs, like those of Lands' End (NASDAQ:LE), Sears Hometown & Outlet Stores (NASDAQ:SHOS), and Orchard Supply, to infuse its balance sheet with cash; and a just-announced need to close more stores than the 130 it had already planned for this year.

If Sears keeps this up, it will dwindle away to virtually nothing.

Unlike other department store chains like J.C. Penney (NYSE:JCP) and Kohl's (NYSE:KSS) that are also on wobbly financial legs, but still present a chance for investors to witness a turnaround, Sears investors have no such hope. Other than continuously stripping away anything of value and leaving behind the rubble of tired stores, falling sales, and everwidening losses, there doesn't appear to be any endgame to reverse the trajectory its on.

Of course, picking over the bones of carrion like Sears is often the specialty of private equity firms who revel in the opportunity to profit from stripping away the flesh, but chairman and CEO Eddie Lampert has already done that. All that's left are a couple of brands like Kenmore, Craftsman, and Sears Auto Center, meaning there's not much meat left for private equity to step in and use to engineer a resurrection.

Another flat tire. Sears Holdings is considering shedding the auto business too.

And Sears is also considering selling off the auto division and shedding its remaining 51% stake in Sears Canada suggesting that not even a retail rival like Wal-Mart (NYSE:WMT) would consider making an offer, even if it could be had on the cheap.

No one wants to throw good money at a store whose name is synonymous with decline.

One of Sears' problems is it lacks a brand identity. Where Wal-Mart is internationally recognized as the low-price leader and Penney, Kohl's, and Target (NYSE:TGT) are bastions of middle-market retailing, it's hard to define just where Sears places or what it means to its customer, assuming there is a "Sears' customer" anymore.

Data: Sears Holdings SEC filings.

In its just reported second quarter, revenues dropped $858 million to $8 billion, with 39% of the decline owing to the spinoff of Lands' End and another 29% coming from store closings. It lost another 17% from its Sears Canada operation, same store sales dropped another 6%, and 10% came from the "just because" category. Those were largely also the reasons behind its $444 million decline in gross margin, with net losses widening to $573 million, or $5.39 per share, from $194 million, or $1.83 per share last year.

Data: Sears Holdings SEC filings.

Even its much ballyhooed Shop Your Way member loyalty program seems to have topped out. Having risen steadily each quarter over the past year to account for nearly three quarters of its sales, the SYW program eased back to 73% of the total in the second quarter. Sure, it's fallen several times following its launch, and we'll need to keep an eye on whether the loyalty program has gone as far as it can, but the program continues to sap Sears margins because it continues to run dual promotional campaigns. It's discounting its way to the poorhouse.  

Bullish investors have long pointed to the value of its real estate holdings as a store of value, though as has unfortunately proved to be the case, it hasn't quite lived up to the hype and its value continues to diminish even as its reduces its physical footprint.

That could be because it's seen as a distressed seller needing to sever its prime properties to keep the cash flowing into its balance sheet. The net book value of the securitized real estate assets in the latest quarter was approximately $700 million, down from around $1 billion five years ago.

Now it says it may need to close even more stores, but shedding additional real estate won't give it a premium on the properties either. Sears talks about raising in excess of $1 billion in proceeds this fiscal year, but that's all just short-term infusions, which it continues to burn through at an alarming rate.

Admittedly some of the problems plaguing Sears Holdings are not of its own making. The recession hurt a lot of retailers and only the very best have bounced back better than before. For the mashup that was Sears, Roebuck and Kmart -- two broken brands even before they were joined together -- the effects have been only magnified.

Yet Lampert has done the company and its investors no favors either, preferring instead to use financial tricks like total return swaps to temporarily make quarterly numbers, until they eventually lost their effectiveness and were abandoned. He also eschewed investing in upgrading his stores, maintaining customers didn't want "decor and fixtures," so why waste money fixing things up? But they don't want to feel embattled when shopping there either, and that can partially explain why consumers have fled to more hospitable environs.

Sears has come a long way since the 1930's, but you're still transported back in time when you walk into many of its stores today. Photo: National Archives.

Shell-shocked would also sum up the feelings of investors who've watched shares of Sears Holdings plunge from their highs of nearly $200 a stub back in 2007 to under $35 a share today, a stunning 83% loss of value.

On the surface that's a distressed stock that ought to have buyers lining up to make an offer. But turn over the rock and all you'll find are bleached bones with little gristle worth gnawing on. If anyone's hoping some buyer will come in and save them from the carnage, there seems little chance of an offer being made.